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20 CHAPTER FOUR CONTRACT ADMINISTRATION INTRODUCTION totaling more than 100%, international agencies seem to prefer a mix of unit-price and lump-sum contracts, and they The administration of a chip seal project has an immense have also contracted with designbuild, whereby the chip impact on not only the cost of the project, but also its ultimate seal contractor is responsible for both the design and the performance. The distribution of risk through the chip seal construction. contract can create either an incentive to furnish the best pos- sible quality or a bias to deliver the bare minimum. For exam- The greater reliance on lump-sum contracts by inter- ple, the heavy use of method specifications that describe in national respondents is significant when one considers that detail the chip seal construction process essentially absolves all of those nations have developed their own chip seal design contractors of long-term performance liability as long as they methodologies that are based on a much more detailed set can prove that they followed the agency's method specifica- of engineering measurements than those used in either the tions to the letter. Therefore, it is important for owners to for- McLeod or the Kearby design methods. Perhaps their more mulate the most appropriate contracts for their chip seal proj- scientific approaches to chip seal design allow those coun- ects. This chapter offers direction on best practices for the tries to feel more comfortable in transferring the construction administration of successful chip seal programs, from project material quantities risk to their respective construction indus- development to post-completion. The types of contracts used, tries. Under volumetric unit-price contracts, the contractor project planning and programming, and contract management has an economic incentive to install as much asphalt and procedures will be discussed. aggregate as possible and thus might construct the seal in a manner not beneficial to the life of the chip seal (Gransberg et al. 1998). Changing the measurement of the chip seal pay CONTRACT TYPES quantities to a surface area reverses this incentive. The sig- Transportation infrastructure contracts have traditionally been nificance of having an engineering-based design method that awarded using a low-bid process that is often required by leg- does allow for significant adjustments in the field is that islation at the state and local level. The survey identified two quantity overruns may likely be reduced because the profit primary types of low-bid contracts: unit price and lump sum. motive for the contractor disappears. Lump-sum contracts are warranted in construction projects where the scope of work can be easily quantified. On the other CONTRACT MANAGEMENT hand, unit-price contracts are used in those situations where the aforementioned conditions do not exist (Clough and Sears Chip seal contract management practices in essence define 1994). The owner assumes the risk of quantity overruns by the constraints within which chip seals are designed and con- agreeing to pay for the actual units applied, rather than pay- structed. There are a number of contract management issues ing a premium for transferring the risk of quantity overruns that must be addressed to ensure that the ultimate perfor- to the contractor by means of a lump-sum price. Given that mance of the chip seal is purely a function of the quality of chip seal projects usually are limited to a defined area of pave- the design and construction and not adversely influenced by ment, quantity surveys should be fairly straightforward and external administrative constraints. The clarity of the con- not highly variable. Therefore, lump-sum contracts, including tract documents is essential, because the agency can enforce the total cost of the project plus mobilization and traffic con- only what is in the contract. trol, could be used without the agency's incurring a substan- tial cost increase. The survey results revealed that Arkansas and Nevada are using lump-sum contracts for their chip seal Construction Season projects. Arkansas also reported that it was getting excellent chip seal results. The literature review showed that chip seals applied early in the summer appeared to perform better than those applied Contracting procedures vary significantly between North at the end of the summer (McHattie 2001). It is not known American and international respondents. As can be seen in what the temperature following chip seal placement will be, Figure 18, North America favors the use of unit-price con- so the only way to address that concern is to limit the con- tracts. As evident by the proportion of international responses struction season. This is because these early season chip seals

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21 100% agement into their chip seal design process that relates to 94% 86% 100% the season in which the chip seal will be placed. Figure 19 is 71% taken from Road Note 39 and illustrates this approach to 80% selecting the proper timing within the chip seal season for 60% construction. 40% 22% 6% 20% Survey respondents were asked to specify their allowable 0% chip seal construction season. Analysis showed that the chip United States Canada AU, NZ, UK, SA seal season is actually not nearly as variable for chip seal proj- Unit Price-Low Bid Lump Sum-Low Bid Design-Build ects as for other highway construction projects such as hot mix paving. Most agencies, regardless of location, contract FIGURE 18 Types of chip seal contracts. for a chip seal program of approximately 4 months in north- ern areas to roughly 5 months farther south. The season is constrained by daily temperature and weather requirements have more time to cure before being subjected to cold temper- aimed at making sure that the chip seal is applied in the atures. Thus, it seems that a best practice is to award chip warmest, driest weather possible for the geography. This seal contracts accordingly to allow for early summer con- topic leads into a discussion of the timing in advertising and struction, which maximizes curing time before the first cold awarding the chip seal contract, which is commonly called spell. The British have incorporated an element of risk man- bid letting. FIGURE 19 Road Note 39 construction season chart (Source: Design Guide for Road Surface Dressing, Road Note 39 1996).