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1 CHAPTER 1 Introduction and Research Approach 1.1 Background: Problem in the procurement process to motivate contractors not only Statement and Research to improve their performance during construction, but Objective equally as important, to build value into the end products of construction. Legislation in most states requires that construction con- tracts for public works projects be procured using a compet- itive sealed bidding process and awarded to the responsible 1.2 Best-Value Contracting bidder submitting the lowest bid. The majority of public Definitions sector construction contracts continue to be awarded solely The term best value has many competing definitions from based on the lowest price. A long-standing concern expressed numerous procurement sectors. There are even competing by public owners, however, is that low bid, while promoting definitions within the highway sector itself. The federal competition and a fair playing field, may not result in the best government uses the term best value in reference to the value for dollars expended or the best performance during purchasing of almost every piece of merchandise from com- and after construction. As noted in the research problem puters to military weapons, as well as highway and building statement for NCHRP Project 10-61, the low-bid system construction. The Army Source Selection Guide (Army 2001) encourages contractors to implement cost-cutting measures defines best value as "The expected outcome of an acquisition instead of quality enhancing measures, which makes it less that, in the Government's estimation, provides the greatest likely that contracts will be awarded to the best-performing overall benefit in response to the requirement." The research contractors who will deliver the highest quality projects. team has chosen to use a broad definition of best-value The primary tool available to owners to counteract the cost- procurement for highway construction as follows: cutting incentives inherent in a low-bid system is through the process of determining bidder responsibility. This determina- A procurement process where price and other key factors are tion may simply involve an evaluation of pricing and financial considered in the evaluation and selection process to minimize ability, but many public owners have broadly interpreted impacts and enhance the long-term performance and value of responsibility as encompassing other factors as well. Recent construction. surveys of the highway industry gathered from previous research indicate that prequalification is used widely by state While this definition can be applied to all current best- and federal agencies in their construction programs to deter- value procurement systems, it overlaps with other innovative mine responsibility in conjunction with a traditional sealed contracting methods. In a broad sense, best value may bidding process. Prequalification in its simplest form is an encompass the concepts from and variations of current high- assessment of financial responsibility, which often mirrors way procurement methods, including prequalification, post- what sureties look for in making their underwriting decisions qualification, A+B bidding, multi-parameter bidding, bid relating to issuance of bonds for public works projects. It also alternates, and extended warranties. Best-value procurement may include other factors such as demonstrated ability to per- methods have been employed under traditional design-bid- form a certain type of work. Whether by prequalification or build contracting, although on a very limited basis at this other methods, public owners are increasingly exploring ways date. Additionally, best-value procurement concepts are com- to include non-price factors, both qualitative and quantitative, monly used in conjunction with design-build contracting,