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8 interest in developing legislation for DOT projects. The The Kentucky revised statute provides for award of con- Colorado revised statute provides for "competitive sealed best- tracts using a competitive sealed bidding process, with the value bidding," using some of the same terminology as the contract awarded "to the responsive and responsible bidder Model Code but offering less flexibility than the Model Code. whose bid offers the best-value." The statute allows significant The Colorado statute permits the procurement officer to flexibility to the awarding agency in establishing the best- " . . . allow bidders to submit prices for enhancements, options, value criteria and their relative weightings, but makes it clear or alternatives that will result in a product or service to the that the criteria must be objective and quantifiable. The state having the best-value at the lowest cost," if a high-level statute includes the following definition of best value: determination has been made that such a process will be advantageous to the state. (The Model Code does not require a 3. Best value means a procurement in which the decision is special determination to be made before incorporating based on the primary objective of meeting the specific business best-value elements, but does include restrictions regarding requirements and best interests of the Commonwealth. These the types of items that may be included.) The Colorado statute decisions shall be based on objective and quantifiable criteria that shall include price and that have been communicated to the allows award to a bidder where the total price offered by the offerors as set forth in the invitation for bids. bidder, including the prices for enhancements, options, or alternatives, exceeds the total price offered by the other bidders, In summary, legislation at the federal and state levels is if it is determined "that the higher total amount provides a moving toward allowing the use of best-value selection strate- contract with the best value at the lowest cost to the state"based gies. Many states have adopted legislation allowing use of on criteria set forth in rules adopted by the procuring agency. design-build and permitting award to be based on a best-value The Colorado statute implicitly allows the owner to consider determination. A number of states have also passed general matters such as life-cycle costs in making the selection decision; procurement legislation that would allow best-value concepts the Model Code provision provides a much clearer statement to be factored into the selection decision for other construc- regarding the process to be followed. tion contracts as well. The best-value concepts, analysis and The Delaware Code allows the use of best-value procurement recommendations presented in this research work have been for large public works contracts, with best value determined on developed within the framework of legislative approaches the basis of objective criteria that have been communicated to currently in place for federal and state agencies. the bidders in the invitation to bid. Delaware agencies can elect to use a best-value procurement process without special findings. However, the Delaware law includes specific require- 2.3 Best-Value Contracting Concepts ments regarding weightings to be assigned to the best-value criteria as follows: As described in Chapter 1, in a broad sense, the definition of best value may encompass the concepts from and variations 1. Price--must be at least 70% but no more than 90% and of current highway procurement methods, including prequal- 2. Schedule--must be at least 10% but no more than 30%. ification, post-qualification, A+B bidding, multi-parameter bidding, bid alternates, and extended warranties. Under the Delaware Code, a weighted average stated in the The research team conducted more than 50 case studies invitation to bid must be applied to each criterion according from all sectors of construction to identify and categorize best- to its importance to each project. The agency must rank the value concepts used in the public sector construction indus- bidder according to the established criteria and award to the try. These agencies include the U.S. Army Corps of Engineers, highest ranked bidder. Every state agency and school district the U.S. Air Force, the Highways Agency in England, the is required, on a yearly basis, to file a report with every mem- National Aeronautics and Space Administration, the Spanish ber of the General Assembly and the Governor that states Road Administration, the Swedish Highway Administration, which projects were bid under best-value procurement and the U.S. Forest Service, and a number of U.S. DOTs. The what contractor was awarded each contract. The Delaware majority of these case studies involve design-bid-build proj- legislature's decision to include specific weightings in the ects, but some design-build projects have been captured as statute could be interpreted as requiring the agency to convert good examples of best-value procedures. These case studies all criteria to numeric ratings even though another evaluation are presented in summary tables throughout this chapter and methodology might be more desirable. The logic underlying in a series of detailed case studies in Appendix D. Table 2.1 the requirement to give the bid price at least a 70% weighting provides a summary of the detailed case studies that were used and schedule at least a 10% weighting is unclear, and may be to develop the best-value concepts described in this report. It problematic for certain projects, for example, those for which also presents a systematic approach to identifying and coding long-term operations costs are significant. best-value parameters.

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9 Table 2.1. Detailed case study index. Case Par ameters Award Algorithm Evaluation Rating Scales 1. Air Force Base Pedestrian A.0 + P.1 Qualitative Cost- Adjectival Rating Bridge Technical Tradeoff 2. NASA Johnson Space A.0 + P.0 + P.1 Qualitative Cost- Adjectival Rating Center Tunnel System Technical Tradeoff 3. U.S. Army Corps of A.0 + P.1 + P.2 + P.4 Qualitative Cost- Not stated Engineers Canal Technical Tradeoff 4. Swedish Highway A.0 + P.1 + P.2 + P.4 + D.0 Weighted Criteria Direct Point Scoring Administration Asphalt Paving Bids 5. Alaska DOT Interchange A.0 + A.1 + P.0 + P.4 + D.1 Weighted Criteria Direct Point Scoring 6. University of Nebraska B.0 + P.0 + P.2 + P.4 + D.1 Fixed Price--Best Direct Point Scoring Cleanroom Proposal 7. U.S. Army Corps of A.0 + B.0 + P.1 + P.2 + P.3 + P.4 Qualitative Cost- Satisficing and Engineers Dam Technical Tradeoff Adjectival Rating 8. Spanish Road Association A.0 + B.0 + P.1 + P.2 + P.3 + P.4 Weighted Criteria Direct Point Scoring Asphaltic Paving and Highway Maintenance 9. Minnesota DOT Highway A.0 + B.0 + P.0 + P.1 + Q.0 + D.1 Meets Technical Satisficing Criteria--Low Bid 10. Missouri DOT Bridge A.0 + A.1 + B.0 + P.1 + P.3 + Q.0 Meets Technical Satisficing Seismic Isolation System + D.0 Criteria--Low Bid 11. Washington State DOT A.0 + B.0 + B.2 + P.0 + P.1 + P.2 Adjusted Score Direct Point Scoring Interchange + P.4 + Q.0 + Q.4 12. U.S. Army Corps Air A.0 + B.0 + P.1 + P.2 + P.3 + P.4 Meets Technical Modified Satisficing Freight Terminal/Airfield + Q.0 + Q.4 + D.0 Criteria--Low Bid 13. U.S. Forest Service A.0 + B.0 + B.2 + P.0 + P.1 + P.2 Quantitative Cost- Direct Point Scoring Highway + P.3 + P.4 + Q.4 + D.1 Technical Tradeoff 14. Maine DOT Bridge A.0 + A.1 + B.0 + B.2 + P.0 + P.4 Adjusted Bid Direct Point Scoring + Q.0 + Q.2 + Q.3 + Q.4 + D.1 15. Sea to Sky Highway A.0 + B.0 + B.2 + Q.3 + Q.4 + P.0 Meets Technical Satisficing Improvement Project: + P.1 + P.2 + P.4 + D.1 Criteria--Low Bid Sunset Beach to Lions Bay 16. RFP Form of the A.0 + P.0 + P.2 + D.1 + Q.4 Adjusted Bid Direct Point Scoring Government of the Ontario 17. RFP Form of the A.0 + B.0 + P.1 + P.2 + D.1 + Q.3 Weighted Criteria Direct Point Scoring Government of the Yukon 18. Model Contract A.0 + B.2 + P.1 + P.2 + P.3 + D.1 Weighted Criteria Direct Point Scoring Document in England + Q.3 + Q.4 19. Forth Road Bridge Toll A.0 + B.2 + P.1 + P.2 + P.3 + D.1 Weighted Criteria Direct Point Scoring Equipment Replacement + Q.3 + Q.4 Project in Scotland 20. Valuascollege Project in A.0 + P.1 + P.2 + P.4 + Q.3 + Q.4 Weighted Criteria Adjectival Rating the Netherlands + D.0 + D.1 Four primary concepts were derived from a review of criteria add value to a project and result in a transparent and these case studies. These concepts include parameters, defensible procurement system. evaluation criteria, rating systems, and award algorithms. Inspection of the literature and case studies identifies a Figure 2.1 illustrates how these concepts can be visualized number of best-value parameters that can be mixed and in a best-value system. matched to create a best-value procurement. Evaluation Defining best-value parameters was not a simple task for criteria associated with these general parameters can be project sponsors. It is critical to identify parameters that combined to create an appropriate best-value definition, eval- would actually add value to a project and be defensible to the uation, and award system. Some of these concepts overlap with industry and the public. As a first step, the best-value param- multi-parameter bidding practices, but the parameter cate- eters must be defined and categorized. These parameters can gories described herein are more comprehensive than those then be further analyzed to determine which evaluation described in previous NCHRP multi-parameter contracting

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10 Best-Value Quality has a number of variations on the theme. Some Evaluation Criteria have been proposed as a component of a multi-parameter A + B + Q bid, but it is difficult to convert these concepts to Best-Value Evaluation Rating a dollar or time amount in a rational way. These are referred Best-Value Systems to as follows: Parameters Best-Value Award Algorithms · Warranty = Q.0 · Warranty Credit = Q.1 · Quality Parameter Measured with % in Limits = Q.2 · Quality Parameter Using Performance Indicator = Q.3 · Quality Management Plans = Q.4 Figure 2.1. Best-value concepts. Design issues can be a critical component of many best-value parameters. This is especially true if agencies are soliciting design alternates. These are referred to as follows: literature (Anderson and Russell 2001). Each flows out of a combination of the following five major categories coded with · Design with Bid Alternate = D.0 a letter designation generally consistent with the literature: · Performance Specifications = D.1 · A = Cost Finally, Incentive/Disincentive clauses often seem to be · B = Time added to the mix of multi-parameter bidding particularly for · P = Qualifications time and quality parameters. Therefore, the suffix "with I/D" · Q = Quality is added to the above generic set to indicate the use of that · D = Design Alternates type of approach to contracting. Thus, a set of potential variations on the theme of best The first two major categories are relatively standard com- value is created that is equal to the number of combinations ponents of multi-parameter contracting. However, within that can be developed using two or more of these parameters. these generic categories several options were identified. For example, the following would be a best-value project that Under the cost parameter, the options included the following has cost, schedule, prequalification, past project performance, initial capital cost and life-cycle cost: and a quality parameter using performance indicator with incentive/disincentives: · Cost = A.0 · Life-Cycle Costs = A.1 · A.0 + B.0 + P.0 + P.1 + Q.3 with I/D The time component includes lane rental and traffic con- The first 14 case studies in Appendix D are presented in trol, which are measured in $/unit time. These will be referred ascending order of the number of parameters used in the to as follows: best-value decision. For example, Case 1 applies only two best-value parameters, cost and past performance, while Case · Time = B.0 14 applies a total of eleven best-value parameters from all five · Lane Rental = B.1 categories (cost, time, qualifications, quality, and design alter- · Traffic Control = B.2 nates). Six case studies were added from the international CM scan project. These cases all involved multiple parameters. The qualifications parameter has five major options: pre- Unique projects have unique parameters that define the best- qualification, past project performance, personnel experi- value system. While some projects need little more than cost ence, subcontractor information, and project management. and qualifications to define the best-value system, some These will be referred to as follows: require a complex interrelationship of a series of parameters. In addition to the analysis of case study populations and · Prequalification = P.0 literature review, the research team also conducted an opinion- · Past Project Performance = P.1 based survey of its advisory board concerning each of the · Personnel Experience = P.2 best-value concepts identified. The advisory board members · Subcontractor Information = P.3 were asked about their experience with each of the best-value · Project Management Plans = P.4 concepts. They were then asked to rate the concepts based on