National Academies Press: OpenBook

Best-Value Procurement Methods for Highway Construction Projects (2006)

Chapter: Appendix H - Training Tool

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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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Suggested Citation:"Appendix H - Training Tool." National Academies of Sciences, Engineering, and Medicine. 2006. Best-Value Procurement Methods for Highway Construction Projects. Washington, DC: The National Academies Press. doi: 10.17226/13982.
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H-1 A P P E N D I X H Training Tool Overview Background and Industry Trends Methods Implementation Procurement Methods Fixed-Price Sealed Bidding Sole Source Selection • Historically Public Sector • Typically Fixed-Price • Open Bidding Price Considerations Historically Public Sector Typically Negotiated Prequalification Processes •- •- •- Qualification Considerations Best-Value Price and Other Key Considerations

H-2 Best-Value Definition A procurement process where price and other key factors are considered in the evaluation and selection process to enhance the long-term performance and value of construction. Industry and Legislative Trends Private Sector Negotiated Procurements FAR Part 15 Contracting By Negotiation Revised ABA Model Procurement Code (MPC 2000)

H-3 Industry and Legislative Trends (cont’d) Various State Statutes Addressing Best-Value Federal Agency Best-Value Procurement Experience • Navy • Army • U.S. Postal Service • Veterans Administration • Federal Bureau of Prisons Use in Highway Industry 41 transportation agencies surveyed 27 had experience with best-value procurement 2 planning to use it

H-4 Perceived Best-Value Advantages Reduction in cost growth Fewer life-cycle costs Time savings Innovation Quality Reduced procurement risk Best-Value Concepts Best-Value Evaluation CriteriaBest-ValueParameters Project Goals Evaluation Plan Best-Value Evaluation Rating Systems Best-Value Award Algorithms

H-5 The Best-Value Parameters Best-Value = A.x + B.x + P.x + Q.x + C.x Where: A = Cost B = Time P = Performance & Qualifications Q = Quality Management C = Construction Alternates x = Weighting Case Study Results 25D.1Environmental Considerations 37D.1Technical Proposal Responsiveness 26D.0Proposed Design Alternate 27Q.4Quality Management 31P.4Management/Organization Plan 29P.3Subcontractor Evaluation/Plan 30P.3Utilization of Small Business 41P.2Key Personnel & Qualifications 25P.1Safety Record (or plan) 44P.1Past Experience/Performance 35P.0Financial & Bonding Requirements 19B.0Project Schedule Evaluation 42A.0Price Evaluation # of Contracts Used (50) BV Parameter Evaluation Criteria

H-6 Best-Value Evaluation Rating Systems Satisficing (Go/No Go) Modified Satisficing Adjectival Rating Direct Point Scoring • Simple • Quick • Bimodal Outcome • Assessment Accuracy not Critical Complex Requires Analysis Array of Outcomes Assessment Accuracy Critical • . • . • . • . Best-Value Award Algorithms Weighted Criteria Adjusted Bid Adjusted Score Meets Technical Criteria - Low Bid Quantitative Cost Qualitative Cost Technical Tradeoffs Fixed-Price Sealed Bidding Sole Source Selection Price Considerations Qualification Considerations Best-Value Price and Other Key Considerations Fixed Price - Best Proposal

H-7 Best-Value Framework One-Step Best-Value Procurement No benefit to using competitive screening system Select parameters that align with project goals Associate parameters with evaluation criteria that add value to project Select rating (scoring) system/award algorithm

H-8 Two-Step Best-Value Procurement Step 1 Evaluation of performance/qualification parameter Similar to current administrative prequalification processes but more detailed Step 2 Evaluation of alternates, quality, cost, and schedule Same process as One-Step Best-Value Best-Value Project Screening & Selection Select projects with characteristics that provide significant benefit from using an alternative form of procurement. Once identified, develop the evaluation plan to confirm that the benefits are real, the negative impacts are minimal, and the risks are manageable.

H-9 Tied to SHA Project Goals & Evaluation Criteria Project Characteristics • Complexity • Specialized expertise needed • Opportunities for innovation Cost savings Quality enhancements Time savings Procurement Risk Best-Value Project Screening & Selection Best-Value Project Screening & Selection Tools Are the SHA’s and Industry’s experience levels adequate? Is the process in place to measure best-value effectiveness? Is enabling legislation in place? Can measurable value be added using best-value? Will procurement affect small or disadvantaged business? Is adequate staff available to perform evaluation?

H-10 Implementation Examples of Selection Process Strategies to Implement Best-Value Procurement Example 1 Any selection process where the eventual award will be determined by the lowest priced, fully qualified and/or responsive bidder. Meets Technical Criteria - Low Bid

H-11 Example 2 The technical proposal and price proposal are evaluated individually. A weight is assigned to price and each of the technical evaluation factors, and the sum of these values becomes the total score. Value Unit Price (Weighted Criteria) Example 3 Tradeoff analysis of price and technical or non-cost factors to arrive at best-value decision. Qualitative Cost - Technical Tradeoff

H-12 Strategies to Implement Legislative Guidelines Model Specifications Agency Champion Industry Collaboration Pilot Projects Model Legislation Guide Spec Model Legislation ABA Model Procurement Code FAR Part 15-Contracting By Negotiation Flexibility in Procurement Approach • Acceptable to project conditions • Appropriate weighting of price and technical factors

H-13 Model Specifications General Information, Definitions, and Terms Proposal Requirements and Conditions Award and Execution AASHTO Format:

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TRB’s National Cooperative Highway Research Program (NCHRP) Report 561: Best-Value Procurement Methods for Highway Construction Projects examines procurement methods, award algorithms, and rating systems for use in awarding best-value highway construction contracts. The report also explores screening criteria for selecting projects for application of best-value procurement, implementation strategies, and a model best-value specification.

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