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44 Table 2.18. Average contract value for the sample population. Category Horizontal Vertical Delivery Best-Value DBB A+B DBB/RFP DB DBB/RFP DBB Method Projects* Projects Projects Projects Projects Projects Projects Projects in 119 708 77 10 32 20 394 Database Average $13.0 $2.0 $15.9 $17.9 $6.0 $6.5 million $1.0 million Contract Value million million million million million * Includes all non-low-bid projects The final performance metric that was calculated is con- The analysis also shows the A+B projects have the best per- struction placement, and the results are shown in Figure 2.12. formance as measured by these metrics. This result clearly Based on Equation 5, a larger number is more desirable than demonstrates that letting the construction contractor estab- a smaller number. This metric measures the efficiency with lish the project schedule and implementing an incentive for which the project delivery method is implemented by creating early completion accrues a direct benefit to the owner. In high- a measure of financial velocity ($/day) at which the contractor way construction, the user costs of congestion, delay, and acci- earns the full value of the contract amount. It can be seen that dents can reach as high as $250,000 per day on an urban implementing best-value procurement effectively doubled freeway (Walls and Smith 1998). Thus, the use of a project the average construction placement for horizontal projects. delivery method that creates a bias toward timely completion The A+B projects had 25% more construction placement than (and possibly a bonus for early completion) can quickly amor- the population as a whole. This would be expected because the tize the incrementally higher cost for accelerated completion A+B projects are by definition schedule driven. Only the hor- in a matter of days or weeks when the cost to the traveling pub- izontal design-build projects failed to outperform the hori- lic is factored into the project life-cycle cost equation. zontal design-bid-build. However, this outcome is misleading Finally, the implementation of best-value contracting does because the design-build project contract period includes the not appear to have a significant impact on bid prices as meas- design phase. Therefore, one should expect that overall CP ured by the change in award growth between best value and would be lower than those projects that completed construc- design-bid-build. The results show that best-value projects tion only. The doubling of CP over traditional low-bid can be awarded in a variety of forms with no apparent nega- projects also held true for vertical best-value projects. tive impact to the public owner's project delivery process. Average contract value is not a performance metric but it must be calculated to allow the research team to put the previ- 2.7 Expert Interviews ous discussion in perspective. Table 2.18 shows that to date pub- lic owners seem to have reserved best-value contracting for their To further validate the results of these findings, the research larger projects. In both the horizontal and vertical cases, the team surveyed the 14 members of the industry advisory average contract amount of the traditional low-bid projects is board to ascertain their opinions of the best-value system. about an order of magnitude less than the best-value projects. While the sample size is small, the board represents a panel of experts, all of whom have personal experience with imple- menting best-value contracts in highway construction. Thus, Conclusions from the Project Performance Metrics the results of this survey act as a "reality check" for the results Analysis of the national survey of state highway agencies and federal A number of conclusions can be drawn from this analysis. construction agencies. The board also contained members It appears that the implementation of best-value contracting from the construction contractor community and therefore on horizontal projects has the potential to accrue both cost furnishes a counterpoint to the opinions expressed by the and time benefits to the public owner. The experience por- community of owners surveyed in the first group. The survey trayed in the database shows that the use of best-value pro- results are summarized as follows. curement reduced both time and cost growth and increased The responses indicated that the panel had experience with the financial efficiency of the projects. While this is significant all of the best-value parameters except warranty credits and the in itself, it is even more convincing when one takes into two measured quality parameters. They rated cost, schedule, account the results of Table 2.18 that show that these savings and past performance the most likely to be successful and cost were accrued on projects that were on average 10 times as and incentive/disincentive schemes as the easiest to implement. large as the traditional projects. Warranties were rated as least likely to be successful and design

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45 Table 2.19. Summary of advisory board responses regarding best-value parameters. Average Ease of Implementation Rating Number That Had Used Average Success Rating (1=effortless; Best-Value Parameter It (1=none; 5=absolute) 5=difficult) Cost = A.0 5.0 4.2 1.2 Schedule = B.0 5.0 4.0 2.8 Lane Rental = B.1 3.0 2.7 3.0 Traffic Control = B.2 1.0 3.0 4.0 Prequalification = P.0 3.0 3.3 2.7 Past Project Performance = P.1 1.0 4.0 2.0 Personnel Experience = P.2 3.0 3.0 2.7 Warranty = Q.0 2.0 2.5 3.5 Design with Bid Alternate = D.1 3.0 2.7 4.0 Incentive/Disincentive clauses 4.0 2.0 1.5 alternates and traffic control alternates as the most difficult to A written comment came from one construction contrac- implement. Table 2.19 contains a summary of the responses. tor representative that responded to the survey. It is a good With regard to the best-value evaluation criteria summa- summary for this section: rized in Table 2.20, the advisory panel rated price and sched- ule as most important and having the highest probability of "My overriding comment is that the various criteria are not success. Warranties were rated both least important to proj- better or worse but should be most applicable to meet the ect success and least likely to be successfully implemented. owner's need. For example, an owner with limited funds (e.g., issuing bonds based on future toll revenues) may place a higher The panel rated bid price as easiest to implement and design emphasis on price and strong contract terms while other own- alternates as the most difficult. ers may be more concerned with the quality of the finished Most of the respondents had experience with direct point product and be willing to pay a premium to get that quality scoring systems. In Table 2.21, one can see that no trend exists (e.g., higher emphasis on subjective quality criteria or on long for this component of the best-value contracting system. term warranty or life-cycle pricing)." Greg Henk, Flatiron Advisory board responses for award algorithms appear in Structures Table 2.22. Adjusted bid was the most frequently used best- value award algorithm. Interestingly, adjusted score was This statement confirms the findings that the best-value ranked higher than adjusted bid with regard to its probability selection and award system will probably be most successful of success. Finally, as would be expected, meets technical if maximum flexibility is preserved and state highway agen- criteria--low bid was rated as the easiest to implement and cies are allowed to customize the selection process to meet the weighted criteria was rated as the most difficult. specific needs of each project. Table 2.20. Summary of advisory board responses regarding best-value evaluation criteria. Average Importance Rating Average Success Average Ease of (1=no importance; Rating Implementation Rating Best-Value Evaluation Criteria 5=imperative) (1=none; 5=absolute) (1=effortless; 5=difficult) Bid Price 4.8 4.6 1.6 Past Performance 4.0 2.8 3.5 Qualifications of Project Personnel 3.5 2.8 3.4 Management Plan 3.3 3.3 3.0 Life-Cycle Cost 3.0 2.0 3.0 Schedule 4.3 4.3 2.3 Warranties 2.0 2.0 3.0 Technical Design 4.0 3.5 3.5 Design Alternatives 3.0 3.0 4.5