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82 D1.2 Delivery Decision Support implications, statutory restrictions, and administrative issues. The decision to use an alternative delivery method invariably The selection of a project delivery system can affect both involves a tradeoff between cost and some other factor such cost-estimating practices and cost-estimating management. as time, user delays, or quality. Delivery decision tools can The design-bid-build delivery system approach, in which unit help to make this tradeoff decision. price construction contracts are awarded to the lowest bid- der, is the traditional system for U.S. highway projects and used in the majority of highway projects today. However, the Why use it? traditional project delivery system has received criticisms stemming from long delivery times, excessive cost growth, The choice of project delivery system often hinges on a and litigious relationships. Continuing to face increasing de- project's cost or time constraints, and estimators must under- mands of the traveling public with declining staffs, federal, stand how to estimate the cost tradeoffs involved in the deci- state and local agencies are employing alternative project de- sion to use an alternative delivery system. For example, the livery, procurement and contracting methods to improve the design-build project delivery system can be used to award a efficiency and effectiveness of public sector project delivery. lump-sum contract for both design and construction of a project much earlier in the project development process than the traditional design-bid-build method. This early award of- What is it? fers a high potential for project delivery-time savings and, in essence, fixes a project's cost earlier in the project develop- Project delivery decision support is a tool that assists SHAs ment process than the traditional process. When design- in the choice alternative project delivery systems. It should build is selected, different approaches must be taken for cost provide a clear understanding of the advantages and dis- estimating and cost management. Cost estimating will in- advantages of alternative delivery systems so that SHAs can make informed decisions about the most effective choice for volve the use of more rigorous conceptual estimating tools the available alternatives to meet the specific project goals. because designs will not be complete and quantities will not Sample of alternatives in use by SHAs at the time that this be known at the time of project award. Cost estimate man- document was published includes: agement will require different change management proce- dures because the design-builder develops the design under a Project Delivery Systems lump sum contract. Construction Management at Risk Design-Build (and variations Operate-Maintain, -Warranty) What does it do? Indefinite Quantity/Indefinite Delivery Given a set of unique project goals, project delivery deci- Job Order Contracting sion support provides an understanding of why an alternative Public-Private Partnerships delivery method might be appropriate for a project. It pro- vides guidance for cost estimating practices and cost estimat- Procurement Systems ing management. Cost + Time Bidding (A+B) Multi-parameter Bidding (A+B+C) Best-Value Procurement When to use it? Alternate Designs Alternate Bids Project delivery decisions should be made as early as pos- Additive Alternates sible in the project development process to optimize their Negotiated or Qualifications-Based Selection impact. Decisions for the overall project delivery system (i.e., (for construction) design-build, public-private partnership, etc.) should prefer- ably be made during the Programming Phase or shortly Contracting and Payment Systems thereafter. In cases of large projects, the decision may be Lane Rental made as early as the Planning Phase. Decisions regarding in- Incentive/Disincentive Payments novative procurement methods, such as best-value or quali- Warranty Contracting fications-based procurements, should be made in the Pro- Lump Sum Payment Methods gramming Phase or very early in the Design Phase. Other less significant procurement and contracting decisions (i.e., A+B When selecting alternative project delivery systems, SHA bidding, additive alternates, lane rental, etc.) can be made personnel should consider issues such as risk allocation, legal sometime in the Design Phase.

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83 How to use it? cost-plus-time bidding, lane rental, job order contracting, and many other non-traditional contracting techniques. State DOT Project delivery decisions should be made with information work plans and evaluation reports from FHWA's Special Exper- from all team members. Cost estimating is a key in the deci- imental Project No. 14, "Innovative Contracting," are provided. sion. A thorough understanding of the design constraints and The site also features a best practices guide and a decision tree opportunities is also necessary to make logical contract pack- for selecting the appropriate contracting technique. aging decisions. An understanding of market conditions (e.g., number and type of contractors available, etc.) is also an im- portant input into making the contract packaging decisions. NHI Alternative Contracting Course (Course No. 134058) Example The FHWA's National Highway Institute (NHI) developed a course on "Alternative Contracting" (Course No. 134058), There are numerous examples of project delivery decision and it is now available. A short description of the course is listed tools. Five national examples are provided here, but numer- below and more information on the course availability can be ous states have developed decision support tools as well. found on the NHI website at http://www.nhi.fhwa.dot.gov/. Course Objective Utah State University Innovative The estimated 2-day training course will teach participants Contracting Website how to select the appropriate projects for alternative project The FHWA sponsored the development of an innovative delivery strategies, choose the correct alternative contract contracting website to provide decision support for innovative provisions, and recognize the legal and programmatic impli- contracting methods. A screen clip of the website is provided in cations associated with these techniques. The course design Figure D1.2.1. The Utah State University's Innovative Contract- is to be flexible, allowing the requesting agency to customize ing website includes information concerning various construc- the presentation for increased emphasis on topics of interest tion contracting techniques such as design-build, warranties, to the agency. Figure D1.2.1. Utah State University Innovative Contracting website http://www.ic.usu.edu.

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84 The target audience includes personnel working in for Warranty, Multi-Parameter, and Best Value Contracting. contract administration, project development and design, http://www4.trb.org/trb/crp.nsf/All+Projects/NCHRP+10-49 and the management of highway construction, including contribution of information in contract provisions. NCHRP 10-61 - Best Value Procurement Methods Upon completion of the course, participants will be able to: for Highway Construction Identify alternative project delivery, procurement, and NCHRP Project 10-61 provides decision support for best- contract management methods for highway construction; value procurement of U.S. highway construction. The result- Identify objectives for the use of alternative project deliv- ing report outlines a comprehensive process that state trans- ery, procurement, and contract management methods; portation agencies can use to create best-value methods in Differentiate among traditional design-bid-build and their individual states. The research effort investigated best- alternative project delivery, procurement, and contract value concepts currently in use in the construction industry, management methods based on relative advantages and evaluated their relative effectiveness, and recommended a risks; best-value system or systems that may be used in conjunction Define how project risks are reallocated using various with a traditional design-bid-build delivery system for high- project delivery, procurement, and contract management way construction. methods; The research products include: Select appropriate alternative contracting methods for use with a given project or select appropriate projects for use A common definition and a conceptual framework for the with a given alternative contracting method or methods; use of best-value procurement methods for highway con- and struction projects. Identify contract requirements appropriate for alternative A best-value procurement system that allows for flexibility contracting methods. in the choice of parameters and award methods. An implementation plan that includes a project screening AASHTO Primer on Contracting system for selecting candidate projects, and a step-by-step for the 21st Century process for selecting appropriate parameters, criteria, and award algorithms. The Primer on Contracting for the 21st Century is an updated Recommendations regarding models to use for legislation version of the Primer on Contracting 2000 (1997). The new and procurement regulations. Primer describes various contracting and contract administra- A compendium of case studies for best-value procurement tion techniques that are currently being used by contracting in the highway construction industry. agencies in their transportation programs and provides contacts A training tool to assist agencies with implementation. within these agencies for use in obtaining additional informa- tion. This report was prepared by the Contract Administration The results of NCHRP 10-61 have been published as NCHRP Task Force of the AASHTO Highway Subcommittee on Con- Report 561: Best-Value Procurement Methods for Highway struction. The document can be found in the references section Construction Contracts. http://www4.trb.org/trb/crp.nsf/All+ of the AASHTO Subcommittee on Construction's website Projects/NCHRP+10-61 http://construction.transportation.org. Tips NCHRP 10-49 Improved Contracting Methods for Highway Construction Projects Choose delivery methods that better align goals and allocate risk properly. The U.S. highway industry must evolve from the The project reviewed relevant domestic and foreign litera- traditional "one size fits all" project delivery method. A re- ture; surveyed the construction industry; identified and evalu- newed focus should be given to alternative delivery methods ated contracting practices with consideration to compatibility that promote early industry involvement and life cycle design with the low-bid system, impact on SHA resources, product solutions to maximize the entire project team's input into meet- quality, and risk allocation; and developed guidelines for three ing customer needs. nontraditional contracting methods: warrant, multi-parameter, and best value. The agency's final report that contains the find- ings of the literature review, discussions of current use, and Resources analysis of survey results has been distributed to all state high- AASHTO Subcommittee on Construction's Website see References way agencies. The guidelines for nontraditional contracting for Primer on Contracting for the 21st Century http://construction. methods have been published as NCHRP Report 451: Guidelines transportation.org.