Time-Related Incentive and Disincentive Provisions in Highway Construction Contracts (2010)

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27 Objectives for Considering I/D Use on a Specific Project When a STA considers the use of an I/D provision for a project, perhaps the first question is what is the STA trying to accomplish through the use of an I/D provision? The answer to this question may be simple or complex, depending on the project specifics. I/D provisions are commonly used to accomplish one or all of the following objectives: 1. Reduce contract duration to minimize overall exposure and the impacts of construction. 2. Complete for a special event or winter conditions. 3. Limit capacity impacts of high traffic flows during construction. While these are the most common objectives, they are not all inclusive. Each project may have unique conditions that warrant the use of I/D provisions. STAs must determine if the use of an I/D provision is appropriate on a project-by- project basis. A clear distinction needs to be made between the reason(s) for using an I/D provision (objective) and the criteria used for determining if an I/D provision is appropriate. It may be desirable to complete a project or milestone before winter weather impacts work and traffic conditions, but unless the ends are justified by quantifiable benefits (RUC), use of an I/D provision is inappropriate. Similar to the previous distinction made between objectives and criteria, there are benefits to using I/D provisions such as reduced impact on local businesses, improved contractor management, and innovation that are desirable but not always justified. Criteria for Using I/D Provisions Whatever the objective for using an I/D provision, there are criteria for determining if an I/D provision is warranted. Regardless of the motivation, projects should meet these cri- teria and also be justified by RUC. I/D provisions should not be considered for contracts that cannot be justified through reduced RUC. FHWA has identified five characteristics that can be used to evaluate the appropriate use of time-related I/Ds (28): 1. Projects on high traffic volume facilities, generally in urban areas. 2. Projects that will complete a gap in a significant highway system. 3. Major reconstruction or rehabilitation on an existing facility that will severely disrupt traffic. 4. Major bridges out of service. 5. Projects with lengthy detours. STAs that have written guidance on the use of I/Ds identify additional factors for using an I/D provision: 6. Construction requires temporary traffic barrier on both sides of a lane and/or a lack of shoulder area (especially critical through a winter season) (29). 7. Special events (school openings, holiday, etc.)(29). 8. Environmental or political commitment requiring work to be completed (29). 9. Agreements requiring completion within a given time frame (29). 10. Disruption of emergency services (6, 30). 11. Adjacent neighborhoods or businesses would be impacted significantly (6, 30). E-mail interview responses show that STAs consider RUCs as the most important factor for determining if a project warrants the use of an I/D provision. On average, STA respondents felt that RUCs were approximately 60% more important than special events, anticipated feedback, and public/political input as a decision making factor for the use of I/D provisions (Figure 16). C H A P T E R 4 Guidelines for the Effective Use of I/D Provisions

Many STA documents used for internal guidance (6, 7, 30, 31) include additional criteria and descriptions of project features that can be used for identifying whether an I/D specification is suitable for a given project. However, assessing the suitability of a project for an I/D provision is separate from justifying the need for an I/D provision. In other words, the need for an I/D must be justified by RUC and/or safety considerations before any consideration is given to what type of provision is most suitable to a project. Types of I/D Provisions Because there is a diversity of time-related I/D provi- sion nomenclature among STAs, the definitions provided in the Terms and the Glossary sections in the Summary are repeated here. I/D provisions can be categorized into two groups: A + B and I/D. The primary distinction between these two types is that the contractor determines the contract duration for an A + B contract while the STA specifies the contract time for an I/D contract. I/D Provisions I/D (calendar or working day) Contractors are motivated to complete a project and/or critical items of work (milestones) within the number of days determined by the contracting agency through the payment of an addition to the contract amount for early completion or the assessment of a contract deduction for late completion (2). Calculation of the final incentive or disincentive is the product of a daily rate established by the contracting agency multiplied by the number of days of early or late completion. Calendar Day. Every day listed on the calendar, regard- less of whether work is accomplished or allowed by other specifications. Working Day. Any day on which work is planned and could be performed; weekends and holidays are frequently omitted from a working day contract. I/D (complete-by-date) The contracting agency establishes a fixed date for comple- tion and calculation of the incentive or disincentive instead of quantifying the number of days allowed for completion. Cost Plus Time Bidding (Generic A + B) Determination of the low (successful) bidder is based on the sum of cost (A) and time (B). A Portion = Traditional contract cost; the sum of extended unit prices multiplied by contract quantities (3). 28 3.0 2.0 2.0 2.02.2 1.4 1.3 1.2 0.0 1.0 2.0 3.0 4.0 user cost special events anticipated feedback public/political input upper quartile average lower quartile Least Important Most Important Figure 16. Relative importance of factors affecting the use of I/D provisions: average, upper quartile, and lower quartile (STA responses to e-mail interview form [n = 32]).

B Portion = Time bid; the product of number of days determined by the contractor multiplied by the daily rate determined by the contracting agency (4). A + B without I/D The bidder determines the contract duration (B). Used only for the determination of the successful bidder, contract award is made to the bidder that has the lowest combined total of cost (A) and time (B). No incentive is offered for early completion, nor is any disincentive assessed for late completion other than normally specified liquidated damages. Standard specifications are applicable for the determination of actual contract time used. A + B with I/D Contract duration is determined by the bidder. Award is made to the bidder that has the lowest combined total of cost (A) and time (B). Incentive is paid for early completion or disincentive is charged for late completion. Actual contract time may be determined by standard specification or by other methods according to special provision(s) of the contract. A + B1 + B2 + Bn Multiple time values (B1, B2, Bn) represent critical mile- stones for which the bidder determines the contract duration and the agency determines the daily rate that is applicable to each milestone. Individual incentives or disincentives are applied to the actual completion of milestones. Lane Rental Charges for closing a lane to traffic during construction are established by the contracting agency. These charges are based on a rate of dollars per day, dollars per hour, or dollars per fraction of an hour (3). Bidders determine the amount of lane rental (lane closure x closure rate) needed for comple- tion of the project. In the case where the cost of lane rental is included in other items of work, the contractor is paid for the estimated lane rental and then actual lane rental is deducted from contract revenues, resulting in an incentive or disincentive for completing the project within the estimated lane rental. When lane rental is included as a contract pay item, any underrun in the total lane rental incurred may or may not be paid to the contractor depending on the specification language. There are two basic types of lane rental provisions. In the first type, the contractor estimates how much lane rental will be incurred to complete the project and that amount is included in other items of work. For the second type of lane rental provision, the contract has a line item for lane rental. Lane rental charges are drawn against that contract item, and if there is any unused lane rental budget remaining at the end of the contract, it is paid to the contractor. The net cost to the contractor and STA is the same for both types. However, the first approach distorts the bid prices, and both approaches distort the bonding amount and the contract value. Lane rental specifications do not necessarily accelerate the work. They are designed to minimize RUC and safety concerns associated with lane closures on a project. Minimizing the impact on the public requires work to be performed at night or during short disconnected time periods. Construction efficiency is reduced (overall durations increase) when the continuity of the work is disrupted, work is performed at night, or both. If lane rental is used in conjunction with other I/D provisions, STAs should pay particular attention to avoid using the same RUC for lane rental and I/D rates during the same time period. Contractors should not be subject to incentive or disincentive charges that in effect double dip on the same RUC. When I/D and lane rental durations overlap, both should be based on RUC that are completely independent of each other. Liquidated Savings Although rarely used, liquidated savings have been included in other publications as a form of I/D provision. FDOT has used liquidated savings on a limited basis in the past. Because the incentive rate is equal to liquidated damages and only considers the STA’s daily engineering cost for time savings, it does not meet the definition of an I/D based on RUC. Discussion of I/D Variables Determination of Contract Time Who determines the contract duration? Two options exist: the contractor or the STA. Lane rental and A + B are the two I/D provision types in which the contractor determines the contract time. The STA specifies the contract duration in all other types of I/D provisions. Unit of Time When some form of time-related I/D is associated with a given project, how will the STA determine if the contractor has earned an incentive or will be assessed a disincentive? I/D milestones can be evaluated based on calendar days where every day is counted toward the milestone deadline. A modified calendar day approach does not count certain specified days, these “no-count” days could include Sundays, holidays, holiday weekends, weather days, weather days in excess of normal adverse weather, winter shutdown periods, and so forth. Working days may also be specified as the unit of time that is 29

used. The definition of a working day varies by STA. The I/D specification must be explicit regarding the unit of time that is specified. One other item to consider is what constitutes a day. For example, if a contractor meets the milestone at 12:02 a.m., is the contractor charged a full day? This is an extreme example, but daily incentive rates of $25,000 are not uncommon. Some I/D provisions state that a day begins at 12:00 a.m., and any portion of a day used is considered a full day. I/D Amount How much is early or late completion worth? I/D amounts should be stated in the specification. The STAs detailed cal- culation of I/Ds need not be explicit in the specification. But, the basis for the I/Ds (e.g., RUC) should be referenced. There must be a quantifiable benefit for early completion or quan- tifiable damages for late completion (27). I/D Accrual and Capping Is the total I/D amount based on a lump sum or a daily rate? I/Ds are normally calculated on a daily rate. It is also common for the incentive to be capped at a maximum amount, while disincentives are not normally capped. Lump sum I/Ds can be used as well. A note about lump sum I/Ds. The equity and effectiveness of lump sum I/Ds was an issue raised by numerous parties during the in-depth Q&A sessions. In certain circumstances, the contractors had taken extensive efforts to accelerate the project but missed the lump sum milestone date by only a few days. The STA recognized that it received nearly all of the benefit of the accelerated schedule yet the contractor did not receive any compensation for the acceleration. In another instance, the contractor came to the conclusion that the lump sum milestone could not be met when the project was approx- imately 60% complete. Consequently, the contractor stopped all efforts at acceleration and concentrated on mitigating the disincentive by documenting delay and disruption claims. The STA acknowledged the inequity and regretted the ineffective- ness of these outcomes from the use of lump sum I/Ds. As a result, the STA will rarely if ever use lump sum I/Ds on future projects. The use of lump sum I/Ds is not considered a best practice. A note about incentive capping. Some of the contractors interviewed questioned the practice of incentive capping. From the STA perspective, there are two issues to consider. First, there is an optimum combination of cost and schedule. STAs want the project to be accelerated, and they are willing to pay an incentive for acceleration, to a degree at least. The relationship between cost and acceleration, though unique for every project, is definitely not linear (Figure 17). Almost all highway construction projects have characteristics that practically limit how much they can be accelerated at a reason- able cost. In other words, acceleration costs associated with overcoming the limiting characteristics of a project would not 30 $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 0 10 20 30 40 50 60 70 80 90 100 110 120 M ar gi na l R a te ($/ da y sa ve d) A cc el er at io n Co s ts ($) Days Saved acceleration costs marginal rate ($/day saved) Figure 17. Hypothetical project acceleration cost curve.

be incremental; they may be exponential. As shown in the hypothetical example in Figure 17, the marginal rate of acceleration ($/day) increases dramatically at approximately 70 days; requesting additional acceleration beyond this point would not be cost effective. Incentive capping not only pro- vides the STAs with a predictable budget, it also puts them in a position to buy an accelerated project at a lower marginal rate, thus reducing the STAs’ risk of overspending for acceleration. Disincentive How much will the contractor be charged for failing to meet the milestone date? When daily rates are used, the total disincentive is equal to the product of the daily disincentive rate × days of late completion. Lump sum disincentives are applied when the contractor fails to meet the specified mile- stone. The disincentive amount is the same whether the con- tractor finishes 1 day late or 1 month late. Incentive If the contractor finishes early, will he/she earn an incentive? If so, what amount will be earned? The incentive portion of a contract is not always used. Some STAs use a disincentive provision only. For daily incentives, the amount earned is equal to the product of the daily incentive rate multiplied by the days of early completion. Lump sum incentives are applied when the contractor completes the specified milestone early. The incentive amount is the same whether the contractor finishes 1 day early or 1 month early. Substantial Completion What determines when the I/D milestone is completed? Very specific criteria regarding the definition of substantial completion of the I/D milestone should be provided in the specification. It does not matter if the I/D milestone is an interim completion item such as opening a ramp to traffic or if it is the total project completion. Examples of substantial completion include the following: • All pay items are completed. • Traffic is in its final configuration and no work requiring lane and/or shoulder closures is required. • The ramp is open to traffic and all traffic signals are operational. Time Adjustments Under what circumstances will the I/D milestone date be adjusted? This is one of the most complicated issues associated with time-related I/D provisions. There are I/D specifications that use a “no-excuse” clause. In its purest form, a no-excuse clause states that no time extensions will be considered in the calculation of a time-related I/D. Whether the contract time is determined by the contractor or the STA, a no-excuse clause in effect creates a complete-by date for milestone completion. Other I/D provisions treat time extensions in exactly the same manner as any other contract with the STA; standard spec- ifications are used to evaluate requests for time extensions (additional time is allowed for all excusable delays). In between the two extremes of the no-excuse clause and the day-for-day excusable delay approaches is where things get complicated. Weather is one variable that is handled in different ways. Some STAs transfer all the weather risk to the contractor, others share the risk by allowing time extensions for abnormal weather, and yet other STAs absorb all the weather risk through work day contracts. Other excusable delays such as plan errors, third party conflicts, and unforeseen conditions are treated in a variety of ways. There are I/D provisions that treat time extensions differently with respect to the incentive and disincentive. In these cases, time extensions may not be considered for the incentive milestone date but they will be considered for the disincentive milestone event. A note about no-excuse clauses. FDOT has been a leader in the implementation of innovative contracting methods. Its approach to no-excuse clauses has evolved. FDOT has what it refers to informally as an “excusable no-excuse” clause. Under this specification, excusable delays that have a total impact greater than 15% of the time remaining are considered for a time extension. This is a compromise that recognizes a con- tractor may still earn an incentive even though the contractor was delayed due to circumstances beyond contractor control. However, this approach does not recognize the cumulative effect of multiple small delays, or what is commonly referred to as disruption delays. Best practices for I/D provisions should include a shared risk approach to no-excuse clauses, contractors should not be unduly penalized for circumstances beyond their control and they should be rewarded for overcoming delays and still meeting milestone criteria. A note about specifying minimum and/or maximum B values. Specifying a not-to-exceed B value and/or a mini- mum B value is not a suggested best practice. For A + B proj- ects, some STAs specify that a contractor may not bid less than or more than a specified number of days for B. Specifying a maximum or not-to-exceed B value is seen as a method to pro- tect the STA from overpaying for an incentive in a non- competitive market or forcing a completion date to meet the STA’s objectives. Similarly, specifying that contractors may not bid less than a minimum B value is seen as a way to protect the STA from excessive bid manipulation, which may inhibit the use of innovative materials and/or processes. In short, A + B is best applied when there are adequate market forces to influence accelerated construction and when plans, specifications, and project conditions are such that the potential for bid manipula- tion is mitigated. When these conditions exist, the need for a STA to specify minimum or maximum B limits is negated. 31

32 I/D Provision Variables I/D Calendar Day I/D Working Day I/D Complete- by-Date A+B without I/D A+B with I/D A+B1+B2+Bn (interim milestone(s) and/or total duration) Lane Rental Determination of Contract Time Owner Contractor Unit of Time Calendar Day Modified Calendar Day Work Day Disincentive Accrual & Capping a/na/ndeppaC yliaD a/na/ndeppacnU yliaD a/na/nmuS pmuL Incentive Accrual & Capping a/na/ndeppaC yliaD a/na/ndeppacnU yliaD a/na/nmuS pmuL Substantial Completion All pay items n/a Partial completion n/a hourly or daily Time Adjustments No-excuse n/a Excusable delays n/a Modified no-excuse n/a Time Adjustments Applied To a/na/nylnO evitnecnisiD a/na/nevitnecnisiD dna evitnecnI Use of this variable is acceptable Use this variable with caution Do not use this variable Table 8. Matrix of I/D types and suggested variables. Types of Time-Related I/D Provisions and Suggested Combinations of Variables A list of all the variations of time-related I/D provisions used by U.S. STAs would be impractical to compile. The local modifications are so numerous that it would be diffi- cult to understand and could potentially lead to misappli- cation of I/D provisions. Instead, a matrix that identifies the suggested combinations of I/D types and variables is provided in Table 8. It is also important to determine what type of project is compatible with a time-related I/D provision. Because there

are so many types of highway construction projects, and all types have the potential to be accelerated, perhaps the better way to view this issue is to discuss what types of projects should not use a time-related I/D provision. Projects that have un- knowns such as utility conflicts, right-of-way conflicts, sizable excavation where the material type(s) have not been identified, and innovative materials and/or techniques are being specified for the first time are not good candidates for time-related I/D provisions. The primary reason is that the occurrence of excusable delays erodes the effectiveness of I/D provisions. Contractors have a distinct advantage when negotiating the time impact of an excusable delay. Implementing a no-excuse clause to compensate for this potential erosion of I/D effec- tiveness is not an equitable solution nor is it a cost effective one. Although the risk of unknowns is passed to the contractor; when it reaches a certain level, it is returned to the STA through increased costs. As one of the contractors that participated in the Phase II research stated, “ . . . if the contract provision begins to look too much like a gamble to the Contractor, the Contractor will acknowledge the potential damages by bud- geting to incur these. The likelihood that the STA then pays for the potential damages, but then never recoups the damages tends to favor the Contractor.” Table 9 contains general guidance on I/D provision type and project type. Another way to look at the applicability of I/D provisions is provided in the following example: Assume a suburban interstate reconstruction project that under normal circumstances would require 300 working days to complete. The approximate number of days saved by changing the working schedule from a 5-day work week to other alternatives is shown in Table 10. For the given example, Table 10 shows that, without accel- eration, this 300-working-day project would take approxi- mately 483 calendar days to complete. When alternative work schedules are used, the approximate calendar days to complete this hypothetical 300 working day project varies from 386 to 217 calendar days. The conversion from work- ing days to calendar days includes an adjustment for antic- ipated weather impacts. Quite often acceleration can be achieved by improved resource use and improved project management, shown in the second row of Table 10. This example is a simplified way to look at the approximate level of acceleration that can be achieved through various work week schedules. In reality, acceleration is achieved through a combination of increased working hours per week and improved resource use. Many STAs have standard specifications that do not allow work on Sundays or holidays, some even limit Saturday work. Limiting the work week and hours conflicts with the desire to accelerate a project, which is inherent in the use of an I/D pro- vision. Rather than specifying a work schedule (number of days per week) on an I/D project, STAs should specify that time will be measured by the calendar day and allow the contractor to ad- just working hours as necessary to meet its schedule. When specifying calendar days is not an available option for an I/D project, care should be taken when using I/D pro- visions other than A+B. Figure 18 shows the applicability of I/D provision types by specified work week schedule, as well as the approximate time savings that can be realized by adjusting the work week and hours. A note about multiple shifts. Specifying multiple shifts should be limited to extreme circumstances. Human resources 33 I/D Provision Appropriate Projects Lane Rental Projects where the primary concern is minimizing the disruption of traffic and the nature of work items results in predictable lane closure durations Overlay Full depth patching Dowel bar retrofit Diamond Grinding Full depth reclamation Cold recycle A+B (all variations) All types of projects except for emergency projects where competition is limited or projects that must be completed by a certain date (e.g., special event) Use whenever the STA does not have the expertise to accurately estimate the project duration and the level of acceleration that is reasonable based on the incentive offered Projects that have adequate competition to assure B durations are aggressive I/D Emergency projects where competition may be limited Projects that must be completed by a certain date (e.g., special event) Use only if the STA has the expertise or is able to obtain the expertise to accurately estimate the project duration and the amount of acceleration that is reasonable to expect based on the incentive offered Table 9. I/D provisions and appropriate projects.

are a valuable commodity to contractors. Requiring multiple shifts may severely hamper a contractors’ ability to manage their portfolios of work or prevent them from acquiring backlog that could be addressed if human resources were freed up from a multiple shift scenario. I/D Decision Process Guide The decision to incorporate an I/D provision into a contract should be considered from the onset of project planning. The following project development framework is used as a template for the I/D decision making process. Project Development Phases 1. Scoping and Environmental Approval 2. Project Design 3. Plans, Specifications, and Estimates (PS&E) 4. Contract Award 5. Construction Multiple activities related to the proper implementation of I/D provisions occur within each of these project develop- ment phases. Guidance is provided for the effective use of I/D provisions within each of the project development phases. Scoping and Environmental Approval The initial phase of project development establishes the objectives of the project. Project needs and conditions must be characterized. Environmental approval documents must be prepared and submitted. Feasible alternatives should also be identified and evaluated. Activities directly related to the use of I/D provisions include the following: • Preliminary cost estimates • Preliminary time estimates • Assessment of project impacts on the public Project Design Activities and decisions regarding I/D provisions should progress through the design phase of project development. As project designs are developed and refined, I/D provision types and variables should be identified that are compatible with the project details. The project design development phase is broken down into these three activities: • 30% design • 60% design • 90% design Plans, Specifications, and Estimates (PS&E) The final phase of project development includes the follow- ing activities directly related to the use of I/D provisions: • Final plans • Final specifications • Final cost estimate • Final time estimate This is the final opportunity to coordinate plans, specifica- tions, and time-related I/D objectives. A thorough review of 34 Work Schedul e Second Shift Efficiency Factor (adjust for estimated actual conditions) Net Working Days per Week Calendar Week s Calendar Days Weather Factor Weather Adjusted Calendar Days (adjust for estimated actual conditions) Estimated Time Reduction (%) Normal 5-da y week n /a 5 6 0 420 1.15 483 n/ a 5-day week with additional resources and/or improved management techniques n/ a 6 50 350 1.15 403 17% 0.90 to 0.80 435 to 386 6-day week n/ a 6 50 350 1.15 403 17% 0.90 to 0.80 435 to 386 7-day week n/ a 7 43 300 1.15 345 29% 0.75 to 0.65 362 to 314 *5-day week with 2 shifts 0. 6 8 38 263 1.15 302 38% *6-day week with 2 shifts 0. 6 9 .6 31 219 1.15 252 48% 7-day week with 2 shifts 0.6 11.2 188 1.15 216 55% 0.50 to 0.45 242 to 217 n/ a n /a *Shown for illustration only, specifying 5- or 6-day weeks with 2 shifts is impractical. If conditions require the contractor to utilize 2 shifts, the contractor will likely work 7 days per week to accelerate as much as possible, with the aim of returning to normal working hours more quickly. Suggested Accelerated Schedule Multiplier Suggested Contract Calendar Days n/ a n /a n/ a n /a 27 Table 10. Conversion of working day schedule to calendar days for different work schedules (using a 300-working- day project with normal production rates, normal resource allocation, and normal management techniques).

all contract documents should be accomplished to identify and correct any conflicts between the documents. Also, a pre-bid meeting should be conducted to clearly communicate the I/D provision objectives and to receive feedback from contractors. Any revisions made to the project during the PS&E phase should trigger a thorough review to ensure that the I/D provi- sion is still compatible with the revised project plans and speci- fications and that no conflicts have been created by the revisions. Contract Award Before award is made, bids should be reviewed for obvious unbalancing, which may be attributable to the use of an I/D provision. Construction Contract time charges and field changes should be thor- oughly documented for equitable calculation and assessment of any earned I/Ds. Time-Related I/D Checklist • Gauge the level of competition for bidding on the project; apply the appropriate I/D type for the estimated level of competition and offer I/D rates that will motivate accelerated construction. • Increase the pool of available bidders by allowing flexibility between the bid award and start of construction. 35 50% 60% *Specified work schedule dictates how contract time is measured. Contractors may elect to utilize a different work schedule to construct the project. *Specified Work Schedule: Applicable I/D Provision Type: A+B: I/D Working Day: I/D Calendar Day: 10% 20% 30% 40% 5 days/week with increased resources 6 days/week with increased resources 7 days/week with increased resources 7 days/week with multiple shifts I/D Complete-by-Date: Ap pr ox im at e Ti m e Sa vin gs Lane Rental Figure 18. Approximate time savings by scheduled work week/hours.

36 Preliminary Cost Estimates Objective: Determine the cost of the project Key items for consideration: Project length Number of structures Magnitude of excavation and embankment Right of way acquisition Utility relocation Methods: Contingency costs for perceived unknowns Historical data—cost per mile (and feature) for comparable project scope Output related to the use of I/D provisions: Project budget Preliminary Time Estimates Objective: Establish the schedule for project development phases Determine the approximate construction duration of the project Key items for consideration: Project length Number of structures Magnitude of excavation and embankment Existing conditions and maintenance of traffic requirements that will dictate multiple phases Right of way conflicts during construction Coordination of utility relocation Methods: For STAs in regions where climate conditions prevent performance of work throughout the year, a determination of whether the project can be completed in one construction season or whether it will require multiple construction seasons Measured mile techniques based on historical performance for similar projects Bar chart scheduling by major phase Time contingencies for unique project features and unknown conditions Output related to the use of I/D provisions: Project development schedule milestones including proposed bid opening year and month (The schedule should include allowing flexibility between the bid letting and the start date to increase competition. This can save significant cost for the STA.) Estimated project duration for construction activities (calendar days) Assessment of Project Impacts on the Public Objective: Characterize the impact the project will have on the public Key items for consideration: AADT and preliminary RUC estimate Traffic mix—commercial traffic vs. commuter/leisure traffic Detour alternatives Special events Construction noise, dust, and construction traffic on local roads Methods: Analysis of traffic data Public meeting(s) to obtain community feedback Output related to the use of I/D provisions: Brief report summarizing the project’s impact on the public, indicating whether the use of an I/D provision would be effective at reducing that impact and the degree to which an I/D provision would likely be justified by RUC (low, medium, or high)

37 30% Design Objective: Id entify project specific details that could become potential barriers to the successful use of an I/D provision Key items for consideration: Id entify and characterize the potential for project unknowns (low, medium, or high) that may result in compensable delays during construction o Unstable/unsuitable soils and other geotechnical issues o Utilities o Unique design and construction features o Right-of-way conflicts o Third party conflicts Evaluation of detour alternatives vs. accelerated construction during full closure that would dictate the use of an I/D provision Maintenance of traffic requirements Refinement of the time estimate Initial RUC estimate Methods: Geotechnical site investigation Utility location survey and relocation of utilities before the project start where possible Internal review by experienced personnel assessing the status of project unknowns and their potential for contributing to compensable delays Critical path method scheduling using project phases and major work items as the activities Output related to the use of I/D provisions: Summary document listing potential barriers to the successful use of an I/D provision that should be fully evaluated during the 60% design stage RUC estimate Maintenance of traffic criteria that will dictate project design details and construction activities (e.g., maintain 2 through lanes at all times, one lane may be closed only between 7:30 pm and 5:30 am, Ramp A may be closed for a maximum of 14 days between March 1 and April 30)

38 60% Design Objective: Final determination of whether an I/D provision is appropriate for a specific project and, if so, which type(s) of I/D provisions should be considered Key items for consideration: Compatibility of the design with the maintenance of traffic criteria developed in the 30% stage Design details and refinement of the design assumptions made during the 30% stage that affect the following items: o Unstable/unsuitable soils and other geotechnical issues o Utilities o Unique design and construction features o Right-of-way conflicts o Third party conflicts o Other items that may result in a excusable delay during construction Refinement of the time estimate Refinement of the RUC estimate Appropriate I/D provision types and variables o Level of acceleration necessary o Project budget and reasonable I/D rates that will achieve the acceleration requested Methods: Internal review by experienced personnel Constructability review by industry Ev aluate and update the summary document produced in the 30% stage; specifically address the st atus of the potential barriers to I/D implementation (resolved or unresolved) based on the 60% design details Critical path method scheduling using project phases and major work items as the activities; durations based on average production rates and design quantities Recommended I/D provision types and variables (Figure 18 and Tables 8 and 9) Output related to the use of I/D provisions: Recommendation of whether or not an I/D provision is appropriate for the project o Indicate what type of I/D provision is most suitable and which I/D variables should be used o List critical milestone events which will be subject to I/Ds (e.g., re-opening of a ramp, completion of a detour, substantial completion of Phase I) List potential barriers to the successful implementation of an I/D provision that need to be resolved in the 90% design stage

39 90% Design Objective: A project design that is compatible with accelerated construction, the maintenance of traffic criteria, and I/D provisions Key items for consideration: Compatibility of the design with the maintenance of tr affic criteria developed in the 30% and 60% stages Design details and refinement of the design assumptions made during the 60% stage that affect the following items: o Unstable/unsuitable soils and other geotechnical issues o Utilities o Unique design and construction features o Right-of-way conflicts o Third party conflicts o Other items that may result in a excusable delay during construction Baseline time estimate Accelerated time estimate Final RUC estimate and proposed I/D rates Methods: Internal review by experienced personnel Resolution of potential barriers to I/D implementation that still remain after the 60% design stage Critical path method scheduling; activities and durations should be based on project quantities, average production rates, and a normal work calendar Accelerated time estimate; based on a conservative reduction in construction time based on the desired work schedule (Table 10) Final recommendation of I/D provision type and variables (Figure 18 and Tables 8 and 9) Output related to the use of I/D provisions: Revise and refine the recommendation of whether or not an I/D provision is appropriate for the project o Indicate what type of I/D provision is most suitable and which I/D variables should be used o List critical milestone events which will be subject to I/Ds (e.g., re-opening of a ramp, completion of a detour, substantial completion of Phase I) Indicate that all potential barriers to the successful implementation of an I/D provision have been considered and are either fully resolved or present a level of risk that can be tolerated

• Avoid overloading the market with I/D projects. • Clearly define the I/D milestone(s) and the method for resolving excusable delays. Clearly state when time charges begin, when they cease, and under what conditions they may be adjusted. • For non-A + B I/D projects, evaluate whether schedule milestones can be reasonably achieved. • Perform a comprehensive site investigation and plan review to minimize the potential for excusable delays and unit price manipulation. • Coordinate plans, construction sequencing, and I/D pro- vision language with constraints imposed by local ordinances (noise, work hours, etc.). Guidelines for Maximizing the Effectiveness of I/D Provisions 1. If a competitive market exists, use an A + B I/D provision. 2. Increase the pool of available bidders by allowing flexibility between the bid award and start of construction. 3. Use an A + B I/D provision if the STA is not capable of accurately estimating the construction duration and the level of acceleration that is reasonable based on the incentive offered. 4. Cap incentives as a means to limit the STA’s exposure to overpaying for acceleration. 5. Because a capped incentive is the product of the specified daily I/D rate and the maximum number of days that the STA is willing to pay for early completion, set the daily I/D rate at a level that will motivate the contractor and also allow the greatest number of days that incentive will be paid. Offering 100 days of incentive at $10,000 per day will likely produce earlier completion than offering 50 days of incentive at $20,000 per day. 6. Use calendar days to measure time. Using working days or modified calendar days introduces ambiguity that may lead to an inequitable assessment of incentive or disincentive. 7. Base I/D rates on an RUC estimating procedure that is uniformly applied for all projects. The percentage of RUC that is used as the I/D rate should be a function of available budget, market conditions, and the level of acceleration desired. 40