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5 CHAPTER 1 Project Background, Objectives, and Research Approach Problem Statement Appendix A for individuals and agencies needing an in-depth perspective on incentive-based contracting methods that goes STAs are under increasing pressure to reduce the duration beyond the scope of this research. of highway construction projects. This pressure stems from Next, information on the use of time-related I/D provisions the desire to reduce traffic delays and other inconveniences to was sought from 50 U.S. STAs, the District of Columbia, and the traveling public. To reduce the duration of construction Canadian provinces. This effort involved an initial telephone projects, many STAs use time-related I/D contract provisions. call to identify the appropriate contact in each STA. This call There is a need to better understand the use of time-related was followed by an e-mail that provided the STA contacts with I/Ds in highway construction contracts. The following issues a brief overview of the research project. were addressed in this project: The final step for the STA information and data collection task was prepared by the research team as follows: The type of time-related I/D contract provisions used in highway construction contracts and the extent to which Develop an e-mail interview form to address the project they are used. team's questions about the use of time-related I/D provisions The success of time-related I/D contract provisions. by STAs. Criteria used to determine when time-related I/D contract Meet with the Oklahoma DOT to review the draft e-mail provisions are appropriate and criteria to select the most interview form for clarity and applicability to STA personnel appropriate provisions. who would be responding to the request for information. Methods used to determine the dollar amount of the time- Revise the e-mail interview form based on feedback from related I/Ds. Oklahoma DOT. The effects of time-related I/Ds on projects. Beta test the e-mail interview form with Oklahoma DOT. Telephone all the STA contacts and follow up with the e-mail Research Objective containing the interview form. The objective of this research was to develop recommen- This step of the research yielded 32 completed interview dations for the effective use of time-related I/D provisions in forms (Figure 1). highway construction contracts. Multiple criteria were used to identify the key sources of information to target for the in-depth follow-up investiga- tions. First was the level of experience that the STAs had with Research Approach time-related I/D provisions. This level was determined using The initial step of this research effort was a comprehensive the responses to the e-mail interview form (each STA pro- review of published literature related to the use of time-related vided the number of I/D projects over the last 2 fiscal years) I/D provisions. More than 375 articles, research reports, and (Figure 2). other publications related to time-based I/D contract provi- The STAs were grouped by level of experience (Table 1). sions were identified. After a thorough review, 164 published Results of the literature search were also used as a factor documents were deemed pertinent to this research. A bib- to determine which states would be chosen for in-depth liography containing most of these documents is included as investigations. Florida, Ohio, and New York had published

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6 STA Interview Responses Figure 1. Province and states responding to the time-related I/D e-mail interview. 120 100 100 80 Number of Projects 65 60 56 53 50 50 43 40 39 40 24 24 20 20 20 16 15 13 10 7 7 7 6 6 5 4 3 3 3 2 2 1 0 FL SC OH NY CA VA MO TN OK IN MI NE UT AR MN VT PA DE GA LA IA MD ND OR CO KS NV ID ME RI TX ON State Transportation Agency Figure 2. Number of I/D projects by STA (last 2 fiscal years).

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7 Table 1. I/D experience level by group. with the STA in-depth investigations would provide an avenue to compare and contrast contractor and STA experiences Experience Level on the same project or similar projects under the same I/D Number of I/D Projects (last 2 fiscal years) States provision. 60 to 100 FL & SC Based on responses to the e-mail interview form, it was 40 to 60 OH, NY, CA, VA, MO & TN evident that the opportunities to obtain meaningful quantita- 20 to 40 OK, IN, MI, NE & UT tive data such as project duration, relative cost comparisons, I/Ds paid or charged from the STAs would be limited. A review of the documents obtained in the literature search provided in-house documentation and guidance on their use of time- access to limited quantitative analyses. It was also known that related I/D provisions (5, 6, 7, respectively). This weighed a few of the STAs were tracking time-related I/D metrics. heavily for their inclusion as interviewees for the in-depth Therefore, the research team decided to execute the in-depth investigations. The fact that each of these STAs had established follow-up investigations with the following strategy: guidance about their use of I/D provisions could mean that these STAs had recent experiences or insight valuable to the In-depth interviews would be conducted with three distinct results of this project. There were also numerous published groups in each state (1) STA headquarters staff, (2) STA field articles on California's use of time-related I/D provisions office staff, and (3) a contractor recommended by the STA. (8, 9, 10, 11). Again, it was evident from these documents that Each group would be interviewed separately to avoid with- California had been through a fairly thorough self examina- holding information as a result of a perceived influence tion on the use of time-related I/D provisions. Florida, Ohio, from superiors or the perception that an agency-contractor New York, and California were chosen for in-depth investi- relationship could be negatively impacted. gations based on their level of experience with I/D provisions For each interview group, a standard form was completed and existing documentation of their practices. by each participant. These forms were developed so the Oklahoma and Utah were the final two states chosen for "experts" could rank/rate their perceptions about time- in-depth interviews. Oklahoma was included because its related I/D provisions and their impacts on quality, cost, experience level was consistent with the goal of having diversity safety, innovation, contract administration, and staffing. within the in-depth group. But the primary factor that led to The results of these ranking forms provided the opportunity Oklahoma's inclusion was its willingness to provide feedback to compare and contrast the impacts of I/D provisions and assist in the development of the in-depth investigation between the groups. materials. Its cooperation assisted dramatically in the devel- Interview participants were allowed to offer detailed answers opment of in-depth investigation techniques used for the during a question and answer (Q&A) session. Each Q&A remaining STAs. Finally, Utah was included based on the session was initially guided by a standard list of questions goal of having diverse experience levels and geographical and that generated discussion among the participants. The goals climatological diversity in the follow-up investigation task of the Q&A session were to (Table 2). Obtain an understanding of how I/D provisions are used Time-related I/D information was gathered from contractors by a specific STA. in the six states corresponding to the STA in-depth interviews. Offer the experts an opportunity to relate their experiences The research team believed a blanket solicitation for informa- with I/D provisions. tion to contractors across the country would be unproductive Gather more detailed information about responses to and would likely yield biased responses. It was determined that the ranking form. on-site interviews with contractors would be coordinated Anecdotally document "lessons learned" on I/D projects. with the STA in-depth investigations. Matching contractor Capture best practices related to the use of time-related experiences and perspectives about time-related I/D provisions I/D provisions. Table 2. SHRP-LTPP environmental zones and in-depth investigation states. SHRP-LTPP Environmental Zone In-Depth Investigation States Wet-Freeze Ohio and New York Wet-Nonfreeze California, Florida and Oklahoma Dry-Freeze California and Utah Dry-Nonfreeze California and Oklahoma

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8 Request copies of current I/D provisions used by the reviewed to complete this list. All practical means were used STA, quantitative measures that the STA uses for track- to make this list comprehensive; however, it is possible that ing time-related I/D projects, and internal unpublished some STAs have used I/D provisions that were not discovered reports related to time-related I/D projects. in this effort. Connecticut, Massachusetts, New Hampshire, and West Virginia were the only U.S. STAs the research team During Phase I, contractors from the six states were inter- could not document as using time-related I/D provisions on viewed about I/D impacts. Although a great deal of beneficial at least one project. information was gathered during those interviews, there is The following notes provide further insight into STA such a diversity in the way that time-related I/D provisions perceptions about I/D provisions. These notes were either are implemented by STAs that it was difficult to compile a provided by the STA in its response to the e-mail interview or consensus of time-related I/D impacts from the contractors' they were transcribed from telephone conversations between perspective. Because of this limitation, the research team STA contacts and a member of the research team. received direction from the NCHRP Project 10-58(01) panel during Phase II. The panel's request was to better capture Utah--"We have found that time related incentives do not contractor perspective on time-related I/D provisions. To do add costs to our project, plus they are a good method of so, the research team decided that a different approach would defining a realistic contract time since the contractor is be most effective. Thus, a position paper was prepared that usually involved in deciding how much time he needs to do synthesized the contractor research results from Phase I with the work. On the other hand, incentives can increase the the research team members' knowledge of I/D impacts on the "tension" between client and contractor because the con- highway contracting industry. This position paper allowed tractor is more inclined to try and get every time extension contractors to provide anonymous feedback on how accurately he feels he deserves to protect earning the incentive. This the position paper captured the contractors' perspective on can create conflicts." I/D impacts. Issues related to innovation, cost, market factors, Delaware--"There are problems with time related I/Ds that risk allocation, and safety were presented in the position paper. are done for political reasons, they are counter-productive. Eight contractors were solicited to provide feedback on the Eventually other contractors want to be included. I don't position paper. Five responses were obtained from different particularly endorse their use unless there are closures or contractors than those used for the Phase I contractor research. very high AADTs involved. The problem created by these The overall level of agreement with the research team's attempt incentives is that it becomes a hassle for the construction to capture contractor perspectives was excellent (Figure 3). administrators. In order for I/Ds to work to everyone's benefit, the plans and specs have to be near perfect." Nevada--"In general, I/D provisions have been successful Use of I/D Provisions by in Nevada. Typically incentives are capped and are less than State Transportation Agencies 3 to 5% of the total project cost. Their use has been limited A list of STAs that currently use or have used time-related to critical projects due to impacts on the infrastructure I/D provisions is shown in Table 3. Along with the 32 STAs system (high traffic volumes) or critical items (e.g., school that responded to the e-mail interview, additional sources were openings, impacts to tourist routes, special events, etc.)." strongly agree Level of Agreement agree not sure disagree strongly disagree 1 2 3 4 5 6 Contractor Responses Median Response by Contractor (All 10 Issues) Median (All Contractors) Figure 3. Median contractor response to "Contractor Perspective on Time-Related Incentive and Disincentive Provisions for Highway Construction" prepared by the research team.

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9 Table 3. States and province with documented use of time-related I/D provisions (June 2007). State/Province Source State/Province Source Alabama in ternet search Nebraska e-mail in terview fo rm Alaska telephone cont act Nevada e-mail in terview fo rm Arizon a literature search (12) New Jersey literature search (13) Arkansas e-mail in terview fo rm New Mexico literature search (13) Califor ni a e-mail in terview fo rm New York e-mail in terview fo rm Colorado e-mail in terview fo rm North Carolina literature search (13) Delaware e-mail in terview fo rm North Dakota e-mail in terview fo rm Florida e-mail in terview fo rm Ohio e-mail in terview fo rm Georgia e-mail in terview fo rm Oklahoma e-mail in terview fo rm Hawaii internet search Oregon e-mail in terview fo rm Idaho e-mail in terview fo rm Pennsylvania e-mail in terview fo rm Illinois literature search (13) Rhode Island e-mail interview fo rm Indiana e-mail in terview fo rm South Carolina e-mail in terview fo rm Iowa e-mail in terview fo rm South Dakota literature search (13) Kansas e-mail in terview fo rm Tennessee e-mail in terview fo rm Kentucky literature search (13) Texas e-mail in terview fo rm Louisiana e-mail in terview fo rm Utah e-mail in terview fo rm Maine e-mail in terview fo rm Vermo nt e-mail in terview fo rm Maryland e-mail in terview fo rm Virg in ia e-mail in terview fo rm Michigan e-mail in terview fo rm Washington literature search (14) Minnesota e-mail in terview fo rm Wisconsin literature search (13) Mississippi literature search (13) Wyom in g literature search (15) Missouri e-mail in terview fo rm District of Columbia telephone cont act Montana in ternet search Ontario, Canada e-mail in terview fo rm Ontario, Canada--"The Ministry of Transportation of Kansas--"Don't use incentives much because payment Ontario generally does not use incentive/disincentive for comes out of their general budget." contract completion. Instead we rely almost exclusively on Maryland--"Been using for years but often loopholes." Liquidated Damage provisions both for working day and completion date contracts. However, we do use incentive/ Further details of the findings from this research project disincentive for many interim dates and time constraints, are provided throughout the report. Additionally, the I/D occasionally with multiple incentive/disincentive within discussion and guidelines presented herein are the product of the same contract. Example is attached; however we have synthesizing information from published literature, research many for many different situations." findings, and the researcher team's expertise.