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NATIONAL
NCHRP REPORT 652
COOPERATIVE
HIGHWAY
RESEARCH
PROGRAM
Time-Related Incentive
and Disincentive Provisions
in Highway Construction Contracts
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TRANSPORTATION RESEARCH BOARD 2010 EXECUTIVE COMMITTEE*
OFFICERS
CHAIR: Michael R. Morris, Director of Transportation, North Central Texas Council of Governments, Arlington
VICE CHAIR: Neil J. Pedersen, Administrator, Maryland State Highway Administration, Baltimore
EXECUTIVE DIRECTOR: Robert E. Skinner, Jr., Transportation Research Board
MEMBERS
J. Barry Barker, Executive Director, Transit Authority of River City, Louisville, KY
Allen D. Biehler, Secretary, Pennsylvania DOT, Harrisburg
Larry L. Brown, Sr., Executive Director, Mississippi DOT, Jackson
Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern Corporation, Norfolk, VA
William A.V. Clark, Professor, Department of Geography, University of California, Los Angeles
Eugene A. Conti, Jr., Secretary of Transportation, North Carolina DOT, Raleigh
Nicholas J. Garber, Henry L. Kinnier Professor, Department of Civil Engineering, and Director, Center for Transportation Studies, University of
Virginia, Charlottesville
Jeffrey W. Hamiel, Executive Director, Metropolitan Airports Commission, Minneapolis, MN
Paula J. Hammond, Secretary, Washington State DOT, Olympia
Edward A. (Ned) Helme, President, Center for Clean Air Policy, Washington, DC
Adib K. Kanafani, Cahill Professor of Civil Engineering, University of California, Berkeley
Susan Martinovich, Director, Nevada DOT, Carson City
Debra L. Miller, Secretary, Kansas DOT, Topeka
Sandra Rosenbloom, Professor of Planning, University of Arizona, Tucson
Tracy L. Rosser, Vice President, Corporate Traffic, Wal-Mart Stores, Inc., Mandeville, LA
Steven T. Scalzo, Chief Operating Officer, Marine Resources Group, Seattle, WA
Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, MO
Beverly A. Scott, General Manager and Chief Executive Officer, Metropolitan Atlanta Rapid Transit Authority, Atlanta, GA
David Seltzer, Principal, Mercator Advisors LLC, Philadelphia, PA
Daniel Sperling, Professor of Civil Engineering and Environmental Science and Policy; Director, Institute of Transportation Studies; and Interim
Director, Energy Efficiency Center, University of California, Davis
Kirk T. Steudle, Director, Michigan DOT, Lansing
Douglas W. Stotlar, President and CEO, Con-Way, Inc., Ann Arbor, MI
C. Michael Walton, Ernest H. Cockrell Centennial Chair in Engineering, University of Texas, Austin
EX OFFICIO MEMBERS
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Peter H. Appel, Administrator, Research and Innovative Technology Administration, U.S.DOT
J. Randolph Babbitt, Administrator, Federal Aviation Administration, U.S.DOT
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Edward R. Hamberger, President and CEO, Association of American Railroads, Washington, DC
John C. Horsley, Executive Director, American Association of State Highway and Transportation Officials, Washington, DC
David T. Matsuda, Deputy Administrator, Maritime Administration, U.S.DOT
Victor M. Mendez, Administrator, Federal Highway Administration, U.S.DOT
William W. Millar, President, American Public Transportation Association, Washington, DC
Cynthia L. Quarterman, Administrator, Pipeline and Hazardous Materials Safety Administration, U.S.DOT
Peter M. Rogoff, Administrator, Federal Transit Administration, U.S.DOT
David L. Strickland, Administrator, National Highway Traffic Safety Administration, U.S.DOT
Joseph C. Szabo, Administrator, Federal Railroad Administration, U.S.DOT
Polly Trottenberg, Assistant Secretary for Transportation Policy, U.S.DOT
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*Membership as of June 2010.
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NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM
NCHRP REPORT 652
Time-Related Incentive
and Disincentive Provisions
in Highway Construction Contracts
Gary Fick
TRINITY CONSTRUCTION MANAGEMENT SERVICES, INC.
Edmond, OK
Ells Tom Cackler
Ames, IA
Steve Trost
STRATEGIC SOLUTIONS INTERNATIONAL, LLC
Sillwater, OK
Lee Vanzler
Blacksburg, VA
Subscriber Categories
Administration and Management · Construction · Economics · Finance · Highways · Planning and Forecasting
Research sponsored by the American Association of State Highway and Transportation Officials
in cooperation with the Federal Highway Administration
TRANSPORTATION RESEARCH BOARD
WASHINGTON, D.C.
2010
www.TRB.org
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NATIONAL COOPERATIVE HIGHWAY NCHRP REPORT 652
RESEARCH PROGRAM
Systematic, well-designed research provides the most effective Project 10-58(01)
approach to the solution of many problems facing highway ISSN 0077-5614
administrators and engineers. Often, highway problems are of local ISBN 978-0-309-15478-9
interest and can best be studied by highway departments individually Library of Congress Control Number 2010929164
or in cooperation with their state universities and others. However, the © 2010 National Academy of Sciences. All rights reserved.
accelerating growth of highway transportation develops increasingly
complex problems of wide interest to highway authorities. These
problems are best studied through a coordinated program of COPYRIGHT INFORMATION
cooperative research.
Authors herein are responsible for the authenticity of their materials and for obtaining
In recognition of these needs, the highway administrators of the written permissions from publishers or persons who own the copyright to any previously
American Association of State Highway and Transportation Officials published or copyrighted material used herein.
initiated in 1962 an objective national highway research program Cooperative Research Programs (CRP) grants permission to reproduce material in this
employing modern scientific techniques. This program is supported on publication for classroom and not-for-profit purposes. Permission is given with the
understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA,
a continuing basis by funds from participating member states of the
FMCSA, FTA, or Transit Development Corporation endorsement of a particular product,
Association and it receives the full cooperation and support of the method, or practice. It is expected that those reproducing the material in this document for
Federal Highway Administration, United States Department of educational and not-for-profit uses will give appropriate acknowledgment of the source of
any reprinted or reproduced material. For other uses of the material, request permission
Transportation.
from CRP.
The Transportation Research Board of the National Academies was
requested by the Association to administer the research program
because of the Board's recognized objectivity and understanding of
NOTICE
modern research practices. The Board is uniquely suited for this
purpose as it maintains an extensive committee structure from which The project that is the subject of this report was a part of the National Cooperative Highway
Research Program, conducted by the Transportation Research Board with the approval of
authorities on any highway transportation subject may be drawn; it the Governing Board of the National Research Council.
possesses avenues of communications and cooperation with federal,
The members of the technical panel selected to monitor this project and to review this
state and local governmental agencies, universities, and industry; its report were chosen for their special competencies and with regard for appropriate balance.
relationship to the National Research Council is an insurance of The report was reviewed by the technical panel and accepted for publication according to
procedures established and overseen by the Transportation Research Board and approved
objectivity; it maintains a full-time research correlation staff of
by the Governing Board of the National Research Council.
specialists in highway transportation matters to bring the findings of
The opinions and conclusions expressed or implied in this report are those of the
research directly to those who are in a position to use them. researchers who performed the research and are not necessarily those of the Transportation
The program is developed on the basis of research needs identified Research Board, the National Research Council, or the program sponsors.
by chief administrators of the highway and transportation departments The Transportation Research Board of the National Academies, the National Research
and by committees of AASHTO. Each year, specific areas of research Council, and the sponsors of the National Cooperative Highway Research Program do not
needs to be included in the program are proposed to the National endorse products or manufacturers. Trade or manufacturers' names appear herein solely
because they are considered essential to the object of the report.
Research Council and the Board by the American Association of State
Highway and Transportation Officials. Research projects to fulfill these
needs are defined by the Board, and qualified research agencies are
selected from those that have submitted proposals. Administration and
surveillance of research contracts are the responsibilities of the National
Research Council and the Transportation Research Board.
The needs for highway research are many, and the National
Cooperative Highway Research Program can make significant
contributions to the solution of highway transportation problems of
mutual concern to many responsible groups. The program, however, is
intended to complement rather than to substitute for or duplicate other
highway research programs.
Published reports of the
NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM
are available from:
Transportation Research Board
Business Office
500 Fifth Street, NW
Washington, DC 20001
and can be ordered through the Internet at:
http://www.national-academies.org/trb/bookstore
Printed in the United States of America
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COOPERATIVE RESEARCH PROGRAMS
CRP STAFF FOR NCHRP REPORT 652
Christopher W. Jenks, Director, Cooperative Research Programs
Crawford F. Jencks, Deputy Director, Cooperative Research Programs
David A. Reynaud, Senior Program Officer
Megan Chamberlain, Senior Program Assistant
Eileen P. Delaney, Director of Publications
Kami Cabral, Editor
NCHRP PROJECT 10-58(01) PANEL
Field of Materials and Construction--
Area of Specifications, Procedures, and Practices
Donald J. Miller, Wisconsin DOT (Chair)
Jennifer Balis, Federal Highway Administration
Mark Brown, Zachry Construction Corp., San Antonio, TX
Kevin J. Dayton, Washington State DOT
Donn E. Hancher, University of Kentucky
David Kent, New York State DOT
Rita B. Leahy, Asphalt Pavement Association of California
Daniel Liston, Virginia DOT
Eugene E. Mallette, California DOT
David G. Manning, St. Catharines, Ontario
Ananth Prasad, HNTB Corp., Tallahassee, FL
Peter A. Kopac, FHWA Liaison
Frederick Hejl, TRB Liaison
AUTHOR ACKNOWLEDGMENTS
This report is the product of research conducted under NCHRP Project 10-58(01) "Time-Related
Incentive and Disincentive Provisions in Highway Construction Contracts." Gary Fick, Vice-President of
Trinity Construction Management Services, Inc., served as the Principal Investigator and primary author
of the report. Other individuals contributing to the research project include Tom Cackler, Consultant;
Steve Trost, President, Strategic Solutions International, LLC; and Lee Vanzler, Consultant.
The research team would like to acknowledge the participation and cooperation of six state departments
of transportation (DOTs) that contributed greatly to the research effort. Their assistance was critical to
the success of the research project: California Department of Transportation (Caltrans), Florida Depart-
ment of Transportation (FDOT), New York State Department of Transportation (NYSDOT), Ohio
Department of Transportation (Ohio DOT), Oklahoma Department of Transportation (Oklahoma DOT)
and Utah Department of Transportation (UDOT).
Along with these agencies, thanks are extended to 12 contractors who provided the research team with
input and feedback regarding the impact of incentive/disincentive (I/D) provisions on their operations.
The contractors were solicited to participate with the promise of anonymity to ensure unbiased feedback.
Finally, the research team wishes to express gratitude to the NCHRP staff and the NCHRP Project 10-
58(01) panel.
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FOREWORD
By David A. Reynaud
Staff Officer
Transportation Research Board
This report will be of interest to state and local highway agency construction managers
and contractors with regard to learning about best practices of time-related incentive and
disincentive contract provisions and their effect on staffing levels, productivity, project cost,
quality, contract administration, and the contractor's operations and innovations. The
report also presents a decision process guide to use as a template for crafting the
incentive/disincentive provisions.
Transportation agencies are under increasing pressure to reduce the duration of highway
construction projects. This pressure stems from the desire to reduce traffic delays and other
inconveniences to the traveling public. To reduce the duration of construction projects,
many agencies have turned to the use of time-related incentive and disincentive contract
provisions. There is a need to better understand the use of these provisions in highway con-
struction contracts, including the type of contract provisions, the extent to which they are
used, their record of success, the criteria used to determine when they are appropriate, the
most appropriate provisions to select, the methods used to determine the dollar amount of
these contract provisions, and their effects on the quality of the constructed project.
Under NCHRP Project 10-58(01), Trinity Construction Management Services, Inc.
developed recommendations for effective use of time-related incentive and disincentive
provisions in highway construction contracts. The researchers reviewed domestic and inter-
national literature and collected information from highway agencies and construction con-
tractors on the use and effectiveness of these provisions. After analyzing the effectiveness of
these provisions, encountering both effective and ineffective applications, the researchers
identified and quantified, where possible, the impacts of these provisions on both highway
agencies and contractors' staffing levels, productivity, project cost, quality, contract admin-
istration, and contractor operations and innovations. The researchers created a decision
process guide for determining the most suitable type of incentive or disincentive contract
provision, and for determining the dollar amount to be applied to these provisions and the
conditions under which they are the most appropriate. The report also identifies best prac-
tices for mitigating negative impact of these contract provisions.
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CONTENTS
1 Summary
5 Chapter 1 Project Background, Objectives,
and Research Approach
10 Chapter 2 Discussion of I/D Impacts
on Project Factors
24 Chapter 3 Estimating Incentives and Disincentives
27 Chapter 4 Guidelines for the Effective Use
of I/D Provisions
41 Chapter 5 Evaluating I/D Effectiveness
42 References
43 Appendix A Bibliography
48 Appendix B Summary of I/D Provisions
55 Appendix C Research Results
