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OCR for page 37
37 Business-Reputation Risk and Risk Mitigation The firms made several suggestions for basic improve- ments in communication and dispute resolution where Business-reputation risk concerns damage to a firm's reputa- they do not exist now. For example, in one state a liaison tion if a pavement marking project does not turn out well. Con- committee has been established between the local chap- tractors and materials manufacturers agreed: business reputa- ter of ATSSA and the state agency to maintain commu- tion is important for maintaining good standing among current nication on current issues. Formation of a panel to clar- and future clients. Although some firms cited specific exam- ify and resolve disagreements was also proposed where ples of mishaps that could lead to damaged reputations (e.g., such mechanisms are not now formalized. (The support- asphalt-related problems discussed under technical risks), it is ing rationale was that a relatively small infraction would reasonable to generalize that any of the sources of risk dis- not disqualify a contractor from future work.) cussed earlier can have negative impacts on business reputa- The concept of qualified product lists (or their equiva- tion. The way to avoid harm to reputation is therefore to man- lents) was widely supported, together with the idea of age the various categories of risk. matching recognized materials to local weather, geog- raphy, and paving materials and practices. Suggestions for Enhancing Benefits The firms recognized the implications of a changing population, the need for wider and brighter markings, The interviewed firms offered several suggestions for improv- and the greater use of contrast markings where helpful. ing the value and benefit of warranties: Consider the wider use of incentives tied to superior pave- EUROPEAN WARRANTY EXPERIENCE ment marking performance above the warranted level. This approach would provide an additional payment of a European experience in road construction warranties has a certain percent if actual retroreflectivity in a given year long history. This experience has been addressed in several is at a level higher than that specified as the minimum studies and international scans by U.S. agencies. Although acceptable in the warranty. An incentive would encourage many of these fact-finding missions are not focused on even better visibility and longer life than that envisioned pavement marking warranties specifically, they do estab- by the warranty. It is a "do more, get more" proposition in lish differences in legal and institutional approaches between terms of lower life-cycle costs (Contractor A). (Incentive European and U.S. practice that likely influence the success provisions are much preferred to disincentives or penal- of warranty use. Following is a summary of relevant Euro- ties.) Contractor E believed in incentives to select the pean practices; a more detailed description is provided in correct material and apply it correctly. Company M2 Appendix E (web only). believed in incentives to promote good performance beyond the warranty period (which saves dollars, for An international scan team organized through the FHWA example, in years 5 to 6 of a 4-year warranty). and AASHTO in November 2002 visited five European View warranties as one method in a range of options to nations--Denmark, Germany, Spain, Sweden, and the United achieve the desired goals of a longer pavement mark- Kingdom--to review short- and long-term warranties for ing life, improved performance during this life, lower asphalt paving projects (D'Angelo et al. 2003). A number of life-cycle costs, and reduced need for road occupancy topics were investigated, including a general review of cur- to repair or replace deficient markings (Contractor B, rent and proposed approaches to road construction contracts Company M2). with warranties, risk assessment for agencies and contractors, Company M2: the ideal situation is to have complete and administration of warranty contracts. Findings and rec- control of the project--ultimately a warranty is about ommendations of the scan team's report addressed material performance, not materials. Tailored materials that they and workmanship warranties, performance warranties, best- are able to produce are able to provide required perfor- value procurement, and alternative contracting methods. A mance at a very competitive price. They are open to summary of the scan team's assessments and recommenda- broader warranty provisions, but the response would tions follows (D'Angelo et al. 2003): likely differ by state when climate, traffic volume and composition, customer expectations, and geography are Materials and workmanship warranties of various dura- factored in (e.g., mountainous terrain versus the plains). tions have been used for 30 to 40 years. The five countries Company M2 envisioned itself becoming more flexible are continuing to move toward pavement performance and innovative to deal with these opportunities. warranties and other methods to engage the contractor Engage contractors more in the pavement marking pro- more fully in assuring the quality of pavement perfor- gram; for example, consider their potential to perform mance through its full life cycle. the data collection needed to monitor the warranty. If Among these quality-oriented practices are the devel- desired, the data could also be posted on an agency's opment of partnership relationships among agencies web system for network-level review and assessment, and industry participants, the use of best-value procure- becoming a part of an agency's overall asset manage- ment techniques, and the application of alternative con- ment (Company M1, Contractor A). tract methods to conventional DBB.

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38 All of the countries visited use materials and workman- processes that yielded superior materials--that is, materials ship warranties of up to 4 years on their traditional road that could improve facility performance significantly, cost- construction projects. Denmark and Sweden use 5-year effectively, with improved safety or reduced construction time. performance warranties in their traditional contracts, while the United Kingdom employs 5-year performance A recommendation by the scan team that is relevant to this warranties in DB contracts, which have become its pre- synthesis concerns procedures for accelerated testing of new ferred method of pavement construction contracting. pavement marking materials and for product acceptance. Ger- All five countries visited use best-value rather than low- many has built a laboratory turntable on which to conduct accel- bid procurement. Among the factors considered in best- erated performance tests of selected pavement markings: tape, value contractor selection are safety, innovation, environ- temporary paint, and permanent paint. Spain has a similar facil- mental impact, the additional years of warranty protection ity, although it was not visited during this scan tour. The scan proposed by the contractor, and contractor prequalifica- team believed that this turntable concept could be considered for tion. All countries reinforced the importance of a best- application in the United States by AASHTO's NTPEP. value approach to the warranty approach, because it pro- motes trust and confidence among the parties. In response to this latter recommendation, the ATSSA Much longer warranty periods (e.g., up to 35 years) are prepared a white paper regarding consideration of a U.S. being explored in alternative types of contracts such as pavement marking test facility. The paper considered the Design-Build-Finance-Operate and Pavement Perfor- implications of an accelerated testing turntable for pavement mance Contracts, which have warranty periods of 11 to markings, raising the following issues ("Pavement Marking 20 years among the host countries. These longer war- Material . . ." n.d.): ranty periods reflect the concept that contractors have responsibility for pavement design, construction, and The need to validate laboratory test data versus actual maintenance according to performance criteria estab- conditions and performance in the field. lished by the owner agency. These alternative arrange- The ability of the turntable to represent climatic and ments are developed in collaboration with industry. topographic variability throughout the United States. The need to better define the goals of the laboratory facility and proposed use of the test results. The scan report recommended actions at the federal, state, The need to address four areas of technical concern in and local governmental levels in the United States to promote which the paper's authors believed that a laboratory greater use of warranties, including short-term (e.g., up to 5 turntable would not yield valid results: years) materials and workmanship warranties that are Lack of exposure to ultraviolet light; intended to lead to long-term performance warranties in the Laboratory preparation of pavement marking sam- future. Legislation enabling wider use of best-value procure- ples that did not mimic actual installation or applica- ment processes and contractor prequalification would be tion methods in the field; sought where needed. The report also recommended that the Standardized, constant laboratory environmental con- federal government take the lead in establishing a warranty ditions that reflect neither the full degree of variabil- resource center for use by the federal, state, and local gov- ity in conditions throughout the United States nor the ernments. It is important that state and local governments short-term cycles of fluctuation that stress highways take practical steps toward developing and implementing in the field; and materials and workmanship warranties and, when it is appro- Differences between the substrate material on the priate to engage contractors in design, short-term perfor- turntable plates that are used to simulate the pavement mance warranties. Best-value and contractor-prequalification surface versus the actual pavement substrate proper- processes could also be implemented. The report recom- ties in the field, including variability in materials mended roles for industry in education, participation in (e.g., asphalt vs. concrete) and variations in these roundtable discussions and pilot projects, and strengthening material properties among states. of its knowledge and capabilities regarding construction and The much different institutional framework and con- maintenance methods and products to support warranty use. struction industry and culture in the United States as compared with those in Europe, which raises questions A second international scan team on Superior Materials, as to whether the effective use of test results from the Advanced Test Methods, and Specifications toured four Euro- turntable can be successfully transferred to the U.S. pean countries--the United Kingdom, Denmark, Germany, legal and business environment. and the Netherlands--in July 2003 to learn about European practices in the subject topics. A particular focus concerned These issues remain under discussion. Further information ways to accelerate identification, evaluation, approval, and on European warranty practices and ATSSA's response to acceptance of new products, and to incorporate the products the 2003 international scan report is given in web-only within project specifications. The investigation also included Appendix E.