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42 agency enforcement of contract requirements, and failure pavement marking projects. These suggestions included the to maintain proper communications among all parties. For wider use of incentives for superior-performing pavement these reasons, the interviewed firms all supported effec- markings, with a balanced administrative approach that com- tive, realistic specifications that are properly enforced. bined realistic incentives and penalties; considering war- Such an approach, they believed, maintains a level play- ranties as one of a range of available options to achieve ing field among competing contractors during the bid improved performance and cost-effectiveness; having materi- process and a uniform expectation of quality during the als manufacturers and contractors engaged to a greater degree construction and the warranty period. in all aspects of project performance; improved communica- · Administrative risks relate to problems with either the tion and dispute resolution procedures; and greater use of warranty specifications themselves or their administra- quality control mechanisms such as approved product lists. tion by the agency. These problems make it difficult to complete a job properly and create stresses in the rela- tionships among agency, contractor, and materials man- FHWA CONTRIBUTIONS ufacturer. Technical risks resulting from unrealistic An important role in the development and promotion of pave- specifications and ineffective enforcement of technical ment marking warranties has been played in the United States requirements have been discussed previously. Other by the FHWA. The FHWA helped sponsor the early trials of administrative issues that might create risks include proj- pavement marking and other highway construction warranties ect bond requirements, ineffective enforcement of safety through its Special Experimental Projects 14 (SEP-14) pro- requirements, lack of uniformity in agency administra- gram. The FHWA promotes the use of road construction war- tion of warranty provisions across multiple jobs, and lack ranties on U.S. federal-aid highway projects and supports dis- of a competent evaluation of contractors' qualifications semination of web-based information on such warranties. The and suitability for future work. FHWA is meeting a Congressional mandate to develop mini- · Financial risks comprise two types of risks identified mum acceptable retroreflectivity thresholds for pavement by interviewed firms: (1) having insufficient reserves to markings. It is also conducting pavement marking demonstra- fund warranted repairs, and (2) having an imbalanced tion projects in Alaska and Tennessee to improve pavement cash flow in which agency payments to contractors are marking durability, resulting highway safety, environmental not in step with the pace at which project costs are protection, and related agency procurement processes. incurred. The interviewed firms regarded mitigation of the first risk as requiring good technical knowledge of likely pavement marking performance (including the EUROPEAN WARRANTY EXPERIENCE factors affecting that performance) through the warranty evaluation period. This understanding helps guide the The review of European warranty practice was based on recent firms in maintaining sufficient reserves to fund repairs international scans of highway agencies that were sponsored that might be needed. The second risk points to the need by the FHWA and AASHTO, and a review of other literature. for a shared understanding between agency and contrac- The European warranties that were addressed applied primar- tor on a fair and reasonable financial structure for a ily to pavements and thus represented general findings rather multi-year warranty project. Such a structure could pro- than those for pavement markings specifically. Nevertheless, tect the interests of agency and contractor alike in pro- these findings established differences in legal and institutional viding a proper incentive for satisfactory pavement approaches between European and U.S. practice that influence marking performance, while reimbursing contractors for the success of warranty use. costs incurred on a fair and timely payment schedule. This issue will likely grow in importance as more agen- European experience in road construction warranties has a cies begin using warranty specifications and as warranty long history. Materials and workmanship warranties of various performance evaluation periods grow longer. durations have been used for 30 to 40 years. European coun- · Risks to business reputation concern damage to a tries are continuing to move toward performance warranties firm's reputation if a pavement marking project does not and other methods to engage the contractor more fully into turn out well. Contractors and materials manufacturers assuring the quality of asset performance through its full life agreed: business reputation is important for maintaining cycle. Institutional differences between Europe (and to some good standing among current and future clients. Because degree Canada) and the United States include a less litigious any of the risks discussed earlier can have negative relationship between agencies and contractors in Europe, and impacts on business reputation, mitigating this risk greater European use of bid alternatives, contractor testing, becomes a matter of managing the spectrum of risks and end-result (or performance-based) specifications rather identified previously. than method-based (or prescriptive) specifications. Several European countries use best-value rather than low-bid pro- In addition to the risk-mitigation steps mentioned earlier, curement. European agencies reinforced the importance of a the interviewed firms suggested several ideas that they best-value approach to the implementation of warranties, believed could enhance the benefits of using warranties on because it promotes trust and confidence among the parties.