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29 CHAPTER FOUR CONTRACTING PROCEDURES INTRODUCTION selves well to maintenance contracting and are often called capacity contracts because the owner has a given capacity to The highway industry is based on construction contracting. satisfy microsurfacing requirements without having to prepare Microsurfacing is no different than any other technology when individual sets of biddable construction documents for each it comes to the regulation of how public highway agencies can new project (North Atlantic Division 2006). These have a long procure these services. Previous research has shown that con- history of use in the federal sector, but are rarely used by state tract policies, procedures, and regulations directly affect con- and provincial DOTs. struction costs (Ohio DOT 2007; Erwin and Tighe 2008). Because contracts are used to allocate risk among the parties to a contract, understanding how design, construction, and CONTRACT ADMINISTRATION performance risk is treated in microsurfacing contracts it is necessary to understand its market pricing and the depth of the The survey contained a specific section devoted to contract pool of qualified contractors. Finally, competition affects con- administration procedures. The output is shown in Table 22. struction costs and the lack thereof can put a pavement preser- The first few questions were designed to gauge the impact on vation and maintenance treatment that is economical in one competition for microsurfacing projects. It has been reported market out of monetary reach in another. that some U.S. and Canadian agencies do not employ certain treatments in their pavement preservation programs because This chapter will review findings as they relate to the poli- of a dearth of qualified contractors (Erwin and Tighe 2008; cies, principles, and guidelines currently being followed by FHWA 2010a). Thus, being able to generate an adequate level state transportation agencies to contract for microsurfacing. It of competition is one parameter in the pavement treatment will deal with the various contracting procedures that are used selection process. by the various agencies that responded to the questionnaire. The distribution of performance risk will also be discussed in Microsurfacing Competition this chapter. Additionally, those contractual mechanisms to ensure responsibility will be identified and discussed as they The first noticeable trend is in the volatility of the agencies' are found both in the literature and in the questionnaire microsurfacing programs. To be able to bid on a microsurfac- responses. It will include the following: ing contract, the contractor has to have the appropriate equip- ment and personnel with enough experience to be able to Contract types, achieve the production rates necessary to submit a competitive Microsurfacing programs and their impact on com- bid. The business case that is to be made for the investment in petition, capital equipment and training has to be offset by a reason- Training and certification programs for contractors and able expectation to be able to recoup that investment with a inspectors, profit using it on agency microsurfacing jobs (Small Business Warranties, and Administration 2009). Thus, more agencies answered "we Microsurfacing contract provisions. rarely know how much microsurfacing we will use from year to year" than any other possible answer combined with the "no CONTRACT TYPES knowledge" answers (to total 10 of 36 replies) suggests that developing the capability to bid on microsurfacing contracts Transportation infrastructure contracts have traditionally been from those agencies is speculative at best. awarded using a low bid process that is often required by leg- islation at the state and local level. The survey identified two The uncertainty in how much microsurfacing will be let primary types of low bid contracts being used: unit price and from year to year will have a chilling effect on competition indefinite delivery indefinite quantity (IDIQ). Although they (Small Business Administration 2009). This phenomenon is also use unit price, the Missouri and New York DOTs both validated by the fact that 33 of 36 total responses indicated indicated using IDIQ contracts. IDIQ contracts are pre-priced they normally had 3 or fewer bidders and 22 of those contracts bid without knowing the exact project locations or responses indicated that they did not receive an "adequate amounts (North Atlantic Division 2006). These lend them- number of qualified bidders." Adding to that is that virtually

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30 TABLE 22 SUMMARY OF SURVEY GENERAL CONTRACTING INFORMATION Question U.S. Canada Total Change in Annual Microsurfacing Program Volume? Virtually the Same Amount 5 3 8 Fluctuates +20% Each Year 6 1 7 Fluctuates +50% Each Year 1 1 2 Rarely Know How Much Each 9 1 10 Year No Knowledge 7 2 9 Typical Number of Bidders? 1 to 3 25 7 32 4 to 6 2 1 3 7 to 9 1 0 1 Adequate Number of Qualified Bidders? Yes 12 2 14 No 14 6 20 No Opinion 2 0 2 Prequalified List of Eligible Bidders? Yes 11 0 11 No 14 8 22 Do Not Know 3 0 3 Required Training/Certification of Contractor Personnel? Yes 1 1 2 No 19 7 26 Do Not Know 8 0 8 Required Training/Certification of Agency Personnel? Yes 5 1 6 No 20 6 26 Do Not Know 3 1 4 all responding agencies outsource their microsurfacing work, sionals need a better understanding of pavement preservation which leads to the conclusion that most of the U.S. and Cana- and maintenance benefits and the different maintenance cat- dian agencies do not believe they have adequate competition egories" (Zaniewski and Mamlouk 1999). among qualified microsurfacing contractors for their pro- grams. The survey responses from those agencies that indi- cated satisfaction with the current level of competition came Microsurfacing Training and Certification from agencies that also reported no more than a 20% fluctua- tion in their annual programs. This suggests that a possible The majority of the respondents answered the question regard- remedy is for each agency to set aside a specific minimum ing a prequalified microsurfacing bidders list in the negative. amount of microsurfacing inside its annual pavement preser- Comparing that response with the response reporting gen- vation and maintenance program to create an incentive for eral agency dissatisfaction with the average number of bidders highway contractors to invest in the equipment and training leads to a concern that perhaps the small number of poten- necessary to increase the level of competition in this impor- tial bidders makes developing a microsurfacing prequalifi- tant sector. cation program moot. Additionally, only two agencies require specific microsurfacing training or certification for their con- tractors. The Virginia DOT has its own slurry seal contractor Microsurfacing Qualifications certification program that applies to microsurfacing contrac- Table 22 also contains the survey results regarding required tors. It consists of a 4-h class covering materials, equipment, types of qualifications and/or training that would make a proper placement procedures, and specifications, and it fin- contractor eligible to be awarded a microsurfacing project. ishes with an examination. Manitoba has a general paving Finally, information on agency personnel microsurfacing contractor certification program. These programs consist of a qualifications, if any, was also sought. The rationale for these series of learning modules that cover the quality management two sets of questions was to provide current information in requirements for each program. A slight increase is noted for support of the FHWA's Pavement Preservation Expert Task training and certification of agency personnel, with six agen- Group's strategic plan in which one goal was to develop a cies answering positively to that question. Kansas, Nevada, pavement preservation certification program for both con- Saskatchewan, Virginia, and Wyoming use in-house training tractor and agency personnel (FHWA 2010a). The idea of programs and Missouri combines their in-house training with contractor and agency workforce development specifically in the web-based National Highway Institute pavement preser- pavement preservation and maintenance has been around for vation course (NHI Course Number FHWA-NHI-131110A) at least a decade. One paper stated that: "Highway profes- for its microsurfacing personnel.