Guide for Pavement-Type Selection (2011)

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27 6.1 Overview Alternate pavement-type bidding is a procurement process in which the contractor is permitted to select one of two or more pavement-type alternatives specified by the agency. The agency develops pavement life-cycle strategies, computes life- cycle costs, and identifies preferred pavement types for inclu- sion in bid documents of a project. The contractor then selects the final pavement type for the project from the alternatives listed in the bid documents. Typically, the agency uses an adjustment factor (C) in bid evaluation to account for the dif- ferences in future costs between alternatives. Best-value alternate differential bidding, a variant of alter- nate bidding, allows for specifying superior alternatives at an agency-determined price differential along with a baseline configuration. The contract award is based on the lowest responsive bid that includes the sum of the base bid price and differential price. Table 9 illustrates how the lowest responsive bid is selected in alternate bidding and best-value alternate dif- ferential procedures. 6.2 Proposed Pavement-Type Selection Process Because the agency establishes the alternatives for alternate pavement-type bidding, it is suggested that the pavement- type selection follow the agency’s process. Additional steps are needed to facilitate successful implementation of the procedure. Active involvement of various stakeholders in the process development will help agencies in developing consen- sus for best practices and troubleshooting conflicts during implementation (Temple et al. 2004). The agency can follow these steps in developing a pavement-type selection process for alternate bidding projects: 1. Identify potential pavement-type alternatives. This step involves developing a formalized process for identifying a broad group of alternatives using the approach discussed in Sections 3.2 and 3.3. The pavement- type selection committee identifies a list of alternatives to be considered in the selection process based on experi- ence within the state or a region within the state. 2. Identify feasible pavement-type alternatives. This step involves developing criteria for identifying feasi- ble alternatives at the project level from the broad group of alternatives, through engineering review and noneconomic selection factors. This approach is discussed in Section 3.4. 3. Establish suitability criteria of alternate bidding projects. Factors such as the project type, project size and scope, market trends of commodity prices, relative competitive- ness of the pavement alternatives, and others influence the suitability of alternate bidding. The agencies should determine their own criteria for executing this proce- dure in paving projects. Alternate bidding may not be suitable for all types of paving projects but is suitable for the following: • No preferred alternative: Alternative bidding is appro- priate for projects when there is no clear preference among alternatives. The agency can use a “cutoff” differ- ence based on total costs or the alternate-preference screening matrix to select equivalent alternatives. • Periods of commodity price uncertainty: Alternative bidding is suitable when the prevailing commodity prices (at the time of contract letting) may not reflect historical material and construction costs, especially during periods of uncertain price trends in the market. In such instances, agencies can use this procedure to manage some of the risks in market price fluctuations, as the type selection is made at the time of contract letting. • Appropriate application: Alternative bidding is more advantageous where the pavement cost items impacted by the alternate bid are likely to influence the final deter- mination of the lowest responsive bidder for the project. • Lack of historical price data for pavement alternatives: Alternative bidding can be used when an agency lacks historical price data for certain alternatives. C H A P T E R 6 Alternate Pavement-Type Bidding

4. Develop pavement life-cycle strategies. The life-cycle strategy of an alternative consists of assign- ing an initial structure (whether new or rehabilitated) and probable M&R activities covering the selected analysis period. The initial structure of the equivalent alternatives should be designed for the same design conditions, such as the traffic level, reliability, and life, and for similar terminal- performance thresholds. In other words, the structural designs should be developed to result in the same magni- tude of relative distresses and roughness at the end of the design period. Realistic sequencing of the timing and extent of M&R activities is vital to the determination of the LCCA adjust- ment factor. The agency should develop realistic M&R strategies based on the approach described in Section 3.5. 5. Develop guidelines for conducting LCCA. This step is identical to the approach discussed in Chap- ter 4. Since LCCA plays a vital role in developing equiva- lent alternatives and bid evaluation, consensus among the stakeholders on a realistic framework is emphasized. 6. Develop criteria for establishing equivalency of design alternatives. Equivalency of pavement-type alternatives is a primary factor in making the decision to use the alternate bidding procedure (Office of Pavement Technology 2008). Equiv- alent alternatives are designed to perform equally, pro- vide the same level of service, over the same performance period, and have similar life cycle costs (FHWA 1999). Because of the difficulties in developing truly equivalent alternatives, the equivalency is established on the basis of life cycle costs. Highway agencies typically use a “cutoff” difference ranging up to 20 percent of total costs in selecting equiva- lent alternatives. The cutoff difference should be estab- lished based on the average differences in the bid costs of previous alternate bid contracts. If sufficient data is not available for establishing the cutoff value, local experience with the life-cycle cost differences of alternatives in design- bid-build projects should be taken into consideration. As an alternate approach, the alternative-preference screen- ing matrix discussed in detail in Section 6.3 can be used for identifying equivalent alternatives. 7. Establish criteria for determining bid adjustment factor. While it is feasible to design the initial structure of pave- ment alternatives for the same conditions using appropri- ate inputs, the required M&R activities, their timing, and associated costs will be different for equivalent alternatives over the life of the pavement. This results in differences in the future cost streams of the various alternatives. There- fore, to compare the final costs of alternatives on a level basis during bid evaluation, an adjustment factor that reflects the present value of the difference in future costs may be used. The agencies should predetermine the cost compo- nents they wish to include for estimating future costs. For instance, some agencies may include only the direct cost components of future M&R activities, while other agen- cies may include associated user delay costs. Therefore, to avoid any conflicts, a consensus is required among stake- holders on the approach to be used in determining future costs for a bid adjustment factor. 8. Use comparable project specifications. The agency should ensure that the project specifications do not encourage bias in the contractor’s selection of one alternative over another. As outlined in the following list, the contractual provisions should provide comparable opportunity for each alternative. • Specifications of material quantities: Agencies should consider approaches that balance materials quantity risk between the pavement-type alternatives. Using different methods to specify/quantify alternatives may result in different levels of materials quantity risk. • Commodity price adjustment: The agency should not allow adjustment factors for material prices, as it is dif- ficult to administer equal treatment to various alternate materials. • Incentive/disincentive provisions for quality: The agency should identify any potential bias in using a quality-based incentive/disincentive structure for 28 Table 9. Bid evaluation of alternate bidding contracts. Alternate Bidding Best-Value Alternate Differential Bidding Lower of Lower of OR Lower of Note: PV = present value, FC = future costs, C = bid adjustment factor, D = differential bid price. low Baseline bid low Alt1 bid + D(Alt1) low Alt2 bid + D(Alt2) low Alt1 bid + PV(FC Alt low Alt2 bid + PV(FC Alt …. …. low Altn bid + D(Altn) low Alt1 bid low Alt2 bid + C C=PV(FC Alt2)- PV(FC Alt1) 1) 2)

different pavement types. The use of end-result or performance-related specifications helps to reconcile any inherent biases in these areas. Performance-related specifications also promote contractor innovation and allow for more opportunity for competitive bidding. The selected alternatives should be comparable and competitive to provide reasonable chances for contrac- tors to win the bid with either of the alternatives. How- ever, it should be recognized that alternatives cannot always be competitive, especially during periods of sig- nificant price fluctuation. 9. Involve industry in developing and reviewing the proposed process. There may be concerns and conflicting interests among stakeholders over many aspects of alternate bidding proce- dures, such as the appropriateness of rehabilitation strate- gies, LCCA inputs, and other design-life assumptions. Upon drafting the process, the agency should actively involve the stakeholders in reviewing and finalizing the proposed process. 10. Implement the alternate bidding procedure. The agency can evaluate the proposed process through implementation projects. Efforts should be made to iden- tify lessons learned, stakeholder feedback, and impending issues. Based on the evaluation, the agency can further refine the process for use in future projects. Agencies also should develop a mechanism for periodic evaluation and review of the process. 6.3 Selection of Alternatives for Alternate Pavement-Type Bidding The alternative-preference screening matrix should be used for identifying equivalent pavement types. As discussed in Chapter 4, when an alternative meets the economic criteria and there are no noneconomic risks that outweigh its inclusion, then the pavement type is considered a qualified alternative. When there are two or more qualifying alternatives, their advantages and disadvantages are analyzed using the screening matrix. The alternatives are ranked and assigned numerical scores. Based on the final scores, the screening matrix indicates whether there is a clear preference among the alternatives. When there are no significant differences among them, the alternatives may qualify for alternate bidding. Some level of engineering judgment may be necessary in establishing the equivalency of alternatives. Figure 16 presents a flow chart of this procedure. Figure 16. Selection of equivalent pavement-type alternatives for alternate bidding. YES Evaluate alternatives using Alternative Preference Screening Matrix Next step: Plans, specifications and estimate Is one Alternative significantly preferred over others? Qualifying alternatives (see Figure 15) Select most- preferred alternative Consider preferred alternatives for alternate bidding Is project suitable for alternate bidding? Select preferred alternatives Develop cost adjustment factor from LCCA YES NO NO 29