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

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