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CHAPTER 7
Contractor-Based Pavement-Type Selection
7.1 Overview focuses on how to deal with the selection process under such
scenarios. In alternate contracting, particularly for projects
In traditional design-bid-build contracts, the contractor requiring long-term contractor involvement, the contractor
delivers construction services as defined in the standard plans (or a concessionaire) bears significantly greater financial
and specifications issued by the highway agency. The contrac- risks than in traditional contracts. However, as the long-term
tor assumes no responsibility for the delivered product except owner of the facility, the agency holds the ultimate responsi-
with regard to materials and workmanship quality for a limited bility toward taxpayers and road users for the performance of
time period. The agency has the entire responsibility and risk the pavement.
for design, construction, and post-construction performance Table 10 shows the agency and contractor relationship for
of the pavement. different contracting scenarios in order to provide the neces-
With the inception of alternative contracting methods, high- sary backdrop for understanding pavement-type selection in
way agencies strive for better "value for money" through spe- such scenarios. These challenges can be managed effectively
cific project objectives relating to construction time, quality,
when risks are understood, their consequences measured, and
innovation, safety, and costs. Examples include lane rental,
they are allocated to the party that can best manage them.
interim completion dates, performance warranties, and design-
build and design-buildfinance-operate contracts.
These initiatives have shifted the roles and responsibilities 7.2 Risk Assessment in Contractor-
of agencies, contractors, and designers from traditional para- Based Type Selection
digms, which have in turn resulted in the shift of risk allocation
In alternate contracting projects, the agency communicates
from agencies to contractors, thus opening up new challenges
the project goals, requirements, and deliverables to the con-
in program delivery and facility management. The alternative
tractor through contract provisions in the RFP. The contractor
contracting scenarios involving contractor-based pavement-
type selection are defined as follows: is obligated to provide the product and services specified in the
contract provisions with certain technical, cost, time, and qual-
· Design-build. Contractor is responsible for only design and ity requirements.
construction (involves materials and workmanship war- As the selection process proceeds from the preliminary engi-
ranty or other warranty types). neering phase to the selection of the final pavement type, three
· Design-build involving O&M. Contractor is responsible for distinct milestones are recognized in this process:
design, construction, M&R, and operations during the con-
cession period (involves performance thresholds established · Advertising for bids--The agency's internal assessments and
by the agency). decisions culminate with the development of contract pro-
· Performance warranty. Contractor is responsible for design, visions. The agency then communicates its requirements to
construction, and M&R over the warranty period with no the potential contractor.
operational responsibilities (involves performance thresh- · Submission of bids--The contractor's internal assessments
olds established by the agency). and the business decisions culminate in the development of
bidding strategies and bid submittal (i.e., the contractor pro-
Although these contracting approaches include much more poses a pavement-type alternative for a certain cost value in
than pavement-type selection, the discussion in this guide the submitted bid).
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Table 10. Agency and contractor roles in different contracting scenarios.
Long-Term
Design- Alternate Design- Design-Build
Process Performance
Bid-Build Bidding Build1 with O&M1
Warranty1
Identification of pavement alternatives
Development of potential alternatives at Agency Agency Agency Agency Agency
agency level
Identification of feasible alternatives at Agency Agency Agency & Agency & Contractor
project level Contractor2 Contractor
Development of a life-cycle model for pavement alternatives
Service life of initial pavement structure Agency Agency Agency & Contractor Contractor
(includes pavement design) Contractor2
Service lives of future rehabilitation Agency Agency Agency Contractor Contractor
treatments
Timing and extent of M&R treatments Agency Agency Agency Contractor Contractor
Estimation of life-cycle costs
Initial construction Agency Agency Agency & Contractor Contractor
Contractor2
Future M&R Agency Agency Agency Contractor Contractor
Salvage Agency Agency Agency N/ A N/ A
Remaining service life at hand back N/A N/A N/A Contractor Contractor
Supplementary Agency Agency Agency & Agency & Agency &
Contractor Contractor Contractor
Work zone costs Agency Agency Agency & Agency & Agency &
Contractor2 Contractor Contractor
Traffic operations4 Agency Agency Agency Agency Agency&
Contractor
Economic analysis of pavement alternatives
Develop expenditure-stream diagrams Agency Agency Agency & Contractor Contractor
Contractor2
Establish LCCA framework Agency Agency Agency & Contractor Contractor
Contractor2
Compute life-cycle costs Agency Agency Agency & Contractor Contractor
Contractor2
Analyze/interpret results Agency Agency Agency & Contractor Contractor
Contractor2
Reevaluate strategies Agency Agency Agency & Contractor Contractor
Contractor2
Economic and noneconomic evaluation of pavement alternatives
Evaluate pavement alternatives using Agency Agency Agency & Contractor Contractor
economic factors Contractor2
Evaluate pavement alternatives using Agency Agency Agency & Agency & Agency &
noneconomic factors Contractor 3 Contractor 3 Contractor3
Weigh noneconomic factors against Agency Agency Agency Agency & Agency &
economic analysis Contractor 3 Contractor3
Final selection of pavement alternative Agency Contractor Agency & Contractor Contractor
Contractor2
1
Agency may perform the pavement-type selection process independently for validating contractor-based analysis and
internal purposes.
2
Depends on the type of design-build contract.
3
Contractor may not consider factors relating to environment, road users, and society.
4
It may be difficult to develop consensus on calculating differential costs during normal traffic operations between
pavement types.
N/A = Not applicable
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· Evaluation of contractor proposal--Upon receipt of bids, not be adequate to cover all the agency risks, which can result
the agency accepts/rejects the contractor's proposal based in a significant loss to the agency. Therefore, the agency-
on its conformance to contract provisions of the project. specified criteria should be robust, realistic, and achievable
in order to attract reasonable bid prices from bidders. The
Figure 17 presents a flow chart of the steps involved in the agency should establish criteria for evaluating contractor-
contractor-based type-selection process. proposed pavement types and communicate them in the RFP
or bid documents. Input from the pavement-type selection
committee may be helpful in establishing contract provisions
7.2.1 Agency Risks
and evaluation criteria pertinent to pavements.
In contractor-based type selection, the agency process begins The agency also may use risk-sharing mechanisms such as
with the determination of an appropriate contracting method warranty ceiling or price adjustment clauses for inflation
in the preliminary phase of the project. The alternate contract- management in order to achieve a balance in risk allocation.
ing methods involving contractor-based selection typically These strategies may play a significant role in developing rea-
include design-build, design-build with O&M, and long-term sonable contract provisions and attracting balanced bids from
performance warranty methods. The contracting method contractors.
largely defines the contractor scope in the project and the asso- The agency then communicates the project requirements
ciated risks. and the evaluation criteria to potential bidders through the RFP
The agency then conducts a comprehensive risk assessment or bid documents. The agency should ensure that these require-
in the preliminary engineering phase prior to establishing ments are defined precisely in these documents.
the contract provisions. Typical agency risks include reduced
pavement performance, increased unplanned intervention,
7.2.2 Contractor Risks
cost overruns, time delays, and associated indirect effects such
as public dissatisfaction and increased work zone accidents. The contractor's risks generally are associated with the con-
The agency also can perform an independent evaluation of tract provisions of a project and the primary organizational
economic and noneconomic factors to address responsibili- objectives. To put it practically, as a private enterprise, the con-
ties toward to the taxpayers, road users, and the environment. tractor's primary organizational objectives are to increase the
Table 11 lists factors that should be considered in the agency's probability of winning the bid, meet the contractual require-
risk assessment. The process includes identification of risks, ments, minimize losses, and maximize profits. The contrac-
categorizing the probability of occurrence, determining the tor's risks depend on the following factors:
likely impact, and properly allocating risks to the parties that
can best manage them. · Construction details (constructability and specifications).
To leverage these risks, the agency uses contract provisions as · Location and site conditions (traffic, subgrade, working
control points to define the contractor's obligations. For exam- conditions, etc.).
ple, an agency may use performance criteria to leverage risks · Performance and financial elements (initial costs, future
associated with the "pavement" component of a proposed facil- needs, anticipated cost inflows, etc.).
ity. The agency then specifies performance threshold values and · Performance criteria.
scheduled monitoring to ensure a desired level of service. · Chances of a successful bid.
Whenever the measured performance fails to meet the · Incentive/disincentive structure.
requirements, the contractor is obligated to undertake repair · Agency's receptiveness to proposed strategies.
and rehabilitation work, and failure to maintain the thresh- · Contractor's experience.
old performance may result in disincentives (Molenaar et al. · Contractor's ability to control operations and subcontrac-
2005). On design-build projects, where the contractor has no tors.
responsibility for operation or maintenance, it is appropriate
for the agency to reduce its risk by stipulating the pavement The project-specific contractor risks begin with the con-
alternative(s) suitable for use or by specifying the selection tract provisions of a project. The contractor's perceived risks
criteria for the contractor to follow. In these cases the agency increase as the "unknowns" in the proposed project increase.
should clearly indicate the procedure and inputs to be used in Contractors tend to manage these perceived risks by building
the pavement design. financial contingencies into their bid price. Similarly, if the
In addressing risks, the agency may be inclined to be more project criteria are unrealistic (e.g., unreasonable quality lim-
stringent in specifying the control points. Such stringent cri- its), the contractor perceives higher risk, resulting in a higher
teria may lead to contractor bids with higher prices than the proposed price. If the final bid price is too high, it is likely that
agency's estimate. In some cases, the contract provisions may the contractor will lose the contract.
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Agency decides on contractor-
based pavement-type selection
Agency determines the
contracting type
Agency performs an impact
assessment of pavement-
related risks
Agency develops strategies
for risk management,
allocation and sharing
Agency develops contract
provisions and specifications
Advertising for Bids Agency Process
Contractor Process
Contractor reviews contract
provisions and agency
practices
Contractor performs risk
assessment and develops risk
management strategies
Contractor develops inputs for
the type selection process
Contractor follows the
selection process of a given
contracting type
Contractor selects an
alternative for the proposal
Submission of Bids Contractor Process
Agency Process
Agency evaluates contractor's
proposal
Does
contractor-
selected alternative NO
meet contract
provisions?
Agency rejects or proposes
modifications to contractor-
YES selected alternative
Acceptance of
Agency accepts contractor-
Contractor's
selected alternative
Proposal
Figure 17. Overview of the contractor-based type-selection
process.
