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34 Table 11. Factors suggested for risk analysis. Design-Build Design-Build with O&M Performance Warranty Initial costs Agency's pool of alternatives Agency's pool of alternatives Supplementary Performance criteria Performance criteria costs Service life of initial pavement Service life of initial pavement Work zone costs Service life of structural Service life of structural Noneconomic rehabilitation rehabilitation factors Type and timing of maintenance Type and timing of maintenance and functional rehabilitation and functional rehabilitation Initial costs Initial costs Commodity price inflation Commodity price inflation Supplementary costs Supplementary costs Future maintenance costs Future maintenance costs Future costs for rehabilitation Future costs for rehabilitation Future operational costs Future operational costs Work zone costs Work zone costs Noneconomic factors Noneconomic factors Inflation, discount factors, and Inflation, discount factors, and macroeconomic risks macroeconomic risks Projected traffic volume Projected traffic volume Projected revenue Additional costs for warranty requirements (for surety bonds as in additional bid price, $/sq. yd) Note: In design-build scenarios, where the contractor is not responsible for O&M or long-term performance warranties, the contractor would follow the agency-specified process in developing life-cycle strategies. The contractor's risk assessment process includes careful Just as for agency risk assessment, contractors may ana- reviewing of the project criteria specified in the RFP or bid doc- lyze the factors listed in Table 11 to assess their own risk. uments, identifying potential risks, categorizing the probabil- The contractor should take a holistic view of the contract ity of occurrence, determining how significant the impact provisions, results of risk assessment, and the available risk- would be if the risk occurred, and developing strategies to mit- sharing mechanisms into consideration in customizing the igate the risks. inputs. The contractor risk assessment can be utilized in establish- ing statistical distribution of risk factors to characterize their 7.3 Developing Inputs variability or uncertainty. For example, the inflationary risks of for Contractor-Based commodity prices may help to set the standard deviation of Selection Process future costs, while the assessment of incentives/disincentives While the overall framework of the agency-based pavement- for measured pavement performance may prompt the con- type selection process is applicable to contractor-based tractor to focus more on maintenance strategies and less on pavement-type selection, contractor-based pavement-type rehabilitation. selection also needs to incorporate the impact of increased risks Statistical characterization of risk factors may be unfeasible in determining the inputs for the process. These factors can be if sufficient data are unavailable. In such cases, the contractor incorporated in the proposed framework of contractor-based can make adjustments based on the results of sensitivity analy- selection under the evaluation of feasible alternatives using sis and Monte Carlo simulation. Contractors should make use economic and noneconomic factors. of probabilistic risk assessment for determining inputs, which When identifying inputs for the selection process, the con- is similar to the probabilistic LCCA process. tractor may find it advantageous to begin by reviewing the agency's pavement-type selection practices, pavement design 7.4 Agency's Evaluation of methodology, and pavement management data. The agency- Contractor-Based Selection based pavement-type selection process can provide a solid starting point. The agency-based selection process reflects The agency evaluates the contractor's proposed pavement local practices on inputs such as M&R and future impacts to type for its conformance to contract provisions of the project, traffic, and the agency is likely to evaluate contractors' techni- as illustrated in Figure 18. The agency can validate the assump- cal proposals based on how well they address local condi- tions and analysis criteria used in the contractor's selection tions. In some alternate contracting projects, the agency process, as well as whether the contractor's selection meets the may provide specific guidance in the RFP on pavement-type overall project goals. Once the contractor submits the pre- selection criteria, such as pavement life-cycle strategies and ferred pavement type, the agency should check for compliance design methodology. with its economic and noneconomic goals.