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35 contractor assumes primary responsibility for both design and Contractor selects an alternative for the proposal construction teams and thus contributes to the elimination of the conflicts between them and the acceleration of the con- struction schedule. Design-build projects are awarded based Agency validates on either lowest price (with or without adjustments for techni- contractor selection process cal value) or best value for a fixed price. An agency may define the contractor's role in pavement- Agency evaluates contractor- type selection in one of the following ways: selected alternative for compliance with its economic Agency-specified. The agency specifies the pavement type and noneconomic goals in the proposal and specifies either the final thickness of each pavement layer or the minimum thickness (or mini- mum compacted depth). The contractor is allowed to Contractor- make necessary design adjustments for certain conditions NO Agency rejects or proposes selected alternative (e.g., frost protection). In any event, the contractor must modifications to contractor- meets contract goals and provisions? selected alternative follow the agency-specified pavement type and thickness design. Agency-preferred. The agency specifies the preferred YES pavement types as well as any pavement types that are Agency accepts contractor- not allowed. The contractor must select a pavement type selected alternative from the choice the agency provides. The agency may ask the contractor to perform thickness design for the Figure 18. Agency evaluation of contractor selected pavement type in accordance with the standard pavement type. procedures. Agency-permitted. The agency allows the contractor to select the pavement type and perform structural design. The The agency can use the following criteria in evaluating the agency requires the contractor to provide detailed docu- contractor-selected pavement type: mentation of the design inputs, a narrative on how the inputs were determined, the design methodology, and the Cost feasibility and reasonableness of alternatives. outputs. M&R schedule. Structural design. Design-build projects usually involve contractor services Innovative/new practices proposed. only in the design and construction phases, typically with a Quality management. limited warranty period; they usually do not extend to other Construction time and the impact of work zone to traffic. phases of the pavement life cycle, such as M&R. On proj- Constructability. ects with a shorter turnover period and limited contractor responsibility, the agency assumes the responsibility for Based on the evaluation, the agency can accept or reject the managing future performance risks. Therefore, the agency contractor's proposed pavement type or initiate negotiations can stipulate the pavement alternative(s) to be used in a for further modifications. When the pavement portion is a project or specify the criteria, such as the life-cycle strate- relatively small part of the project, scoring on the pavement gies, design criteria and inputs for LCCA, to be followed in design will not be a determining factor in the award of the the selection process. These stipulations help to ensure that project. In such cases, and where a low bid award is mandated the contractor builds a pavement that meets the agency's by law, the agency should consider specifying the acceptable expectations. pavement designs in the RFP. In the agency-specified scenario, the agency performs the pavement-type selection using its own design methodology, 7.5 Pavement-Type Selection in life-cycle strategies, and cost criteria. While specifying the Alternate Contracting Projects final pavement type, the agency is encouraged to allow for incentives for contractor innovation and competition that 7.5.1 Design-Build Projects would result in long-term cost savings. In the agency-preferred In design-build projects, an agency executes a single contract and agency-permitted scenarios, contractors follow the agency's for both design services and construction of a project. The process in pavement-type selection. The contractor can follow

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36 Scenarios for design-build projects Figure 19. Pavement-type selection for design-build projects. the process presented in Figure 19. The individual steps of the Due to the complexity of these projects, there are several risk selection process include: factors associated with finance, revenue, macroeconomics, and facility management that may have a direct or indirect bearing Step 1. Identifying feasible alternatives from the RFP when on the pavement-related costs. These risks may have a "subjec- restrictive, or the agency's pool of alternatives when tive" influence on the contractor's decision making. Assump- permissive (see Figure 3). tions pertaining to the following factors contribute to these Step 2. Following agency-allowed practices or RFP instruc- risks: tions in developing pavement life-cycle strategies for alternatives (see Figure 4). Traffic volume projections. Step 3. Following agency-allowed practices or RFP instruc- Revenue from tolls. tions in conducting LCCA (see Figure 8) and evalu- Maintenance costs. ation using economic and noneconomic factors (see Operational costs. Figure 15). Financing costs. Step 4. Selecting the most-preferred alternative (see Fig- Commodity prices. ure 18). Inflation and discount rates. Given the contractor's risks and responsibilities in design- 7.5.2 Design-Build Projects with O&M build with O&M, agencies generally allow the contractors to These projects involve a greater role for the private sector select the preferred pavement type. The contractor can fol- through publicprivate partnerships in areas such as project low the process presented in Figure 20. The individual steps conceptualization, financial planning, project financing, O&M, of the selection process can include: toll collection, congestion pricing, and design and construction. Design-build projects with O&M typically are larger and more Step 1. Reviewing contract provisions to identify potential complex than traditional projects. risks (see Figure 17 for Steps 1 through 4). Variants of design-build projects with O&M include: Step 2. Performing risk assessment to develop risk manage- ment strategies. Design-buildoperatemaintain. Step 3. Reviewing the agency's pavement-type selection prac- Design-buildfinanceoperate. tices, design methodology, and pavement performance Long-term lease. data.

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37 Agency decides on Step 7. Conducting LCCA using contractor-specific inputs design-build project with (see Figure 8) and evaluation using economic and operations and maintenance noneconomic factors (see Figure 15). Step 8. Selecting the most-preferred alternative (see Fig- Contractor reviews agency ure 18). practices, contract provisions and performance criteria 7.5.3 Performance Warranty Projects Contractor performs risk Pavement warranties require significant decision making by assessment both agencies and contractors, as they contribute additional risks and benefits to pavement life-cycle costs. There are three Contractor develops types of warranties practiced in the highway industry: materi- pavement life-cycle strategies als and workmanship, short-term performance, and long-term for agency-specified performance. Table 12 provides a comparison of the important performance criteria aspects of the three warranty types. Contractor performs LCCA and evaluation using Materials and Workmanship Warranty economic and noneconomic factors In projects involving materials and workmanship war- ranty, the contractor is responsible only for material prop- Contractor-based selection of erties and workmanship issues that contribute to poor the most-preferred alternative pavement performance during the warranty period. Since the agency is responsible for pavement-type selection, pave- Figure 20. Pavement- ment design, and LCCA, the agency-based process can be type selection for followed. design-build projects with O&M. Short-Term Performance Warranty Step 4. Developing contractor-specific inputs for use in the In short-term performance warranty projects, the agency is selection process. responsible for pavement-type selection and structural design Step 5. Selecting feasible alternatives considering project- requirements. Some agencies, however, may allow the con- specific constraints (see Figure 3). The contractors tractor to select the pavement type in addition to design and may select alternatives from the agency's pool or pro- construction aspects, and thereby allow for innovation. The pose their own alternatives. contractor is responsible for material design, any improvements Step 6. Developing pavement life-cycle strategies for selected needed in materials and structural designs, better quality con- alternatives using contractor-specific inputs and trol, and performance issues during the warranty period. Short- agency-specified performance criteria (see Figure 4). term warranties are used in both traditional design-bid-build Table 12. Comparison of pavement warranty types. Materials & Aspect Short-Term Performance Long-Term Performance Workmanship Typical period 24 years 510 years 1020 years Agency-specified minimum Agency-specified minimum Agency's current standard structural design, material Type of materials and construction specifications for specific design, materials, and specifications requirements acceptable for treatment construction requirements project acceptable for project Agency Structural design, material Structural design, evaluation Evaluation responsibility design, evaluation Correct defects in Material design, quality Structural design, material Contractor pavement caused by control, and pavement design, quality control, and responsibility elements within their performance for warranty pavement performance for control period warranty period Initial: construction activities Initial: construction activities Acceptance of In accordance with project agency's normal practices Final: after specified Final: after specified warranty warranty period is completed period is completed

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38 maintenance activities over an extended period (typically, Options for performance warranty projects between 10 and 20 years). This type of warranty is used in both traditional and alternate contracting projects, where some projects may involve substantial financial investment from the contractor. However, the contractor generally is not Long-term Short-term Materials and given facility operations control. performance performance workmanship In these projects, the contractor is responsible for pavement- (10 to 20 years) (5 to 10 years) (2 to 4 years ) type selection, structural design, materials selection and Contractor reviews Contractor reviews design, quality control, pavement maintenance, rehabilitation agency practices and agency practices and strategies, and performance. Contractor-based type selection performance criteria performance criteria is considered vital to long-term performance warranty proj- ects, as it allows the contractor to select the most appropriate Contractor performs Contractor performs and cost-effective strategy for meeting performance require- risk assessment risk assessment ments. The agency is responsible for establishing realistic per- formance thresholds, monitoring performance and, in some Contractor develops Agency-based cases, sharing risks. Establishing realistic and achievable per- pavement life cycle pavement-type formance thresholds based on historical data is critical. Agen- strategies for selection cies use performance specifications for acceptance in these agency -specified performance criteria projects. The contractor can follow the process presented in Figure 21. Contractor performs The individual steps of the selection process can include: LCCA and evaluation using Step 1. Reviewing contract provisions to identify potential economic and non- economic factors risks (see Figure 17 for steps 1 through 4). Step 2. Performing risk assessment to develop risk manage- ment strategies. Contractor-based selection of Step 3. Reviewing the agency's pavement-type selection prac- most-preferred alternative tices, design methodology, and pavement perfor- mance data, Figure 21. Pavement-type selection for performance Step 4. Developing contractor-specific inputs for use in the warranty projects. selection process. Step 5. Selecting feasible alternatives considering project- contracts and alternate contracts including design-build and specific constraints (see Figure 3). The contractor multiparameter bidding. may select alternatives from the agency's pool or pro- The agency specifies performance thresholds to monitor pose their own alternatives. pavement performance during the warranty period. In short- Step 6. Developing pavement life-cycle strategies for selected term performance warranty projects, the agency-based alternatives using contractor-specific inputs and pavement-type selection process can be followed (see Fig- agency-specified performance criteria (see Fig- ure 21). In addition, the contractor may need to perform risk ure 4). assessment to incorporate risk premiums in the bid price. Step 7. Conducting LCCA using contractor-specific inputs (see Figure 8) and evaluation using economic and Long-Term Performance Warranty noneconomic factors (see Figure 15). In long-term performance warranty projects, the contractor Step 8. Selecting the most-preferred alternative (see Fig- is responsible for performance issues and planned/unplanned ure 18).