National Academies Press: OpenBook

Guide for Pavement-Type Selection (2011)

Chapter: Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects

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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Suggested Citation:"Appendix C - Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects." National Academies of Sciences, Engineering, and Medicine. 2011. Guide for Pavement-Type Selection. Washington, DC: The National Academies Press. doi: 10.17226/14538.
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Page 62

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57 This appendix illustrates an example of the contractor-based selection in design-build O&M projects using the process pro- posed in Chapter 7. Needs Statement Assume that an agency is procuring a design-build O&M contract for reconstructing a 15-mile segment of a six-lane urban interstate highway. The facility serves as the primary route of the growing urban traffic, and the agency would like to reduce traffic disruptions as much as possible. The agency has identified funding mechanisms for the project and has decided to procure contractor services for design, construc- tion, operations, and maintenance phases of the project for a period of 40 years. The agency is in the process of developing contract provisions addressing pavement-related needs for inclusion in the RFP. Agency’s Internal Assessment As noted, the agency has identified the contracting type and the overall scope of contractor involvement in this proj- ect. While the agency retains the financing responsibilities of the project, the agency plans to procure contractor services in design, construction, and facility management with a single contract. The agency performs an impact assessment to identify pavement-related risks in accomplishing project goals and successful execution of the contract. Based on the evalua- tion, the agency identifies strategies to manage them. The agency’s evaluation culminates with contract provisions in the RFP that specify requirements for the project and the bid proposal. The key aspects of the process are summarized as follows: • Pavement-type alternatives—The agency evaluates the pavement types currently used in its jurisdictions to deter- mine if any of these alternatives should not be considered for this project. The agency considers all alternatives to be adequate and finds none of them to be restricted in this project. The agency also makes a decision to allow consid- eration of other pavement alternatives that are neither rou- tinely used nor restricted in the RFP, if proposed by the bidders. The agency prepares a statement reflecting this provision such as: The agency considers the following alternatives adequate for this project: – Alternative 1 (conventional) – Alternative 2 (conventional) – Alternative 3 (long-life) – Alternative 4 (long-life) – Alternative 5 (composite) If proposed by the bidder, the agency will also consider another pavement type and determine its suitability and accept- ability to the agency’s pavement-type selection committee. • LCCA program—The agency requires bidders to conduct an LCCA of the feasible alternatives used in the selection process. The bidders are required to submit documenta- tion of the process identifying the inputs and assumptions used. The agency recommends that bidders use FHWA’s RealCost software. • Pavement design procedures—The agency allows bidders to use any nationally recognized procedure in developing pavement structural designs, but detailed documentation of the design calculations must be provided for approval and/or acceptance. The documentation should include all design inputs that are used to arrive at the pavement selections, including a narrative on how the inputs are determined. • Service-life estimates of initial pavement and structural rehabilitation—The agency recommends that bidders follow agency guidelines in developing expected service lives of various pavement types and rehabilitation activi- ties, as these estimates were developed using the agency’s A P P E N D I X C Example of Pavement-Type Selection in Design-Build Operations & Maintenance Projects

pavement management data. The agency will allow bid- ders to make appropriate adjustments to these estimates but must be provided documentation supporting any deviations from the agency guidelines. The agency will then evaluate the reasonableness of these deviations. • Type and timing of maintenance and functional rehabilita- tion—The agency recommends using the agency’s guide- lines in determining the type and timing of maintenance and functional rehabilitation activities. Should the bidders deviate from the standard agency practices, documentation supporting the deviations is necessary. The agency will then evaluate the reasonableness of these deviations. • Initial costs—The agency has established standard protocols for bid analysis to determine if the bids are reasonable and responsive or if re-advertisement is necessary. If needed, the agency may compare the bid prices against historic cost models. • Commodity prices, inflation, and macroeconomic risks— The agency typically uses Consumer Price Index (CPI) based inflation forecast models to predict short-term inflationary effect on materials, labor, and equipment. Considering the ineffectiveness of these models in predicting long-term trends, the agency recognizes the need for risk sharing with the potential contractor. Since the contract is executed for a 40-year period, the sharing of macroeconomic risks is nec- essary to get reasonably priced bids. The agency develops the following strategies for managing monetary risks associated with pavements: – The agency will pay the contractor a supplement if the future rehabilitation costs exceed 10 percent of the bid amount. – The agency will revise payments annually for scheduled maintenance, consistent with inflationary trends. – The agency prefers a pavement type with lower future costs and overall lower life cycle costs. • Supplementary costs—The agency finds no risks in supple- mentary costs. • Futurecostsformaintenanceand rehabilitation—The agency will make adjustments to payments to reflect increases in commodity prices, prevailing labor rates, and equipment only. The agency will not pay for any unscheduled mainte- nance or rehabilitation not presented in the proposal. • Work zone costs—Since the facility is expected to carry heavy traffic, the user cost component is expected to be sig- nificant. The agency develops the following strategies for managing work zone related risks: – The agency identifies 10-hour road closure as the stan- dard strategy for traffic maintenance. Based on this strat- egy, the agency develops a baseline scenario for project completion and determines daily road user costs. – The agency then allows the bidders to propose alternate work-zone lane-closure strategies in their submittal. The agency will evaluate the strategy proposed in each submittal against the baseline scenario and score them accordingly. – The agency will specify a lane rental fee for this project. The rental fee will be determined based on the daily road user costs for the selected work zone strategy. – The agency prefers a pavement type with minimal future interventions. • Noneconomic factors—The agency did not find any risks with noneconomic factors when the pavement types in the agency’s list are used. • Projected traffic volume—The agency forecasts the traffic volume to grow between 2 and 6 percent annually. The agency requires the contractor to use a 4 percent growth rate for developing structural designs and user costs. Should the traffic growth exceed this value, the agency will make finan- cial adjustments to the contract. • Performance criteria—The agency requires the contractor to maintain the pavement at a threshold performance level. The contractor is required to maintain the facility at all times meeting the following criteria: – IRI ≤ 140 inches/mile. – Average rut depth in wheel paths ≤ 0.25 inches. – Faulting ≤ 0.25 inches. The agency requires the contractor to submit the results of pavement condition surveys conducted annually. • Hand-back criteria—On hand back, the agency requires the contractor to demonstrate that the pavement has at least 5 years of remaining useful life. The agency also spec- ifies the method to be adopted in calculating the remain- ing useful life. • The agency establishes evaluation criteria for contractor- proposed pavement types (see Table C1). The agency uses an adjusted bid method (life-cycle cost of an alternative/ technical score) for approving the contractor-proposed pavement type. The agency then develops the RFP that includes identified strategies and requirements and advertises for bidding. 58 Evaluation Factor Criteria Weights Overall technical feasibility Pass/Fail Not required Feasibility of initial costs Pass/Fail Not required Adequacy of structural designs Pass/Fail Not required Adequacy of M&R activities Pass/Fail Not required Annual maintenance costs Numerical rating 10% Future rehabilitation costs Numerical rating 50% %03gnitarlaciremuNstsocresU Future work zone disruptions Numerical rating 10% Table C1. Agency’s evaluation criteria.

Contractor’s Selection Strategies Upon the release of the RFP, the contractor reviews the contract provisions and the standard agency practices. The contractor evaluates potential risks and develops bidding strategies accordingly. The key aspects of the contractor’s risk assessment and strategies are summarized as follows: • The contractor evaluates the adequacy of the agency-specified alternatives and the potential for considering other pavement types. The contractor takes into consideration various influ- encing factors, such as the contract period, hand-back crite- ria, performance criteria, and estimated service lives and costs of the initial structure and subsequent M&R activities. • The contractor reviews the agency’s M&R guidelines and practices and identifies if any adjustments are warranted. • The contractor reviews the agency’s service-life estimates and identifies any potential adjustments. The contractor considers adding a risk factor to the service-life estimates of alternatives to account for statistical variations in the agency’s estimates. • The contractor reviews the agency’s LCCA parameters. To account for the uncertainties in the inputs, the contractor prefers using the probabilistic approach for LCCA. • Although the agency will share the economic risks associ- ated with future rehabilitation costs, the contractor intends to add a risk factor to account for uncertainties in projected future costs. • The contractor does not include a risk factor for M&R costs, as the agency shares the risk of economic inflation. Similarly, the initial costs do not have a built-in factor for economic inflation. • The contractor recognizes that user costs will play a signifi- cant factor in determining the winning bid. The contractor performs demand-capacity analysis of the existing traffic patterns to identify optimal lane closure strategies. • Since the lane closure timings have an impact on project completion time and road user costs, the contractor con- siders performing further analysis for strategy selection. • The contractor recognizes the importance of shorter com- pletion time and fewer traffic disruptions for maintenance and rehabilitation activities. Contractor’s Selection of Inputs Based on the contractor’s selection strategies, the contrac- tor finds it necessary to make adjustments to the agency’s practices as follows: • LCCA framework: – The agency’s process uses a 40-year period, but the con- tractor adjusted this value to 45 years to account for the 5-year remaining useful-life requirement specified in the hand-back criteria. – The contractor uses the probabilistic approach for LCCA. – The agency currently uses a discount rate of 3 percent. The contractor reviews the historic discount factor pub- lished in OMB Circular A-94 and proposes a triangular distribution for discount factor with 4 percent as the most likely value and 2.5 and 6.5 percent as the mini- mum and maximum values, respectively. – The NPV will be used, to be consistent with the agency practice. • Service-life estimates: The contractor selects a triangular distribution with a 10 percent variation on either side of the agency’s estimated values. For instance, if the expected service life of a pavement is 20 years, the contractor will use a triangular distribution with 20 years as the most likely value and 18 and 22 years as the minimum and maximum service lives, respectively. • Initial and maintenance costs: The contractor does not use risk factors for initial and scheduled maintenance costs. However, the agency will make annual adjustments to main- tenance costs with inflation. • Future rehabilitation costs: The contractor determines that a 10 percent risk factor to future costs will be optimal to minimize the future losses and maximize the chances of winning the bid. In the LCCA, the contractor uses a proba- bilistic distribution for future rehabilitation costs that varies uniformly between the projected estimate and the 10 per- cent above it. For instance, if the expected rehabilitation cost of an alternative is $150,000, the contractor will select a probabilistic distribution in the FHWA RealCost software that varies uniformly between $150,000 and $165,000. • Project completion time: The contractor estimates the proj- ect completion time of initial and subsequent rehabilitation activities assuming a normal production rate associated with 10-hour lane closure (see Table C2). • User costs: The contractor considers investigating feasible options for the following maintenance of traffic strategies: – 5- to 7-hour/day lane closure (only 1 lane open during closure). – 10-hour/day lane closure (only 1 lane open during closure). 59 Activity Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5 Initial construction 30 35 30 36 40 Rehab 1 7 1 21 1 4 Rehab 2 20 2 0 0 4 Rehab 3 7 3 0 0 0 Note: Number of work zone days required to complete 5 miles of two lanes. Table C2. Number of required work zone days.

– 16-hour/day lane closure (only 1 lane open during closure). – 24-hour/day lane closure (2 lanes open during closure). The weekend closure is not considered a feasible option due to lack of alternative routes to handle the heavy traffic on this segment. • Using data from similar projects, the contractor deter- mines the project completion time based on the productiv- ity rate of 10-hour lane closure. The contractor develops production and cost factors to account for the effect of var- ious lane closure strategies on project completion time and costs, respectively (see Table C3). Contractor Selection Process The contractor follows the agency’s process for pavement- type selection. The key steps are summarized as follows. In this example, it is assumed that there will not be any non-economic risks associated with the agency-specified pavement types con- sidered in the selection process. Therefore, the steps involving the evaluation of alternatives using noneconomic factors and the alternative preference screening matrix are not required. Step 1. Identify Feasible Alternatives for the Project The contractor identifies the following alternatives feasible for this project: • Alternative 1 (conventional). • Alternative 2 (conventional). • Alternative 3 (long-life). • Alternative 4 (long-life). • Alternative 5 (composite). Step 2. Develop Pavement Life-Cycle Strategies The contractor performs structural designs and identifies life-cycle strategies for each alternative (see Figure C1 through Figure C5). The contractor takes the performance criteria into account in developing life-cycle strategies. The intervention strategies are planned based on the expected deterioration trends of each pavement type in service. Step 3. Compute Life-Cycle Costs The contractor then conducts LCCA using FHWA Real- Cost. The undiscounted direct costs for various life-cycle activities of alternatives are presented in Figure C1 through Figure C5. The direct costs are calculated for 10 lane-miles, while the user costs are calculated for 10-hour lane closure of two lanes in a 5-mile work zone. Table C4 summarizes the NPV of various alternatives obtained from the probabilistic analysis. Alternative 4 has the lowest life cycle costs, followed by Alternative 5 and Alterna- tive 3. Table C5 presents the summary of estimated user costs of all alternatives obtained from the probabilistic analysis. These estimates are based on the 10-hour lane closure schedule and associated project completion schedule. Alternative 3 has the lowest user costs, followed by Alternative 4 and Alternative 2. Based on both life-cycle costs and user costs, the contractor considers Alternative 4 as the preferred pavement type. 60 Lane Closure Duration Number of Lanes Open During Closure Production Factor* Cost Factor** 7-hour/day 1 3 1.05 10-hour/day 1 1 (Normal) 1 16-hour/day 1 0.5 1.15 24-hour/day 2 0.25 1.25 * Project completion time = production factor times normal completion time ** Contractor costs = cost factor times contractor cost under normal completion schedule Table C3. Production and cost factors for various lane closure duration. Figure C1. Pavement life-cycle strategies for Alternative 1. Figure C2. Pavement life-cycle strategies for Alternative 2.

61 Figure C3. Pavement life-cycle strategies for Alternative 3. Rehab 1* 5 years life $820,000 to $902,000 Figure C4. Pavement life-cycle strategies for Alternative 4. Figure C5. Pavement life-cycle strategies for Alternative 5. Statistics Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5 Mean NPV $7,670,000 $7,270,000 $6,920,000 $6,540,000 $6,860,000 Minimum NPV $6,700,000 $6,740,000 $6,370,000 $6,470,000 $6,550,000 Maximum NPV $8,780,000 $7,940,000 $7,790,000 $6,780,000 $7,240,000 90th Percentile $8,210,000 $7,570,000 $7,270,000 $6,600,000 $7,040,000 Percent difference in mean NPV 17% 11% 6% 0% (lowest) 5% Note: The values in this table indicate direct contractor costs for constructing 10 lane-miles (two lanes in a 5-mile work zone section). Table C4. Life-cycle cost estimates of feasible alternatives. Statistics Alternative 1 Alternative 2 Alternative 3 Alternative 4 Alternative 5 Mean NPV $372,000 $287,000 $271,000 $287,000 $330,000 Minimum NPV $312,000 $282,000 $246,000 $287,000 $323,000 Maximum NPV $441,000 $293,000 $315,000 $288,000 $338,000 90th Percentile $405,000 $290,000 $287,000 $287,000 $334,000 Percent difference in mean NPV 37% 6% 0% 6% 22% Note: The values in this table indicate estimated user costs for a 10-hour closure of two lanes of a 5-mile work zone section. Table C5. User cost estimates of feasible alternatives.

62 Lane Closure Duration Production Factor Daily User Costs for Initial Construction User Costs for the Entire Project Duration 7-hour/day 3 $4,010 $144,000 10-hour/day 1 $7,960 $287,000 16-hour/day 0.5 $394,190 $14,190,000 24-hour/day 0.25 $168,760 $6,075,000 Note: The values indicate estimated user costs for a 5-mile work zone section. Table C6. User cost estimates of different lane closure strategies. setoNairetirCrotcaFnoitaulavE Overall technical feasibility Pass No issues are found. rehtootderapmochgiherastsoclaitinIssaP)stsoctsrif(laitinI alternatives but feasible. Adequacy of structural designs Pass No issues are found. Adequacy of M&R activities Pass No issues are found. Annual maintenance costs 9% (out of 10%) Annual maintenance costs are low compared to other alternatives. Future rehabilitation costs 45% (out of 50%) The expected cost is low. Only one major activity is expected. nahtrehgihera4evitanretlAfostsocresU)%03fotuo(%81stsocresU those of Alternative 3 but acceptable. Future work zone disruptions 9% (out of 10%) The probability of future major intervention is low. Total score = 81% Life-cycle costs of Alternative 4 = $6,540,000 Adjusted bid score = $6,540,000/0.81= $8,074,074 Note: Total score = 81%; life-cycle costs of Alternative 4 = $6,540,000 (see Table C4); adjusted bid score = $6,540,000/0.81 = $8,074,074. Table C7. Agency’s evaluation of proposed pavement type. The contractor also explored the possibility of using differ- ent lane closure strategies for Alternative 4 only. The user cost estimates of different lane closure times are presented in Table C6. While the 7-hour lane closure appears desirable for managing work zone traffic, this strategy is expensive for the entire project duration. Similarly, although the 16-hour or 24-hour lane closures would provide for shorter project com- pletion time, these strategies will result in longer queues, excessive delays, and higher user costs. Therefore, the con- tractor considers 10-hour road closure as the most feasible alternative. Should the contractor select 10-hour road closure for this project, the agency is expected to use the daily user cost value ($7,960) as lane rental fee for the entire project duration. Step 4. Selection of Preferred Alternative The contractor proposes Alternative 4 and 10-hour daily lane closure as the preferred pavement type and the work zone strategy in the bid. Agency’s Evaluation Upon submission of the contractors’ type-selection infor- mation, the agency evaluates the technical and cost feasibility of the proposals. Among the scheme of other components, the agency evaluates the pavement type proposed by each bidder using the criteria in Table C1. For the pavement proposed in this example, the agency’s evaluation is shown in Table C7. The agency finds Alternative 4 acceptable for this project for the following reasons: • It has lower life-cycle costs than other alternatives. • Although its first costs are higher than those of other alterna- tives, it will not adversely affect on the overall system needs. • Because its expected service life is 45 years, the pavement will require minimal interventions apart from scheduled maintenance. • Its expected costs of scheduled maintenance are lower than those of other alternatives. Because no or fewer major interventions are required, it will result in fewer traffic disruptions.

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TRB’s National Cooperative Highway Research Program (NCHRP) Report 703: Guide for Pavement-Type Selection includes processes for conducting systematic evaluations of pavement alternatives and for making decisions on pavement-type selection.

The processes may be used for both agency-based and contractor-based type selections and may be applied to different pavement types and structures.

Further elaboration on the work performed in developing this report is available online.

In July 2013, the following errata on NCHRP Report 703 was issued: On page 67, in the second bullet point at the bottom of the page, the second to last sentence should read, “To maximize the economic value, the agency should consider alternatives that stimulate competition and incorporate innovative approaches.” The wording has been corrected in the online version of the report.

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