Alternative Quality Management Systems for Highway Construction (2015)

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APPENDIX A: GLOSSARY A-1 Standard Definitions – Quality Terminology For the purposes of this report, the Transportation Research Circular E-C137: Glossary of Highway Quality Assurance Terms (Leahy 2009) will be used to define the quality related terminology in this report. Acceptance. The process of deciding, through inspection, whether to accept or reject a product, including what pay factor to apply. [Where contractor test results are used in the agency’s acceptance decision, the acceptance process includes contractor testing, agency verification, and possible dispute resolution.] Acceptance plan. An agreed–upon method of taking samples and making measurements or observations on these samples for the purpose of evaluating the acceptability of a lot of material or construction. Composite pay factor. Also called combined pay factor or overall pay factor. A factor obtained from two or more quality characteristics and often expressed as a percentage, to be multiplied by the bid price to determine the contractor’s final payment for a unit of work. [Methods typically employed to arrive at this factor are (1) calculate either a standard or a weighted average of individual pay factors, (2) multiply individual pay factors, or (3) use the lowest individual pay factor. Composite pay can also be calculated by adding the sum of individual pay adjustments to the bid price, as would likely be the case when pay adjustments are expressed in direct dollar amounts.] Contract payment provision. The contract language that defines how design and construction professionals will be paid for their services. The four primary contract payment provisions are fixed price lump sum, guaranteed maximum price (GMP), cost plus fee, and cost reimbursable. Construction deliverable. A product produced by the design-builder’s construction team that is submitted for review to the agency. (shop drawings, product submittals, etc.) Construction Manager/General Contractor (CMGC). A project delivery method where the contractor is selected during the design process and makes input to the design via constructability, cost engineering, and value analysis reviews. Once the design is complete, the same entity builds the projects as the general contractor. CMGC assumes that the contractor will self-perform a significant amount of the construction work. Design-bid-build (DBB). A project delivery method where the design is completed either by in- house professional engineering staff or a design consultant before the construction contract is advertised. Also called the “traditional method.” Design-build (DB). A project delivery method where both the design and the construction of the project are simultaneously awarded to a single entity. Design deliverable. A product produced by the design-builder’s design team that is submitted 149

for review to the agency. (i.e. design packages, construction documents, etc.) End result specifications. Specifications that require the contractor to take the entire responsibility for supplying a product or an item of construction. The highway agency’s responsibility is to either accept or reject the final product or to apply a pay adjustment commensurate with the degree of compliance with the specifications. [End result specifications have the advantage of affording the contractor flexibility in exercising options for new materials, techniques, and procedures to improve the quality or economy, or both, of the end product.] Incentive–disincentive provision (for quality). A pay adjustment schedule that functions to motivate the contractor to provide a high level of quality. [A pay adjustment schedule, even one that provides for pay increases, is not necessarily an incentive–disincentive provision, as individual pay increases–decreases may not be of sufficient magnitude to motivate the contractor toward high quality.] Independent assurance (IA). A management tool that requires a third party, not directly responsible for process control or acceptance, to provide an independent assessment of the product and/or the reliability of test results obtained from process control and acceptance testing. (The results of independent assurance tests are not to be used as a basis of product acceptance). Inspection. The act of examining, measuring, or testing to determine the degree of compliance with requirements. Liquidated damages provision (for quality). A pay adjustment schedule whose primary function is to recover costs associated with the contractor’s failure to provide the desired level of quality. [This same concept also can be used to justify pay increases for superior quality above the level specified.] Manufacturing-based quality. Conformance to specifications. (ASQ 2013) Materials and methods specifications. Also called method specifications, recipe specifications, or prescriptive specifications. Specifications that require the contractor to use specified materials in definite proportions and specific types of equipment and methods to place the material. Each step is directed by a representative of the highway agency. [Experience has shown this tends to obligate the agency to accept the completed work regardless of quality.] Materials and workmanship warranties. Specifications that hold the contractor responsible for correcting defects in work elements within the contractor’s control during the warranty period. [Under materials and workmanship warranties, the highway agency is responsible for the pavement structural design. The contractor assumes no responsibility for pavement design or those distresses that result from the design. Some responsibility is shifted from the agency to the contractor for materials selection and workmanship.] Pay adjustment. The actual amount (either in dollars or in dollars per area, weight, or volume) that is to be added or subtracted to the contractor’s payment for a unit of work. Pay adjustment schedule (for quality). Also called price adjustment schedule or adjusted pay schedule. A pre-established schedule, in either tabular or equation form, for assigning pay 150

factors associated with estimated quality levels of a given quality characteristic. The pay factors are usually expressed as percentages of the contractor’s bid price per unit of work, but may also be given as direct dollar amounts. Pay adjustment system (for quality). Also called price adjustment system or adjusted pay system. All pay adjustment schedules along with the equation or algorithm that is used to determine the overall pay factor for a submitted lot of material or construction. [A pay adjustment system, and each pay adjustment schedule, should yield sufficiently large pay increases/decreases to provide the contractor sufficient incentive–disincentive for high/low quality.] Pay factor. A multiplication factor, often expressed as a percentage, used to determine the contractor’s payment for a unit of work, based on the estimated quality of work. [Typically, the term “pay factor” applies to only one quality characteristic.] Performance specifications. Specifications that describe how the finished product should perform over time. [For highways, performance is typically described in terms of changes in physical condition of the surface and its response to load, or in terms of the cumulative traffic required to bring the pavement to a condition defined as “failure.” Specifications containing warranty/guarantee clauses are a form of performance specifications. Other than the warranty/guarantee type, performance specifications have not been used for major highway pavement components (subgrades, bases, riding surfaces) because there have not been suitable nondestructive tests to measure long-term performance immediately after construction. They have been used for some products (e.g., highway lighting, electrical components, and joint sealant materials) for which there are suitable tests of performance.] Performance-based specifications. QA specifications that describe the desired levels of fundamental engineering properties (e.g., resilient modulus, creep properties, and fatigue properties) that are predictors of performance and appear in primary prediction relationships (i.e., models that can be used to predict pavement stress, distress, or performance from combinations of predictors that represent traffic, environmental, roadbed, and structural conditions). [Because most fundamental engineering properties associated with pavements are currently not amenable to timely acceptance testing, performance-based specifications have not found application in highway construction.] Performance-related specifications. QA specifications that describe the desired levels of key materials and construction quality characteristics that have been found to correlate with fundamental engineering properties that predict performance. These characteristics (for example, air voids in AC and compressive strength of PCC) are amenable to acceptance testing at the time of construction. [True performance-related specifications not only describe the desired levels of these quality characteristics but also employ the quantified relationships containing the characteristics to predict as-constructed pavement performance. They thus provide the basis for rational acceptance/pay adjustment decisions.] Performance warranties. Specifications that hold the contractor fully responsible for product performance during the warranty period. [Under performance warranties, the contractor guarantees that the pavement will perform at a desirable quality level. The contractor assumes 151

some level of responsibility, depending on the specific project, for the structural pavement or mix decisions. Pavement performance warranties can be classified as either short-term (typically 5–10 years) or long-term (typically 10–20 years). Pavement materials and workmanship warranties are typically 2–4 years.] Product-based quality. Quality is a precise and measurable variable and differences in quality reflect differences in quantity of some product attribute. Project delivery method. The comprehensive process by which designers, constructors, and various consultants provide services for design and construction to deliver a complete project to the owner. While names can vary in the industry and owners often create hybrid delivery methods, there are essentially three primary project delivery methods: design-bid-build (DBB), construction manager-at-risk (CMR), and design-build (DB). Project Quality Assurance (PQA). All those actions necessary for the owner to ensure that design-builder performed QA activities give a true representation of the quality of the completed project. This may include owner verification and acceptance testing or independent assurance as owner oversight actions when the design-builder is assigned the responsibility for design and/or construction QA activities. Additionally, these also include owner oversight, verification, validation, acceptance, and other activities necessary to satisfy FHWA Technical Advisory 6120.3 (2004) for projects with federal funds and the employment of independent quality consultants that may be necessary in DB projects with post-construction operations and/or maintenance options. Quality. (1) The degree of excellence of a product or service; (2) the degree to which a product or service satisfies the needs of a specific customer; or (3) the degree to which a product or service conforms with a given requirement. Quality assurance (QA). All those planned and systematic actions necessary to provide confidence that a product or facility will perform satisfactorily in service. (QA addresses the overall problem of obtaining the quality of a service, product, or facility in the most efficient, economical, and satisfactory manner possible. Within this broad context, QA involves continued evaluation of the activities of planning, design, development of plans and specifications, advertising and awarding of contracts, construction, and maintenance, and the interactions of these activities). Quality assurance specifications. A combination of end result specifications and materials and methods specifications. The contractor is responsible for QC (process control), and the highway agency is responsible for acceptance of the product. [QA specifications typically are statistically based specifications that use methods such as random sampling and lot-by-lot testing, which let the contractor know if the operations are producing an acceptable product.] Quality assurance organization (QAO). The assignment of the roles and responsibilities associated with the quality management of a project from concept through completion. Quality control (QC). Also called process control. Those QA actions and considerations necessary to assess and adjust production and construction processes so as to control the level of quality being produced in the end product. 152

Quality Management (QM). The totality of the system used to manage the ultimate quality of the design as well as the construction encompassing the quality functions described above as acceptance, QC, independent assurance and verification. Relative Quality. Loose comparison of product features and characteristics. Statistically based specifications. Also called statistical specifications or statistically oriented specifications. Specifications based on random sampling, and in which properties of the desired product or construction are described by appropriate statistical parameters. User-based quality. Fitness for intended use. Validation. The process of confirming the soundness or effectiveness of a product (such as a model, a program, or specifications) thereby indicating official sanction. [The validation of a product often includes the verification of test results.] Verification. The process of testing the truth, or of determining the accuracy of test results, by examining the data or providing objective evidence, or both. [Verification sampling and testing may be part of an independent assurance program (to verify contractor QC testing or agency acceptance) or part of an acceptance program (to verify contractor testing used in the agency’s acceptance decision).] Value-based quality. Conformance at an acceptable cost. 153

A-2 Standard Definitions – Procurement Terminology For the purposes of this report, the Federal Highway Administration report entitled: Design- Build Effectiveness Study – As Required by TEA-21 Section 1307(f): Final Report (2006) will be used to define the procurement and alternative project delivery terminology in this report. Administrative prequalification: A set of procedures and accompanying forms/ documentation that must be followed by a construction contractor to qualify to submit bids construction projects using traditional project delivery. Alternative or Innovative Contracting: Various methods of contracting authorized by state statute that departs to some degree from the traditional design-bid-build low-bid process. These methods include but are not limited to Time-Plus-Money (A + B), Design/Build, Warranty, and Incentive/Disincentive. Best Value: The overall maximum value of the proposal to a sponsor after considering all of the evaluation factors described in the specifications for the project including but not limited to the time needed for performance of the contract, innovative design approaches, the scope and quality of the work, work management, aesthetics, project control, and total project cost of the formulas or other criteria for establishing the parameters for the Best Value are generally clearly defined with the goal of being objective. Bid Proposal: A technical proposal and a separately sealed price proposal submitted by each Design-Build Firm. Bonus: A monetary incentive placed on a specific milestone within a contract for the expressed purpose of completing that element within the prescribed time. Construction Manager-General Contractor (CMGC): A project delivery method where the contractor is selected during the design process and makes input to the design via constructability, cost engineering, and value analysis reviews. Once the design is complete, the same entity builds the projects as the general contractor. CMGC assumes that the contractor will self-perform a significant amount of the construction work. Construction Manager-at-Risk (CMR): A project delivery method similar to CMGC, but where the CM does not self-perform any of the construction work. Contract payment provision: the contract language that defines how design and construction professionals will be paid for their services. The four primary contract payment provisions are fixed price lump sum, guaranteed maximum price (GMP), cost plus fee, and cost reimbursable. Construction deliverable: A product produced by the design-builder’s construction team that is submitted for review to the agency. (shop drawings, product submittals, etc.) 154

Design-Bid-Build (DBB): The traditional method for building highways and making highway improvements where the state transportation department (STA) or a consulting engineer working for the STA designs the project, solicits bids, and awards the construction contract to the lowest responsive bidder (construction contractor) to build the project. Design-Build (DB): The process of entering into a single contract with a contractor in which the contractor agrees to design and build a highway, structure or facility, or any other items required in an RFP. Design-Builder (or Design-Build Contractor or Firm): An individual, company, firm, partnership, corporation, association, joint venture or other legal entity that is permitted by law to provide the necessary design and construction services, including engineering, architecture, construction contracting, and contract administration. The entity may include a construction contractor as the primary party with a design professional as the secondary party or vice versa. The contractor or design professional cannot team with other partners to submit more than one bid per project. Likewise, the secondary part of the design-build team, either designer or contractor, cannot change after award. Design-Build Contractor means the same as Design- Builder. Design-Build Package (also Design and Construction Criteria Package): Document published by the STA that contains the Public Advertisement (Notice to Bidders), the Request for Proposals, General Requirements, Design Scope of Work, Technical Specifications, Price Proposal Documents including the Bid Schedule, and any forms, drawings and other supporting documents necessary to guide the proposers in preparation and submittal of a proposal for a design-build project. Design deliverable: A product produced by the design-builder’s design team that is submitted for review to the agency. (i.e. design packages, construction documents, etc.) Incentive: Monies paid to the contractor for early completion of a project as provided for in the contract. Incentives may be paid for on A + B, Bonus, Incentive/Disincentive, Liquidated Savings, and Escalating Incentive/Disincentive contracts. Incentive/Disincentive: Various methods of contracting authorized by state statutes which apply an incentive for early completion or a disincentive for late completion by the contractor. These methods include but are not limited to Incentive/Disincentive and Escalating Incentive/Disincentive arrangements. Performance based prequalification: A set of procedures and back-up documents that must be followed by a construction contractor to qualify to submit a bid on a construction project based on quality, past performance, safety, specialized technical capability, project-specific work experience, key personnel, and other factors. Price Proposal: Contains the proposer's price for performing the work contained in the technical proposal and specified in the design-build package. In general, the price proposal is sealed and completed only on forms included in the design-build package. The proposer for an A + B type of price proposal also quotes a specified project time. 155

Project: The project to be designed and constructed as described in the public announcement. Project delivery method: the comprehensive process by which designers, constructors, and various consultants provide services for design and construction to deliver a complete project to the owner. While names can vary in the industry and owners often create hybrid delivery methods, there are essentially three primary project delivery methods: design-bid-build (DBB), construction manager-at-risk (CMR), and design-build (DB). Procurement procedure: the process of buying and obtaining the necessary property, design, contracts, labor, materials, and equipment to build a project. The four primary procurement procedures are low-bid, best-value, qualifications-based, and sole-source procurement. Project Manager: The STA's designee responsible for administering the design-build project. Proposer: A design, construction management, design-build firm or joint venture submitting a technical proposal for a design-build project. Request for Proposal (RFP): The package to be provided to the firms qualified to bid on a project. It may contain, but is not limited to a detailed scope of work, including design concepts, technical requirements and specifications, time allowed for design and construction, STA's estimated cost of the project, deadline for submitting a proposal, selection criteria and a copy of the contracts. FHWA approval of the RFP is required on FHWA oversight projects prior to authorization and the release of the RFP to short-listed Firms. The RFP must clearly define all functions and responsibilities required by the firm. Request for Qualifications (RFQ): A frequent part of the design-build selection process that contains the desired minimum qualifications of the firm, a scope of work statement, project requirements, amount of stipend or reimbursement (if any) that the STA has determined will be paid to prospective firms who qualify for the short list, but are not awarded a contract, selection criteria that STA will use in compiling the short list of prospective Firms to consider, and a copy of the contract. Responsive: A proposal that substantially complies with the criteria identified in the short-listing process or a proposal that contains all the information and level of detail requested in the RFP and complies with the design and construction criteria defined in the RFP or design-build package. Scope of Work: Information provided or furnishes in the design-build package and RFP that describes the project work and provides the firm with the essential requirements. Standard Bid: The traditional cost associated with the materials and labor to construct the project. STA: State transportation agency. Statement of Qualifications (SOQ): Refers to the process that establishes criteria for evaluating interested Firms. Criteria required for the SOQ is stated in the advertisement. Often, firms desiring to submit bid proposals on design-build projects must submit an SOQ setting forth the 156

qualifications of members of the firm and providing any other information required by the announcement of the project. Stipend: The fee paid to unsuccessful firms for development of a responsive proposal. Technical Proposal: The design-builder's response to the Request for Proposals. This document contains detailed descriptions and methodology of the design-builder's approach to designing, constructing, and managing the project in accordance with the design-build package. The design- builder's conceptual design is included as well as a proposed construction sequence and schedule. Technical proposals are expected to be in-depth, and could contain tables, charts, drawings, plots, and sketches. Time-Plus-Money: Various methods of contracting including but not limited to Lane Rental, A + B Bidding, and Liquidated Savings. These methods consider both the construction costs and time of project. Reduction of contract time is a critical consideration for these methods. Total Bid: The standard bid cost and the time bid cost added together for determining the low bidder. Warranties: An insurance policy to warranty a specific element or elements within the contract from premature failure. Weighted Criteria: The technical proposal and the price proposal are evaluated individually. A weight is assigned to the price and each of the technical evaluation factors. The sum of these values becomes the total score. The offeror with the highest total score is selected. 157