Indefinite Delivery/Indefinite Quantity Contracting Practices (2015)

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14 chapter three INDEFINITE DELIVERY/INDEFINITE QUANTITY PROCUREMENT POLICIES, PROCEDURES, AND PROGRAMS INTRODUCTION Federal Supply Schedules were the first version of IDIQ con- tracts and appeared with the creation of the General Services Administration (GSA) by the Federal Property and Admin- istrative Service Act of 1949. They were part of a program designed to accelerate the acquisition of commonly used supplies and services for federal agencies (U.S. Congress 1951; GAO 1979; Matchette and Danis 1995). The notion of using IDIQ contracting to compress project delivery periods and facilitate procurement procedures is still shared by fed- eral and state agencies. Indeed, recommendations made by practitioners and regulatory agencies encourage public own- ers to limit proposal submittal requirements to a minimum and implement streamlined contracting techniques such as the oral proposals and work orders (OFPP 1997; Dunston and Reed 2000; Sandner and Snyder 2001; FAR 2005). How- ever, strict and inflexible statutes and regulations appear to hinder an optimal use of IDIQ contracting by requiring large amounts of contract documents and complex procurement procedures (Thornton 2002). “Oral presentations of proposals can be a useful tool in achieving a more timely and cost-efficient source selection.” (AFMC 1999) State DOTs are recognizing IDIQ contracting as an oppor- tunity to improve their procurement procedures, mainly by consolidating the procurement of a number of similar proj- ects into a single transaction and offering flexibility in deliv- ery scheduling (Rueda and Gransberg 2014b). This chapter analyzes policies, principles, and guidelines currently being followed by state transportation agencies to implement IDIQ contracting for transportation projects. The findings presented in this chapter are the result of a comprehensive assessment of all the information collected through the lit- erature search, the IDIQ document content analysis, and the surveys and interviews with state DOTs and industry professionals. INDEFINITE DELIVERY/INDEFINITE QUANTITY POLICIES AND PROCEDURES A content analysis was conducted using the protocol pro- posed by Neuendorf (2002) on 65 IDIQ contract docu- ments from federal, state, and local agencies, including IDIQ documents from 32 state DOTs. The documents analyzed included solicitation documents RFP, RFQ, Invitation for Bids (IFB), and agency policy documents (i.e., implemen- tation guidebooks and manuals of procedures), official reports, work plans, and other written information related to IDIQ practices of state transportation agencies. Figure 9 shows the distribution of these documents among state DOTs. This figure does not include documents from federal or local agencies. Information related to IDIQ practices currently in use was also collected through survey responses from 43 state DOTs (an 84% response rate), and the comprehensive analysis of seven case examples from six state DOTs and the FHWA’s CFLHD. All information collected was combined, as appro- priate, in an attempt to define an IDIQ contracting profile for each DOT, to provide a better understanding of the state of practice of this alternative contracting approach in different state transportation agencies across the country. Table 6 sum- marizes some general policies and procurement techniques observed in this study and presents the frequency of occur- rence of these characteristics among the 41 DOTs that use IDIQ techniques. Table 6 includes state transportation agencies that either responded to the survey as IDIQ users or did not respond to the survey but are known users (see Figure 5 in chapter one). Although IDIQ contracts for design services are not included in the synthesis scope, they are included in Table 6 to high- light the wide use of this practice among state DOTs and emphasize the need for future research on this matter. This table reveals the level of diversification of IDIQ practices within the transportation industry. Although this contract- ing approach is more often used for the acquisition of A/E services, it also appears to be widely used to procure minor construction and maintenance services for DBB contracts. Some of the policies and procedures presented in this table and other important aspects related to IDIQ contracting are explained in detail throughout this chapter, and those specifi- cally related to design services will be briefly discussed at the end of the chapter. Project Delivery Methods in IDIQ Contracting As can be seen in Figure 10, the use of IDIQ techniques with DBB, DB, or CMGC does not alter the conventional contractual/communication structure of these delivery meth-

15 ods (see Figures 1–3 in chapter one). It does mean that in DBB-IDIQ the owner remains responsible for finishing the design in order for the contractor to proceed with construc- tion; in DB-IDIQ a single firm is selected to furnish most of the design services and complete construction activities for each project (each work order); and in CMGC-IDIQ a firm is engaged to provide input during the design of each project to subsequently perform as the general contractor during the construction phase. Because final designs and construction services in IDIQ contracts are usually furnished on a work order basis, and given that guidelines stated by these delivery methods are primarily intended to regulate these two proj- ect phases, the selection of any of these contracting meth- ods does not have a major impact on those preconstruction activities performed before awarding (Figure 10). Thus, the types of contracts mentioned here must be understood as a group of individual DBB, DB, or CMGC projects under a single IDIQ contract. Regardless of the delivery method used and the number of awardees involved in an IDIQ contract, planning and design activities must be undertaken in two different phases as shown in Figure 10. The owner must carry out some initial design activities (included in the “Scope of Contract” phase illus- trated in Figure 10) in order to develop the contract documents needed to advertise the contract without knowing the specific details of each work order to be issued. The level of complete- ness of this initial design is given by the required content of bid packages to be submitted by interested contractors. As observed in this study, IDIQ contracts with straightforward scopes and uniform work orders (high similarity between work orders) tend to result in more initial design detail in the solicitation documents. Once the contract is awarded, to issue the first work order the owner proceeds with a supplementary preconstruction phase intended to complete planning and design activities at the work order level. As shown in the “After Contract Award” column of Figure 10, the role of each contract par- ticipant during this second preconstruction phase will vary by the selected project delivery method. In a DBB-IDIQ, the owner will develop the final design using in-house design staff or external design consultants for each work order. Similarly, in a CMGC-IDIQ, the final design will be com- pleted with the assistance of the CMGC. There are some FIGURE 9 IDIQ document content analysis distribution. Policies and Procedures Answers and Observations Frequency of Observations (out of 41) Frequency % Delivery Method Used for IDIQ Contracts DBB 17 51 DB 5 12 CMGC 4 10 Type of Work Design 41 93 Construction 24 59 Maintenance 32 78 Average Number of IDIQ Contracts Awarded per Year 1–2 3 7 3–5 5 12 6–10 3 7 >10 15 37 Classification by Location(s) City-wide 1 2 County-wide 5 12 District-wide 18 44 State-wide 19 46 Other 4 10 Use of Multiple Award IDIQ Contracts Yes 17 41 No 9 22 Unknown 15 37 Use of IDIQ Contracts in Emergency Situations Yes 13 32 Unknown 28 68 TABLE 6 IDIQ POLICIES AND PROCEDURES

16 instances where the owner must first complete an initial portion of these design activities, referred to in Figure 10 as conceptual design. It is to be detailed enough to efficiently communicate the scope of each work order under two specific situations: to allow the awarded contractor in a single award DB-IDIQ to continue with the final design, or to advertise and award each work order in multiple award DB-IDIQ or CMGC-IDIQ contracts. The DBB project life cycle illustrated in Figure 10 shows commonly used IDIQ practices for the procurement of construction and maintenance services. Conversely, the DB-IDIQ model presented in the figure was based on the chapter five case example completed on the FDOT’s DB Push-Button (DB-PB) contracts (FDOT 2009). These are single award IDIQ contracts procured through one-step full and open competition procedures. They consist of selecting a design-builder by evaluating technical and price propos- als for the first work order. Therefore, interested DB firms have to develop their own preliminary design based on solicitation documents. Although no solicitation documents for DB-IDIQ con- tracts advertised and awarded using qualifications-based selection (QBS) procedures were obtained, the fundamen- tals of this practice and DB method allow the authors to infer that this would be a suitable approach when detailed information about upcoming projects cannot be provided to proposers for the development of technical proposals. In the case of DB-PB contracts, this would occur when FIGURE 10 Project life cycle for each delivery method.

17 the agency is unable to incorporate the specific antici- pated scope for the first work order into the solicitation documents. Even though some survey participants from state DOTs reported the use of CMGC-IDIQ, access to solicitation docu- ments from these contracts was not available. However, the structure of this contracting approach illustrated in Figure 10 was developed from the New York State DOT emergency bridge replacement IDIQ case study, which was found in NCHRP Synthesis 438: Expedited Procurement Procedures for Emergency Construction Services (Gransberg and Lou- lakis 2012) to have operated in much the same manner as a CMGC contract. Since the use of IDIQ practices with any of these delivery methods appears to not change the fundamentals of these contracting methodologies, and despite the lack of research on this matter, the study found no reason to believe that combining IDIQ procedures alters the advantages or dis- advantages commonly attributed to these delivery methods. Although the project-level impacts of each delivery method are perceived at the work order level in IDIQ, the grouping of similar projects into a single IDIQ contract allows agen- cies to take advantage of shorter delivery periods, greater flexibility in delivery scheduling, and other benefits pro- vided by each alternative contracting method (Rueda and Gransberg 2014a). Figure 11 presents the different project delivery methods in use by state transportation agencies to procure construc- tion and maintenance services. It was found that at least two agencies, the Delaware and Maryland DOTs, have been able to use IDIQ contracting with all three delivery methods. This and because the Delaware DOT is also executing multiple award contracts, as will be shown in the next section, sug- gests a high degree of development of IDIQ techniques by this agency. IDIQ Advantages and Disadvantages In an attempt to understand the motivations of state DOTs to incorporate IDIQ contracting into their procurement prac- tices, survey participants were asked to select, from a list of options, those advantages (all that apply) that they have observed in IDIQ techniques over traditional contracting methods. Figure 12 shows responses submitted by survey par- ticipants to this question and also indicates what the majority of state DOTs consider as the most important advantage of IDIQ contracting. Because almost all DOTs that responded to this question (24 of 25) recognized the usefulness of IDIQ contracting as a great emergency response strategy, it was clear that it is not considered as the most important factor (Figure 13). When survey participants were asked in a separate ques- tion to indicate the most important advantage observed in the implementation of IDIQ contracting by their agencies, 15 selected the acceleration of the project delivery period, followed by flexibility in delivery scheduling. The difference of the responses between these two questions is almost intui- tive when considering that the ability to effectively use IDIQ contracting for emergency situations is primarily the result of the reduction of project delivery periods and the flexibility in delivery scheduling. An overall analysis of Figures 12 and 13 reveals a wide range of benefits that different state DOTs perceive in the use of IDIQ contracting. However, it does not show the relation- ship between the perceived advantages and the contracting approaches adopted by these agencies. Different procurement FIGURE 11 Distribution of project delivery methods used with IDIQ contracting.

18 FIGURE 12 IDIQ advantages—Survey output. FIGURE 13 IDIQ most important advantage for DOTs.

19 policies and procedures may represent different sets of benefits for public owners. In an effort to find a trend that relates IDIQ benefits and IDIQ project delivery methods, the study compared the information collected from the literature review with each contracting model illustrated in Table 3 (in chapter one) and found three different levels of advantages related to these generic models. Table 7 presents the benefits attributed to each model and shows how an owner would find the same and more benefits as it moves from a single work order approach to a multiple award IDIQ contracting model. However, when comparing these three models, it found one advantage that single work order and single award contracts have over multiple award IDIQ contracts; an advantage related to the greater administrative efforts required from owners to coordinate and supervise multiple construction contractors. Therefore, agencies awarding contracts to single contractors would require fewer resources to manage these contracts. This study found two primary disadvantages in IDIQ con- tracts regardless of the model used. The first disadvantage is related to the lack of knowledge and experience of state agencies and contractors to plan, execute, and administer IDIQ contracts (Farris 2002). Ironically, the second dis- advantage is the result of two benefits noted in Figure 12. To obtain increased flexibility in delivery scheduling and the possibility of assigning funds on a work order basis, the owner sacrifices its ability to conduct complete planning, programming, and budgeting procedures for the entire con- tract. The lack of detailed estimates and schedules at the contract level restricts the use of some project management practices that have been useful in traditional contracting methods. For example, the requirement to develop a pricing scheme in single award IDIQ contracts makes it difficult to site-adapt each work order specifically over the course of the contract. Therefore, the unit prices of site-specific pay items not included in the original contract must be negotiated as they are encountered. Institutional characteristics and policies may also limit the capabilities of this contracting approach and create a disadvantage for implementing IDIQ in that agency. How- ever, both federal and state agencies have successfully used IDIQ procedures to deliver a series of similar large con- struction projects using multiple award DB work orders (Rueda and Gransberg 2014b). This report will show that the only major constraint on the use of IDIQ is for broad- scope contracts that do not lend themselves to the multiple award format. IDIQ Types of Work DOT survey participants were asked to indicate the types of work they usually perform with IDIQ contracts. Figures 14 and 15 show the most common types of work procured using IDIQ contracting classified in two different categories; con- struction and maintenance services. Survey data were aug- mented by information gathered from state transportation agencies that did not participate in the survey but are known IDIQ users, as well as actual IDIQ documents provided by survey participants. Given that IDIQ contracts are usually composed of multi- ple work orders for similar project types, this approach is commonly used for repetitive tasks such as minor construc- tion and maintenance and repair activities (OFPP 1997; GSA 2013). However, the size and complexity of the proj- ects executed using this method appear to be increasing. A closer look at these practices at the federal level shows that IDIQ contracting has evolved from merely the acquisi- tion of supplies or services through the issuance of work orders for simple products or services frequently required by federal agencies such as furniture, safety equipment and clothing, and transportation services (GAO 1979). In the early 1980s, the Department of Defense (DoD) intro- duced the use of IDIQ for the acquisition of construction - Owner only has to deal with one contractor M ul tip le A w ar d Si ng le A w ar d S in gl e W or k O rd er - Owner can keep lower inventory levels - Flexibility in quantity and delivery scheduling - Supplies and services are ordered when they are really needed - Agencies commit only for a minimum or no amount of work to be ordered - Owner can direct shipments directly to the users - Shorter project delivery period - Lower preconstruction costs - Allows contractor involvement in preconstruction activities - Fast use of year-end funding - Lower cost in future issuance of work orders - Useful contracting option during emergencies - Increase quality and timeliness of delivery - Reduce potential for graft and corruption - Highly competitive - Lower bid prices - Larger participation of small-size and disadvantaged business Source: Rueda and Gransberg (2014a). TABLE 7 CONTRACTING ADVANTAGES OF EACH IDIQ MODEL

20 services, increasing the capabilities of this contracting approach (Farris 2002). Currently, the DoD uses this contracting approach to support military forces worldwide with a set of three major (>$1 billion) cost-plus-award-fee multiple award IDIQ contracts: the Logistics Civil Augmentation Program (U.S. Army Sustainment Command 2007), the Global Contin- gency Construction Multiple Award Contract (NAVFAC 2012), and the Air Force Contract Augmentation Program (DoD 2005) administrated by the Army, Navy, and Air Force, respectively. These three programs are an example of the degree of flexibility and usefulness contained in IDIQ contracting methods. The broad scope of these multimillion dollar contracts goes from welfare and recreation activities to construction of military facilities. These multiple award IDIQ contracts are also used worldwide for a quick response to natural disasters or emergency situations generated dur- ing military operations. Taking Figure 14 with the informa- tion provided in this section, it can be concluded that IDIQ contracts may be used on virtually all types of work as their scope comprises recurring or frequently required tasks. FIGURE 14 Use of IDIQ contracting by state DOTs by type of work. FIGURE 15 IDIQ users per type of work.

21 IDIQ contracts may be used virtually on all types of work as their scopes comprise recurring or frequently required tasks. Table 8 shows a complete content analysis on IDIQ con- tract documents from 20 federal agencies. It presents differ- ent contracting elements used by these agencies and the types of IDIQ contracts on which these elements were used. The classification of contracts in Table 8 (job, task, and delivery order) corresponds to the configuration presented in Figure 5 (in chapter one) rather than the actual terminology used by these agencies in their IDIQ contracts. The table is divided into two sections; the first contains work order pricing provi- sions, the second is related to contract administration ele- ments of IDIQ contracts. Table 8 is another example of the wide range of contracting elements that can be used along with IDIQ techniques to customize this type of contract in accordance with the specific requirements of each agency and project. Multiple Award IDIQ Contracts The principal difference between single award and multiple award IDIQ contracts is the number of contractors selected to perform the work orders to be issued. Thus, multiple award contracts require additional provisions to describe work order placement procedures among awarded contractors. In subpart 16.5 of FAR (FAR 2005), the government compels federal agencies to “give preference to making multi ple awards of indefinite-quantity [IDIQ] contracts under a single solicitation Agency Type of Contract Work Order Pricing Features Contract Administration Features Fixed Price Unit Price Cost- Plus GMP I/D Single Award Multiple Award Stated Min. Stated Max. LD CR VE Architect of the Capitol TO Department of Agriculture TOJO Department of Commerce TO Department of Defense Army Contracting Command DO TO JO Army Corps of Engineers DO TO JO Defense Information Systems Agency TO Department of the Air Force DO TO JO Naval Facilities Engineering Command TO JO Department of Education TO Department of Energy DOTO Department of Health and Human Services TO JO Department of Homeland Security DO TO JO Department of State DO Department of the Interior TOJO Department of Transportation Federal Highway Administration TO JO Department of Veteran Affairs DO TO JO General Services Administration DO TO JO International Trade Commission TO National Aeronautics and Space Administration TO JO Securities and Exchange Commission TO CR = Constructability Reviews; DO = Delivery Order Contract (supplies); GMP = Guaranteed Maximum Price; I/D = Incentives/Disincentive Provisions; JO = Job Order Contract (construction services); LD = Liquidated Damages; TO = Task Order Contract (services); VE = Value Engineering. Adapted from Rueda and Gransberg (2014a). TABLE 8 IDIQ DOCUMENT CONTENT ANALYSIS—FEDERAL AGENCIES

22 for the same or similar supplies or services.” This preference was stated in an effort to maintain appropriate levels of price competition in federal procurement procedures (OFPP 1997); however, it does not apply to design or consulting services (FAR 2005). As mentioned in chapter one, this philosophy has not been adopted by state transportation agencies since it does not appear to fit their procurement practices or it is not allowed by many state-level procurement regulations. Although state transportation agencies do not share the preference for multiple award IDIQ contracts stated by FAR for federally funded projects, 14 state DOT survey partici- pants reported that they have used or are currently using this approach in at least one IDIQ contract. However, only six reported the use of this practice specifically to procure con- struction and maintenance projects: Colorado, Florida, Geor- gia, Maine, Tennessee, and Vermont. In addition, the literature review uncovered multiple award construction/maintenance IDIQ solicitation documents from four different DOTs, includ- ing two of the aforementioned (Maine and Vermont). The other two solicitation documents correspond to the California and Delaware DOTs. Thus, combining these with the survey responses, there are at least eight agencies currently using multiple award construction/maintenance IDIQ contracts. The possibility exists that some agencies that responded positively to the use of multiple award IDIQ contracts may have mistakenly identified their prequalification programs as multiple award procedures. These types of programs were found in most of these agencies and their descrip- tions make them appear very similar to IDIQ contracts awarded to more than one bidder. To avoid this confusion, this study developed the following criteria that must be fully met in order to include a contract within the multiple award IDIQ category: • Execution of work orders must be limited to a number of awardees (more than one) selected under the same solicitation. • All awardees are to share the same contract period. • Contract documents will include language describing work order placement procedures among all awardees. • When awarding the contract, no contract conditions or submitted proposals can be individually negotiated by the owner with any bidder if negotiated aspects will have an impact (positive or negative) on its ability to compete or be considered for the performance of work orders under the advertised contract. Prequalification programs implemented by these agen- cies usually incorporate lists of firms whose ability to furnish specific services have been previously proven. Some agen- cies maintain these lists to restrict the submission of propos- als to prequalified contractors on specific types of projects (Oklahoma DOT 2010; UDOT 2010a). Thus, the agency has access to a pool of firms to procure some predefined ser- vices, which is also the philosophy of multiple award IDIQ contracts. Nonetheless, prequalification programs are usu- ally maintained for long periods of time, during which lists of prequalified firms may be modified several times (Oklahoma DOT 2010; UDOT 2010a). Moreover, in many cases this prequalification status does not involve a con- tractual relationship with the agency and, when it does, the agency commonly negotiates individual single award IDIQ contracts with each prequalified firm, as has been done by the Idaho Transportation Department and Nevada DOT (Nevada DOT 2008; ITD 2013). The Iowa and Massachusetts DOTs use prequalification programs to constrain participation of firms in letting processes of some or all their IDIQ contracts as do at least 12 other survey respondents. It is important to keep a balance between the number of award- ees and the expected number of work orders to be issued under a given contract. Past studies conducted on the use of multiple award IDIQ contracts at the federal level highlight the importance of determining an appropriate number of firms to participate in this type of contracts (Thornton 2002; Rueda and Gransberg 2014a). It is important to balance the number of contractors in the multiple award pool with the expected number of work orders to be issued to ensure appropriate levels of competi- tion and provide the contractors in the pool with a decent opportunity to perform work beyond the stated minimum, if any (OFPP 1997; Rueda 2013). The literature mentions a series of factors that agency contracting personnel might consider when determining the number of awards to be made under a single solicitation: • Scope and complexity of projects to be executed under the contract (OFPP 1997; FAR 2005). • Expected number and duration of work orders and their frequency (FAR 2005; Rueda 2013). • Required resources a contractor would have to per- form for the types of work described in the contract documents (FAR 2005). Similar practices used by state transportation agencies to advertise and award single award IDIQ contracts are typi- cally used in multiple award IDIQ contracts. An agency new to IDIQ can develop a single set of procurement procedures for both single and multiple award IDIQs, although there will be some slight differences. The primary difference between single award and multiple award IDIQ contracts was found in post-award administrative activities, which will be dis- cussed in chapter four of this report. INDEFINITE DELIVERY/INDEFINITE QUANTITY CONTRACTS—ADVERTISING AND AWARD In the survey used to gather data for this synthesis report, state DOTs were asked to indicate the advertising and award procedures they are using on construction and maintenance

23 IDIQ contracts. These procedures comprise two different aspects; the way these agencies communicate to potential contractors their intention of awarding an IDIQ contract and the subsequent process to select the contractor that most effectively fits the requirements stated in the solicitation doc- uments. Table 9 shows the responses to this question comple- mented with observations obtained from the content analysis techniques applied to IDIQ solicitation documents. Table 9 includes the four basic advertise/award models explained here, and some variations of these models related to the use of prequalification programs and multiple award solicitations. • IFB—Low-bid contractor selection: Contract is adver- tised through an IFB that contains guidelines for con- tractors to prepare and submit price proposals that will be used as the only selection criterion to award the con- tract (Yu and Wang 2012). • RFQ—One-step QBS: The owner issues a RFQ, includ- ing all guidelines for contractors to prepare and submit statements of qualifications showing their experience and demonstrating their ability to perform all types of work described in the RFQ. These statements are evaluated in accordance with processes described in the solicitation documents and used to select the most qualified contrac- tor (Lo and Yan 2003). This model does not involve price competition. • RFP—One-step best-value selection: This model can be seen as a combination of the two models defined pre- viously. The contract is advertised by the owner issuing a RFP that contains guidelines for interested contrac- tors to prepare and submit bid packages. These pack- ages include a price proposal, a technical proposal, and additional documents and information to certify that the contractor has the required and desired (if any) expe- rience and qualifications to perform all types of work described in the RFP. These packages are evaluated in accordance with processes described in the solicitation documents and used to select the most advantageous offer to the owner using price, technical capabilities, qualifications, and other possible factors as selection criteria (Gransberg and Ellicott 1997). • RFQ/RFP—Two-step best-value selection: Contract is advertised in two steps. First, the owner issues a RFQ that contains guidelines for contractors to prepare and submit statements of qualifications. These statements are used to develop a short list, with the most highly qualified contractors in accordance with processes described in the RFQ. The second step of this selection model consists of the preparation of a RFP, issued only to shortlisted con- tractors, outlining the requirements for preparation and submission of technical and price proposals used to iden- tify the most valuable offer to the owner (MnDOT 2011). Basically, this model applies the same criteria used in a one-step best-value selection approach, but evaluated in two different stages. It is important to understand that the terminology contained in this section may not agree with that in use by any given agency. For example, an Iowa DOT document called an RFP was actually intended to advertise an IDIQ contract using a one-step QBS process and thus was an RFQ based on the definitions standardized for this synthesis report (Iowa DOT 2011). In addition, terms such as Notice to Bidders and Notice to Contractors are being used by the Maine and Minnesota DOTs, respectively, to refer to the IFB mentioned in this report (Maine DOT 2011; MnDOT 2013a). The terminology used in Advertising and Award Procedures Construction % Maintenance % IFB—Low-bid contractor selection, full open competition 14 82 20 77 IFB—Low-bid contractor selection, competition restricted to prequalified entities 9 53 6 23 RFQ—One-step QBS, full open competition 2 12 3 12 RFP—One-step best-value selection, full open competition (including qualifications, technical capabilities, and price) 1 6 3 12 RFQ/RFP—Two-step full open competition 2 12 2 8 RFQ—One-step QBS, competition restricted to prequalified entities 1 6 0 0 RFP—One-step best-value selection, competition restricted to prequalified entities (including qualifications, technical capabilities, and price) 1 6 1 4 RFQ/RFP—Two-step best-value selection, competition restricted to prequalified entities 1 6 1 4 Multiple contractors selected—Low-bid contractors selection 2 12 5 19 Multiple contractors selected—QBS 1 6 2 8 Sole source 1 6 0 0 Totals 17 26 Note: It was possible for a single agency to select more than one procedure. Thus, the numbers and percentages shown will not add up to 100%. TABLE 9 ADVERTISING AND AWARD PROCEDURES FOR CONSTRUCTION/MAINTENANCE SERVICES

24 this section is used throughout the synthesis report and is based on the definitions presented earlier. The number of responses shown in Table 9 for each selection approach indicates a great deal of diversification in the way transportation agencies address this issue. It is also possible to identify different trends and common practices that state DOTs are adopting for differ- ent types of projects. These practices are easier to identify in Figure 16, which presents the same data but arranged in a less specific manner. Responses and observations in the figure are classified based on the four general selection models. It can be concluded from Figure 16 that simpler low-bid procedures appear to fit better with construction and mainte- nance services. This was a trend expected by the authors. As mentioned before, the implementation of IDIQ techniques does not alter the traditional structure of delivery methods used for transportation projects. Therefore, there was no rea- son to believe that IDIQ techniques represent a change in the use traditionally given to these advertise/award methods. Taking into consideration that IDIQ contracts are used pri- marily to perform recurrent similar projects, this contracting approach fits better for minor construction and/or mainte- nance tasks rather than large and complex highway construc- tion projects. For instance, it is not expected that a state DOT awards multiple large corridor projects in a one- or two-year period. Consequently, simplified processes provided by low- bid contracting selection strategies work most effectively with minor construction or maintenance projects. It makes no sense to conduct complex and expensive selection proce- dures for simple low-risk projects. That being said, it does not mean to imply that this contract- ing approach cannot be used for large and complex projects. IDIQ techniques can be used in virtually all types of projects and may even comprise very broad scopes as they represent a recurrent need for the contracting agency. It simply requires the adjustment of contracting procedures to incorporate risk management strategies to counteract the higher level of risk usually perceived by owners in large projects (Morris and Willson 2006; Touran and Lopez 2006). For example, the owner may consider the use of multiple award IDIQ contracts and carefully determine an appropriate number of awardees in order to mitigate the risk of contractor default and main- tain good levels of competition. The owner may also decide to use a more exhausting contractor selection procedure such a best-value method, to ensure a fair quality of the work to be provided by the contractor for a reasonable price. In addition to the contractor selection models described earlier and their alternative approaches using prequalifica- tion programs and multiple award techniques (see Table 9), the survey included another model that is used with IDIQ contracts by at least one agency (Colorado DOT) for con- struction services. This model is referred to in Table 9 as sole source. Sole source contracting, as defined by some authors, is a practice used by owners to procure very specialized work directly from a contractor, without going into a full-blown public competitive procurement, when there appears to be the only one source with the experience and technical capa- bilities to furnish the necessary services (Hessing 2008). Although it may be inferred that sole source contracting practices are reserved for projects and services that are required infrequently or during emergencies, this is not the case for the Colorado DOT. Because they use sole source negotiated IDIQ suggests that the specialized work obtained under these con- tracts are recurrent requirements during the contract period. In that case, a single award IDIQ contract becomes the tool for the acquisition of these services. By limiting the procurement to a single transaction, a major issue highlighted by Hessing (2008), the unavoidable delays generated by the complicated administrative procedures required to obtain approval to execute this type of non-competitive contracts is overcome. Some agencies must go through time-consuming procedures FIGURE 16 Advertising and award procedures for construction/maintenance services.

25 to obtain government approval under these situations since “they must prove beyond any doubt that the individual con- tractor is uniquely qualified to perform the work” (Hessing 2008). Therefore, the Colorado DOT anticipates the recur- rent need for the specialized services and establishes a single ongoing agreement, requiring a single approval that will cover multiple projects. These agreements typically are pro- grammed over a convenient period of time and structured as single award IDIQ contracts. Multiple Award IDIQ Contract Advertise/ Award Processes This section discusses different advertise/award approaches in use by state DOTs to procure multiple award construction/ maintenance IDIQ contracts. The content of multiple award IDIQ contract documents was analyzed and is shown in Table 10. This table presents some general characteristics of these contracts: scope description, contract duration, advertise/ award method, and number of awardees. It is important to note that the last two features correspond to procedures fol- lowed to award the contract rather than those used to select the contractor to perform each task order. Work order award methods will be discussed in chapter four of this report. Low-Bid Multiple Award IDIQ The low-bid multiple award IDIQ systems developed by the California, Delaware, and Maine DOTs are similar. Basically, the agency prepares the IFB, including all pay items to be priced by interested contractors. Sealed bids are submitted, and the agency reviews all bid packages on a pass/fail basis for responsiveness. Finally, the contract is awarded to multi- ple contractors (MaineDOT 2011; DelDOT 2013; Caltrans 2014). Caltrans specifies a maximum number of bidders to be selected in the solicitation documents, whereas the Delaware and Maine DOTs form the multiple award contractor pool with all responsive and responsible bidders without limit. An unlimited number of awardees do not pose a problem because no minimum amount is guaranteed to each contrac- tor under the IDIQ contract. In essence, the contractor pool is merely a form of prequalification and, as such, the agency is not obligated to award work orders to all awardees during the contract period. Unlike federal multiple award IDIQ contracts, in which the selected contractors are required to bid updated unit prices on each new work order, the bid packages submitted by successful contractors in these three state low-bid con- tracts are intended to be used throughout the contract period to price all work orders. Therefore, work orders are assigned in accordance with the lowest cost obtained by applying bid unit prices on the specific pay items and quantities required for each project. Post-award administration practices, including work order placement procedures, are discussed in detail in chapter four. Best-Value Multiple Award IDIQ Figure 17 illustrates the pre-award phase of the federal multiple award approach mentioned earlier. It was obtained from an IDIQ construction case study contract executed by Agency Project Description Contract Duration (years) Advertise/Award Number of Awardees Caltrans Identify and remove underground hazardous material/waste and tanks 3 IFB—One-step low-bid Up to 6 DelDOT Landscaping 1 IFB—One-step low-bid All responsive and responsible bidders Maine DOT Paving construction and maintenance services 1 IFB—One-step low- bid All responsive and responsible bidders VTrans Bridge and pavement preventive maintenance 1 RFP—One-step best- value All responsive and responsible bidders TABLE 10 MULTIPLE AWARD CONSTRUCTION/MANAGEMENT IDIQ CONTRACTS FIGURE 17 Federal multiple award IDIQ contract—Pre-award phase.

26 the CFLHD and analyzed in chapter five and Appendix D, but presented in this section of the report to compare federal and state multiple award practices. Figure 17 shows a one- step, best-value selection process occurring simultaneously with the selection of the low bidder for the first task order. Basically, CFLHD releases the IDIQ RFP along with a statement of work for the first work order (termed a task order in the federal parlance). Interested construction contractors are required to submit documents that detail their experience and qualifications, as well as a price proposal for the first task order. Once all bids have been received, the agency proceeds to evalu- ate each bidder based on a number of factors such as previous experience, logistic skills, qualifications, financial capability, and price proposals. From this evaluation, CFLHD awards the contract to those bidders whose proposals appear to provide the highest overall value for the agency; usually three contrac- tors. Along with the announcement of the successful bidders, CFLHD announces the contractor selected to perform the first task order, which corresponds to the lowest price proposal (CFLHD 2012). Further explanation and analysis of the con- tractor selection procedures adopted by CFLHD are presented in Appendix D. There are two main factors that make this federal IDIQ contacting methodology different from those in use by state DOTs for multiple award IDIQ contracts. The first is adver- tising the contract along with a statement of work for the first work order, and the second is submission of unit prices for the first work order. Advertising the first work order simultane- ously with the RFP allows the agency to use the specifications and requirements of the first project to determine the technical capabilities of the contractor, which together with the price proposal allow CFLHD to conduct a complete best-value selection process. By advertising the contract along with the first work order, the owner is able to conduct a complete best-value selection process. As mentioned previously in this chapter, the same prac- tice is used in single award DB-PB contracts awarded by FDOT. A closer look at these two contracts may confirm that best-value techniques are better suited for large-project IDIQs. Although the most costly contract in Table 10 is the one from Caltrans with a maximum contract amount of $1.5 million, the CFLHD and FDOT contracts had maximum values of $35 million and $20 million, respectively (FDOT 2009; CFLHD 2012). In conclusion, best-value contractor selection is being used as a risk mitigation strategy for large IDIQ contracts. To do this, agencies will need to be willing to invest the effort to fully develop the first work order’s design before awarding the contract. Another practice worthy of mention and not shown in Table 10 is one used by the Maine and Vermont DOTs. Con- tractors are allowed to bid different unit prices for different locations listed in the solicitation documents. Contractors are not required to bid all locations, and there is no limit on the number of contractors selected to compete for work orders in the same location. The unit prices contained in the bid are used to compensate contractors for all work performed under any work order. The flexibility provided by this prac- tice allows contractors to prepare price proposals consider- ing costs that are highly related to the location of the job site. This methodology could become a valuable tool to address the issue of pricing mobilization expenses, which will be dis- cussed later in this report. Indeed, it may provide a similar benefit if used in single award IDIQ contracts as well. PROPOSAL SUBMITTAL REQUIREMENTS During the literature review, many sources highlighted the importance of keeping proposal submittal requirements to a minimum. Some of the strategies proposed by these sources include the use of oral presentations to shorten written proposals, page limitations for submittal requirements that must remain in a written manner, and protocols that create an interactive solicitation environment and improve the com- munication between owners and contractors (OFPP 1997; Dunston 2000; Sandner and Snyder 2001; GSA 2005). The use of oral solicitation procedures was not found in any of the contract documents reviewed; however, it was found that at least eight state DOTs include a page limit for specific parts of the proposal or for the entire document. Figure 18 shows the frequency of observations of differ- ent solicitation requirements found during the IDIQ docu- ment content analysis. These observations are classified by type of work and correspond to 16 IDIQ contracts awarded by 14 different state DOTs. Figure 18 shows that IDIQ construction and maintenance contracts usually follow simpler solicitation procedures, a finding that is based on the number of different components that make up the proposals rather than the effort or cost that it would require for the contractors to prepare bid packages. Depending on the project complexity and technical content, the preparation of price proposals for construction or mainte- nance activities can be an expensive and exhausting process. However, minimizing the number of selection factors greatly facilitates the owner’s required effort to evaluate the propos- als and make the selection decision (Gransberg and Ellicott 1997; Lo and Yan 2009). It also allows agencies to save time and money on selection procedures. Thus, the number of proposal submittal requirements does not merely reflect the contractors’ level of effort to prepare proposals but rather the effort and time required of the owner to review them. The number of proposal submittal requirements does not merely reflect the contractors’ level of effort to prepare proposals but rather the effort and time required of the owner to review it.

27 Contractor selection procedures for construction and main- tenance projects usually focus on price proposals; therefore, unit prices for pay items listed in the IFB or RFP compose the principal component of proposals. The only construction contract in the figure that includes in the proposal submittal requirements factors other than price was the unusually large single award DB-PB contract awarded by FDOT. To determine the technical and financial capability of proposers required for the agency to conduct a best-value selection procedure, FDOT requires the submission of a larger number of requirements that demand the expenditure of more time and money for their revision. However, it allows the agency to manage the risk of awarding larger and longer contracts, minimizing the num- ber of procurement actions on a single contract (Rueda and Gransberg 2014b). It can be seen in the first work order issued under this contract, which actually contained 11 different projects for a total cost of $12.5 million (FDOT 2009). DETERMINATION OF PAY ITEMS AND BID QUANTITIES When advertising a traditional low-bid non-IDIQ contract, the owner usually includes in the solicitation documents a list of pay items to be priced by interested contractors based on bid quantities also provided by the owner. The bid quan- tities are estimated by the agency in accordance with com- pleted project designs. Therefore, they are expected to be a good approximation of the actual amount of work to be performed by the successful contractor. In theory, extend- ing the bid quantities with the competing contractor’s unit prices the owner can confidently select the contractor that will represent the lowest cost for the project. It is assum- ing that the project will be delivered on time, no significant change orders will be issued by the owner, and the final prod- uct will have the expected quality. These assumptions have been widely questioned in project management literature (Abdelrahman et al. 2008; Lo and Yan 2009). However, they are ubiquitous in unit price contracts used to deliver highway construction projects. The same assumptions apply to low-bid IDIQ contracts; nonetheless, given the typical straightforward scope of these contracts, the risk taken by owners when making these assumptions is usually not high enough to prevent them from using low-bid techniques in construction or maintenance contracts. It is suggested that future research be conducted to provide guidance for state DOTs to develop methodologies to estimate the level of risk of each IDIQ contract and set risk thresholds above which the agency considers the use of a different advertise/award approach. The real issue that public owners face when advertising low-bid IDIQ contracts is the determination of pay items and bid quantities. The ability to accurately determine the actual FIGURE 18 IDIQ proposal submittal requirements for construction/maintenance services.

28 pay items required for a typical work order and estimate the associated quantities is a function of the complexity of the work contemplated to be completed over the life of the IDIQ contract. A single award IDIQ for milling and overlay- ing pavement could be quite simple if the agency chooses to package the work orders in amounts that are roughly equal in length; whereas, an IDIQ bridge maintenance and repair contract would demand a more extensive set of pay items and quantities of work that may not be known until the main- tenance or repair work commences. Therefore, an effective practice is to develop single award IDIQs in a manner where the number of unit price pay items is minimized. This is not an issue for multiple award contracts with competitive work orders, federal MATOCs, since both pay items and their estimated quantities are advertised on a work order basis. Another solution found in the study was the creation of a construction task catalog to be used throughout the con- tract period to price every work order. Survey responses and content analysis procedures have shown that this practice has been adopted by at least seven state DOTs; Florida, Missouri, New Jersey, New Mexico, New York, Pennsylvania, and West Virginia. At the federal level, DoD often selects a commercial estimating manual and then asks contractors to bid a multi- plier for those prices awarding to the lowest multiplier (DAF 2014; NAVFAC 2014). A similar approach could be devised using DOT average bid tabulation results. Regardless of the approach, master pay item catalog development demands that the agency possess a high degree of awareness about the requirements inherent in the scope of the specific IDIQ con- tract. This procedure may become challenging when the con- tract comprises a very broad scope, in which case the agency would consider the possibility of using a multiple award IDIQ instead of single award. Most IDIQ contracts reviewed in this study provide for tasks required for a given work order, but did not contain a master pay item catalog. In these cases, the agency enters into negotiations with the contractor to determine a price for those goods or services not priced in the original price proposal. The post-award negotiation of prices in a non-competitive environment, what would happen in a single award contract, would leave the agency in a vulnerable situation by increasing the contractor’s bargaining power. The possibility of establish- ing unit prices to be used on an indefinite number of projects during a given period of time gives owners control of the bud- get. Consequently, the higher the uncertainty regarding the pay items to be required under the contract, the higher the risk for the agency of negotiating disadvantageous prices and the higher the need for considering the use of a multiple award approach (with competitive work orders) or other non-IDIQ contracting method. Figure 19 illustrates a process that state DOTs could follow to develop an appropriate pay item list. This figure does not cover procedures to establish bid quanti- ties since they will be explained later in this section. As will be detailed in the next section of this chapter, agencies such as the Florida, New York, and Utah DOTs use IDIQ contracting as a tool to improve their response capa- bilities for emergency situations (Gransberg and Loulakis 2012). They either use separate IDIQ contracts specifically intended for these situations or allow the use of active non- emergency IDIQ contracts when the scope does not deviate significantly from the work required to address a particular emergency event. In the latter case, the agency may add con- tingency pay items that depend on the exact nature of the emergency and ask the contractors to provide unit prices on an if-needed basis. Another type of contingency pay item provides a strategy to obligate available year-end funding using IDIQ contracts without the need to execute and expedite the procurement pro- cess. According to the survey, the Delaware DOT has config- ured IDIQ contracts with this purpose in mind. In this case, the agency would award an IDIQ contract for work that is needed but perhaps is not a high enough priority to get funded; plan- ning to issue work orders for this type of work contingent on availability of funds. An example would be an IDIQ to bring curbs and gutters at intersections into compliance with the Americans with Disabilities Act of 1990 (ADA) or to furnish and install wire rope median barriers in areas where crash experience indicates they are warranted. In both cases, these are contracts whose size can be easily adjusted to allow for quick use of these funds. FIGURE 19 Contract pay item determination process.

29 Having determined all tasks to be required under the con- tract, the owner must proceed to assign bid quantities to each pay item. The determination of pay items and bid quantities is to be made for all IDIQ solicitations that pretend to use price as a selection factor; however, good practices on this matter are particularly needed for low-bid procedures because the selec- tion of the contractor is fully entrusted to the computation of these quantities with prices submitted by bidders. Survey participants were asked to indicate the approach used to determine bid quantities when using unit prices in their IDIQ contracts. Figure 20 shows three principal methodolo- gies used for this purpose and the responses given by 20 differ- ent agencies. It indicates a clear trend for using total estimated quantities in spite of the particular characteristics of this con- tracting approach with regard to the traditional indefinite nature of work quantities. The use of total estimated quantities was observed on low- bid IDIQ contracts planned and advertised based on a reliable list of potential projects to be performed under different work orders (not always the case). The list might include specific projects that the agency would like to execute, but does not have the funds at the time of the IDIQ contract award. Thus, the agency awards an IDIQ contract and progressively issues individual work orders as funding becomes available. In a traditional low-bid non-IDIQ contract bid schedules are intended to be as accurate as possible, representing actual total work quantities for the entire contract (Anderson et al. 2007). In IDIQ contracting, the owner is not obligated to purchase more than the guaranteed minimum. Even when bid quantities correspond to a total estimate for the entire contract, owners are not legally committed to these quantities. IDIQ contracts can be individually funded so financial assessments are usually made on a per project basis. In addition, in IDIQ contracts, because bid unit prices decrease as bid quantities increase must be carefully considered. Bidders know that actual quantities will not be determined until the end of the contract period and that they are only guaranteed the contract minimum; therefore, using total bid quantities may not result in lower bid unit prices. The dynamics of the unit price bidding process will dictate the contractors’ bid prices (Gransberg and Riemer 2009) and be based on what each competitor perceives as the quantities seen in a typical work order. Therefore, an effective practice when using total quantity-based pricing is to include the engineer’s estimate of quantities for a typical work order and eliminate the contractors’ need to assume those numbers in order to appropri- ately allocate its fixed cost across the bid pay items. Ideally, the bid quantities will be in the same proportion as the quantities of anticipated actual work required throughout the life of the contract. The inclusion of unit prices in IDIQ proposal submittal requirements is primarily for selection purposes and not to calculate the expected total cost of the contract. In an ideal situation, bid quantities will be in the same proportion as the expected actual work quantities required throughout the contract’s life. It implies that owners tried to keep work order scopes as uniform as possible in order to maintain this proportion during the entire contract period to increase the probability that the low bidder is indeed the lowest final cost, regardless of the number of work orders to be issued. It confirms the previous conclusion that broad-scope con- tracts (e.g., those with different types of work orders) are best suited for multiple award IDIQ procedures with com- petitive work orders since bid quantities are established for each work order. Broad-scope work orders that entail different types of work orders are more efficiently delivered using multiple award IDIQ procedures with competitive work orders. FIGURE 20 Bid quantity selection methodologies.

30 The following example may provide a clearer idea about the importance of setting proportional quantities to compare price proposals among bidders. Table 11 shows unit prices submitted by two bidders for items A and B. These values were taken from a case example analyzed in chapter five. It corresponds to a contract executed by MnDOT. These are the two most significant pay items of this contract, representing more than 80% of the total price proposals submitted by these bidders. In this case, bid quantities are estimates of the expected total quantity of work to be per- formed under the contract. Since this is an IDIQ contract, it would be prudent to assume some degree of uncertainty in these quantities. For the purposes of this example, it is assumed that actual values observed upon completion of the contract could present a maximum variation of 10% from those showed in Table 11. If this contract had been awarded based on the two items shown in Table 11, the agency would have selected Bidder 2. However, when considering the 10% uncertainty contained in these bid quantities, the sensitivity analysis found the prob- ability that Bidder 1 would actually result in the lowest final cost was 35%. In other words, the risk that the low bidder will not eventually result in the lowest actual cost must be accepted by the agency. Figure 21 shows the result of the probabilistic analysis conducted for this example. The previous example illustrates the importance of devel- oping well-balanced proportional bid quantities. Any method used to determine these quantities is appropriate if it guar- antees a fair proportionality in relation to the actual work to be performed throughout the contract. It is suggested that further research be undertaken to provide DOTs guidance for preparing solicitation documents for single award IDIQ contracts and master pay item lists. The urgency for conduct- ing further research on this matter is supported by the wide use of low-bid techniques in IDIQ contracts by state DOTs. A specific aspect that could be addressed by future research projects is the development of decision-making processes to be used on a per contract basis to determine the suitability of low-bid selection techniques and the appropriate approach to establish bid quantities. Likewise, it would be worth con- sidering the implementation of a stochastic contractor selec- tion method for IDIQ contracts in order to mitigate the risk related to the erroneous selection of the low bid. USE OF INDEFINITE DELIVERY/INDEFINITE QUANTITY CONTRACTS FOR EMERGENCY SITUATIONS IDIQ contracting techniques provide public owners with the capability to rapidly issue work orders without engaging in a complete procurement process, improving their capacity to respond to emergency situations such as industrial accidents and natural or environmental disasters (Jeffrey and Menches 2008). When survey participants were asked to select those advantages that they have observed in IDIQ techniques in comparison with traditionally procured contracts, 96% of those who answered this question (24 of 25) cited the use- fulness of this contracting approach during emergency situ- ations. In addition, the content analysis process found 13 IDIQ solicitation documents for two types of contracts used in emergencies: • Single objective IDIQ contracts let specifically for the acquisition of required resources and services to mitigate short-term impact after emergency situations. In these contracts the scope of work is completely intended for the specific activities required to reduce the level of dam- age produced by an anticipated emergency event on a specific region, as shown in the following statement of Pay Item Bid Quantity Bidder 1 Bidder 2 Unit Price Extension Unit Price Extension Pay Item A 718,670 $0.50 $359,335.00 $2.92 $2,098,516.40 Pay Item B 1,796,675 $1.50 $2,695,012.50 $0.50 $898,337.50 Totals $3,054,347.50 $2,996,853.90 Source: MnDOT (2013b) TABLE 11 BID SCHEDULE—EXAMPLE FIGURE 21 Probability that the low-bid will result in the lowest final cost—Example.

31 work taken from an IDIQ contract awarded by FDOT for emergency debris removal: This statement of work describes and defines the services which are required for the execution of Natural Disaster- related emergency debris removal [ . . . ]. The contrac- tor shall provide all services described herein and any other services required to complete the project. Activities include, but are not limited to, field operations, debris pickup, debris hauling and removing, debris staging and reduction, temporary debris storage site management and debris management (FDOT 2010a). • Non-emergency IDIQ contracts authorized to be used during contingency events given their scope to respond to these situations. Usually, these contracts are designed to procure routine work, which could also be required by the agency as part of its emergency response programs. A good example of this approach is an IDIQ contract exe- cuted by the Arizona DOT for “Sign, Marker, and Delin- eator Installation and Maintenance” (ADOT 2013). In this contract, ADOT anticipates the issuance of two types of work orders; Routine Task Orders, which “involve sign cleaning and installation of delineators, mark- ers, reference markers and mile posts” (ADOT 2013), and Emergency Task Orders, to be used for “work that needs immediate response in the field, such as a STOP sign knock down” (ADOT 2013). Taking into consid- eration the cost implications of performing work under an Emergency Task Order, the agency included some contract provisions applicable only under these cir- cumstances and intended to compensate the contractor for expediting the work. The following is an example of these provisions: Realizing that the cost of mobilization and equipment uti- lization can vary based on the size of the Task Order and the required response and completion time, two coefficients have been introduced. The first coefficient is to compensate for the additional cost of an emergency Task Order response (CE). The second coefficient is to adjust for the range in size of the Task Order (ADOT 2013). A previous research project (Rueda 2013) found that an effec- tive approach to handling IDIQ contracting techniques was by awarding a number of single work order or single award IDIQ contracts covering different areas that may be affected by the given type of emergency (i.e., hurricane, earthquake, etc.). Fur- thermore, awarding IDIQ contracts to more than one contractor in each area provides the ability to use as many contractors as required by the magnitude of the situation. The FDOT awards hurricane damage restoration contracts annually (FDOT 2010b) and the New York State DOT maintains a standing emergency bridge replacement IDIQ contract (Gransberg 2013). In other words, these agencies execute separate contracts with multiple contractors instead of single multiple award IDIQ contracts. The use of the latter was not considered for contracts specifi- cally aimed at contingency situations in order to avoid unac- ceptable delays related to work orders awarding processes. However, new information collected about IDIQ practices implemented by state transportation agencies brought into consideration an alternative methodology to be used under these critical circumstances; multiple award IDIQ contracts with non-competitive work orders as those currently used by the DOTs listed earlier in Table 10. By requesting that contractors in multiple award IDIQs bid a single list of unit prices, as done by the California and Delaware DOTs, or different prices for different locations as done by the Maine and Vermont DOTs, the agency creates a pool of contractors that may be used in an expeditious manner based on the location of the emergency, magnitude of the event, and type of work required. This approach is similar to the single award approach mentioned in the previous paragraph. Multiple award contracts may help to reduce agency staffing require- ments and improve procedures with regard to the distribution of work among awarded contractors; however, it implies equal contract periods for all awardees, restricting the ability of agen- cies to modify the list of contractors in the emergency response program. INDUSTRY PERSPECTIVE In an attempt to understand the industry perspective with regard to IDIQ contracting, a survey was prepared and dis- tributed to transportation contractors and subcontractors. A total of 18 responses were received and analyzed. Face-to- face structured interviews were also conducted with four survey participants in order to have further discussion about some key issues. In addition, this section introduces survey responses for the same question from 24 contractors and sub- contractors doing business with MnDOT (24 of 56 responded this question) obtained from previous research (Gransberg and Rueda 2014). Based on their experiences with IDIQ contracting, sur- vey participants were asked to rate a list of factors typically related to public contracting practices in relation to traditional contracting procedures. Table 12 contains the responses from both groups of participants; those contacted specifically for this report (henceforth referred to as AGC/ARTBA contractors) and MnDOT contractors. It must be noted that the MnDOT con- tractors were commenting on a new process, whereas the AGC/ ARTBA contractors had extensive IDIQ experience throughout the country. Statistically significant tests were conducted on both sets of responses to determine differences and similarities in the opin- ions provided by both groups of survey participants. Those factors in which the opinions were shown to be significantly similar are noted in Table 12. A significant similarity between contractors’ opinions implies that there is a high probability that the observed difference between survey responses is the result of the change (Boddy and Smith 2009). Therefore, in those factors where opinions can be considered roughly equal, the responses from MnDOT contractors can be com- bined with the others to draw conclusions.

32 The information in Table 12 leads to the conclusion that the contractors’ ability to obtain necessary financing to perform IDIQ contracts and staff contracting procedures are not affected by the specific characteristics of this contracting approach. In a less conclusive manner, the same could be said for contract insurance requirements as expressed by most contractors. On the other hand, it appears that the uncertainty inherent in IDIQ contracting makes it more difficult for general contractors to establish agreements with suppliers and subcontractors. The information in this table suggests that contractors maintain an overall negative perception of IDIQ contracting. In some factors they showed a neutral position in compari- son with traditional contracting methods; however, there are more aspects in which contractors expressed a negative opin- ion and virtually no aspects with a higher positive percep- tion. It does not necessarily question the suitability of IDIQ contracting for the procurement of transportation projects, but indicates a need for developing and implementing effective practices to reduce the usual uncertainty and risk contained in IDIQ contracting. The face-to-face interviews, supported by the contractor survey responses, lead to the conclusion that regardless of the contractors’ opinion about IDIQ or the risk perceived, contractors do not find the negative percep- tions to be strong enough to prevent them from bidding IDIQ contracts. However, the contractor interviews confirmed that the perception of contract risk perception is reflected in larger contingencies as a risk mitigation strategy. CONTRACTING PLANNING AND PROCUREMENT Figures 22 and 23 present a generic contracting framework for IDIQ planning and procurement phases, respectively. These figures present the information and analyses contained in chapters one and three of this report and are intended for use by state DOTs when implementing or improving IDIQ contracting practices. Figure 22 proposes three different scenarios for rejecting the use of an IDIQ contract. 1. When the scope of the contract does not constitute repetitive similar work; 2. When the scope does not meet owners’ IDIQ policies or other applicable regulations; or 3. When the scope is broad and the size of the project is not enough to award multiple contractors. DESIGN AND OTHER PROFESSIONAL ENGINEERING SERVICES While conducting this study, a broad and unexplored con- tracting structure used by state transportation agencies to procure professional engineering services through IDIQ tech- niques was uncovered. The content analysis process found A/E IDIQ contracts in use by some DOT survey participants that did not report the use of these practices. This study found a wide range of these contracting practices and approaches that are being referred to under different names and programs that have not been formally associated with IDIQ contracting and that need to be clearly defined to determine the real state of practice of IDIQ contracting in order to procure design and other professional engineering services in the transporta- tion industry. Consequently, this gap in knowledge has been identified as a topic for future research. Although the use of design IDIQ contracts by state DOTs is not contained in the scope of this synthesis, this section was added to the report with the purpose of providing a basis for a future research project. Figures 14 and 24 support an observation stated earlier with regard to the versatility of IDIQ contracting. As occurs with construction and maintenance contracts, this contracting approach may be used for several types of design services. Factors AGC/ARTBA (14 responses) MnDOT (24 responses) Better No Change Worse Better No Change Worse Schedule risk 6 4 3 2 9 13 Cost risk 5 4 5 3 4 17 Overall risk 3 7 3 1 5 18 Transparency* 2 7 5 4 9 11 Complexity 4 7 3 2 10 12 Bargaining power of suppliers* 0 4 9 4 9 10 Subcontracting plan* 1 4 8 0 11 13 Insurance requirements* 0 12 1 0 19 5 Staff management* 0 7 6 1 13 8 Ability to obtain necessary financing* 0 13 0 0 22 1 Resource conflicts with other ongoing contracts* 0 6 6 1 8 15 Ability to achieve small business participation goals (or similar)* 0 6 6 0 11 10 *Factors with statistically significant similar opinions between both groups of participants. TABLE 12 CONTRACTORS’ PERCEPTION OF THE IMPACT OF IDIQ CONTRACTING

33 In addition, a closer look at the data used to create these two figures shows that these contracts are used to procure preconstruction and design activities by all 41 (100%) of the agencies that reported the use of IDIQ contracting. Thirty-two of these agencies (78%) also use it for maintenance projects and, in turn, 24 (59%) are using IDIQ contracts for construc- tion services. In other words, all agencies using IDIQ tech- niques for maintenance and construction projects are also using it for design activities. It is possible that most of these agencies started using this methodology for preconstruction services and, as with the federal sector, moved on to use it for more complex maintenance and construction projects as more experience was acquired with the approach. The following sections briefly present and discuss some spe- cific elements of design IDIQ contracts, including advertise/ award procedures, proposal submittal requirements, and multiple award structures. Advertise/Award Procedures in Design IDIQ Contracts As done for construction and maintenance services, DOT survey participants were asked to indicate their advertise/ award procedures in use for the procurement of design ser- vices through IDIQ contracts. Table 13 shows the responses FIGURE 22 IDIQ planning framework.

34 to this question complemented with observations obtained from the content analysis techniques applied to IDIQ solici- tation documents. It can be concluded from Table 9 and Table 13 that sim- pler low-bid and QBS approaches are more commonly used than best-value selection procedures to advertise and award IDIQ contracts in the transportation industry at the state level. As mentioned earlier, low-bid procedures appear to fit better with construction and maintenance services, while (as indicated in Table 13) a greater use of one-step QBS proce- dures can be seen in design IDIQ contracts, as usually done with non-IDIQ contracts for design services (Gransberg and Ellicott 1997). Figure 25 illustrates the same data contained FIGURE 23 IDIQ procurement framework.

35 FIGURE 24 Use of design IDIQ contracts by state DOTs. Advertising and Award Procedures Design % IFB—Low-bid contractor selection, full open competition 4 16 IFB—Low-bid contractor selection, competition restricted to prequalified entities 4 16 RFQ—One-step QBS, full open competition 18 72 RFP—One-step best-value selection, full open competition (including qualifications, technical capabilities, and price) 4 16 RFQ/RFP—Two-step full open competition 3 12 RFQ—One-step QBS, competition restricted to prequalified entities 3 12 RFP—One-step best-value selection, competition restricted to prequalified entities (including qualifications, technical capabilities, and price) 0 0 RFQ/RFP—Two-step best-value selection, competition restricted to prequalified entities 3 12 Multiple contractors selected—Low-bid contractors selection 0 0 Multiple contractors selected—QBS 7 28 Sole source 2 8 Totals 25 Note: It was possible for a single agency to select more than one procedure. Thus, the numbers and percentages shown will not add up to 100%. TABLE 13 ADVERTISING AND AWARD PROCEDURES FOR DESIGN SERVICES FIGURE 25 Advertising and award procedures for design services.

36 in Table 13, but arranged in more general categories. This figure provides an easier perception of the use of these adver- tise/award approaches for design IDIQ contracts, highlight- ing the wide use of one-step QBS procedures for this type of IDIQ contract. Proposal Submittal Requirements for Design IDIQ Contracts Given the subjective nature of procedures to determine the qualifications and technical capabilities of potential award- ees required in QBS and best-value selection practices, agen- cies are forced to evaluate multiple factors increasing the size of the proposals. This is the reason why the five non-price submittal requirements in Figure 26 are more often found in design IDIQ contracts than those in construction/maintenance projects (see Figure 18). The qualifications and past perfor- mance elements are commonly used to determine the contrac- tor’s ability to perform all types of work to be required under a given contract. Multiple Award Design IDIQ Contracts From the 14 survey participants who reported the use of mul- tiple award IDIQ contracts, only six DOTs reported their use for the procurement of design services: Colorado, Florida, Georgia, Tennessee, Washington State, and Oklahoma. The first four agencies also indicated the use of this contracting approach for construction/maintenance projects. To get a better understanding of the implementation of these practices at the state level in the transportation industry, content analy- sis procedures were applied to multiple award design IDIQ contract documents from three state DOTs; South Carolina, Texas, and Washington. Table 14 presents a summary of the FIGURE 26 IDIQ proposal submittal requirements for design services. multiple award design IDIQ contracts executed by the South Carolina and Texas DOTs, and some contracting practices obtained from the Washington State DOT’s Consultant Ser- vices Manual (WSDOT 2011). Although Table 14 does not contain enough data to allow for drawing strong conclusions regarding effective advertise/ award practices for multiple award design IDIQ contracts, it is important to note that two of the three cases presented in this table use best-value selection procedures instead of the QBS approach commonly used to procure this type of service. The common use of best-value procedures as a mechanism to manage the risk of awarding larger and lon- ger projects (as stated earlier in this report) suggests that the Texas and Washington State DOTs perceive a certain level of risk in these contracts, leading them to implement selection procedures to ensure that the contract will be awarded to the designer and/or consultant with the required technical and logistic skills for a reasonable price. As occurs with the multiple award construction/ maintenance contracts presented earlier in this chapter, the work order placement procedures described in Table 14 are not fully competitive procedures based on price proposals and/ or qualifications packages originally submitted to compete for the contract. Likewise, it can be seen how, as observed in the construction/maintenance contracts, selection procedures used at the contract level are somehow emulated at the work order level to assign work among awardees. The contract from the South Carolina DOT in Table 14 is presented and analyzed in detail in Appendix D. The pric- ing for this contract was individually negotiated between each contractor and the agency. However, it is still consid-

37 Agency Feature Description SCDOT Project Description Bridge design engineering services Contract Duration (years) 3 Advertise/Award RFQ—One-step QBS Number of Awardees 6 Work Order Placement Procedure “Consultants will be evaluated and ranked based on their score during the selection process. Consequently, work under each On-Call will initially be assigned based on the consultant’s ranking. Once the list has been exhausted, work will then be assigned to best maintain equity in the value of work unless an exception is approved” (SCDOT 2014). TxDOT Project Description Biological or environmental services Contract Duration (years) 2 Advertise/Award RFP—One-step best-value Number of Awardees Up to 4 Work Order Placement Procedure Texas DOT uses best-value techniques to assign each work order. For each work order the agency evaluates the qualifications, experience, and price in accordance with the specific characteristics of each project. Evaluation elements are obtained from bid packages originally submitted by contractors. WSDOT* Project Description Consultant services Contract Duration (years) N/A Advertise/Award RFP—One-step best-value Number of Awardees All bidders at or above a certain score Work Order Placement Procedure Work orders are assigned through best-value procedures using information and rates originally submitted by consultants. However, consultants are allowed to submit different rates only if they are lower than those originally submitted. *WSDOT multiple award IDIQ practices were not obtained from solicitation documents of a specific contract. It was obtained from the agency’s Consulting Services Manual. N/A = not available. TABLE 14 MULTIPLE AWARD DESIGN IDIQ CONTRACTS ered as a multiple award IDIQ contract since the results of these negotiations are not intended to lower or increase the contractors’ ability to be considered to perform any work order during the contract period. South Carolina DOT’s work order placement procedures are based entirely on original qualification scores assigned when awarding the contract. SUMMARY This chapter found that the use of IDIQ techniques along with DBB, DB, or CMGC does not alter the fundamental struc- ture of these delivery methods. Likewise, owners may expect the same benefits and disadvantages commonly attributed to these delivery methods, but at the work order level. It also discovered a wide range of potential benefits perceived by different state DOTs in the use of IDIQ contracting. Most state DOTs perceive the acceleration of the project delivery period as the most important benefit associated with this con- tracting approach, followed by enhanced flexibility in deliv- ery scheduling. Keeping pre-award proposal submittal requirements to a minimum and implementing streamlined contracting tech- niques such as oral proposals and page limitations appear to be effective practices. Additionally, conducting training ses- sions with in-house staff and pre-bid meetings with bidders to instruct them about this IDIQ contracting approach was also quite effective.