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45 Performance specifi cations are not ideal for every construction contract. However, they may hold signifi cant advantages over traditional method specifi cations when cer- tain criteria or conditions are met. To help agencies identify and understand these conditions, this chapter presents a two-part decision process for evaluating when to use or not to use performance specifi cations. Part 1 of this decision process, outlined in Figure 5.1, is based on a projectâs scope and goals. Part 2, summarized in Figure 5.2, addresses the project delivery considerations that can also affect the decision. A more detailed discussion of the decision process follows the fi gures. The decision to use method or performance specifi cations is often a matter of degree (how much and at what level). Different approaches to specifying may be appropriate to specifi c elements within a project. Therefore, a project may include both method and performance requirements, though that is unlikely. To develop and write effective performance specifi cations, the screening process described in this chapter should be followed by a more in-depth evaluation of the type and level of performance 5 DECIDING TO USE PERFORMANCE SPECIFICATIONS Chapter Objectives This chapter addresses the following questions: ⢠Under what conditions should performance specifi cations be used instead of tradi- tional method specifi cations? ⢠How does the project delivery approach affect the decision to use performance specifi cations?
46 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS Deï¬ne projectâs scope of work Deï¬ne project goals Considerations: ⢠Road / bridge class ⢠Type of construction ⢠Annual avg. daily traï¬c ⢠Location ⢠Project complexity ⢠Region ( climate) Considerations : Construction: ⢠Enhance quality ⢠Minimize user impacts ⢠Maintain traï¬c ï¬ow ⢠Reduce time ⢠Other Postconstruction: ⢠Reduce maintenance cost ( LCC ) ⢠Promote long life ⢠Minimize user impacts Go to project delivery screening questions Can key performance parameters be measured and tested in the ï¬nished product, and are the test methods rapid, reliable, & economical? Yes Can performance be deï¬ned in terms of desired outcomes or user needs? Yes Use method speciï¬cations No No Figure 5.1. Decision process Part 1: Project-level considerations.
47 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS 5.2.1: Identify where the project is in the delivery process Conceptual Design Preliminary Design Detailed Design Considerations Does the agency have legislative authority? Is there internal agency support? Is industry willing and able to assume the responsibility and risk for performance? Is there suï¬cient public support? 5.2.3: Can the agency transfer responsibility to industry for desired outcomes? 5.2.2: Are there multiple approaches to achieving the desired outcomes? Use DBB + end-result performance requirements No No Yes 5.2.4: Is there an advantage to long-term industry asset management? Consider DB with end-result performance requirements and/or a short-term warranty Yes No Consider DB with long-term O&M performance requirements Yes Figure 5.2. Decision process Part 2: Project delivery considerations.
48 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS requirements appropriate for the project characteristics and contracting type (see also Framework for Developing Performance Specifications, Chapter 2). Although a single person can perform this evaluation, a multidisciplined team should be assembled to provide for a more balanced and accurate selection process. Personnel for a selection team may include planners, designers, and construction and maintenance personnel. Representatives from local industry also can be consulted to obtain their perspective on performance specifications. PROJECT-LEVEL CONSIDERATIONS Scope of Work Project scope is a key issue when deciding whether or not to use performance specifica- tions. Although performance specifications have been applied to a wide range of trans- portation project types, experience indicates that certain conditions are more likely to yield a successful outcome than others. Project Characteristics Table 5.1 summarizes the typical conditions under which method and performance specifications can best be applied. The likelihood of realizing the advantages of each specification type tends to cor- relate with project complexity. Performance specifications are typically most advan- tageous when the project provides ample opportunity for industry to innovate and TABLE 5.1. APPROPRIATE CONDITIONS FOR USING METHOD VERSUS PERFORMANCE SPECIFICATIONS Method Specifications Performance Specifications ⢠End-product performance cannot be easily defined. ⢠End-product performance cannot be easily or economically measured and verified. ⢠Limited methods exist that would satisfy the agencyâs minimum requirements. ⢠The agency must retain performance risk because of permit requirements, maintenance considerations, the need to tie into existing or adjacent construction, and similar issues. ⢠Removing and replacing defective work would be impractical. ⢠Preexisting conditions would compromise the transfer of performance risk to the contractor. ⢠End-product performance can be defined in terms of desired outcomes or user needs. ⢠Key performance parameters can be measured and tested, and the test methods are rapid, reliable, and economical. ⢠Multiple approaches can achieve the desired results. ⢠Industry is willing to assume performance risk. ⢠The agency is willing to relinquish control over some aspects of the work.
49 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS influence performance outcomes. This is often the case on complex projects involving major reconstruction or new capacity, multiphased work zone management, major or nonstandard structures, and high traffic volumes requiring accelerated design and construction. In contrast, less complex projects involving only minor resurfacing or restoration of the pavement surface or the use of standard structural components to match exist- ing facilities are less likely to benefit from a performance specification. An exception would be projects in which the agency allows significant latitude through the selection of alternate designs, materials, or construction methods. Scoping Issues Preexisting conditions can significantly limit the ability of performance specifications to shift performance risk to the contractor, particularly on project elements with an extended warranty or maintenance period. In those situations, the contractorâs scope of work should include activities to correct any preexisting conditions that could potentially affect performance. Alternatively, if the scope of work does not address under lying defi- ciencies, the specification should identify exclusions relieving the contractor of respon- sibility for performance problems stemming from preexisting deficiencies. If the risk associated with underlying conditions cannot be allocated to the con- tractor in an equitable manner, the scope of the performance specification may have to be modified to exclude certain sections of the work or to eliminate certain performance requirements all together. These scoping considerations should be factored into deci- sions regarding whether and how to use performance specifications for specific project elements. Also, many projects involve reconstruction of facilities while maintaining traffic flow. Agencies traditionally provide prescriptive requirements for maintenance of traffic and project phasing in the construction plans. The agency must decide whether retaining control is too restrictive when specifying time-based and/or quality-based performance requirements for a project. For example, on more complex projects with higher traffic volumes, shifting control of work zone management and phasing to the contractor may be beneficial, particularly when using alternate procurement methods or a design-build contract. This shift would allow the contractor to plan and phase the work in a manner that best suits its design and construction operations. Project Goals and Desired Outcomes In addition to project scoping, the agency should identify and prioritize the key goals or specific outcomes desired for a project. As shown in Figure 5.3, outcomes may focus on construction or may extend to postconstruction performance. As an initial task, the project team should identify desired goals and rank the objectives in order of importance. One approach for determining rankings is to rate or score the relative importance of project goals in a committee forum on a scale of, say, 1 to 10 (with 1 being minimally important and 10 being extremely important to project success). The ratings can then be compiled and averaged to determine the rela- tive ranking of goals.
50 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS To the extent possible, the goals should be based on definitive criteria (e.g., time savings in days or annual maintenance cost in dollars). More subjective goals will ben- efit from a group discussion to determine their relative importance. Achieving multiple goals in a rapid renewal context may be possible. But first the project team must assess whether performance specifications are the best way to achieve the desired outcomes. To this end, the next steps in the decision process are designed to help determine whether goals can be described, measured, and tested in terms of end-product performance. Defining Performance by Desired Outcomes or User Needs Once project characteristics and desired outcomes have been identified, some basic issues have to be considered to determine the feasibility and practicality of using performance specifications. As a first step, the project team must determine whether project goals or desired outcomes can be defined in terms of key end-result perfor- mance parameters that are within the contractorâs control. Such parameters may relate to the operational or end-result performance of the finished product (e.g., pavement ride quality) or to functional parameters that are more indicative of actual product performance over time (e.g., surface distresses such as rutting or cracking as in a pave- ment warranty provision). Desired outcomes may also include time performance in terms of construction time or traffic delays in the work zone. Measuring and Monitoring Performance over Time Given the existence of valid performance parameters, the next step is to determine whether the parameters can be measured and tested rapidly, reliably, and econom- ically. For example, nondestructive testing techniques may be able to reduce some of the delay associated with quality assurance and acceptance activities, especially if results are available in real time or within a matter of days. Similarly, techniques that Figure 5.3. Project goals during construction and postconstruction.
51 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS minimize traffic disruption (e.g., by ensuring timely opening of roadways after a con- struction project or by eliminating the need for lane restrictions during warranty or maintenance periods) would be preferable to those that impair mobility. If the measurement strategy is difficult to achieve in a rapid renewal context, or if potential gaps exist (see Table 5.2), the extent to which a performance measurement strategy can be based solely on end-result or functional requirements is limited. For this reason, performance specifications must often incorporate some more prescrip- tive materials and construction-related properties to act as surrogates. (For example, density and moisture content are commonly used as surrogate properties in acceptance plans and payment schedules for soils even though they do not provide as direct an indication of future performance as would a modulus value.) In the absence of surrogate measures, a gap may also have the wider effect of eliminating the use of performance specifications to achieve project goals, in which case traditional method specifications may provide the best option. TABLE 5.2. POTENTIAL GAPS ASSOCIATED WITH PERFORMANCE SPECIFICATIONS Gap Considerations Technology gap ⢠Can a particular parameter be measured and evaluated using existing technology? ⢠Are standardized tests available? ⢠Do the tests provide repeatable results? ⢠Will both the agency and contractor have confidence in the ability of the measurement strategy to yield reliable results? ⢠Are ârefereeâ tests available if the agency or contractor disputes the results of the initial testing? ⢠Is the approach quantitative? If not, is it possible to minimize the subjectivity of qualitative measures by requiring the parties to reach agreement as to what constitutes acceptable performance before construction (e.g., through the use of trial sections)? Sampling and testing gap ⢠Can the data be collected, processed, and analyzed in a timely manner to influence and improve contractor operations? ⢠Can sampling and testing be conducted in a manner that has minimal impact on traffic and lane closure? ⢠Compared with other testing techniques (or the use of method specifications), is the measurement and testing economical? Is a major capital investment required? ⢠Do the measurement techniques require a high skill level from technicians? Are special certifications necessary? ⢠Is specialized equipment necessary? If so, should the contractor provide this equipment or should the agency? ⢠Does sampling provide continuous coverage? Knowledge gap ⢠Are the main factors affecting performance for a particular parameter known and understood? ⢠Would a typical contractor know how to control its materials and processes to meet a particular performance standard? ⢠Is there sufficient experience or historical data to properly calibrate design or predictive models?
52 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS PROJECT-DELIVERY CONSIDERATIONS If Part 1 of the decision process demonstrates significant advantages to using a per- formance specification to achieve project goals, an additional set of decisions should be made to address project delivery. The project delivery approach affects the extent to which the agency can or should transfer responsibility for design, materials, con- struction, and possibly postconstruction maintenance and operation to the private sector. (This decision will also be driven by the degree of flexibility inherent in the project scope.) In this context, project delivery refers to the overall contracting and procurement process for a project, inclusive of design, construction, and maintenance and operation phases. Figure 5.4 compares the range of delivery systems applicable to performance specifications. Note that for the case of construction manager at risk (CMR), the performance specifications would be similar to those implemented under design-bid-build. The choice of delivery method affects the level of control and risk that can be shifted to the contractor. To help select a delivery system that is compatible with a given projectâs characteristics and goals, the project team should consider the issues that follow. Stage of Development The first step in selecting a project delivery approach is to identify where the project is in the overall development process. Are the elements of the work in the conceptual design stage or in the detailed or final design stages? The stages are defined differently by various highway agencies, but, in essence, they relate to the extent that the project design has been defined with regard to geometry, alignment, materials selection, right- of-way, environmental clearances, traffic phasing, and other key project elements. In general, a project with greater design definition (more detailed or final design) offers fewer opportunities for a contractor to innovate or provide alternative design or construction solutions under performance specifications. This situation would drive the decision toward using a traditional design-bid-build (DBB) delivery system with some level of end-result specifications. Possible Delivery Approaches If the project is in the preliminary or conceptual design phase but still requires the use of a standard design or a specific component to match existing facilities, or if the project scope is not complex and allows for little flexibility or innovation, then traditional DBB delivery with some end-result requirements is appropriate. If the project is larger, more complex and multifaceted, has a relatively low level of design definition, and allows multiple solutions to achieve the desired outcomes through alternate designs, materials, or construction methods, then design-build (DB) and its variations may provide a better means of achieving the project goals.
53 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS Figure 5.4. Alternative delivery systems. FIGURE 5.4 D es ig n-Ââ Bi d-Ââ Bu ild  Specification  Strategy  ⢠Construction  acceptance  criteria  based  on  surrogate  or  end-Ââ result  properties   Contractual  Roles  ⢠Design  responsibility  retained  by  agency  ⢠Quality  management  by  contractor  ⢠Verification  testing  by  agency  ⢠Acceptance  at  end  of  construction  by  agency  ⢠Postconstruction  maintenance  and  asset  management  by  agency  Procurement  Approach  ⢠Procurement  likely  by  low  bid  (cost  only),  but  may  incorporate  additional  cost  factors  related  to  time  or  bid  alternatives  in  the  selection  process  D es ig n-Ââ Bu ild  Specification  Strategy  ⢠Construction  acceptance  criteria  based  on  surrogate  or  end-Ââ result  properties   Contractual  Roles  ⢠Design  criteria  by  agency  ⢠Final  design  by  contractor  ⢠Quality  management  by  contractor  ⢠Verification  testing  by  agency  ⢠Acceptance  at  end  of  construction  by  agency  ⢠Postconstruction  maintenance  and  asset  management  by  agency  Procurement  Approach  ⢠Procurement  based  on  low  bid  (cost  only)  or  best  value,  incorporating  cost  and  other  factors  related  to  performance  in  the  selection  process  W ar ra nt ie s  Specification  Strategy  ⢠Construction  acceptance  criteria  based  on  surrogate  or  end-Ââ result  properties  ⢠Postconstruction  performance  based  on  functional  properties   Contractual  Roles  ⢠Design  by  agency  (if  DBB)  ⢠Quality  management  by  contractor  ⢠Verification  testing  by  agency  ⢠Acceptance  at  end  of  construction  by  agency  ⢠Asset  management  by  agency  ⢠Warranty  by  contractor  Procurement  Approach  ⢠Procurement  based  on  low  bid  (cost  only)  or  best  value,  incorporating  cost  and  other  factors  related  to  performance  in  the  selection  process  D es ig n-Ââ Bu ild -O pe ra te -M ai nt ai n  Specification  Strategy  ⢠Performance  criteria  based  on  functional  and  high-Ââlevel  operational  parameters   Contractual  Roles  ⢠Performance  criteria  by  agency  ⢠Design  by  contractor  ⢠Quality  management  by  contractor  ⢠Verification  testing  by  agency  ⢠Postconstruction  maintenance  and  asset  management  by  contractor  ⢠Performance  monitoring  by  contractor  and  agency  Procurement  Approach  ⢠Procurement  likely  by  best  value,  incorporating  cost  and  other  factors  related  to  performance,  or  a  qualifications-Ââ based  negotiation Â
54 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS Transfer of Responsibility to Industry The choice of delivery method affects the extent to which control and risk can be shifted to the contractor. Under traditional DBB delivery, the agency retains the major- ity of the performance risk related to design; the contractor assumes responsibility for the aspects of performance related to materials and construction workmanship. If moving to design-build (DB) and/or postconstruction warranty or maintenance agreements, the responsibility for design, materials, construction, traffic, and asset management can be shifted in varying degrees to the industry. The questions that follow can be used to determine the feasibility of transferring some of these responsibilities. Does the agency have the legal authority to use alternative project delivery methods (e.g., DB, with or without warranty, or long-term maintenance agreements)? If the agency faces legal barriers to implementing alternative delivery and procurement methods, then application of performance specifications may be possible only under a DBB approach by specifying performance-related or end-result construction require- ments. Also, if legal barriers existârelated to the use of DB, warranty provisions, or best-value procurementâthen the agency may need to obtain special legal authority to test the alternative delivery methods under an experimental or pilot program before gaining support for broader legislative authority. Does the public support alternative delivery? Performance specifications may require a higher initial investment. The agency must consider whether the public and legislators are receptive to the higher initial cost, particularly if benefits will not be realized until far in the future. Does the agency have internal support for using alternative delivery? As discussed in Chapter 2, performance specifications change the traditional roles and responsibilities of agency and contractor personnel, potentially affecting the way a project is admin- istered and inspected. Agency personnel must be willing to relinquish control in some areas in exchange for the contractor accepting more performance risk. The agency may find it beneficial to provide training and support for its staff to ensure that any changes in traditional roles and responsibilities are adequately and consistently com- municated and enforced. For example, if the agency is not going to perform the same level of inspection, personnel have to be aware of the quality management, testing, and record keeping required of the contractor to ensure adequate performance. One approach used successfully by several agencies is to set up a special projects group (or innovative contracting office) dedicated to alternative delivery to develop internal sup- port and staff experience. Is industry able to assume the performance risks? Quite often the industryâs appe- tite for risk determines whether a performance specification is feasible. Under perfor- mance specifications, contractors that traditionally rely on owners to specify materials and construction processes have to take on greater responsibility for keeping up with the state of practice. If the local contracting community has limited resources and
55 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS expertise or is averse to being held responsible for performance outcomes, then perfor- mance specifications may not provide the best option. The agency must carefully gauge the interest and ability of industry to respond to alternative delivery and procurement requests. If industry is not prepared or is unable to assume performance risk, the result of implementing a performance specification may be less competition and potentially higher costs. For projects involving a warranty or postconstruction maintenance agreement, cooperation from the surety industry is also important. Sureties may be reluctant to participate in a project subject to a performance warranty (e.g., 5 to 10 years for pave- ments). For sureties, unwillingness to offer a bond often boils down to the uncertainty regarding risks associated with long-term performance specifications. Sureties may either not offer a bond or increase the premiums on the bond to cover perceived risk, which translates to higher bids. If the answers to these questions are generally positive and support the transfer of responsibility for performance to the private sector, then DB with or without a short-term warranty is an appropriate delivery option for the agency. The last step to consider is whether or not private-sector asset management should be included in the alternative delivery system. Private-Sector Asset Management Some agencies may perceive a need to outsource the long-term asset management of a facility. This may be accomplished through a long-term operation and maintenance (O&M) agreement or a public-private partnership agreement. From the agencyâs per- spective, private-sector asset management may fill a gap in the agencyâs resources, reduce its cost of inspection and maintenance, or allow the project to be constructed sooner than available public funds would allow. Industry may perceive the poten- tial for a higher rate of return through innovation or performance incentives and the oppor tunity for a long-term return on investment. Typically, the private sector incurs significantly more risk for performance under such long-term agreements. The payment terms often require industry to finance cer- tain front-end costs of the project (e.g., planning, design, construction) to be recouped through toll revenue or other periodic payments during the O&M phase of the agree- ment. The payments are dictated in part by the ability of the contractor to meet certain performance targets and operational (usage) goals of the facility. A number of conditions must exist to allow for long-term private-sector asset management of a transportation asset (roadway, bridge, or transportation corridor). These include the following: ⢠The agency has the legislative authority to collect tolls or transfer the responsibility and risks for asset management to the private sector. ⢠The intended performance of the facility over time can be described in terms of functional performance parameters that can be measured and tested during the O&M period and at handback.
56 STRATEGIES FOR IMPLEMENTING PERFORMANCE SPECIFICATIONS: GUIDE FOR EXECUTIVES AND PROJECT MANAGERS ⢠Industry is capable of entering into a long-term O&M agreement and meeting the performance goals for the facility with a reasonable return on investment. If the project does not meet these conditions or industry is not suited for long-term asset management, the agency should instead consider using DB with a short-term per- formance warranty.
