Best-Value Procurement Methods for Highway Construction Projects (2006) / Chapter Skim
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Pages 18-58
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From page 18... ...
Contractor selection is typically based on multiple factors that include cost, schedule, quality management, safety, and technical ability (Dorsey 1995)
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From page 19... ...
The competitive sealed proposal process is described in Section 3-203 of the Model Code. The Model Code intends for this process to be used for design-build projects and for other projects for which competitive sealed bidding is determined to be impracticable or not advantageous to the owner.
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From page 20... ...
The logic underlying the requirement to give the bid price at least a 70% weighting and schedule at least a 10% weighting is unclear, and may be problematic for certain projects, for example, those for which long-term operations costs are significant. The Kentucky revised statute provides for award of contracts using a competitive sealed bidding process, with the contract awarded "to the responsive and responsible bidder whose bid offers the best-value."The statute allows significant flexibility to the awarding agency in establishing the bestvalue criteria and their relative weightings, but makes it clear that the criteria must be objective and quantifiable.
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From page 21... ...
Valuascollege Project in the Netherlands A.0 + P.1 + P.2 + P.4 + Q.3 + Q.4 + D.0 + D.1 Weighted Criteria Adjectival Rating Par Four primary concepts were derived from a review of these case studies. These concepts include parameters, evaluation criteria, rating systems, and award algorithms.
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From page 22... ...
Best-value concepts. Best-Value Parameters Best-Value Evaluation Criteria Best-Value Evaluation Rating Systems Best-Value Award Algorithms
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From page 23... ...
The next sections will detail that analysis for the major components including parameters, evaluation criteria, rating systems, and award algorithms. Parameters Cost Best-value cost parameters generally include two options: initial capital costs of construction and life-cycle costs incurred after construction is complete.While best-value contracting seeks to award a project on a basis of other than low bid alone, cost usually plays an important part, if not the most important part, of the overall decision.
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From page 24... ...
By using specific qualifications parameters in the selection process, the public agency can filter out unqualified contractors and can consider the contractor's past performance record, thereby increasing the probability that the project will be completed successfully (Gransberg and Ellicott 1996)
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From page 25... ...
However, when an owner only allows a narrow amount of contractor-determined design scope, the responsibility for coordinating the contractorproposed elements of work with the rest of the ownerdesigned construction project becomes less clear. One advantage of requesting design alternates is that it opens the door to potentially innovative design solutions for a specific design problem.
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From page 26... ...
P.1 25 Current Project Workload P.1 17 Regional Performance Capacity (Political) P.1 4 Key Personnel & Qualifications P.2 41 Utilization of Small Business P.3 30 Subcontractor Evaluation/Plan P.3 29 Management/Organization Plan P.4 31 Construction Warranties Q.0 11 Construction Engineering Inspection Q.2 1 Construction Methods Q.3 1 Quality Management Q.4 27 Proposed Design Alternate & Experience D.0 26 Mix Designs & Alternates D.0 2 Technical Proposal Responsiveness D.1 37 Environmental Protection/Considerations D.1 25 Site Plan D.1 5 Innovation & Aesthetics D.1 5 Site Utilities Plan D.1 D.1 1 Coordination 1 Cultural Sensitivity D.1 1 Incentives/Disincentives 4 Best-Value I/D Table 2.2.
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From page 27... ...
Management criteria come in three general varieties: • Qualifications of the individual personnel • Past performance of the organizations on the best-value team • Plans to execute the project Many public owners include schedule in the managementplanning portion of their best-value solicitations, but because it is a unique and overarching feature of the project environment, it will be dealt with individually in the next section. Individual qualifications can generally be placed into to two broad categories.
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From page 28... ...
The key plans that are addressed in most best-value solicitations are as follows: • Construction quality management • Safety • Traffic control/congestion management • Environmental protection • Logistics management • Public outreach and information • Small business participation • Other management plans that are important to making the best-value award decision Table 2.3 shows the typical types of management evaluation criteria that were found in the case study data collection effort. When comparing these criteria with the associated number of occurrences for each type of criteria in Table 2.2, one finds that public owners currently use a wide range of management evaluation criteria to arrive at a best-value award decision.
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From page 29... ...
. Management Evaluation Criteria (1)
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From page 30... ...
Cost information can range from a simple requirement to provide a lump sum amount to a complex requirement to provide detailed elements of a build-operate-transfer 18 Schedule Evaluation Criteria (1) Best-Value Parameter (2)
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From page 31... ...
Many solicitations contain only a single cost criterion: the proposed price. The following is a list of typical cost limitation criteria set by the owner: • Maximum price • Target price • Funds available • Public project statutory limits • Type of funding – Multiple fund sources – Fiscal year funding A maximum price criterion is a cost constraint that defines the allowable cost ceiling for the project.
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From page 32... ...
Table 2.6 shows typical design alternate evaluation criteria that were found in the case study population. Best-Value Evaluation Rating Systems Public owners have used a variety of evaluation (scoring or rating)
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From page 33... ...
Proposed Design Alternate & Experience D.0 Mix Designs & Alternates D.0 Technical Proposal Evaluation D.1 Environmental Protection/Considerations D.1 Site Plan D.1 Innovation & Aesthetics D.1 Site Utilities Plan D.1 D.1Coordination Cultural Sensitivity D.1 Table 2.6. Case study design alternate evaluation criteria.
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From page 34... ...
Green Meets specified minimum performance or capability requirements necessary for acceptable contract performance. Yellow Proposal meets most of the minimum requirements for this item, but offers weak area or mimics SOLICITATION language rather than offering understanding of the requirements.
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From page 35... ...
Marginal Little Confidence Based on the Offeror's performance record, substantial doubt exists that the Offeror will successfully perform the required effort. Changes to the Offeror's existing processes may be necessary in order to achieve contract requirements.
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From page 36... ...
Case Study 19: Forth Road Bridge Toll Equipment, in Appendix D, provides a simple example of a direct point scoring system that is based on adjectives shown in Table 2.9. The Washington State DOT I405 Kirkland Stage I HOV Design-Build RFP provides a more detailed direct point scoring system that is based on adjectival ratings.
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From page 37... ...
Building, water/wastewater, industrial, and highway projects from both the public and the private sector were analyzed. The seven algorithms are as follows: • Meets technical criteria -- low bid • Adjusted bid • Adjusted score • Weighted criteria • Quantitative cost -- technical tradeoff • Qualitative cost -- technical tradeoff • Fixed price -- best proposal A description of each of these procedures follows.
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From page 38... ...
Algorithm: AS = (T x EE) /P Award ASmax AS = Adjusted Score T = Technical Score EE = Engineer's Estimate P = Price Proposal Weighted Criteria The weighted criteria algorithm also requires use of numerical scoring (or adjectival ratings converted to numbers)
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From page 39... ...
Fixed Price -- Best Proposal The fixed price -- best proposal algorithm is based on the premise that the project owner will establish either a maximum price or a fixed price for the project. Each Offeror must submit a technical proposal accompanied by an agreement to perform the work within the specified pricing constraints.
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From page 40... ...
The generic classification of the award algorithms provides a baseline for comparison among agencies.Figure 2.4 depicts the frequency of use for the award algorithms. The qualitative cost-technical tradeoff and the weighted criteria algorithms are the most frequently used and make up onehalf of the sample population.
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From page 41... ...
In this case, some function of the technical score is divided by the proposed price to give an index in the units of technical points per dollar. It would follow that the adoption (continued)
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From page 42... ...
Then computes a "$-value" of technical proposal and subtracts from price Adjusted Bid Naval Facilities Engineering Command Best Value Uses Weighted Criteria approach to arrive at technical score Qualitative CostTechnical Tradeoff Nashville County, Tennessee Competitive Sealed Proposals Qualifications, Management Plan and Price plus Warranty Adjusted Score National Aeronautics and Space Administration Best Value Uses Weighted Criteria approach to arrive at technical score Qualitative CostTechnical Tradeoff National Institute of Standards and Technology Best Value Uses Weighted Criteria approach to arrive at technical score Qualitative CostTechnical Tradeoff National Park Service Best Value Uses "technically acceptable" approach to arrive at technical score Qualitative CostTechnical Tradeoff Pentagon Renovation Program Office Best Value Uses Weighted Criteria approach to arrive at technical score; includes incentive clauses Qualitative CostTechnical Tradeoff Seattle Water Department Best Value Uses Weighted Criteria approach to arrive at technical score Cost-Technical Tradeoff University of Colorado Best Value Qualifications/Experience in Step 1 and Price and Technical in Step 2 Weighted Criteria University of Nebraska Best Value Qualifications/Experience in Step 1 and Price and Technical in Step 2 Weighted Criteria Table 2.16. (Continued)
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From page 43... ...
Customs Service Best Value Uses Weighted Criteria approach to arrive at technical score. Requires Guaranteed Maximum Price Qualitative CostTechnical Tradeoff U.S.
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From page 44... ...
The fixed-price best proposal award algorithm is similar to all of the algorithms that assign a technical score to the bestvalue offer, but the price is fixed for all offerors. This award algorithm should only be considered when the bidding of design alternates is being entertained.
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From page 45... ...
The questionnaire, shown in Appendix C, was designed to identify the current state of practice in the industry and to identify key respondents that could provide additional project-related information for follow-up case studies. It identified transportation agencies that are using or considering the use of a best-value procurement process consistent with the definitions and concepts discussed in the previous section.
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From page 46... ...
Other formulas cited were adjusted bid, adjusted score, a prequalification rating formula, and weighted criteria combined with life-cycle cost. The fifth question asked respondents to identify what relative weightings of price and technical factors were used, where 34 Figure 2.6.
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From page 47... ...
This effort started by first adding an additional 500+ projects to the research team's original 600+ project database to craft a study database of more than 1,100 projects with an aggregate contract value of more than $5 billion. The next step involved separating those projects in the study population into two major groups: those delivered by traditional design-bid-build, low bid, and those delivered using a best-value award method.Next,each major group was divided by type into horizontal projects (highways, bridges, runways, etc.)
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From page 48... ...
The equation below identifies the factors that go into a bid for 36 Category Horizontal Vertical Delivery Method DBB Projects Best-Value Projects* A+B Projects DBB/RFP Projects DB Projects DBB/RFP Projects DBB Projects Projects in Database 708 119 77 10 32 20 394 Aggregate Value $3.4 billion $1.1 billion $824 million $140 million $166 million $131 million $273 million *
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From page 49... ...
Innovative contracting procedures, however, place the emphasis on meeting performance criteria for one or more of the social cost variables: Contractor's Bid Price = CS + CM + CQ+ CT + CO Eq. 1 Contract Costs: CS = Cost or profit for providing the service CM = Cost of providing materials and equipment Social Costs: CQ = Cost of providing a quality service or product CT =Cost of finishing a project on time CO =Cost associated with the risk of other social cost considerations such as legal/administrative, complexity of design, environmental, and safety A contractor approaches their function in the traditional bidding process by determining the cost to meet the owner's responsive parameters for CM, CQ, CT, and CO.
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From page 50... ...
The best-value non-price parameters included specialized construction experience, qualifications, and project staffing. The award was based on a 50/50 split of technical and price using a cost-technical tradeoff evaluation (Anderson and Russell 2001)
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From page 51... ...
Eq. 3 Time growth is the percentage change in time between the final contract time and the original contract time, expressed as a percentage.
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From page 52... ...
Looking at the three best-value types in the best-value population as shown in Figure 2.9, one sees that A+B projects have a slight increase in cost from the engineer's estimate. This increase is due to the fact that these projects are not generally awarded to the low bidder, and the engineer's estimates are probably formed using traditional design-bid-build bid tabulations.
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From page 53... ...
The vertical best-value projects had a large negative award growth while the vertical design-bid-build projects had a commensurately large positive award growth. Awarding vertical projects using best-value procurement is a relatively new development (Allen et al.
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From page 54... ...
Again, no conclusion can be made with regard to the performance of horizontal design-bid-build RFP projects. However, it is interesting to note that while they were awarded at about 25% less than the engineer's estimate, they were completed at 22% over the original contract price, basically breaking even with the original pre-award estimate.
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From page 55... ...
Thus, any time growth that occurs in these projects is most likely a result of either unforeseen conditions (which neither party can control) or owner-caused increases in project scope after award.
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From page 56... ...
DBB Projects A+B Projects DBB/RFP Projects DB Projects DBB/RFP Projects DBB Projects Projects in Database 119 708 77 10 32 20 394 Average Contract Value $13.0 million $2.0 million $15.9 million $17.9 million $6.0 million $6.5 million $1.0 million Table 2.18. Average contract value for the sample population.
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From page 57... ...
Adjusted bid was the most frequently used bestvalue award algorithm. Interestingly, adjusted score was ranked higher than adjusted bid with regard to its probability of success.
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From page 58... ...
Average Ease of Implementation Rating (1=effortless; 5=difficult) Meets Technical Criteria -- Low Bid 1.0 2.0 2.0 Adjusted Bid 3.0 3.7 3.3 Adjusted Score 2.0 4.0 3.5 Weighted Criteria 1.0 3.0 4.0 Cost-Technical Tradeoff 0.0 n/a n/a Fixed Cost-Best Proposal 1.0 3.0 3.0 TABLE 2.22.
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