Pavement Type Selection – Updated Guidance on Use of Alternate Bidding

Virginia Concrete Conference Richmond, VA March 6, 2014

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Session Outline

• Background on FHWA Policy & Guidance on Alternate Bidding for Pavement Type Selection 2 • State Usage 3 • FHWA Technical Advisory 2

Background on FHWA Policy & Guidance Information

Federal Register Oct 8, 1981 PTS Policy If designs equivalent then alternate bidding permitted Federal Register Nov 9, 1981 Clarification Discourages use of price adjustment clauses w/ AB 23 CFR, Part 626 Non-Regulatory Supplement April 8, 1999 FHWA does not encourage use of AB for PTS due to issue of equivalent pavement designs 3

Background on FHWA Policy & Guidance Information

FHWA Memo Nov 13, 2008 Clarifies & consolidates FHWA policy AB is not encouraged Use of commodity price adjustments should not be used SEP 14 approval needed if using price adjustments NCHRP Report 703 – Guide for Pavement Type Selection March 2011 4

PTS Method #1

Identify feasible alternatives Perform LCCA Consider subjective factors: constructability, adjoining pavement, competition, traffic control, budget, etc.

YES Cost within specified % of lowest estimate NO Eliminate alternative Make Decision 8 states

PTS Method #2 (MI)

Identify feasible alternatives 1 rigid, 1 flexible Perform LCCA YES Alternate with lowest LCC Make selection decision NO Eliminate alternative

Identify feasible alternatives

PTS Method #3

Perform LCCA Submit to selection committee. Committee evaluates engineering and economic factors Committee recommends a decision

PTS Method #4

Identify feasible alternatives Prepare LCC Adjustment factor Alternate Bids to determine pavement type 10-25 states Both rigid and flexible alternatives are feasible YES Perform LCCA NO Eliminate alternative

Overview of Pavement Type Selection

Components of Agency Processes – Selection of alternatives – Structural design – Economic Analysis – Primary/Secondary Factors Contractor-based processes – – – – Alternate Bidding Design Build Long Term Warranty Other ( PPP, Value Engineering, BV Contracting, Contract Maintenance)

State Usage

State has advertised at least 1 alternate bid job State has not utilized alternate bidding State did not reply to survey 10

Technical Advisory

Use of Alternate Bidding for Pavement Type Selection, T 5040.39 December 20, 2012 Elimination of SEP 14 approval for price adjustments, November 8, 2012 11

Question 1 Purpose of TA

Guidance on use of AB for PTS on Federal-aid projects on NHS 12

Question 2 Does TA Supersede other Guidance

TA Supersedes: – Federal Register FHWA PTS Policy Statement 11/9/81 – 23 CFR 626 NR Supplement issued 4/8/99 – HIPT Memorandum issued 11/13/08 13

Question 3 Background on AB for PTS

Risk associated w/ material costs and performance 23 CFR 626 NR Guidance did not encourage use of AB Limited use due to: – lack of national guidance, – consistent approach to AB and – open competitive bidding environment 14

Question 4 Scope/Applicability of TA

Recommended practice for use on FA projects on NHS 15

Question 5 FHWA Position

Suitable approach when, – Engineering/economic analysis shows no clear choice between different pavement designs 16

Question 6 When is AB Appropriate

Equivalent Designs – Similar level of service over same performance period (use of ME Design software) – Similar life-cycle costs • Performance period should include min one major rehab • NPV < 10% of alternative 17

Question 6 When is AB Appropriate

Discount Rate – Guidance available in LCCA in Pavement Design – Interim Tech Bulletin Sept 1981 – Recommend use of NPV for future costs – Recommend use of Real Discount Rate consistent w/ OMB Circular A-94 18

Question 6 When is AB Appropriate

Consideration of Uncertainty – Determine total LCC for each alternative – Consider use of RealCost software 19

Question 6 When is AB Appropriate

Maintenance and Rehab Strategy – Should reflect realistic pavement management practices – Should utilize realistic timing and extent of M&R activities – Provide similar level of service over performance period – NCHRP Report 703 Section 3.5 has reasonable approach

http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_70 3.pdf

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Question 6 When is AB Appropriate

Non-Economic Factors – Agency may consider, • Constructability • Continuity of adjacent pavements • Availability of local materials • Experience 21

Question 6 When is AB Appropriate

Appropriate Application – Only use when AB will likely influence determination of lowest bid – Projects w/ substantial quantities of different pavement items not suited for AB 22

Question 6 When is AB Appropriate

Work Zone User Delay Costs – Not suited when user delay costs for initial construction and M&R exceed 20% 23

Question 7 Administration of AB

LCCA Bid Adjustment – – Should be used for all AB projects Compute NPV of all unique costs over performance period – Establish process w/ industry input – – Include LCCA bid adjustment in project specs Should not include non-agency costs • • User delay costs Vehicle operating costs • Environmental costs. Etc 24

Question 7 Administration of AB

Commodity Price Adjustment – Not desirable • Difficult to administer equal treatment • May result in in different levels of material cost risk 25

Question 7 Administration of AB

Quality Price Adjustments – If used, • Provide similar incentives/disincentives for all alternate pavement types 26

Question 7 Administration of AB

Material Quantities – Pay items based on weight/mass may result in cost overruns – Recommend agency establish process to monitor costs to prevent any systematic bias 27

Question 7 Administration of AB

Approvals – Title 23 U.S.C. 112 FA construction contracts awarded based on lowest responsive bid – SEP 14 Innovative Contracting • Evaluated use of alternate pavement type bidding using LCCA bid adjustments – Approval of LCCA bid adjustments no longer required per Nov 8, 2012 memo 28

Question 7 Administration of AB

Change Orders – Should not allow post-award change order for pavement type 29

Question 8 Program Effectiveness

Monitor number of bidders and unit cost of projects Solicit input from respective pavement industry groups 30

Question 9 Reference Materials

NCHRP Report 703 dated November 2011, Guide for Pavement Type Selection

http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_703.

pdf

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Questions

Gary Crawford Pavement Design and Analysis Team Tele: (202) 366-1286 E-mail: [email protected]

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