Alternative Contracting Strategies for Highway Construction

Alternative contracting strategies for highway construction

(Literature review and comparative analysis)

Siddharth A. Shah1

1Graduate Student, Department of Civil and Environmental Engineering, University of Illinois Urbana Champaign

sashah11@illinois.edu

Abstract: An approximate $84.19 billion worth of roadway construction is estimated in the United States in year 2015. The efficient management of the highway construction and rehabilitation projects is also crucial in the face of an increased requirement of pavement overhauls in recent times. It has been proven that employing proper contracting method can significantly help in achieving the project objectives. Thus, the study of contracting methods for highway construction is pertinent.

The road construction sector in the U.S has started adopting various new contracting and procurement methods that incentivise the contractor for early project delivery and/or put additional costs for failure to meet the required performance parameters. There has been a departure from the standard method awarding to the lowest bidder and paying for the quantities. Various alternative contracting methods such as providing design-build, lane rental, warranties, A+B bidding are now coming in practice. These innovative contracting methods allow for factors such as time, quality, and innovation to be considered, in addition to low bid.

The paper explores each of the alternative contracting method in detail. The specific conditions that differentiate them from the traditional contracting method and how they affect the overall project delivery are investigated through study of the available literature. A comparative analysis of each of the contracting strategy is carried out. Recommendations for the alternative contracting strategies are provided.

Keywords: Project Management, Lean Construction, Confined Site, Space Management, Multistory Building Construction

1. INTRODUCTION

An appropriate project delivery method can enhance the probability of meeting project goals and objectives, significantly increasing its efficiency (Touran, et al. 2011) (Luu, Ng and Chen 2005) (Rwelamila and Meyer 1999). Gordon (Gordon 1994) states that the selection of more efficient contracting methods could reduce project cost by an average of 5%. In a survey by The Charted Institute of Building (CIOB), a whooping majority of 87% believe that proper selection of project delivery system is synonymous with a successful project (The Chartered Institute of Building 2010). While there is no standard solution for all projects and thus there is no single project delivery system best suited for all projects (Masterman 2003), for a particular project, one project delivery system is better than all other (Love, Skitmore and Earl 1998).  

1. CHALLENGES FACING THE DEPARTMENT OF TRANSPORTATIONS

The department of transportations (DOTs) in United States are currently facing a two-pronged challenge: While a large part of the transportation infrastructure in U.S. is nearing the end of its design life and needs to be reconstructed, the traffic and congestion levels are increasing steadily at the same time (Huie & Schneider, 2015).

Thus, new alternative contracting methods offer a solution to promote building of highways and bridges in a safer, faster and improved way. Before studying that, it is important to understand DBB.

1. TRADITIONAL CONTRACTING/PROJECT DELIVERY METHOD

The traditional project delivery method employed for highway construction has been DBB (Design-Bid-Built) delivery. In Design-Bid-Build delivery method, the design and construction occur in sequence with solicitation steps for each (The Construction Management Association of America, 2012). Under this traditional approach, the design documents are first completed and the construction contract is awarded to a qualified bidder with the lowest price. The design and contractor selection is thus simplified.

Here, the design and engineering firms are contracted separately. After the designs and specifications are completed, bid solicitation for construction follows. As with detailed designs available, firm costs can usually be established. Payment for construction is also done item wise as generally, unit price for each item is established.

The specifications here are largely method based and the role of the owner agency is mostly that of inspection and administration.

In general the benefits of Design-bid-Build delivery system are:

• Competitive bidding due to large number of bidders
• Simple process
• Reduced potential for corruption
• Risks and rewards easy to understand
• Well known and accepted by almost every party

The procedure for procuring lowest responsive bidder, technical specifications and management practice are structured to minimize risk for the owner agency. DBB necessitates minimal interaction between the designer and contractor, but also omits reviews for constructability cost savings or schedule improvements (The American Institute of Artchitects; The Associated General Contractors of America, 2011). It is also very difficult to preclude any dishonest or incompetent contractors from bidding for the project.

1. ALTERNATIVE CONTRACTING STRATERGIES

As the traditional contracting method have proved to be very time intensive, slowing down the project completion, and not promoting any innovation in the construction field, new contracting strategies are being adopted by an increasing number of owner agencies, i.e. the department of transportation. Following are the alternative strategies reviewed in this paper:

1. Design-Build
2. Construction Manager – As advisor
3. Construction Manager at Risk
4. Performance Contracts
5. A+B Contracting
6. Lane Rentals
7. Construction Warranties
8. Indefinite Quality/Indefinite Delivery
9. Incentive / Disincentive Provisions for Early Contract Completion
10. No Excuse Contract

1. NEED FOR ALTERNATIVE CONTRACTING STRATERGIES

The new contracting approaches, while being promising also face some challenges during implementation. A major challenge is inculcating a cultural change in the existing organizations, owner agencies as well as contractors, wherein the departure from traditional approaches can meet resistance. The owner agencies shall need to recognize that in providing flexibility to contractors through some of the new approaches, they are sacrificing some control.