Pavement Type Selection – Updated Guidance on Use of Alternate Bidding

Virginia Concrete ConferenceRichmond, VAMarch 6, 2014

Session Outline

1• Background on FHWA Policy & Guidance on

Alternate Bidding for Pavement Type Selection

2• State Usage

3• FHWA Technical Advisory

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Background on FHWA Policy & Guidance Information

Federal Register Oct 8, 1981 PTS PolicyIf designs equivalent then alternate bidding permitted

Federal Register Nov 9, 1981 ClarificationDiscourages 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

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Background on FHWA Policy & Guidance Information

FHWA Memo Nov 13, 2008 Clarifies & consolidates FHWA policy AB is not encouragedUse of commodity price adjustments should not be usedSEP 14 approval needed if using price adjustments

NCHRP Report 703 – Guide for Pavement Type Selection March 2011

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PTS Method #1Identify feasible alternatives

Perform LCCA

Cost within specified % of

lowest estimate

Eliminate alternative

NO

YESConsider subjective factors:

constructability, adjoining pavement, competition, traffic control,budget, etc.

Make Decision

Cost within specified % of

lowest estimate

8 states

PTS Method #2 (MI)Identify feasible alternatives 1 rigid, 1 flexible

Perform LCCA

Alternate with lowest LCC

Eliminate alternative

NO

YES

Make selection decision

PTS Method #3Identify feasible alternatives

Perform LCCA

Submit to selection committee. Committee evaluates engineering and economic factors

Committee recommends a

decision

PTS Method #4

Identify feasible alternatives

Perform LCCA

Both rigid and flexible

alternatives are feasible

Eliminate alternative

NO

YES

Prepare LCC Adjustment factor

Alternate Bids to determine pavement type

10-25 states

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)

Overview of Pavement Type Selection

State Usage

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State has advertised at least 1 alternate bid jobState has not utilized alternate biddingState did not reply to survey

Technical Advisory

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

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Question 1 Purpose of TA

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

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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

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Question 3 Background on AB for PTS

Risk associated w/ material costs and performance23 CFR 626 NR Guidance did not encourage use of ABLimited use due to:– lack of national guidance, – consistent approach to AB and – open competitive bidding environment

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Question 4 Scope/Applicability of TA

Recommended practice for use on FA projects on NHS

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Question 5 FHWA Position

Suitable approach when,– Engineering/economic analysis shows no clear

choice between different pavement designs

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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

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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

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Question 6 When is AB Appropriate

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

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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_703.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

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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

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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%

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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

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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

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Question 7 Administration of AB

Quality Price Adjustments– If used,

• Provide similar incentives/disincentives for all alternate pavement types

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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

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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

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Question 7 Administration of AB

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

pavement type

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Question 8 Program Effectiveness

Monitor number of bidders and unit cost of projectsSolicit input from respective pavement industry groups

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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 CrawfordPavement Design and Analysis TeamTele: (202) 366-1286E-mail: gary.crawford@dot.gov

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