Chapter 9: Transportation
Use Alternative Bidding Methods to Speed Construction Projects
Summary
Texas Department of Transportation (TxDOT) road construction work performed
by highway contractors is awarded on a low-bid basis. Federal law has been
changed to allow states to experiment with other kinds of bidding. TxDOT is
using some innovations like incentive and disincentive clauses and factoring in
construction time as a part of the bidding process. State law currently
precludes the use of the major new option known as design-build. This method
allows a single entity to do both the engineering design and the construction,
saving time, lowering costs and speeding construction.
Background
To help TxDOT fulfill its responsibility for the state’s overall
highway transportation system, private sector contractors construct highways
with department oversight. For fiscal 2000, projected contract letting
(construction) is $2.9 billion, including contracted preventive maintenance.
Construction contracts are generally paid over three or more years. Currently,
after the Department completes the design, the construction contractors are
selected based on the submission of the “lowest responsive bid;”
this process is known as design-bid-build.[1]
Traditional Contracting Processes
Because the highway sector in the United States is largely directed by the
federal and state departments of transportation (DOT), the contracting practices
are considered by some to be the most conservative of the construction industry.
Although the actual construction technologies, methods and materials have
advanced, until recently the contracting processes have remained the same.
The traditional approach to contracting highway construction projects is
dictated in large part by the Federal Highway Administration (FHWA), although
recent changes now allow more innovative methods. This traditional
process has been for the owner (normally the state DOT) to fully complete the
design and then prepare a bid package that is awarded to the low bidder (known
as design-bid-build.) The pay items are established on a unit-price basis and
the requirements for construction are spelled out in very detailed
specifications.[2]
The most frequently stated potential disadvantages of design-bid-build focus
on the higher commitment of time and oversight by the owner, less input from the
contractor into design, more time needed to complete projects, and the
possibility of an adversarial relationship between the government agency and the
contractor.[3]
Current TxDOT System
TxDOT relies on this lowest responsive bidder system in awarding contracts.
In fact, this has historically been one of the basic rules of Federal-aid
contracting, although, as discussed below, there are new options allowed under
federal law. Based on the principle of competitive sealed bids with award to the
lowest responsive bidder who meets specific conditions of responsibility, this
traditional competitive bidding system has served the public well over the past
century. Low bid methods are believed by many in the industry to produce the
lowest initial cost. The highway contracting community is very
comfortable with the low bid approach.[4]
Current TxDOT contracting practices are tightly controlled and monitored to
assure fairness and minimize risk. As part of the lowest responsive bidder
procedures, transportation agencies have developed practices that detail exactly
what is built, how it is built, the materials to be used, how traffic is
maintained during construction, and testing procedures. The specifications that
guide this type of highway contracting are known as “method”
specifications in that they frequently prescribe how the work is to be
performed, to minimize risk for the department. On a statewide basis, the TxDOT
Construction Division spends approximately 6,000 to 10,000 man-hours per year
researching, writing, and modifying these
specifications.[5] Calculation of the lowest
responsive bid follows a complex set of regulations designed to eliminate
uncertainties.[6]
TxDOT project size
Over the last five years, the average TxDOT construction contract was $2.2
million, rising to about $2.7 million in 1999. The department has about 2,600
active contracts, averaging 126 days each, at any one time. From 1997-1999, 89
percent of contracts let (representing 27 percent of total contract costs) were
for less than $2 million. (These figures exclude locally let maintenance
contracts.[7]) In contrast to these smaller
projects, during 1995-1998 only five projects were let in excess of $50 million,
and nine such large projects in 1999.[8] Although
it is important to continue to provide work for smaller contractors to ensure a
competitive industry, there is a considerable amount of effort involved in
mobilizing, inspecting and managing each of these contracts.
The smaller average contract size comes partly as a result of the planning
process. While the specific TxDOT planning and programming decisions are made by
the three-member Texas Transportation Commission (TTC) based on input from TxDOT
staff, local government officials and the public, there is a complex allocation
process that supports those decisions. TxDOT currently divides available
revenues into 34 federal/state and state-only funding categories. While each
category has a specific purpose or mandate, there are three general groupings:
statewide categories—funding categories that are either programmed for
projects across the state by TxDOT headquarters divisions using various ranking
indices (e.g., the cost effectiveness index) or directly allocated for priority
projects by TTC; district bank balance categories-funding allocated to
TxDOT’s districts by established formulae and programmed through project
selection processes developed by each engineering district; and local bank
balance categories-funding allocated to metropolitan planning organizations
according to population for certain federal programs such as federal surface
transportation planning. Programmed projects are identified and selected through
each metropolitan area’s transportation improvement plan’s
development process.[9]
This complex allocation process can encourage districts to pursue piecemeal
approaches to project completion. The cost effectiveness index (CEI) is the most
widely used index and determines the ratio of TxDOT’s project costs to an
estimated dollar value of travel timesaving created by a
project.[10] The cost efficiency index can
favor breaking candidate projects into smaller components to compete more
effectively for the available funds. TxDOT’s description of this process
is one that “allows the maximum flexibility to each district to structure
projects in the most economical package possible while maintaining minimum
statewide fiscal restraint.” A primary concern in TxDOT’s current
allocation process is spreading funding across the
state.[11]
Innovations in Contracting Processes
A 1991 Transportation Research Board circular on innovative contracting
practices clearly showed the struggle to change contracting practices in the
highway industry by pointing out, “Innovation involves risk. Government
contracts are intended to avoid
risk.”[12] The major barriers to
innovation in highway contracting are resistance to change, concerns about risks
both in contract selection and construction, and cost.
FHWA and the American Association of State Highway Officials (AASHTO) have
recently started exploring more innovative contract practices. Highway officials
in some parts of the country have come to the conclusion that the lowest initial
cost provided by the low-bid selection process may not be the lowest overall
cost. A white paper initiated in 1996 by the AASHTO Subcommittee on
Construction-Contract Administration Task Force stated that “While the low
bid system has served the public well, it has not always optimized the overall
quality of the final product and it is not necessarily the most efficient way to
procure services for all types of highway contracts.” The resulting
Contracting 2000 Techniques for Non-Traditional Contracting Methods produced
from this subcommittee included incentive/disincentive provisions,
cost-plus-time bidding and several variations of
design-build.[13] Some of the reasons for
exploring new types of contracts include downsizing of DOTs, and the increased
pressure to complete projects quickly without raising taxes or sacrificing
quality.[14]
Cost-Plus-Time Bidding
A very valuable tool in speeding project delivery is bidding based on cost
plus time (“A+B” bidding). A+B focuses on the lowest initial cost
but also factors in the time needed to complete the project, especially
important in busy traffic areas where construction delays create substantial
congestion. The “A” component is the traditional unit-price
construction bid. The “B” component is the number of days required
to complete the project as estimated by the bidder. For award consideration
only, the bid price is viewed as a combination of the actual construction cost
and a time cost factor, calculated by multiplying the estimated time of the
project by a set daily user cost. Payments for work performed are based on the
“A” component as in a straight low-bid selection, but there may be
incentive components as well. [15]
According to AASHTO, 27 states and the District of Columbia have used the A+B
method under Special Experimental Projects No. 14 provision (SEP-14) at FHWA.
(SEP-14 encourages states to use non-traditional or innovative contracting
practices.) Of these, Maryland, Missouri and North Carolina have been the most
active users. California used the A+B Method to reconstruct critical bridges
damaged in the Los Angeles earthquake.[16]
A+B contracting was first used by TxDOT in 1997, using the formula (A) + [(B)
x (daily road user cost).[17]
According to a 1998 TxDOT report, the advantages of A+B bidding include:
- consideration of the time component of a
construction contract;
- favorable treatment of contractors with most
available resources to complete the project;
- incentives for contractors to compress the
construction schedule; and,
- greater potential for early project
completion.
TxDOT policies recognize that A+B bidding is not applicable to all projects
and that there must be a balance between the benefits of early completion and
any increased cost of construction. To ensure that TxDOT can take advantage of
the faster contract completion, before the project is bid, all right-of-way must
first be acquired and utilities adjusted or
relocated.[18]
The TxDOT guidelines state that road-user cost may be considered for the
following types of projects:
- projects that add capacity (may include grade
separations);
- projects where construction activities are
expected to have an economic impact on local communities and businesses; and,
- rehabilitation projects in very high traffic
volume areas.[19]
In addition to the criteria listed above, department guidelines state that a
secondary evaluation can be made considering issues relating to utility
relocations and right of way clearing, availability of inspection forces, and 25
percent of the estimated daily road-user cost must be greater than the contract
administrative liquidated damages.[20]
TxDOT has not made extensive use of A+B bidding. As noted in a May 2000
report, through 1997 there were 10 such contracts awarded by TxDOT; subsequent
to that date there have been only 3 with the last one let July
1999.[21] Interviews with Construction Division
staff indicate that the decision to use A+B is made by each district. According
to TxDOT, one barrier to using A+B has been the calculation of delay costs.
Previously they exclusively used computer modeling to calculate the delay cost,
and have recently published a manual calculation method prepared by the Texas
Transportation Institute for use by the districts in certain
situations.[22] One example that was
highlighted in an Engineering News Records article of a prime A+B project
was the last A+B project awarded. This was in the San Antonio area for a $50
million Interstate 10-Loop 410 project where the contractor faces $22,500 day in
potential liquidated damages for each day after the 805 allotted, but could also
win the same amount in bonuses for early completion of up to 45 days. A
vice-president for the contractor stated that the A+B method would save 25
percent off of the schedule.[23]
Incentives and Disincentives
A closely related and more widely used tool is inclusion of incentives and
disincentives in contracts. Incentives may take forms such as extra payments if
projects are completed early. Disincentives are frequently liquidated damages.
Provisions for the assessment of liquidated damages are included in all TxDOT
contracts. Liquidated damages are pre-agreed charges to the contractor if
criteria such as completion dates are not met. The schedule of administrative
liquidated damages was most recently revised in April 2000 for inclusion in
those contracts scheduled for letting in July 2000. Those projects that are
delinquent are to be assessed liquidated damages. Construction Division
information indicates that 6 percent of all active TxDOT projects, representing
approximately 4 percent of the department’s overall construction budget,
are currently behind schedule.[24]
There are two levels of liquidated damages used by the department: the
standard administrative liquidated damages, and road user cost (RUC). RUC is a
function of hourly traffic volume and roadway configuration, calculated by
specialized computer software or manually based on tables. In the last five
years, TxDOT developed a course and conducted training on computer traffic
simulation methods for determining these costs. In February 2000 they issued a
study to the districts on the manual methods for determining road user
costs.[25] The criteria for use of RUCs are the
same as those for A+B bidding. The percentage of RUC to be included in
liquidated damages can be a default cap of 25 percent of the calculated RUC or
adjusted based on unique features of the project. The current value of time
calculation for Texas is $15.70 per hour for passenger
cars.[26]
Since 1996 the department has used incentive clauses on 12 contracts, and two
years ago developed standard incentive/disincentive provisions that may be used
by the districts in their contracts.[27]
Design-Build
In design-build, the highway department contracts with a single entity to
provide design and construction services. Design-build has been popular in the
private sector for many years, especially in vertical construction and turnkey
facilities such as power plants. Design-build is just beginning to make its way
into highway construction. Until the billion dollar I-15 project in Utah for the
Olympics, the major design-build highway projects in the United States had
primarily been for the new generation of tollroads: E-470 in Colorado,
Transportation Corridor Agencies’ projects in Orange County California,
Pocahontas Parkway in Virginia, and the private tollroads SR91 in Orange County
and Dulles Greenway in Virginia. These are all developed and operated by non-DOT
agencies or private entities.
Federal Approval
FHWA officials may approve design-build contracts in accordance with the
experimental program already in existence (SEP-14). As of May 2, 2000, 142
design-build projects in 27 different states have been approved by
FHWA.[28]
The recent federal highway legislation known as TEA-21 provides a
modification of Title 23, US Code, which will eventually allow states to use
design-build contracting on a limited basis. According to Section 1307(e)
of TEA-21, FHWA is required to develop design-build regulations by June 9, 2001.
After the final rules are published, states will be able to use design-build for
a qualified project using any procurement process permitted by applicable state
or local law without specific FHWA approval. A qualified project is one
exceeding $50 million estimated cost for highway projects and Intelligent
Highway System projects of over $5
million.[29]
Other areas of transportation are adopting design-build as well. The newly
enacted $40 billion aviation bill has a provision permitting design-build on up
to seven airport projects funded by federal Airport Improvement Program
grants.[30]
Texas Law Prohibits Design-Build
Under state law, TxDOT is prohibited from using design-build by the
requirement to accept the lowest responsive bid for construction work. Texas
Transportation Code Chapter 223 relates to bids and contracts for highway
projects and subchapter 223.001 specifies competitive bids will be used for
contracts that improve a highway or for materials to be used in the construction
and maintenance of highways. In the most recent legislative session the statutes
were reorganized but this did not change the fact that TxDOT has been required
since 1925 to award to the lowest bidder.[31]
For project design, there are the requirements of the Professional Services
Procurement Act for a two-step, qualifications-based selection and price
negotiation process.[32]
In 1998, as required by Senate Bill 370 of the 75th Legislature,
TxDOT prepared a review of cost and time savings suggestions. TxDOT suggested
that design-build may be appropriate to shorten the final stage project
development time for emergency projects, since construction can begin before
design is complete. Design-build might also be used when the contractor becomes
the operator/lessor of the facility or if a special project were authorized with
special or unanticipated funding. The department has urged caution with
design-build, however, because in their view “this option allows
contractual relationships between a designer and builder that may not promote
the best design, proper construction processes or best materials
utilized.” TxDOT believes that design-build costs will be “at or
above average,” although they do not supply data to support this view.
They also propose the need to have “close control to ensure that inferior
materials are not used in the project merely to shorten time or increase profits
for design-build contractors.”[33] The
issues previously expressed by TxDOT highlight the need to take a different
approach with a design-build contract than that used for traditional
design-bid-build.
Design-Build in Laredo
Although TxDOT is not currently using design-build contracts, there are
innovative examples of this method in Texas. The first private toll road in
Texas opened in October 2000—the 21.2 mile, $51 million Camino Columbia,
which runs from near the existing Solidarity Bridge, some 20 miles northwest of
Laredo, east through ranch land to Interstate 35. This road will provide an
alternative to crossing the border at Laredo and add additional capacity for
truck traffic to and from Monterrey, Mexico’s center of US trade. Camino
Columbia, Inc., formed by area landowners in 1989 to develop the road, will
charge a toll of $3 for cars and from $12 to $20 for
trucks.[34]
Design-Build Pros and Cons
The foremost objective for using design-build is saving time. Design-build
also is generally considered the method which allows the contractor maximum
flexibility for innovation in the selection of design, materials and
construction methods while giving the owner the advantage of dealing with a
single entity responsible for the project. Other potential advantages of
design-build include:
- assignment of design and construction to a single
party, allowing construction to start before design is complete;
- a single point of contact and corresponding
accountability for quality, cost and schedule;
- reduction of administrative and inspection
costs;
- reduction or elimination of change orders and
claims due to errors and omissions; and,
- expertise not available in-house (such as
Intelligent Transportation
Systems).[35]
Further, adding a warranty, as is common, promotes quality and performance
during the warranty period.[36]
The disadvantages of design-build contracting primarily include less direct
control over the project, a more complex process, and difficulty in converting
to performance-based approach. There are several varieties of design-build and
they can be combined with other project delivery
systems.[37]
Some members of the highway construction industry are opposed to the
design-build method of contracting, believing it will put smaller firms at a
competitive disadvantage. Design-build requires significant effort and expense
in preparing proposals and some feel it would be difficult for unsuccessful
firms to stay competitive. The industry also has many concerns about the shift
in responsibility required with the use of warranty provisions in design-build
contracts. Some engineering associations also have concerns regarding
professional liability issues.[38]
However, by granting greater discretion to contractors, design-build
contracts may actually allow small construction firms to subcontract into large
projects in which they might otherwise never have had an opportunity to
participate. Also, relatively small construction firms can contract jointly with
engineering firms to provide the expertise required under a design-build
contract, which may actually result in greater competition. Experience in other
states also indicates that large projects are in reality done by local
subcontractors. When the E-470 Authority in Colorado entered into a $321 million
design-build contract in 1995 with Morrison Knudsen and Fluor Daniel, they
subcontracted all of the construction work to local
contractors.[39] Finally, TxDOT will have to
recognize that the contractor environment will have to be monitored and use its
contract discretion to strategically award contracts to preserve
competition.
Texas Design-Build Work Group
The Senate formed a Design-Build Work Group to receive comments from
professionals who would be affected by any change in statute permitting the use
of that method by TxDOT and the Department of Criminal Justice. Some of
the concerns expressed have included:
- assurance that other procurement options are
available in addition to design-build;
- uniformity of statutes regarding
design-build;
- uniform criteria for selection of design-build
team;
- contractor discrimination and biased selection;
and,
- assurance that small and minority contractors
will be able to participate on state design-build
projects.[40]
To answer these concerns, it must be stressed that design-build should not be
used for the majority of DOT construction contracts. In those cases that do not
meet the design-build criteria, other contract processes should be used. If
desired, the agency can specify a certain amount of the work to be subcontracted
to increase participation by smaller subcontractors and to meet any Historically
Underutilized Businesses (HUB) requirements. This contracting process, just like
those now in existence, must have guidelines in place and appropriate
oversight.
Appropriate Use of Design-Build
Design-build may be appropriate for projects meeting the following
criteria:
- Low-end projects including overlay or basic
reconstruction projects of less than $5 million with little or no room for
innovative design but with strict time constraints. These projects are usually
emergency situations where right-of-way, utility and environmental issues have
been resolved.
- Mid-level projects between $5 million and $20
million including those where design-build is used to bring in new technology in
which TxDOT staff do not have sufficient expertise. These projects include
bridge reconstruction or Intelligent Transportation Systems with a large
incentive for innovation. Key factors for using the design-build approach here
are the potential for time savings and the need for outside expertise.
- Mega-projects including those that previously
would have been done by being subdivided into many small projects but now can be
funded through the design-build contractor, through a bond issuance, or with
other special financing. These projects tend to be time-dependent and very
complex in design. In Utah this technique will enable the design-builder to
design and construct a project in 4.5 years when it would have taken 10 years
under the traditional design-bid-build
process.[41]
The Transportation Corridor Agencies (a public tollroad authority in
California), that have done more transportation-related design-build projects
than any other agency in the United States, agree that design-build is an
effective method for delivering projects but they do not intend to use it in
every circumstance. Their real-life list of advantages includes: simplified
project management, substantial time savings, better control of cost,
re-allocation of risk (reduces change orders), and is well received by financial
institutions.[42]
The Transportation Corridor Agencies (TCA) compared construction schedules
for two of their projects. TCA’s San Joaquin Hills Transportation Corridor
project, a combination of design-bid-build and design-build contracts, was
delivered 6 percent ahead of schedule. TCA’s Eastern Transportation
Corridor project, 100 percent design-build, was delivered 23 percent ahead of
schedule. In contrast, the average construction projects in their region of
California are 16 percent over schedule.
A study by the Journal of Construction Engineering and Management compared
design-build vs. design-bid-build. Design-build was found to provide 6 percent
lower cost, 12 percent faster construction speed, 33 percent faster delivery
speed, 5.2 percent cost growth, and 11.4 percent less schedule growth for the
projects studied.[43]
Recommendations
- State law should be amended to permit TxDOT to use
design-build contracting.
Design-build would require amending Chapter 223 of the Transportation Code.
For Texas Turnpike Authority (TTA), Subchapter F, Chapter 361 of the
Transportation Code would require an amendment. The language of any new proposed
legislation should allow TxDOT the ability to use design-build for any projects
it deems in the best interest of Texas taxpayers subject to regulations for use
of Federal funds where applicable.
Design-build contracting should be phased into use at TxDOT. TTA is the
logical starting point for pilot design-build programs as the authority already
has the ability to use other contracting methods (please see the discussion of
TTA elsewhere in this report).
- TxDOT should increase the use of A+B
bidding.
Existing, reasonable TxDOT criteria allow A+B bidding. The department’s
current approach, however, discourages this method, and should be changed to
encourage wider use. The Construction Division’s recent release of the
manual calculation method may increase use of A+B bidding by districts. If the
calculation of road user costs continues to be a hindrance, however, the
Construction Division should provide the expertise to directly assist districts
in preparing the calculations.
- TxDOT should create standardized procedures to
determine appropriate use of alternative delivery
methods.
TxDOT needs to implement an evaluation process to determine which projects
are the best candidates for alternative delivery methods. Selection should be
tied to project scope and complexity, cost-effectiveness, timely delivery and
appropriate risk transfer. Criteria for selecting appropriate projects
include:
- strict selection based on low bid is not
practicable or not advantageous;
- cost may not be the sole award criteria;
- financial packaging considerations (e.g., revenue
bonds);
- time is a critical factor; and,
- the project is large and complex, or involves
special expertise such as Intelligent Transportation Systems.
The selection process should focus on whether or not design-build or some
other alternative approach will allow TxDOT to realize all project goals cost
effectively and within desired time constraints. Time-critical projects are
especially appropriate for incentive and disincentive provisions in contracts.
The decision to use an alternative delivery method should be made as early in
the process as possible. In design-build contracts, for example, maximum time
savings occur when project construction begins when the design is less than 50
percent complete.[44]
TxDOT should develop a design-build contract form and appropriate performance
criteria, which should accompany any request for proposals. Further, TxDOT
should develop guidelines for (1) prequalification of potential bidders, (2)
fair and balanced evaluations including separate evaluations of cost and
qualitative issues, (3) appropriate submission requirements, and (4) use of lump
sum contracts for competitive selection where
feasible.[45]
- TxDOT should look for opportunities to aggregate
projects.
In order to increase efficiency, TxDOT should develop larger projects, thus
reducing the number of contracts that need to be administered as well as
allowing the use of alternate delivery and new financing methods such as GARVEEs
(discussed elsewhere in this report.) Projects need to be at least $50 million
to take advantage of the TEA-21 permission to proceed with design-build
contracts without special Federal Highway Administration (FHWA) permission. In
the years 1995-1997 there was only one $50 million project; in 1998 and 1999,
there were four and nine, respectively.
TxDOT must review alternative financing, other delivery methods, and project
size together as part of their project selection process.
Fiscal Impact
Implementation of these recommendations could result in savings in
construction costs to the Department, but the effect cannot be estimated. TxDOT
could reallocate any reduction in costs to additional projects. In addition,
there are economic benefits to drivers from cutting construction time discussed
below as well as broader economic benefits.
Although the average construction contract over the last year was
approximately $2.7 million, alternate project delivery methods are better suited
for larger projects. Looking at projects of at least $2 million, the average
size between 1996-1998 was approximately $6.5 million, and over $8 million in
1999. Reducing project completion time 12 percent from the 1999 average of 267
days could save an average 32 days. In addition to direct cost savings to the
Department from lower construction costs, cost to drivers that result from
construction delays would also be reduced.
Design-build contracts will probably be used for even larger contract amounts
and could result in significant cost savings. For example, TTA contracts now
under consideration range from $200 million to $900 million with correspondingly
longer construction periods. The projects under current consideration total over
$1.8 billion, so a 6 percent cost savings would be on the order of $110 million.
For 1999 there were nine TxDOT projects over $50 million that would have been
candidates for design-build projects based on size. The awarded amount for those
projects totaled over $585 million. Cost savings using Design-build on these
combined projects could have ranged from 6 to 12 percent, or from $35 million to
$70 million.
Additionally, these alternative contracts could result in reduced inspection
and oversight effort. Design-build has also been found to have less frequent
change orders, leading to corresponding cost and administrative savings.
Design-build contracting has broader economic effects than just the costs and
completion time associated with TxDOT operations. For example, consider two
hypothetical construction projects that would, under traditional
design-bid-build contracting, take three years (36 months) to complete and cost
$50 million each, for a total of $100 million. Design-build contracting on these
two projects would result in a total cost of $94 million as a result of the
projected 6 percent cost savings and would be completed in 32.4 months if
completion time was cut by 10 percent. This means the people of Texas would
benefit from design-build contracting on two traditional $50 million projects in
two ways. First, the projects would be completed sooner. Second, $6 million
would be freed to support other road construction projects in the state.
The net economic benefits of design-build are much more profound than the
mere reallocation of $6 million in construction funds. Roads have a large effect
on productivity in our economy with one comprehensive study indicating that
every dollar spent on roads results in a 29 cent increase in
productivity.[46] Due to the savings in road
construction, design-build yields more road surface and productivity for the
economy, saving money that can then be invested for further productive uses in
the economy. Additional productivity also results from the completion of two
projects 3.6 months earlier than otherwise. Finally, there is some positive
economic boost from speeding up construction. Over twenty years, the net present
value of all these net benefits of design-build contracting is on the order of
an estimated $67.6 million.
The net benefits from design-build are even greater if construction time is
shortened by more than 10 percent. Using the same example as above, with two
hypothetical $50 million design-bid-build projects, if using design-build
contracting shortens the length of time for construction by one-third (33
percent) to 24 months instead of 36, the net-present value of this more
efficient contracting method increases to an estimated $121 million. Once again,
a large proportion of these net benefits accrue from an additional $6 million
road investment made possible from cost savings from design-build
contracting.
[Endnotes]
1 Texas Department of
Transportation budget and organization information provided in response to
information requested by Hagler Bailly Services, Inc.
[2] Donn E. Hancher,
“Contracting Methods for Highway Construction,” TR News 205
(November-December 1999), p. 10.
[3] Donn E. Hancher,
“Contracting Methods for Highway Construction,” TR News 205
(November-December 1999), p. 10; Design-Build Institute of America, The
Design-Build Process for the Civil Infrastructure Project.
[4] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html).
(Internet document.)
[5] Texas Department of
Transportation, Construction Division’s response to information requested
by Hagler Bailly Services, Inc., June 7, 2000, p. 3.
[6] Transportation Research
Board/National Research Council, “Innovative Contracting Practices,”
Transportation Research Circular, Number 386, (Washington, DC December
1991), p. 5.
[7] Texas Department of
Transportation responses to information requested by Hagler Bailly Services,
Inc., June 2, 2000 and June 7, 2000.
[8] Spreadsheet provided by
Texas Department of Transportation in response to information requested by
Hagler Bailly Services, Inc., January 20, 2000.
[9] Funding Category
Workshop Manual, Texas Department of Transportation, (Austin, Texas,
November 2, 1999). Reference issue paper entitled “Planning, Programming,
and Highway Funding Allocation Processes” for a detailed discussion of the
current Texas Department of Transportation funds allocation process.
[10] See issue paper entitled
“Planning, Programming, and Highway Funding Allocation Processes”
for a detailed discussion of the current Texas Department of Transportation
funds allocation process and the use of the cost efficiency index.
[11] Letter from Kirby W.
Pickett, P.E., deputy executive director, Texas Department of Transportation, to
Clint Winters, Research and Policy Development Division, Texas Comptroller of
Public Accounts, August 21, 2000.
[12] Transportation Research
Board/National Research Council, “Innovative Contracting Practices,”
Transportation Research Circular, Number 386, (Washington, DC December
1991), p. 19.
[13] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html). (Internet
document.)
[14] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html). (Internet
document.)
[15] Texas Department of
Transportation, Contract Administration Handbook for Construction
Projects, “Daily Road-User Costs, Incentives and “A+B”
Bidding,” (Austin, Texas, May 3, 2000), pp. 3-4.
[16] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html).
(Internet document.)
[17] Texas Department of
Transportation, “Review of Cost and Time Savings on Highway Construction
and Maintenance Contracts” as required by S.B. 370, 75th
Legislature, November 17, 1998, p. 2; and modified according to letter from
Kirby W. Pickett, P.E., deputy executive director, Texas Department of
Transportation, to Clint Winters, Research and Policy Development Division,
Texas Comptroller of Public Accounts, August 21, 2000.
[18] Texas Department of
Transportation, Review of Cost and Time Savings on Highway Construction and
Maintenance Contracts (Austin, Texas, November 17, 1998), p. 2.
[19] Texas Department of
Transportation, Contract Administration Handbook for Construction
Projects, “Daily Road-User Costs, Incentives and “A+B”
Bidding,” (Austin, Texas, May 3, 2000), p. 1.
[20] Texas Department of
Transportation, Contract Administration Handbook for Construction
Projects, “Daily Road-User Costs, Incentives and “A+B”
Bidding,” (Austin, Texas, May 3, 2000), p. 1.
[21] Texas Department of
Transportation, A+B Bidding Report, (Austin, Texas, May 2000).
[22] Interview with
Construction Division personnel: Elizabeth Boswell, Head of Construction
Section; Katherine Holtz, Head of Materials Section; Bob Hundley, Contract
Claims; and Scott Nichols, Contract Letting and Processing, Austin, Texas, May
25, 2000.
[23] “Work Thrives in
San Antonio,” Engineering News-Record, June 5, 2000, p.
16.
[24] Texas Department of
Transportation, Construction Division’s response to information requested
by Hagler Bailly Services, Inc., June 7, 2000.
[25] Texas Department of
Transportation, Construction Division’s response to information requested
by Hagler Bailly Services, Inc., June 7, 2000.
[26] Ginger Daniels, David
Ellis, and William Stockton, Texas Transportation Institute, “Techniques
for Manually Estimating Road User Costs Associated with Construction
Projects,” (http://tti.tamu.edu/research/planning/407730.stm).
(Internet document.)Memorandum from Thomas Bohuslav,
director, Construction Division, Texas Department of Transportation, to District
Engineers, February 18, 2000.
[27] Texas Department of
Transportation, Construction Division’s response to information requested
by Hagler Bailly Services, Inc., June 7, 2000, p. 4.
[28] Federal Highway
Administration Spreadsheet “Design Build Projects Approved Under
SEP-14,” May 2, 2000.
[29] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html). (Internet
document.)
[30] “Washington
Observer: Airports,” Engineering News Record, May 1, 2000, p.
11.
[31] V.T.C.A., Transportation
Code §223; and letter from Kirby W. Pickett, P.E., deputy executive
director, Texas Department of Transportation, to Clint Winters, Research and
Policy Development, Texas Comptroller of Public Accounts, August 21,
2000.
[32] V.T.C.A., Government
Code, Chapter 2254, Subchapter A.
[33] Transportation Research
Board/National Research Council, “Innovative Contracting Practices,”
Transportation Research Circular, Number 386, (Washington, DC December
1991), pp. 6-7.
[34] “Influx of
Design-Build Plans Enter Texas Highway Future,” Engineering News
Record, April 24, 2000, p. 16.
[35] Utah Technology Transfer
Center, “Design-Build Best Practices Guide,”
(http://www.utaht2.usu.edu/projects/InnovativeContracting/BestPractices/Design-Build.html).
(Internet document.)
[36] Utah Technology Transfer
Center, “Design-Build Best Practices Guide,”
(http://www.utaht2.usu.edu/projects/InnovativeContracting/BestPractices/Design-Build.html).
(Internet document.)
[37] Hagler Bailly Services,
Inc., Project Delivery Methods: Major Issues Related to Selection, July 30,
1999, p. 7.
[38] American Association of
State Highway Transportation Officials, “Primer on Contracting
2000,” 2nd Edition, October 1998
(http://www.aashto.org/info/primer/primer_1-18.html). (Internet
document.)
[39] Telephone interview with
Steve Richards, project manager, Morrison Knudsen, August 18, 2000.
[40] Senate Committee on
Intergovernmental Relations Design-Build Work Group Meeting minutes, April 5,
2000 and April 19, 2000.
[41] Utah Technology Transfer
Center, “Design-Build,”
(http://www.utah2.usu.edu/IC/IC-Overview/ICTDesign-Build.html).
(Internet document.)
[42] Russell Zapalac, P.E.,
director, Design & Construction for Transportation Corridor Agency
presentation on “Design/Build Lessons Learned” November
1999.
[43] Construction Industry
Institute survey reported at November 1997 Design-Build Institute of America
convention on Design-Build, April 1998.
[44] Utah Technology Transfer
Center, “Design-Build Best Practices Guide,”
(http://www.utaht2.usu.edu/projects/Innovative).
(Internet document.)
[45] Design-Build Institute
of America, The Design-Build Process for the Civil Infrastructure
Project, pp. 7-8.
[46] M. Ishaq Nadiri and
Theofanis Mamuneas, Federal Highway Administration “Contributions of
Highway Capital to Output and Productivity Growth in the U.S. Economy and
Industries,” August 1998 (http://www.
fhwa.dot.gov//////policy/gro98cvr.htm). (Internet document.); a summary is
also available at (http://www.fhwa.dot.gov//////policy/nadiri2.htm).
(Internet document.)
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