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Best Practices for Price Adjustments

Best Practices for Price Adjustments. AASHTO Subcommittee on Construction / Contract Administration Task Force. Presented by . . . . Gene Wortham, ITD Eugene Hoelker, FHWA Mark Richter, FHWA Prepared by. . . . Frances J. Hood, ITD. Connecticut Delaware Georgia Idaho Illinois

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Best Practices for Price Adjustments

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  1. Best Practices for Price Adjustments AASHTO Subcommittee on Construction / Contract Administration Task Force Presented by . . . . Gene Wortham, ITD Eugene Hoelker, FHWA Mark Richter, FHWA Prepared by. . . . Frances J. Hood, ITD

  2. Connecticut Delaware Georgia Idaho Illinois Iowa Maryland Minnesota Mississippi Montana Nebraska Nevada New Hampshire New Jersey South Dakota Virginia Tennessee Texas West Virginia Wisconsin State Transportation Agencies (STAs) Responding - 20

  3. Best Practices for Price Adjustments Focus • Price adjustment practices for bid items not already addressed in either standard specifications or quality assurance special provisions. • State agency procedures and practices for work not addressed in the contract but determined to be acceptable to leave in place.

  4. Does your State define reasonably close conformity? Yes: 4No: 16

  5. Reasonably Close Conformity Reasonably close conformity usually means compliance with the tolerances specified in the contract and with customary manufacturing and construction practices where tolerances are not specified.

  6. Reasonably Close Conformity cont. At least one state allows the Engineer to accept variations beyond specified tolerances as reasonably close conformity where they will not materially affect the value or function of the work and the interests of the State. Several states do not use the term "reasonably close conformity" and just use "conformity".

  7. Does your State ever accept work not in conformance with the contract? Yes: 20No: 0

  8. Do you have procedures or guidelines in place for accepting non-compliant work?Yes: 14No: 6

  9. What is your basis of acceptance? “Case-by-Case based on Engineering Judgment" (NV/NJ/MS/TX) “Case-by-Case working with other sections with the most knowledge and experience." (VA/NH/TN/SD) “Some material price adjustment guidelines and case-by-case engineering judgment" (CT/ID/WV/DE)" “Miscellaneous Deduction Help Guide to aid in understanding and calculating deductions for work that does not meet the contract but is still adequate to meet the design purpose." (MT)

  10. What is your basis of acceptance cont.? “Guidelines Developed for Non-Conforming Materials but not Non-Conforming Work” (WI) “The following are considered: public safety, life cycle cost, maintenance cost, traffic disruption, contractor cost" (NE) “We have specifications for price adjustments for the majority of non-conformance work. We continue to add price adjustment specifications." (MD) “Price Adjustment based on estimate of reduced service life.” (GA)

  11. What is your basis of acceptance cont.? “Standard price adjustment methods defined in specifications, materials IMs and Construction Manual apply in most instances." (IA) “Section 1501.3 Basis of Decision criteria specified for engineering judgment: Facts and Inferences. Inherent variations in materials and processes Risks associated w/ small samples. Past Experiences. Department Procedures. Other factors. " (MN) “Adjustment based on "how close", contractor good faith, traffic impact, service life effect, past project history, political considerations" (IL)

  12. Recommended Best Practice Goal Achieve uniformity in administering price adjustments for non-conforming but acceptable materials and work that remains in place.

  13. Best Practices At a minimum: Base decision on Agency established criteria. Consult with others in Agency with suitable knowledge and experience.

  14. Best Practices To mitigate inconsistencies: Develop standard price adjustments and formalize into agency guidelines and procedures. (See handout of agencies reporting standard price adjustments)

  15. Best Practices To reduce disputes: Specify price adjustments in the contract but….. Use judiciously - Contractors may use to their advantage (wire fence example, unbalanced bidding). (See handout for agencies reporting specified price adjustments)

  16. THANK YOU (A contact list of reporting agencies is provided should your agency desire more information)

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