Pavement Type Selection – Updated Guidance on Use of Alternate Bidding

Virginia Concrete Conference Richmond, VA March 6, 2014 Pavement Type Selection – Updated Guidance on Use of Alternate Bidding

Session Outline

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

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

PTS Method #1 Identify feasible alternatives Perform LCCA Cost within specified % of lowest estimate Cost within specified % of lowest estimate • Consider subjective factors: • constructability, adjoining pavement, competition, • traffic control, • budget, etc. YES NO Eliminate alternative Make Decision 8 states

PTS Method #2 (MI) Identify feasible alternatives 1 rigid, 1 flexible Perform LCCA Alternate with lowest LCC YES Make selection decision NO Eliminate alternative

PTS Method #3 Identify feasible alternatives Perform LCCA Submit to selection committee. Committee evaluates engineering and economic factors Committee recommends a decision

PTS Method #4 Both rigid and flexible alternatives are feasible Identify feasible alternatives NO YES Perform LCCA Prepare LCC Adjustment factor Eliminatealternative Alternate Bids to determine pavement type 10-25 states

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

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

Question 1 Purpose of TA • Guidance on use of AB for PTS on Federal-aid projects on NHS

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

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

Question 4 Scope/Applicability of TA • Recommended practice for use on FA projects on NHS

Question 5 FHWA Position • Suitable approach when, • Engineering/economic analysis shows no clear choice between different pavement designs

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

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

Question 6 When is AB Appropriate • Consideration of Uncertainty • Determine total LCC for each alternative • Consider use of RealCost software

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

Question 6 When is AB Appropriate • Non-Economic Factors • Agency may consider, • Constructability • Continuity of adjacent pavements • Availability of local materials • Experience

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

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%

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

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

Question 7 Administration of AB • Quality Price Adjustments • If used, • Provide similar incentives/disincentives for all alternate pavement types

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

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

Question 7 Administration of AB • Change Orders • Should not allow post-award change order for pavement type

Question 8 Program Effectiveness • Monitor number of bidders and unit cost of projects • Solicit input from respective pavement industry groups

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

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

Pavement Type Selection – Updated Guidance on Use of Alternate Bidding