Use of warranties on highway construction
Ann Johnson of the Department of Civil Engineering at the University of Minnesota presented highlights from a new manual published by the LRRB Research Implementation Committee. The manual—Use of Warranties in Highway Construction (176 KB PDF)—updates a 1999 report titled Use of Design/Build and Warranties in Highway Construction, and was written specifically for local governments.
The manual includes a status of warranties in Minnesota, an update on the history and use of warranties in the United States, benefits and disadvantages of warranties, and recommendations for local governments, including step-by-step guidelines. "No one at the local level in Minnesota has done warranties," she said. "This manual gives you a thorough resource if you're thinking of it."
Mn/DOT awarded three pilot warranty projects in 2001 and is now working toward a one-year warranty on all design/build contract elements. Across the country, states are using warranties to improve quality and innovation and to address shortages in personnel.
Benefits of warranties include less maintenance by the owner, less inspection by the owner during construction, quality improvements, contractor innovation, shifted risk from the owner to contractor, and compatibility with the low-bid system.
A disadvantage is that savings are questionable. "No one has quantified the savings over time, so it is still up in the air," she said. Another critical issue is monitoring the warranty. "It's a double-edged sword," she said. "Warranties can help you during the construction phase, but the key issue is having trained staff to do monitoring."
Another drawback is that agencies are uncertain of their ability to administer and enforce warranty contracts. What's more, the bonding requirements don't provide a fair environment for small contractors, so competition is reduced.
The manual gives useful step-by-step guidelines for local governments considering warranties. Factors covered include project selection criteria, bidding system compatibility, risk allocation, and staffing.
You can obtain a copy of report number 2004-40 at www.lrrb.org/pdf/200440.pdf (180 KB PDF).