Innovative contracting techniques
The Center for Transportation Studies Seventeenth Annual Research Conference, held May 24–25 in St. Paul, featured many presentations of interest to local agencies. This is one of three presentations summarized in this issue of the Exchange.
Many of us rent cars at times, but have you ever thought of renting a traffic lane? With one of Mn/DOT’s innovative contracting approaches, road builders are charged “rent”—higher during rush hours, lower on weekends—to minimize congestion and delays from construction.
Lane rental was one of the new techniques reviewed by Jay Hietpas, design-build program director with Mn/DOT, to reduce project delivery time, improve quality, and increase contractor production. These techniques—including A+B (cost + time) bidding and incentives for early completion—are currently being used on several high-profile projects around the state.
Public expectations are driving these innovations, he said. Results of a 2004 omnibus survey found by a three to one margin, Minnesotans favor spending more on construction scheduling to get work done more quickly. They also favor shorter durations even if it means Mn/DOT would do fewer projects each year.
Lane rental encourages contractors to minimize road-user impacts during construction. The rental is part of the bid, and then during construction, lane rental is assessed for each lane closure and subtracted from the bid amount. For example, on a TH 55 project in the metro area, the peak hour rate was $3,000/hour, off-peak $1,000/hour, and night/weekends $500 to $700/hour. The low bid for lane rental was $89,250 and the actual charged was $50,750, so the incentive ended up at $38,500.
Lane rental is used for intermittent disruptions and flagging operations, Hietpas said. It’s not used for difficult bids or when contract changes are possible due to third-party delays, poor soil scenarios, and right-of-way issues.
A+B bidding uses the traditional bidding method but adds a time factor. In this process, Mn/DOT defines a daily road-user cost and a maximum amount of time allowed. Then, contractors bid cost + time: (A) + (B x road user cost/day). The contract is awarded to the lowest bid of the combination of cost plus time.
The A+B approach is best used on high-impact projects and those with detours, Hietpas said. It’s not advised when there is minimal benefit to the public or a potential for significant contract changes.
The A+B approach has been used on projects ranging from $601,000 to $102,000,000. It was used on 15 projects from 2002 to 2005, and at least 8 are expected in 2006. Bid prices are comparable to standard projects. At project completion, total time was reduced 36 percent with incentives, and 19 percent without incentives. To shave time for these approaches, contractors work longer hours and on weekends, improve coordination with subcontractors, add more up-front work at bidding, and improve efficiencies. Hietpas said Mn/DOT’s approach means more staff overtime to oversee the contractors’ work and answer their questions.
Incentives for early completion are used to reduce contract time and help with public perception. They are best used for A+B projects and those with high impacts to businesses and motorists. Incentives typically range from $3,000 to $10,000 per day, with a maximum at 2 to 3 percent of the bid cost. (FHWA recommends less than 5 percent.)
“Incentives are a good tool,” Hietpas said. “Mn/DOT’s Office of Construction and Innovative Contracting encourages more use of incentives on high-profile projects.”
For more information, see the Mn/DOT Innovative Contracting Web site at www.dot.state.mn.us/const/tools/innovativecontract.html.
—Pamela Snopl, LTAP editor