Innovative Contracting and Trns*Port Gus Wagner Minnesota Department of Transportation Office of Construction and Innovative Contracting Trns*Port Users Group Mobile, Alabama October 14, 2004

Disclaimer The information given here is based upon experiences of the Minnesota DOT and may not represent all states. There is no encouragement or discouragement of innovative contracting. It is only an acknowledgement of the use of these practices as a part of doing business.

What will be covered? Reasons for Innovative Contracting Design-Build/ Lane Rental/ A+B Definition Benefits Drawbacks Trns*Port Issues Possible Solutions Other types of Innovative Contracting Warranties Incentive/Disincentive for Time and Quality Questions

Why is Innovative Contracting Needed in Minnesota?

Slow Delivery of Construction Projects A typical project can take five to seven years; some projects can even take decades to complete. Reasons include: Increased emphasis on public involvement, agency partnerships and environmental stewardship Land acquisition, utility relocation and engineering design becoming more challenging Political barriers compromise the timely delivery of projects

Safety and Congestion In 2001 there were 98,984 traffic crashes in Minnesota: An average of 271 crashes per day 588 people died on Minnesota roads 42,223 people were injured Road rage is a growing concern

Costs When construction projects are delayed, construction and land acquisition costs rise due to inflation. The cost per person due to congestion in the Twin Cities is nearly 14 percent higher than cities with similar population size. On average, drivers in the Twin cities spend about 53 hours per year stuck in traffic. In 2000 traffic tie-ups cost the average Twin Cities commuter $1,000 in lost time and wasted fuel.

Design Build

Definition Design-build is a contracting process that brings designers and contractors together early in the detail design portion of a project. The owner clearly defines the standards and general specifications they expect for a project, and the design-build team works together to satisfy those requirements The design-build process differs from the traditional method by overlapping design and construction, allowing construction to begin after a portion of the design has been completed.

Benefits Shortens the time to complete a project by overlapping design and construction Allows construction to begin before all design details are finalized Results in greater innovation and flexibility in the selection of design, materials, and construction methods because of collaboration between the designers and contractors

Benefits Reduces claims construction delays due to design errors because the design and construction are performed under the same contract Accelerates response times, and resolves concerns and disputes more quickly through a team environment Provides a single point of contact for quality, cost, and schedule from design through construction

Benefits Shortens project delivery time which can result in reduced user costs Allows for the use of the best-value project award-selection criteria, which evaluates both technical and financial elements

Drawbacks The rules and practices of the traditional process are familiar to Mn/DOT, contractors, and consulting engineers. New rules for design-build change stakeholders' roles. The bidding process is more expensive for design build teams. Coordination responsibility can be more challenging due to a faster pace.

Trns*Port Issues Estimating and Contract Monitoring No complete plans to estimate No Items that match Trns*Port Items List Projects activity based not item based No knowledge of materials sources that will be used

Trns*Port Issues Letting Best value project award causes problems No Items for contractors to bid (Lump Sum Bid) Unit Price for a single item to large for fields Large amount background material needed which does not easily allow for electronic bid submittal

Trns*Port Issues Construction Project Activities based with no Items for Quantity Control No items to check effects material control schedule Contract Time and Payment is based upon Critical Path Methodology

Solutions Final quantities backed out of “Final As-Built” Design Final contract time results backed out of “Critical Path Methods” Back out materials sources/location from final documentation Final testing rates can be generating and compared to final quantities

Lane Rental

Definition Lane rental is a concept used to encourage contractors to minimize road-user impacts. The contractor will be required to pay a rental fee for closing lanes and shoulders to do the construction work. The lane rental fee is based on the estimated cost of delay or inconvenience to the road user during the rental period. Minnesota uses three types of Lane rental.

Definition Lane Rental by Lane Mile The rental fee rates are stated in the bidding proposal in dollars per lane mile per time period The rental fee rates are dependent on the number and type of lanes closed and distances involved (number of lane miles) The rental fee rates can vary for different hours of the day (dependant of the traffic impact) The amount of the total lane-rental charges a contractor proposes for a project can be combined with the cost for the work items to determine the successful bidder

Definition Lane Rental by Site The rental fee rates are stated in the bidding proposal in dollars per lane per time period for a given site The rental fee rates are dependent on the number and type of lanes closed for a given site The rental fee rates can vary for different hours of the day (dependant of the traffic impact) The amount of the total lane-rental charges a contractor proposes for a project can be combined with the cost for the work items to determine the successful bidder

Definition Lane Rental Incentive – Disincentive The rental fee rates are stated in the bidding proposal in dollars per lane per time period The rental fee rates are dependent on the number and type of lanes closed and can be in lane miles or by site The rental fee rates can vary for different hours of the day (dependant of the traffic impact) The agency determines amount of the total lane rental hours for a given project The contractor receives an incentive or a disincentive for the actual lane miles used

Benefits Contractors to schedule their work in order to keep traffic restrictions to a minimum both in terms of duration and number of lane closures The concept has merit for use on projects that significantly impact the traveling public Major urban-area projects are prime candidates for this approach

Drawbacks For the agency It will require more closely watching what the contractor has in the schedule and how the field implementation is working Funds have to be allocated for such work and the work has to be charged back to the contract. It may require the agency staff to get more knowledge on how contractors operate and determining staging how long lane are used

Drawbacks For the Contractor Assumes more risk (a cost likely to be passed on to the agency) Requires better control of subcontractors and employees May require developing new skills Estimating time Project staging Traffic Control

Trns*Port Issues Need to modify many reports and electronic bidding interface Need to Create contract specific items and/or Sites in PES Need to find ways for the contractor to bid the project using BidX and Expedite New methods for tracking the items may need to be created for construction

Possible Solutions Use the modifications to PES/LAS and Expedite to add the use of multiple sites Create items in the master list that can be used to add to projects Create copies of current reports and modify them leaving current report alone

Cost-plus-time bidding A + B Bidding Cost-plus-time bidding

Definition Cost-plus-time bidding, more commonly referred to as the A + B method, involves time, with an associated cost, in the low-bid determination. Under the A + B method, each bid submitted consists of two components: The "A" component is the traditional bid for the contract items and is the dollar amount for all work to be performed under the contract. The "B" component is a "bid" of the total number of calendar days required to complete the project as estimated by the bidder.

(A) + (B x Road User Cost / Day) Definition The number of days is multiplied by the road user cost furnished by the owner and added to the "A" component to obtain the total bid. This formula is only used to determine the lowest bid for award and is not used to determine payment to the contractor. (A) + (B x Road User Cost / Day)

Definition A disincentive provision that assesses road user costs is incorporated into the contract to discourage the contractor from overrunning the time "bid" for the project. An incentive provision may be included to reward the contractor if the work is completed in fewer days than bid for the project. A maximum incentive cap is generally specified as well.

Benefits The contractor is forced to put together a well-thought-out schedule and coordinate with subcontractors to minimize the construction time and delay to the traveling public. For critical projects that have high road-user delay impacts, the A + B method can be an effective technique to significantly reduce these impacts.

Drawbacks More time to develop a reliable schedule must be done by the contractor. Contract changes are magnified and too many changes nullify the advantages of A + B. This acceleration technique may require more resources for contract administration. Negotiations for additional work are more intense with time being a bigger issue.

Trns*Port Issues Need to modify many reports and electronic bidding interface Need to Create contract specific items and/or Sites in PES Need to find ways for the contractor to bid the project using BidX and Expedite

Possible Solutions Use the modifications to PES/LAS and Expedite to add the use of multiple sites Create items in the master list that can be used to add to projects Create copies of current reports and modify them leaving current report alone

Other Innovative Contracting Warranties Standard set length A-C varied length Incentives and Disincentives Contract Time Material Quality and Workmanship Aggressive Contract and Intermediate completion Dates

Other Contacts This section is commonly known as people who really know much more about this subject than I do Peggy at Infotech New Mexico DOT

Questions?