1. 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

4. 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.

5. 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

6. Why is Innovative Contracting Needed in Minnesota?

7. 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

8. 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

9. 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.

10. Design Build

11. 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.

12. 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

13. 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

14. 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

15. 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.

16. 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

17. 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

18. 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

19. 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

20. Lane Rental

21. 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.

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

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

31. 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.

32. (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)

33. 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.

34. 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.

35. 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.

36. 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

37. 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

38. 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

39. 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

40. Questions?