Innovative Contracting Techniques HISTORY OF INNOVATIVE CONTRACTING AND

Innovative Contracting Techniques HISTORY OF INNOVATIVE CONTRACTING AND INNOVATIVE FINANCING Cordell M. Parvin

Innovative Contracting Techniques Legal Issues • It is Clear that Disputes and Litigation Follow Any Type of Change or Innovation. – In the case of Innovative Contracting Disputes Will Arise Because They Affect Opportunities for Contractors – Innovative Contracting Techniques Affect Liabilities of Contractors – Contractors Generally Resist Change

Innovative Contracting Techniques Legal Issues • Types – Is the Innovative Techniques Legally Permissible? – Disputes Over Award; Factors Other Than Low Bid – Disputes Over New Standards

Innovative Contracting Techniques TRB Task Force Studied: – Bidding Procedures – Materials Control – Quality Considerations – Insurance and Surety Issues

Innovative Contracting Techniques TRB Task Force • September 1989 Workshop – Two Days – Industry Participants

Innovative Contracting Techniques TRB Task Force • Recommendations – Cost-Plus Time Bidding – Warranties – Constructibility – Performance Specifications – National Center – Value Engineering

Innovative Contracting Techniques SEP-14 • Initiated February 1990 • No Longer Experimental – A+B Bidding – Lane Rental – Warranties

Innovative Contracting Techniques FHWA Report Objective: Investigate Innovative Contract Practices to: • Determine Effects of Various Contract Management Methods on: – Construction Quality – Pavement and Bridge Performance – Costs – Risk to Contractual Parties

Innovative Contracting Techniques FHWA Report Objective: Investigate Innovative Contract Practices to: • Recommend Contract Management Methods With Greatest Potential to Improve Quality and Performance and Can Be Promoted for Implementation in a Quality-Oriented Contracting System

Innovative Contracting Techniques FHWA Report Objective: Investigate Innovative Contract Practices to: • Develop Instructional Guide or Guides to Select and Implement the Chosen Contracting Approaches and to Educate the Highway Construction Community

Innovative Contracting Techniques FHWA Report Innovative Contracting Practices Studied • Quality Based – Quality Assurances (QA) Specifications – Performance-Related Specifications (PRS) – Construction Warranties

Innovative Contracting Techniques FHWA Report Innovative Contracting Practices Studied • Time Based – Incentive/Disincentive (I/D) Provisions – Cost-Plus-Time or (A+B) Bidding – Lane Rental – Design-Build – Indefinite Delivery/Job Order Contracting (JOC)

Innovative Contracting Techniques FHWA Report Innovative Contracting Practices Studied • Multiple Bases (Quality, Cost, Time) – Value Engineering (VE) for Design and Construction – Partnering – Alternate Bids (Design Alternatives) – Privatization/Build-Operate-Transfer (BOT)/Build-Transfer-Operate (BTO)

Innovative Contracting Techniques FHWA Report Other Innovative Practices • Design-Build Warranty • A+B Bidding + Warranty • A+B+C Bidding

Innovative Contracting Techniques FHWA Report Legal Points • Incentive/Disincentive – No Legal Barrier – Road User Costs May Be Included in Liquidated Damages

Innovative Contracting Techniques FHWA Report Legal Points • A+B Bidding and Lane Rental – No Longer Experimental – Conforms to Lowest “Responsible” Bid – No FHWA Restriction on Lane Rental

Innovative Contracting Techniques FHWA Report Legal Points • Design-Build – Legal Barriers Limit Use – Brooks Act - Type Procurement of Design – Lowest Responsible Bidder – 1996 FHWA Chief Counsel Office Opinion

Innovative Contracting Techniques FHWA Report Legal Points • Quality-Based – QA - Used in Almost All States for Procurement – Performance Specifications - Not Discussed – Warranties - Have Been Restricted Because of Opposition and Bonding Issues

Innovative Contracting Techniques FHWA Report Legal Points • Quality-Based - GOA Report Barriers – Difficulties in Attributing Responsibility for Failures – External Factors Beyond the Contractor’s Control – Reluctance by Sureties to Bond Long. Term Warranties Except for Larger Well-Financed Firms

Innovative Contracting Techniques FHWA Report Legal Points • GAO Recommendations – Relatively Short Warranty Periods – Target or Restrict Warranties – Use End-Result or Performance Specifications – Develop Model Warranty Language and Terms for Specific Project Types

Innovative Contracting Techniques Innovative Financing Pre-TEA-21 Consisted of Various Programs in Title 23, ISTEA and National Highway Designation Act

Innovative Contracting Techniques TEA-21 Innovative Financing • Financing Includes • Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA)

Innovative Contracting Techniques TEA-21 Design-Build • • • Specifically Authorizes Design-Build Greater Than $5, 000 for ITS Greater Than $50, 000 for Others Regulations Within 3 years Effective in 3 Years SEP-14 Continues Until Then