1. Pavement Type Selection – Updated Guidance on Use of Alternate Bidding Virginia Concrete Conference Richmond, VA March 6, 2014

2. Session Outline 1 Background on FHWA Policy & Guidance on Alternate Bidding for Pavement Type Selection 2 State Usage 3 FHWA Technical Advisory 2

3. Background on FHWA Policy & Guidance Information Federal Register Oct 8, 1981 PTS Policy If designs equivalent then alternate bidding permitted Federal Register Nov 9, 1981 Clarification Discourages use of price adjustment clauses w/ AB 23 CFR, Part 626 Non-Regulatory Supplement April 8, 1999 FHWA does not encourage use of AB for PTS due to issue of equivalent pavement designs 3

4. Background on FHWA Policy & Guidance Information FHWA Memo Nov 13, 2008 Clarifies & consolidates FHWA policy AB is not encouraged Use of commodity price adjustments should not be used SEP 14 approval needed if using price adjustments NCHRP Report 703 – Guide for Pavement Type Selection March 2011 4

5. PTS Method #1 Identify feasible alternatives Perform LCCA Cost within specified % of lowest estimate Eliminate alternative NO YES Consider subjective factors: constructability, adjoining pavement, competition, traffic control, budget, etc. Make Decision Cost within specified % of lowest estimate 8 states

6. PTS Method #2 (MI) Identify feasible alternatives 1 rigid, 1 flexible Perform LCCA Alternate with lowest LCC Eliminate alternative NO YES Make selection decision

7. PTS Method #3 Identify feasible alternatives Perform LCCA Submit to selection committee. Committee evaluates engineering and economic factors Committee recommends a decision

8. PTS Method #4 Identify feasible alternatives Perform LCCA Both rigid and flexible alternatives are feasible Eliminate alternative NO YES Prepare LCC Adjustment factor Alternate Bids to determine pavement type 10-25 states

9. Components of Agency Processes – Selection of alternatives – Structural design – Economic Analysis – Primary/Secondary Factors Contractor-based processes – Alternate Bidding – Design Build – Long Term Warranty – Other ( PPP, Value Engineering, BV Contracting, Contract Maintenance) Overview of Pavement Type Selection

10. State Usage 10 State has advertised at least 1 alternate bid job State has not utilized alternate bidding State did not reply to survey

11. Technical Advisory Use of Alternate Bidding for Pavement Type Selection, T 5040.39 December 20, 2012 Elimination of SEP 14 approval for price adjustments, November 8, 2012 11

12. Question 1 Purpose of TA Guidance on use of AB for PTS on Federal-aid projects on NHS 12

13. Question 2 Does TA Supersede other Guidance TA Supersedes: – Federal Register FHWA PTS Policy Statement 11/9/81 – 23 CFR 626 NR Supplement issued 4/8/99 – HIPT Memorandum issued 11/13/08 13

14. Question 3 Background on AB for PTS Risk associated w/ material costs and performance 23 CFR 626 NR Guidance did not encourage use of AB Limited use due to: – lack of national guidance, – consistent approach to AB and – open competitive bidding environment 14

15. Question 4 Scope/Applicability of TA Recommended practice for use on FA projects on NHS 15

16. Question 5 FHWA Position Suitable approach when, – Engineering/economic analysis shows no clear choice between different pavement designs 16

17. Question 6 When is AB Appropriate Equivalent Designs – Similar level of service over same performance period (use of ME Design software) – Similar life-cycle costs Performance period should include min one major rehab NPV < 10% of alternative 17

18. Question 6 When is AB Appropriate Discount Rate – Guidance available in LCCA in Pavement Design – Interim Tech Bulletin Sept 1981 – Recommend use of NPV for future costs – Recommend use of Real Discount Rate consistent w/ OMB Circular A-94 18

19. Question 6 When is AB Appropriate Consideration of Uncertainty – Determine total LCC for each alternative – Consider use of RealCost software 19

20. Question 6 When is AB Appropriate Maintenance and Rehab Strategy – Should reflect realistic pavement management practices – Should utilize realistic timing and extent of M&R activities – Provide similar level of service over performance period – NCHRP Report 703 Section 3.5 has reasonable approach http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_70 3.pdf 20

21. Question 6 When is AB Appropriate Non-Economic Factors – Agency may consider, Constructability Continuity of adjacent pavements Availability of local materials Experience 21

22. Question 6 When is AB Appropriate Appropriate Application – Only use when AB will likely influence determination of lowest bid – Projects w/ substantial quantities of different pavement items not suited for AB 22

23. Question 6 When is AB Appropriate Work Zone User Delay Costs – Not suited when user delay costs for initial construction and M&R exceed 20% 23

24. Question 7 Administration of AB LCCA Bid Adjustment – Should be used for all AB projects – Compute NPV of all unique costs over performance period – Establish process w/ industry input – Include LCCA bid adjustment in project specs – Should not include non-agency costs User delay costs Vehicle operating costs Environmental costs. Etc 24

25. Question 7 Administration of AB Commodity Price Adjustment – Not desirable Difficult to administer equal treatment May result in in different levels of material cost risk 25

26. Question 7 Administration of AB Quality Price Adjustments – If used, Provide similar incentives/disincentives for all alternate pavement types 26

27. Question 7 Administration of AB Material Quantities – Pay items based on weight/mass may result in cost overruns – Recommend agency establish process to monitor costs to prevent any systematic bias 27

28. Question 7 Administration of AB Approvals – Title 23 U.S.C. 112 FA construction contracts awarded based on lowest responsive bid – SEP 14 Innovative Contracting Evaluated use of alternate pavement type bidding using LCCA bid adjustments – Approval of LCCA bid adjustments no longer required per Nov 8, 2012 memo 28

29. Question 7 Administration of AB Change Orders – Should not allow post-award change order for pavement type 29

30. Question 8 Program Effectiveness Monitor number of bidders and unit cost of projects Solicit input from respective pavement industry groups 30

31. Question 9 Reference Materials NCHRP Report 703 dated November 2011, Guide for Pavement Type Selection http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_703. pdf 31

32. Questions Gary Crawford Pavement Design and Analysis Team Tele: (202) 366-1286 E-mail: gary.crawford@dot.gov 32