ROAD CONSTRUCTION: Self-prescribed

March 10, 2011

Every state is feeling the crunch: too many projects, not enough funding and lack of experienced staff.


Every state is feeling the crunch: too many projects, not enough funding and lack of experienced staff.

However, while funding may be tight for many years to come, performance contracting provides a solution whereby owner agencies form cost-effective, results-focused partnerships with the contractors who build and maintain our nation’s vital roadways. In Michigan, the DOT used performance contracting and reduced construction time from 127 days to 94 days, extended the expected service life of the pavement from 11 years to 20 years, and created a total savings of $1,651,675 over the now longer, 20-year service life of the roadway.

Performance contracting for construction (PCfC) taps the contractor for ideas by focusing on results without prescribing how the work must be done. Performance goals define critical outcomes to be achieved while providing the flexibility for contractors to do what they do best: innovate and improve the construction process. If an agency may legally use an award process other than traditional low bid and also is able to offer incentive payments, PCfC can help both the contractor and the agency share the financial risks of innovation through incentives and disincentives. In PCfC, the agency specifies performance goals, such as the maximum allowable work-zone traffic queue and dates to open business accesses, rather than construction methods. Contracts are awarded based on best-value factors as well as price.

While the first Michigan performance contract was a pilot subsidized by the Federal Highway Administration’s (FHWA) Highways for Life (HfL) funds, MDOT’s pilot has been so successful that it has decided to add PCfC to its toolbox and will use performance contracting independently for a new reconstruction project slated to begin in 2011.

Sit back and see

It was a good day for Michigan DOT’s Jack Hofweber when he discovered that grant funding was available from the HfL program to pilot a new contracting concept. Hofweber, a design engineer, had a road reconstruction project ready to go. A rural, two-lane section of M-115, about 5.5 miles long, needed refurbishment. The pavement was in poor condition, with a 2006 remaining service life of 1 year, a Pavement Surface Evaluation and Rating (PASER) system rating of 3 (needs structural improvement), and a sufficiency rating (SR) of 4.5 (very poor). The two small bridges on this stretch of roadway also were in extremely poor condition and needed significant rehabilitation. But the state budget was tight, and there wasn’t enough money to do the job. Or so Hofweber thought. Then he learned about the HfL grant.

He approached his supervisor, Terry Palmer, and Terry Anderson, a former Bay Region engineer, for support and guidance in developing the MDOT application for the HfL grant. They gave it.

“We thought we had a good opportunity because we had a project already designed, and we thought this would be a good project for the grant,” said Hofweber.

As they learned more about PCfC and its potential benefits, Hofweber and his colleagues became even more excited about the possibilities.

“What was exciting was that we could get it out to the contractors with the goals we wanted to achieve through the project and we could sit back and see what they would change about that contract to make the project work better. We had a baseline because we had the project already designed. So [the bidding contractors] had a copy of the project to see what we would do and they had the opportunity to change it, and we could see what they would do to meet that goal,” Hofweber explained.

Although performance contracting also works well with a design-build contract, it can sometimes be preferable for an agency to design the project fully in anticipation of the solicitation. With a 100% designed project, contractors who don’t have the capacity to design a reconstruction project may still participate in the bidding process. The process for making modifications to the design during construction will vary by state, but generally should be laid out in the solicitation package.

Stakeholders’ share

Before the M-115 request for proposal (RFP) could be let, it was necessary to form a stakeholder group to define a set of achievable performance goals that would be used to measure the effectiveness of the selected contractor’s work. Among the 15-member stakeholder group were senior MDOT managers and representatives from the Michigan Infrastructure & Transportation Association as well as the local concrete and asphalt industry associations. By involving industry association representatives in the pre-solicitation goal development process rather than representatives of individual contracting companies, it was possible to avoid conflict-of-interest issues and the potential for otherwise eligible firms being disqualified from bidding once the RFP was issued. But the makeup of the stakeholder group—senior managers and industry professionals with long experience in their respective fields—presented its own set of challenges.

“[In] that group of people, [everyone] has their opinions on certain things, and we had to compromise some to get [everybody] to agree to the goals,” Hofweber noted.

In addition to setting the goals, another challenge to the DOT was “getting the department to relax on the traditional way of doing things . . . to get them to give up control,” Hofweber added. Because performance contracting allows the contractor to decide the best way of doing things rather than following an agency-prescribed process, agencies that use this method must be able to change their mindset and let the contractor take charge of determining how the project will be done.

The result?

“We received a much better project than we would have from our original design that would have been done the normal way,” Hofweber admitted.

A follow-up evaluation of the demonstration project conducted by the HfL program confirms this. The report points out that, because of the innovations and risk sharing supported by the performance-contracting framework, the selected contractor for the project, Central Asphalt Inc., opted to mill the existing HMA overlays, rubblize the underlying portlant cement concrete (PCC) pavement, and place an asphalt stabilized crack relief layer (ASCRL) prior to placing the HMA overlays. The MDOT design included in the original RFP only required the contractor to perform full-depth repairs of deteriorated areas prior to placing the HMA overlays. Because of this difference, the as-constructed pavement is expected to perform better and last longer than the pavement originally planned by the DOT.

Performance driven

While MDOT alone was responsible for identifying the parameters for the desired end result and establishing the minimum design criteria, it was the stakeholder group that established the performance goals for the project.

The goal areas selected were completion date (date open to traffic); construction and cleanup completion; pavement performance, which was divided into initial pavement acceptance, pavement performance warranty and ride quality; worker safety during construction; work-zone crashes; and motorist delay. It was MDOT’s responsibility to measure performance according to the procedures and measurements that the stakeholder group worked to define.

The contractor was expected to meet the minimum performance goals established by the stakeholders in these areas in order to receive incentive payments; failure to meet the minimum requirements would result in moneys being withheld. In addition, the contractor was expected to propose an innovative “best-value” approach to improving safety during and after construction, reducing congestion caused by construction, and improving the quality of the highway infrastructure.

In response, Central Asphalt Inc. proposed a set of creative solutions to satisfy the project performance goals and enhance the value of the final product, including:

Self-adjusting temporary signals. These movable signals were used to regulate the traffic that was constrained to one lane during the bridge-reconstruction phase. This solution nearly eliminated the need for flaggers, one of the more dangerous jobs on a construction site due to their proximity to traffic. The signals worked so well to reduce delay and improve safety that MDOT has implemented the use of these devices as a common practice and encourages their use where feasible in work zones throughout the state.

Temporary traffic lanes. The contractor opted to create an 11-ft-wide temporary traffic lane in the project area to enable two-way traffic, which also reduced delays, eliminated flag-control-type crashes, and increased the speed of construction.

Temporary object markers. Because this segment of M-115 traditionally experienced high rates of recreational vehicles running off the road, the contractor installed temporary object markers along the temporary traffic lane to minimize the danger of run-off-road-type crashes.

Precast bridges. The contractor elected to replace the two bridges along the span with precast bridges, reducing the construction time for these segments by nearly half and also reducing the amount of time traffic was operating under part-width construction.

Rubblized concrete pavement. The contractor also chose to rubblize the underlying concrete pavement rather than perform joint repair at the bridges. Not only did this decision reduce the contractor’s risk on the contractually required 5-year pavement warranty, it provided a superior pavement design over the joint repair option.

Emergency pull-off areas. The contractor created emergency pull-off areas within the construction area to reduce the hazards and delays associated with breakdowns in the open travel lanes within or adjacent to the work zone. 24-hour roadside service. The contractor provided 24-hour roadside services within the construction zone to help eliminate any delays caused by breakdowns.

Taken as a whole, the pilot was a complete success for both the agency and the contractor. All the project performance measures and outcome goals were achieved, and the contractor received a total of $340,100 out of a possible $395,100 in incentive payments for exceeding performance goals on a contract with an overall value of about $4 million. In return, Michigan and its citizens saved $611,178 in delay costs due to the contractor’s ability to reduce construction time from 127 to 94 days. In addition, based on the previous crash history of similar construction efforts in this area, a savings of $67,667 in work-zone crash-related costs was realized. Safety features such as rumble strips, which were not planned in the original design but were installed by the contractor, also are expected to reduce roadway departure crashes over the life of the pavement. In sum, an economic analysis determined that Michigan was able to save a total of $1,651,675 on the M-115 project by using performance contracting.

Hofweber agreed that this pilot project was successful in part because the contractor paid such close attention to the performance criteria and put significant effort into developing and applying innovative approaches to the work. Because they had a vested interest in achieving the highest possible performance ratings, the contractor managed the project proactively, continually adjusting their own methods to ensure the best possible outcomes.

Michigan was so impressed by how well the performance contracting vehicle worked on the M-115 project that they are going to use this approach on another project, one in a different and rather challenging environment.

Something bigger

Building on the success of the M-115 project, MDOT chose to use the performance-contracting approach when it issued a solicitation in the fall of 2010 for the reconstruction of M-39, a major urban freeway in the metro Detroit area that serves nearly 165,000 vehicles per day. The M-39 reconstruction project, scheduled to be constructed in the 2011 construction season, is much larger than the M-115 effort; it is valued at about $75-80 million. In addition, unlike the rural M-115 project, the majority of the project work on M-39 includes bridge rehabilitation and pavement reconstruction through an area of northwest Detroit that is primarily residential. Because of the impact this reconstruction will have on residents, MDOT has reached out to the community to identify its needs, concerns and ideas for how the project should be constructed and what the end result should be.

MDOT has learned through this process that the community’s most frequently raised concerns are associated with “quality-of-life” issues, including such factors as air quality, noise, restrictions on construction truck traffic on neighborhood streets, maintaining water pressure and other utilities to homes during construction, avoiding damage to adjacent property from vibration and heavy construction work, and fixing damage that does occur. Due to deeply depressed local economic conditions, residents also have the expectation that members of the community will be able to participate in the economic opportunities resulting from this infrastructure investment through local work-force hiring, contracting opportunities and business development in general.

The contractor will be expected to propose solutions to all these concerns as well as determine how it will meet safety and quality goals for the actual construction work.

Tony Kratofil, the metro region engineer for MDOT and one of the champions for performance contracting in Michigan, believes that the proactive, creative approach to the performance criteria used by the M-115 contractor also will be realized on this urban reconstruction effort characterized by these community-oriented issues. To date, said Kratofil, the industry representatives for the road-construction industry have been very cooperative on developing this new solicitation as MDOT is proposing it.

“The industry understands we have these community issues to address, and they have not been too resistant to this approach,” Kratofil said. “I think they have a reasonable amount of discomfort because these are not the kind of issues they normally deal with—noise, dust and work-force issues—but they’re not saying ‘we can’t do this.’ We have some very creative contractors,” Kratofil added.

At the time of this writing, the request for proposals for the M-39 project was due out in mid-September 2010, with award expected in early November.

About The Author: Bedsole and Robinson work out of the Transportation Solutions Division of SAIC, McLean, Va. Huie is program coordinator for FHWA’s Highways for LIFE.

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