ways of awrading highway contract

A Term Paper

ON

VARIOUS WAYS OF AWARDING HIGHWAY CONTRACT

BY

AKINDOLIRE IDOWU OPEYEMI

QSV/12/0248

QUANTITY SURVEYING DEPARTMENT

QSV304

SUBMITTED TO

Quantity surveying department, FUTA

Lecturer-in-charge

MR. IJIGHA

                                                                     MARCH, 2015.

Abstracts:

It’s expedient to know that there are several ways of awarding highway contract as discussed in these term paper compiled by me and all information were sourced online and thoroughly scrutinized by comparing facts to facts, events to events, challenges to challenges, solutions other solutions incurred by various clients and contracted companies and personnel and a little delve into the historical methods that birthed the ongoing trends now as well as some future predictions.

All highway contracts are usually and always Government projects and therefore the most adopted method is as that of the selective tendering as it is widely adopted with varying names and application pending on the region to which it is applied.

Highway contracts are usually awarded to known contractors in a particular nation and region as binding to their general applications and known reputation to perform due time stipulation as stated in nitty-gritty of the contracts document. The following terms cannot be undermined when highway contracts are been fostered as methods and factors guiding the clients and contractors;

·         Competitive bidding.

·         Warranties.

·         Quality control.

·         Multi parameters.

·         Reviews of constructabilities.

·         Quality-based Contractor Prequalification.

·         Design build.

·         Future applications; Electronic biddings.

·         Innovations, challenges, solutions incurred and other interventions.

The ever changing world in vast models, software, and materials is making the awarding of highway contracts ever competitive.

Methodology:

The information is as referenced below and were carried out by me; via online researches through internet surfing and compilation to meet suits the topic demands.

Introduction:

There are several methods for awarding contracts for highway project construction. Transportation construction is a large industry—particularly highway construction, on which more than $50 billion is spent annually. Small improvements can result in significant savings in time and cost, as well as better quality and fewer disputes. In recent years, many innovations have occurred in highway construction. The atmosphere within the industry is highly charged with optimism, uncertainty, and debate. Contracting methods for highway construction work are no exception to these developments.

This is the way used during a procurement in order to evaluate the proposals (tender offers) taking part and award the relevant contract. At this stage, eligibility of proposals has been concluded and by so doing choosing the most preferable among the proposed.

Highway Construction (Engineering):

This scope covers a wide range of engineering works and scope which includes planning, design, construction, operation and maintenance of roads and tunnels; which ensures safe and effective transportation of people and goods. They consider future traffic flows, design of highway intersections/interchanges, geometric alignment and design, highway pavement materials and design, structural design of pavement thickness, and pavement maintenance. (wikipedia, 2015)

Planning/Development: This involves the estimation of current and future traffic volumes on a road network. They try to predict and analyze its effect and adverse effects on the environment, such as noise pollution, and other ecological impacts.

Financing; most countries are always faced with high maintenance cost of aging transportation highways. Multi-purpose characteristics of highways, economic environment, and the advances in highway pricing technology are constantly changing as well.

Highway construction is usually preceded by detailed surveys and subgrade preparation. The methods and technology for constructing highways has evolved overtime and become increasingly sophisticated and thus has raised the level of skill sets required to manage such construction.  We’re considering factors such as the project’s complexity and nature, the contrasts between new construction and reconstruction, and differences between urban region and rural region projects. Contractors are required to be vast in the below and of admirable success of such or similar works.

·         Materials to be used.

·         Material quality.

·         Installation techniques.

·         Traffic.

·         Environmental aspects.

·         Managerial and maintenance skills.

·         Political aspects.

·         Legal and public concern.

The old method of contracting highway construction: The traditional approach to contracting for highway construction projects has been design–bid–build. Under this approach, projects are awarded to the qualified bidder with the lowest total price, pay items are established on a unit price basis, the specifications for highway projects are strict method specifications, and the role of the owner or agent is to inspect.

By the 1970s, as a result of this approach, the industry had developed into a highly litigious environment of owners, contractors, lawyers, and claims consultants. In the 1980s, as the total quality management movement grew in the United States, transportation agencies started to question whether these traditional contracting methods were really cost effective and quality oriented. As a result, many research projects addressing highway construction were initiated. The traditional lowest-responsive-bidder system is well-understood and accepted throughout the country. Most contractors are comfortable with the procedure and understand its risks and rewards.

The approach is also generally considered to be fair. However, it does have some limitations. The system is slow and does not favor a life-cycle cost approach to projects. Innovation is often stifled; some innovative ideas necessitate changes in laws and regulations and are therefore difficult to implement. In addition, there is little opportunity for contractor input into design, and quality is often an issue of dispute. Moreover, the traditional system requires that the highway department have a large staff to conduct all of its necessary functions.

Current Highway Construction Practices:

The highway sector is perhaps the most conservative segment of the construction industry. Although highway contractors have implemented many new construction technologies, owner contracting methods have until recently remained the same.

Rejuvenating practices of awarding contracts:

Awarding Contracts ways:

The method by which contracts are awarded is ordinarily regulated by statute or constitutional provision, and the prescribed method must be followed. For significant expenditures of public funds, government bodies usually must use a bidding process. In the awarding or letting of public contracts such as a highway project, the public body invites bids or makes "requests for proposals" so that it can award the contract to the bidder who qualifies under the terms of the governing statute. The submission of a bid in response to an invitation is considered an offer, and although it may not be freely withdrawn prior to acceptance, it does not become a contract unless and until such time as it is accepted by the proper public authority. A bid that does not respond to the terms contained in the invitation to bid is not within statutory requirements but is considered to be a new proposition or a counterproposal.

Warranties: A warranty is an assurance that a product will serve its useful life and that if it does not, the provider will replace the product or pay to return it to its proper condition. The current warranty for almost all government-funded projects is the performance bond. This bond provides assurance that the materials and workmanship of the contractor will be good during the project and up to 1 year after project completion and acceptance. The use of long-term warranties is a common practice in Europe and other countries. The governments of both Europe and America believe warranties motivate the contractor to do a better job than would be done without such assurance. Warranties have a perceived higher initial cost and in practice some believe the cost of a warranted contract is comparable to that of a no warranted contract. The warranty approach has, however, met with stiff resistance from contractors, surety companies, and contracting agencies in countries like United States. Many contractor organizations are opposed to warranties because small firms may not be able to obtain bonding to cover Construction Management 3 warranty projects, and may therefore be denied the ability to bid on such projects. Large contractors, on the other hand, could see a reduced volume of contracts. Surety companies are skeptical, but have backed some contractors bidding on highway work that requires long-term warranties. Most of the work warranted to date has involved asphalt paving, pavement striping, and bridge painting. (HANCHER)

Quality Control Transfer: The transfer of quality control has for some time been a major requirement on highway construction projects and the subject of many problems for highway agencies. With increasing costs and shrinking staff resources, many agencies are addressing these problems by specifying that contractors are responsible for quality control, with only performing quality assurance tests to ensure that the contractor is fulfilling its quality control responsibilities properly.

This approach allows the government agency to reduce its staff, which in turn results in lower operating costs and, therefore, lower overhead costs. The contractor can reduce project costs by having more control over materials and workmanship, but this cost savings is lowered somewhat by the need to hire more people to handle the quality control activities. To ensure that a project meets those standards, government representatives spot-check some parts of the project for quality assurance. The contractor is penalized if the project is not meeting its requirements. Penalties can include being removed from the contract if the project is of very poor quality. Contractors are also required to submit and have approved a plan for carrying out the quality control function.

Competitive Bidding

For major government expenditures, such as construction highways roads, government bodies require competitive bidding, which is a well-defined public process of letting a contract. Competitive bidding is a means of preventing political graft and corruption because the public nature of the process discourages favoritism and fraud. The integrity of the process is a central goal of competitive bidding. If a public official or employee is later found to have had an interest in a public contract, the agreement is void and unenforceable, and the interested parties may be subject to criminal prosecution. To provide bidders with an opportunity to bid competitively on the same work, the appropriate public authorities must adopt plans and specifications that definitely set the extent and type of the work to be done and the materials to be furnished. The public entity itself must prepare these plans and specifications, and it must provide all prospective bidders with the same specifications from which to prepare their bids. The specifications must not be drafted so as to restrict bidding to a single bidder unless it is clearly essential to the public interest to do so.

Multi-parameter

Bidding Cost plus time (or X + Y) bidding is a contracting procedure that still involves looking at the lowest initial cost, but also factors into the selection process the added cost of time to complete the project. The time cost for bidding is calculated by multiplying the estimated time of the project by a set daily user cost. The bid for award consideration is based on a formula comprising the traditional price bid by the contractor (X) and the amount of time allowed for the project (Y). The award formula is as follows: award bid = (X) + (Y t road user cost/day). This formula is used only to determine the lowest effective bid for award, and not to determine payment to the contractor.

By incorporating a quality element into the bid, the contractor is promising to perform at a set level, or to receive a disincentive for failing to do so.

Reviews of Constructability

Constructability reviews involve a formal process of allowing contractors to provide input on the design of a project. The contractor reviews the design to determine the level of difficulty of construction, and to suggest design revisions that could enhance the construction process while resulting in possible cost and time savings and fewer disputes. Such reviews result in greater potential for a better-quality final product. Constructability review is most effective when contractor input is sought during the preliminary design phase, not just before the bidding process begins. It is much easier to implement changes in philosophy early in the design process, instead of waiting until the design effort is nearly complete. One reason for the failure of value engineering on highway projects was the animosity that occurred among designers when contractors expressed criticism of nearly completed designs. Value engineering input is now sought only for minor changes after a project has been awarded.

Public contribution has been always been successfully, and constructability input has been improving overtime.

Design–Build

Design–build is probably the most discussed and controversial issue in transportation construction today. A popular contracting method in the private sector for many years, it has not seen significant use in the public sector. Under the design–build approach, design and building of a project are performed by a single company or a joint venture of companies. This approach provides the government with one source of responsibility for the project. The design–build group shares information throughout the project, beginning with the design phase. The responsibility for all problems is centralized in the design– build firm. Design–build does face legal barriers in some states where the process is not allowed. Because of federal statutes regarding design and construction contracts, considers such contracts to be experimental.

The most visible example of design–build is the rehabilitation of Interstate 15 in Salt Lake City, Utah. This project involves the complete renovation of 16 Construction Management 5 miles of roadway and 137 bridges in preparation for the 2002 winter Olympics, at an estimated cost of $1.36 billion. Three bidders pursued this historic project, and the two that were not selected received a complimentary stipend to cover their costs for the preliminary bidding. A 10-year maintenance warranty is also included in the bid to ensure that the contractor will complete the project as expected. Attitudes about design–build are beginning to change. A major benefit is reduced time for the total project and better design for complex projects as a result of the designer–builder interaction that occurs from the outset. There is, however, a great deal of resistance from the design community, which fears that cost will dominate decision making and result in lower-quality designs.

Quality-based Contractor Prequalification

Prequalification of contractors has been used for years to screen out firms that represent a risk of inot adhering to state highway project specifications. Although many standards are set with which interested contractors must comply for prequalification, essentially all that is required is the ability to secure a bid or performance bond for a project. One of the major qualification criteria is the quality of prior work performed, but this criterion has generally been discussed and not enforced. The emphasis on quality performance, however, is now becoming a major factor in evaluation. The Ontario Ministry of Transportation has begun using a highly innovative approach to contractor prequalification to improve the quality of performance and reduce infractions on its projects. This approach involves evaluating the contractor in four areas: quality, safety, timeliness, and contract execution. Each area is given a different weight in the determination of a contractor’s performance index: quality counts for 60 percent of the contractor’s rating; safety and timeliness each account for 15 percent, and contract execution for the remaining 10 percent. The performance index covers the past 3 years and is weighted to give the most recent projects more influence. Contractors are allowed to appeal and attempt to improve their rating.

The performance index is used to either increase or decrease the amount of work a contractor can be given on the basis of the prequalification limit.

Note: DOT- Department of Transportation.

Electronic Bidding

Most contractor bids are prepared and updated using laptop computers and spreadsheets, but a paper copy must still be submitted to the DOT at a set time. This requirement can cause a hardship for contractors who live at a great distance from the DOT’s main office and for those that receive subcontractor prices at the last minute. Moreover, the rushed nature of the process results in a greater chance of errors. Allowing electronic bidding can alleviate these problems. Electronic bidding is not limited to accepting bids from contractors. Announcement of the invitation to bid and the bidding documents, along with the relevant plans and specifications, can be placed on a DOT’s website for the review of interested contractors. Contractors can send their bids either by submitting a disk, by using electronic mail, or by uploading the bid to the DOT website. The DOT can also list the bid reports on its website. Transportation in the Millennium 6 The use of electronic bidding should benefit both contractors and DOTs. The major concern with electronic bidding, however, is security. How can the DOT and contractors be certain that the files they send or receive have not been tampered with and have been sent by the correct person? Software exists for ensuring the privacy of transmission on the Internet; however, DOTs have not yet developed such in-house systems for handling full electronic bidding processes. (HANCHER)

Winning Contracts and evaluating tenders is essential to the continuing viability of any contractor / client. It involves an understanding of the issues and requirements of the procurement stage but also the skills and ability to structure the tender not just to be successful but to increase profits as well.

The department offers work through a tender process and various construction and maintenance contract arrangements. In general, tenders will only be considered for Transport and Main Roads' major works using the road construction contract (RCC) document if the tenderer is currently prequalified. The prequalification level of the tenderer must be equal to or greater than the advertised project level for the works. Tenders Transport and Main Roads generally calls for tenders for its construction projects. A number of projects, however, are delivered under sole invitee arrangements with local governments or with. Transport and Main Roads' own commercial units.

Challenges of the Future Innovations in Highway Contracting

They are just beginning to be implemented. After years of stagnation, many innovations are now being implemented in several states, while many others are under review for possible implementation. in addition to innovative contracting construction management 7 practices, there will continue to be a demand for enhanced technologies, such as construction equipment automation, new construction materials, improved design methods, and improved construction operations.

There will be much support for further study and evaluation of these innovative practices and technologies, and many will result in formal research projects conducted by dots, consultants, and university researchers.

Conclusion

It is clearly expressed that there are various forms to which a tenderers would be awarded a highway construction project by the clients and with several intrepid personnel that help cut down excesses and companies overheads to which the contracts are awarded.

Recommendation

Research ought to be carried out in various countries by contractors on how they can maximize the natural resources available, rather than employ and import their materials and contractors from other countries by so doing beating cost. If more indigenous contractors were trained by their government by sending to other countries and contractors that has successfully undergone such projects, then the cost incurred by awarding the contracts to foreign contractors would be reduced, providing more jobs to indigenous contracting firms. I.e. Most Nigeria’s contracts for highway and roads generally are awarded to foreign companies such as Julius Berger, RCC etc. Information says the country still owes companies as Berger which could be curtailed if locals were trained and undertake such projects to cut down this big companies costs and overhead of importing and running the operations.

Reference

HANCHER, D. E. (n.d.). Contracting Methods for Highway Construction. pp. 1-8.

wikipedia. (2015, june 15). highway engineering. Retrieved july 24, 2015, from en.wikipedia.org: https://en.wikipedia.org/wiki/Highway_engineering