comparison of the performance of alternative...

COMPARISON OF THE PERFORMANCE OF ALTERNATIVE CONTRACTING

METHODS IN FDOT CONSTRUCTION PROJECTS BETWEEN 2007 AND 2016

By

DEV VIJAYBHAI SHAH

A THESIS PRESENTED TO THE GRADUATE SCHOOL

OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT

OF THE REQUIREMENTS FOR THE DEGREE OF

MASTER OF SCIENCE IN CONSTRUCTION MANAGEMENT

UNIVERSITY OF FLORIDA

2017

To my family and friends

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ACKNOWLEDGMENTS

I would first like to sincerely thank my chair Dr. R. Edward Minchin Jr. for choosing me

to be a part of the research team which paved the path for me doing this thesis at the University

of Florida. He agreed to be the chair for my thesis and helped me get through my Master of

Science in Construction Management at M.E. Rinker, Sr. School of Construction Management. I

gained a lot of knowledge and useful insight in the transportation industry while working with

him.

I would also like to thank my committee member Dr. Chini for guiding me throughout

the research and providing useful directions that helped me in my thesis. I would also like to

thank Dr. Franz for his contribution in helping me get a better idea of the implementation of

delivery systems in building construction industry. I would like to take this opportunity to show

my gratitude to my co-researchers Yuanxin Zhang and Lourdes Ptschelinzew for helping me

with my thesis. Yuanxin has helped me at every stage in my thesis and throughout my time at

University of Florida. I would also like to show my gratitude to the staff and faculty at M.E.

Rinker, Sr. School of Construction Management.

I would like to thank my family for their constant support and encouragement throughout

my time here. I want to thank my friends here in the United States and back home in India for

their constant encouragement to achieve a Master of Science degree.

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TABLE OF CONTENTS

page

ACKNOWLEDGMENTS ...............................................................................................................4

LIST OF TABLES ...........................................................................................................................7

LIST OF FIGURES .........................................................................................................................8

LIST OF ABBREVIATIONS ........................................................................................................10

ABSTRACT ...................................................................................................................................11

CHAPTER

1 INTRODUCTION ..................................................................................................................12

Background .............................................................................................................................12 Problem Statement ..................................................................................................................14 Objective .................................................................................................................................14

Scope .......................................................................................................................................14

Outline ....................................................................................................................................15

2 LITERATURE REVIEW .......................................................................................................16

A+B Bidding ...........................................................................................................................17 Incentive/Disincentive ............................................................................................................19

Lump Sum Contracting ...........................................................................................................20 No Excuse Bonus ....................................................................................................................22 Design-Build ...........................................................................................................................23 Design-Bid-Build only ............................................................................................................24 Construction Manager-at-risk .................................................................................................24

Liquidated Savings .................................................................................................................25

Lane Rental .............................................................................................................................26

3 METHODOLOGY .................................................................................................................28

Data Extraction .......................................................................................................................28

Data Analysis ..........................................................................................................................29

4 RESULTS ...............................................................................................................................33

5 DISCUSSION .........................................................................................................................37

A+B.........................................................................................................................................37

Lump Sum ..............................................................................................................................41 No Excuse Bonus ....................................................................................................................45

6

Incentive/Disincentive ............................................................................................................49 Design-Build ...........................................................................................................................53

6 CONCLUSION AND LIMITATIONS ..................................................................................59

Conclusion ..............................................................................................................................59 Limitations ..............................................................................................................................64

7 RECOMMENDATIONS ........................................................................................................65

LIST OF REFERENCES ...............................................................................................................66

BIOGRAPHICAL SKETCH .........................................................................................................68

7

LIST OF TABLES

Table page

4-1 Distribution of all Projects by Contracting Method and Work Type.................................34

4-2 Distribution of All Projects by Alternative Contracting Method. ......................................35

6-1 Comparison of Number of Projects. ..................................................................................59

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LIST OF FIGURES

Figure page

3-1 Data filtering process for analysis.....................................................................................29

4-1 Distribution of all projects by Alternative Contracting Method (2007 report). ................33

4-2 Distribution of Projects by Alternative Contracting Method. ...........................................35

5-1 Comparison of Number of A+B Projects..........................................................................37

5-2 Comparison of Change in Duration for A+B in Percentage. ............................................38

5-3 Comparison of A+B Time Saving in Days. ......................................................................38

5-4 Project classification based on project completion. ..........................................................39

5-5 Comparison of Change in Cost for A+B in Percentage. ...................................................39

5-6 Comparison of A+B Cost Saving in Dollars.....................................................................40


5-8 Comparison of Number of Lump Sum Projects. ..............................................................41

5-9 Comparison of Change in Duration for Lump Sum in Percentage. ..................................42

5-10 Comparison of Lump Sum Time Saving in Days .............................................................42


5-12 Comparison of Change in Cost for Lump Sum in Percentage. .........................................43

5-13 Comparison of Lump Sum Cost Saving in Dollars. .........................................................44


5-15 Comparison of Number of No Excuse Bonus Projects. ....................................................45

5-16 Comparison of Change in Duration for No Excuse Bonus in Percentage. .......................46

5-17 Comparison of No Excuse Bonus Time Saving in Days. .................................................46


5-19 Comparison of Change in Cost for No Excuse Bonus in Percentage. ..............................47

5-20 Comparison of No Excuse Bonus Cost Saving in Dollars. ...............................................48

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5-22 Comparison of Number of Incentive/Disincentive Projects. ............................................49

5-23 Comparison of Change in Duration for Incentive/Disincentive in Percentage. ................50

5-24 Comparison of Incentive/Disincentive Time Saving in Days...........................................50


5-26 Comparison of Change in Cost for Incentive/Disincentive in Percentage. ......................51

5-27 Comparison of Incentive/Disincentive Cost Saving in Dollars. .......................................52


5-29 Comparison of Number of Design-Build Projects. ...........................................................53

5-30 Comparison of Change in Duration for Design-Build in Percentage. ..............................54

5-31 Comparison of Design-Build Time Saving in Days. ........................................................54


5-33 Comparison of Change in Cost for Design-Build in Percentage. .....................................55

5-34 Comparison of Design-Build Cost Saving in Dollars. ......................................................56


6-1 Comparison of Number of Projects. .................................................................................60

6-2 Comparison of change in duration in Percentage. ............................................................61

6-3 Comparison of Time Savings in Days. .............................................................................61

6-4 Comparison of change in cost in Percentage. ...................................................................62

6-5 Comparison of Cost Savings in Dollars. ...........................................................................63

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LIST OF ABBREVIATIONS

A+B Cost plus time

AASHTO American Association of State Highway and Transportation Officials

CEI Construction Engineering and Inspection

CM Construction Manager

CMR Construction manager-at-risk

D-B Design Build

DBB Design Bid Build

DOT Department of Transportation

EDC Every Day Counts

FDOT Florida Department of Transportation

FHWA Federal Highway Administration

GMP Guaranteed Maximum Price

I/D Incentive/Disincentive

ISTEA Intermodal Surface Transportation Efficiency Act

LRC Lane Rental Cost

NEB No Excuse Bonus

NYSDOT New York State Department of Transportation

PPPR Pre-project peer review

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Abstract of Thesis Presented to the Graduate School

of the University of Florida in Partial Fulfillment of the

Requirements for the Degree of Master of Science in Construction Management

COMPARISON OF THE PERFORMANCE OF ALTERNATIVE CONTRACTING

METHODS IN FDOT CONSTRUCTION PROJECTS BETWEEN 2007 AND 2016

By

Dev Vijaybhai Shah

August 2017

Chair: Robert E. Minchin, Jr.

Major: Construction Management

The author was an investigator on a University of Florida research team led by Dr. R.E.

Minchin (Minchin et. al. 2016) that investigated five alternative contracting methods. It was the

author’s responsibility to collect data from the Florida Department of Transportation (FDOT)

database and analyze the data based on cost and time. The topic of this thesis is to compare and

analyze the results of two reports related to evaluation of alternative contracting methods in

FDOT construction projects. The alternative contracting methods this thesis focuses on are cost

plus time (A+B), lump sum, no excuse bonus (NEB), incentive/disincentive (I/D), and design

build (D-B). This thesis is trying to determine how the alternative contracting methods are

performing in 2016 compared to their performance in 2007. This thesis focuses on comparing the

change in performance based on three factors viz. number of projects, time and cost. The results

of this study show that all alternative contracting methods evaluated here are performing better

now than they were nine years ago based on cost and time analysis. This study provides some

recommendations that would help FDOT improve the performance even more.

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CHAPTER 1

INTRODUCTION

Background

The construction industry in the transportation sector uses a three-component-based

contracting system: the delivery system, the procurement procedure, and the payment provision.

The FHWA, under SEP-14, has allowed the state Department of Transportation’s (DOTs) to use

several methods, included under these three components, individually as alternative contracting

methods. This led to the use of delivery systems such as design-build (D-B), and procurement

procedures such as cost-plus-time (A+B), and payment provisions such as lump sum,

incentive/disincentive (I/D), no excuse bonus (NEB) to be used as standalone contracting

methods. A well-known traditional delivery system known as design-bid-build (DBB) served the

public for the vast majority of the 20th century. The designers are selected based on qualifications

(Brooks Act – Public Law 92-582) and based on competitive sealed bids, contractors with the

lowest responsive and responsible bid are selected, often based on 100% plans, specifications

and estimates, which helped solidify the propagation of DBB in the public sector.

The use of DBB has helped the public with efficient and safe transportation facilities built

at the lowest cost that responsible, competitive bidders provide. The use of separate contracts

with the designer and contractor help in providing checks and balances, and encourage

competition in the private sector. It has effectively prevented favoritism in the spending of public

funds. This process can lead to adversarial relationships among the entities that are part of the

project, restrict innovation, result in high cost and time growth, eventually failing to provide the

best value to the owner.

In recent years, these issues have become a more pressing concern for highway agencies

as the deteriorating infrastructure and increasing population have created tremendous pressure to

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expedite critical projects from the planning phase, through design phase and into the construction

phase, without an appropriate increase in available funding. Florida’s response to this pressure

led to several innovative contractual clauses and contract types in the late 1980s. These brought

about the innovations listed earlier, that when assessed based on time, cost and quality,

performed better than DBB.

Even after these innovations were implemented, DBB remained the almost exclusive

project delivery method for transportation projects until the introduction of design-build (D-B) in

the Intermodal Surface Transportation Efficiency Act (ISTEA) of 1991. In 1996, the Federal

Acquisition Reform Act authorized the use of D-B for federal projects taking the next step in its

propagation.

The Florida Department of Transportation (FDOT) executed a pilot program in the early

1990s, building five projects using the D-B method for a total of approximately $50 million. In

1995, the Florida Legislature authorized FDOT to use D-B processes for buildings, major

bridges, and rail corridor projects. In 1996, this allowance was expanded to include all project

types as part of the “innovative” practices package, which further authorized FDOT to use

alternative contracting techniques intended to control time and cost increases on construction

projects. Whereas D-B has advantages, including single point responsibility, accelerated

delivery, collaboration and innovation, it also has certain disadvantages, including less agency

control over design and a perception in some states of a lack of transparency in the awarding of

the D-B contract. Under D-B, Design and construction services are provided by a single entity,

which often eventually contracts out the design services. The process of design services is

considerably different as compared to DBB. Recently, in October 2010, the Every Day Counts

(EDC) initiative was implemented by FHWA to improve project delivery approaches and

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promote innovative practices in highway construction by reducing construction times, reducing

taxpayer costs, and increasing driver safety (FHWA 2015a).

Problem Statement

The primary purpose of this research is to analyze and understand the change in the

performance of alternative contracting methods over the past nine years. In 2007, Ellis et al.

evaluated the performance of alternative contracting methods by FDOT on highway construction

projects, and a similar study was conducted in 2016 by Minchin et al. This study compares the

cost and time results of the abovementioned studies and attempts to assess the reason behind the

change encountered in this comparison. Based on these reasons, this study also recommends

some changes that could help FDOT in the future.

Objective

There is a continuing need for highway agencies to review and evaluate alternative

procurement and contracting procedures that promote improved efficiency and quality. The

reports by Ellis et al. (2007) and Minchin et al. (2016) both focus on evaluating the performance

of alternative contracting methods on FDOT construction projects. It is important to compare

them in terms of cost and time. The objective of this study is to analyze the change in the

performance and find the reason behind the change. This would help FDOT decide on how it

wants to proceed with the alternative contracting methods.

Scope

This research used results from the reports on performance of alternative contracting

methods by Ellis et al. (2007) and Minchin et al. (2016). The results used from these two studies

were average cost growth during construction, time growth during construction, contractor

performance, cost savings, time savings, incentives achieved, and bonus earned. The reports

classify certain contracting methods as suitable for a particular type of project. Designers,

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contractors and inspectors were interviewed, and their input is considered as an integral part of

this study.

Outline

This thesis is divided into seven chapters. This section is part of the first chapter, and it

will give a background to the study, the objective of the study, the scope of the study and the

outline of the remainder of the thesis. The second chapter consists of the literature review, which

presents the conclusions from the studies carried out by other researchers on the five alternative

contracting methods of interest: A+B bidding, lump sum, NEB, I/D and D-B. The third chapter

presents the methodology of the study and gives specific steps that were followed in this study.

The fourth chapter provides the results of the project filtering mentioned in chapter three. The

fifth chapter presents the results from the two reports, compares them, analyzes them and gives

the reasoning behind the change. The sixth chapter summarizes the results and conclusions from

this study and provides a list of limitations of this study. The seventh chapter presents

recommendations regarding what FDOT could do to improve the performance of alternative

contracting methods.

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CHAPTER 2

LITERATURE REVIEW

Every state DOT uses alternative contracting as a means of working through the issues it

encounters in providing transportation construction to its state. FDOT constantly remains well-

informed regarding any new alternative contracting methods developed and used by any state

DOT. FDOT has consistently assessed and evaluated many innovative and alternative

contracting techniques over the past three decades. The improvement of delivery systems

depends on these evaluations carried out by FDOT.

FDOT projects were utilized by Shr and Chen (2004) to demonstrate a model they

developed for choosing the suitable (appropriate) contracting methods for any project. They used

statistical data from FDOT projects awarded through the 1996–1997 and 1997–1998 fiscal years

using alternative contracting methods including the A+B contract, the I/D contract, and the NEB

method.

For most state DOTs, “low bid” has been the dominant feature used for awarding

contracts, whereas some DOTs have identified the significance of other project factors, including

delivery time, lifecycle costs, quality, and safety. The Federal Highway Administration (FHWA)

has used the Special Experimental Projects 14 (SEP-14) Program to allow state DOTs to evaluate

the use of nontraditional contracting methods on federal highway projects (FHWA 2015b). As

early as 1990, the SEP-14 program permitted DOTs to use project-specific contracting practices,

which would reduce lifecycle costs while simultaneously maintaining project quality. This

section of the literature review reports on five alternative contracting methods viz. A+B bidding,

lump sum contracting, NEB, I/D, and D-B.

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A+B Bidding

A+B is a procurement procedure that is currently being used as an alternative contracting

method under the SEP-14 program. Contractors submit their bids in two components: (1) “A”

comprises the dollar amount for work performed; and (2) “B” comprises the total calendar days

required to complete the job, multiplied by a pre-established dollar value for each contract day.

The two components are then added to determine a total bid for a contract. This method of

calculating the bid provides a more comprehensive valuation of the project than the conventional

low-bid method. The project duration is an important factor in this method, which leads to

contractors adjusting specific activities to elevate the construction speed.

Per FHWA, the formula for calculating the total bid for the cost-plus-time bidding

method is (A) + (B x Road User Cost / Day) (FHWA 2015a)

The road user cost is determined by the owner and is known to all the bidders. This formula is

specifically used to determine the lowest bid, not payments to the contractor. The road user cost

per day value is a dollar value pre-established by FDOT before advertising for the project

(FDOT 2015a). Road user costs are used for two purposes: (i) to discourage contractors from

closing traffic lanes more than necessary and (ii) to expedite the project to provide the travelling

public access to amenities as early as possible. Projects using this type of bidding method are

typically combined with an I/D clause. The contractor is incentivized for completing the project

ahead of schedule, but disincentives and liquidated damages are usually assessed based on the

schedule delay per contract conditions. The contract time is adjusted by the owner for extra

work, unforeseen conditions, and weather when disincentives are assessed.

FHWA reports that the use of A+B produces notable results including reduced contract times,

acceptable costs, and maintained quality (FHWA 2015a). Furthermore, for projects with the

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potential for high delay impacts, FHWA reports that this method can significantly reduce these

impacts (FHWA 2015a).

Herbsman (1995) compared conventionally bid projects (cost-only) to projects with A+B

bidding projects, showing substantial savings in the latter bidding method. This study made some

additional conclusions which are mentioned below. The most popular type of projects for A+B

bidding were bridge projects. Most states that use A+B often use A+B in conjunction with I/D.

Contractors achieve more accurate scheduling, efficient project management, and better resource

management when they are motivated to complete the project early. The use of A+B leads to

completion of projects ahead of schedule or on time for most contractors. The early completion

of projects was attained without any additional cost compared to similar conventionally bid

projects.

In 2007, Ellis et al. researched FDOT’s use of alternative contracting techniques and

evaluated their performance based on cost, time and quality. The use of A+B contracts with I/D

clauses was supported by FDOT personnel because of the inclement weather in Florida affecting

the performance of the projects awarded under this method (Ellis et al. 2007).

Anderson and Damnjanovic (2008) evaluated the performance of A+B projects and

concluded that projects which used A+B bidding had accelerated schedules, although these

projects were more inclined to be higher in cost. Recently, Choi et al. (2012) studied several

California-based transportation projects and recommended that the combined use of A+B and

I/D should be implemented to motivate contractors to meet project schedules.

The New York State Department of Transportation (NYSDOT) communicated its

experience with innovative contracting techniques that consider driver impact and the

appropriate use of A+B bidding (Kent 2013). The use of A+B bidding appropriately was

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recommended for areas with heavy traffic volumes, projects that complete an existing gap in a

significant highway system, major reconstruction or rehabilitation of an existing facility that

disturbs the traffic severely, projects with lengthy detours of heavy traffic, and projects with

accident locations that might be worsened by ongoing construction.

Incentive/Disincentive

I/D usually classified under a payment provision was approved under the SEP-14 to be

used as a standalone alternative contracting method. Incentive monies are awarded to the

contractor for early completion of a project as specified in the contract. Similarly, disincentive

monies are subtracted for late completion of a project as specified in the contract (FDOT 2015b).

I/D may be used as a standalone method or combined with other alternative contracting

techniques including, the previously mentioned A+B bidding as well as with the D-B and NEB

contracting methods. I/Ds are evaluated daily and can be used to achieve milestones in a project

as well as early project completion. I/Ds are established by the agency after considering

administration costs, inspection costs, and road-user costs. The types of I/Ds are either linear

(with constant daily values) or nonlinear (with escalating daily values) (FDOT 2015b). This

method of contracting is most appropriate when an agency is ready to pay for expediting work,

which eventually reduces time, either for specific milestones or the entire project (FDOT 2015b).

Jaraidei et al. (1995) developed useful guidelines for implementing I/D provisions in

highway construction. They suggested types of projects that would be appropriate for I/D use.

Projects that cause severe economic impact on local businesses, harm emergency service access

for a long time, require lengthy detours on poorly maintained roads, severely impact traffic on

main arteries, and place the safety of road users or construction workers at risk are the types of

projects appropriate for I/D. Note that these criteria would also welcome considerations for the

use of any accelerated construction method.

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In 1997, Arditi et al. carried out early studies in Illinois and concluded that most projects

involving I/D were completed on time or early; however, the number and value of change orders

were greater for I/D projects than non-I/D projects.

Ellis et al. (2007) determined that high-volume, large, or interstate projects were best

suited for I/D. Additionally, FDOT includes I/D provisions on all A+B projects. Recent studies

conducted in California support this practice, recommending the use of I/D simultaneously with

A+B bidding (Choi et al. 2012).

Anderson and Damnjanovic (2008) found that I/D promotes faster project completion and

may reduce construction engineering and inspection (CEI) costs due to shorter schedules.

However, they noted several disadvantages for the method including increased construction costs

and the potential for reduced quality, change orders and utility conflicts. Moreover, their research

found that unforeseen conflicts often required timely responses as well as an increased need for

field inspections.

Lump Sum Contracting

Lump sum contracting is a method in which a contractor is provided bid documents based

on which the contractor calculates the quantities and provides a lump sum bid (FHWA 2015a).

The lump sum bid comprises all materials, labor, equipment, overhead, and profit for the project

(Gordon 1994). This method is usually used as a payment provision but under SEP-14 it is used

as an individual alternative contracting method. This method is meant for projects with well-

defined scopes and well-defined quantities, and with an intention to reduce the administrative

costs on a project.

The design process is different for a lump sum project. Willoughby (1995) defined the

prerequisites for success of any design project under a lump sum contract as experience and

confidence, management skill, sound communication, and a comprehensive work plan.

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Experience allows contractors to resolve problems based on lessons learned from problems

encountered on past projects. Management skill helps in the generation of performance

measurements, and “bringing planning, scheduling and budgeting to the table is essential.” In

project management, good communication skills assist in achieving overall success. Finally, a

detailed work plan is developed comprising a project description, an organizational chart, a

scope of service, a work breakdown structure, and a list of all deliverables with responsibilities.

Ellis et al. (2007) compared lump sum to conventional projects and determined that

projects with well-defined risks such as vertical construction, landscaping, signalization and

projects with minimal earthwork work best with lump sum contracting. Anderson and

Damnjanovic (2008) determined that time was saved in measuring quantities because it was

completed as part of the lump sum bid. They also determined that if uncertainty exists in the

quantity estimates, contractors might add greater contingency to their lump sum bids.

A pre-project peer review (PPPR) is conducted by a construction company to reduce its

risks prior to committing to a guaranteed maximum price (GMP) or to a lump sum contract. It is

associated with delivering projects on time, under budget, and satisfactory to the clients.

Reviewers give their unbiased feedback to the project team before a commitment is made to a

GMP or a lump sum contract. Kaplanogu and Arditi (2009) surveyed the use of PPPR in GMP

and lump sum contracts aimed at alleviating risks. The results showed that PPPR was necessary

and critical, although in reality, formal PPPR is not generally practiced. Many companies prefer

an informal PPPR over a formal PPPR, and companies that did not perform PPPR deemed it

essential. According to Kaplanogu and Arditi (2009), “A lump sum contract requires a contractor

to provide a fixed price to the owner to do all the work required by the agreement. A lump sum

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contract can only be executed when the scope of the work is clearly defined and understood by

all parties. This type of contract offers the owner the best protection.”

No Excuse Bonus

NEB method of contracting is a method in which a contractor is given a “drop-dead

date”, by when to complete a part of the project or the entire project and bonuses are awarded for

completing work prior to this date. Time extensions are granted in the case of catastrophic events

only and not for unforeseen conditions or weather delays. There are no disincentive clauses

attached to this method, but typical liquidated damages are incurred by the contractor if the

project is delayed. This method is best suited for projects that must be completed by a critical

date. FHWA approved FDOT’s use of NEB on federal aid projects in 1996 (FHWA 2015a).

As conceived, this contracting method includes a substantial bonus, which motivates the

contractor to complete the project early regardless of any unforeseen conditions or problems. The

large bonus encourages contractors to remain on schedule and improve overall construction

productivity (FDOT 2015c). NEB incentivizes early completion and, consequently, minimizes

disruption and inconvenience to the travelling public. Under an NEB contract, contractors

usually expedite construction to obtain the bonus, which requires increased participation from

the subcontractors and other parties involved in the project. The contractors may divide the

bonus among the subcontractors and other parties to obtain their support in earning that bonus.

Utility scheduling is critical, and a heavy emphasis on CEI is essential (FDOT 2015c). In the

case of additional CEI expenses incurred during a project, they are settled using contingency

funds, which are usually established for expenses of this nature.

Most FDOT personnel interviewed about the use of NEB suggested that there should be a

substantial bonus to justify the use of additional resources to complete the project early (Ellis et

al. 2007). According to that study, to provide motivation for the contractor to finish the project

23

early, graduated bonuses were preferred over an all-or-nothing bonus. This study also

recommended appropriate project types for when NEB could be used: projects with large

budgets, long durations, high traffic, high visibility, or emergency situations and projects that can

be constructed mostly outside hurricane season.

Anderson and Damnjanovic (2008) determined that, as noted for A+B projects, NEB

projects result in faster project completion, but this early completion may lead to unforeseen

risks caused by delays. This may eventually result in higher costs for the contractor to cover

those unexpected risks.

Design-Build

D-B is a method that combines the design and construction process into a single contract

to lower costs and expedite construction. For many years, it was a popular delivery system in the

commercial building sector. SEP-14 allowed DOTs that previously used state funds exclusively

to fund fast-track highway and bridge construction to apply for federal funding for the

construction of highways and bridges using the D-B delivery system (FHWA 2015b).

The American Association of State Highway and Transportation Officials (AASHTO)

Subcommittee on Construction (2006) underlined the flexibility a contractor would have under

D-B in design and construction. A contracting agency would set (performance-based) end results

that would permit bidding parties to optimize their design and construction methods.

According to Ellis et al. (2007), D-B proved sensitive to delays, and most interviewees

cautioned about using the delivery system with right-of-way and utility-laden projects. However,

it was noted that D-B projects enabled better relationships between the contractor and FDOT

than between the FDOT and design professional. Administration for D-B was considered similar

to DBB.

24

Anderson and Damnjanovic (2008) showed how time savings was the greatest advantage

of D-B, not only because of an overlap of design and construction but also most likely due to the

familiarity with the project contractors (compared to undergoing an open bid process to find a

suitable contractor). The research also noted the agency’s loss of design control and the design-

builder’s increased risk as disadvantages.

More recently, Minchin et al. (2014) evaluated the use of D-B and Construction

Manager/General Contractor in highway construction and determined that D-B is preferred over

DBB for critical delivery and that legislative authority still precludes several agencies from using

the method.

Design-Bid-Build only

Design-bid-build is a method in which all entities i.e. owner, designer, and contractor

work individually and independently. For FDOT the designers are usually in-house and the

design is known to all the bidders. The contractors bid on the unit price of the items included in

the bid documents and the unit prices include all costs for materials, equipment, labor, and all

markups. The bidder with the lowest overall bid is awarded the contract and can then begin

construction on the project. For the purpose of this research the projects using DBB only were

used for analysis and compared to projects that utilized the other contracting methods that have

been discussed in this thesis. No DBB projects that included combinations of contracting

methods were analyzed. The goal was to isolate each contracting method, analyze each on its

own merits, and compare their performance with the performance of the same contracting

methods in 2007. This includes DBB projects that employed no additional contracting method.

Construction Manager-at-risk

Construction manager-at-risk (CMR) delivery method involves a commitment by the

construction manager (CM) to deliver a project for a GMP using an integrated team approach to

25

the planning, design, and construction of a highway project. CMR is used to control schedule and

budget, and to ensure quality for the project owner. The owner; the designer, who might be a

separate entity or an in-house engineer; and the at-risk CM are part of the CMR team. There are

two parts to a CMR contract: (1) preconstruction services and (2) construction. The GMP, in

most agencies, is determined when the design is sufficiently developed and the CM can provide a

cost for the project with the least contingency for possible changes in scope. The aim of this

project delivery method is to utilize the at-risk expertise quite early in the design process to

augment constructability, manage risk, and enable concurrent execution of design and

construction without the owner handing over control regarding the details of design as they

would in a D-B project.

The main purpose of CMR is to provide an owner with construction and management

expertise at every stage of a project, whose organization may not have the capabilities to perform

those tasks in-house (Strang 2002).

Sometimes, the agency thinks that the CMR’s contractual price is not competitive. In

such cases the agency reserves the right to re-let the work as a competitive, low-bid project. This

is usually the last resort (Minchin et al. 2007).

The contractor is given more time to understand and improve the design and to learn

previously unused construction methods under the CMR process. The continuous review of the

constructability in the design phase optimizes the design for construction and reduces the project

costs. The contractor is able to inform the team about the construction methods that would

simplify the construction and reduce cost and time (Alder 2007).

Liquidated Savings

Liquidated savings is a method intended to reward the contractor for each calendar day

the contract is completed and accepted before the expiration of the allowable contract time.

26

Contract time is adjusted for time extensions. The contractor receives an incentive amount equal

to the amount saved by the owner for completing the project ahead of schedule. Liquidated

damages is the opposite of liquidated savings and a similar approach is used for calculating both

liquidated damages and liquidated savings. The amount of reward will be based on the direct

savings to the department related to CEI and contract administration costs (FDOT 2015d).

Lane Rental

Lane rental is a payment provision which imposes a fee on the contractor for occupying

traffic lanes or shoulders during highway construction. This method is used most often on

rehabilitation or reconstruction projects. This gives the contractor an incentive to complete the

project as early as possible (Herbsman and Glagola 1998). The lane rental technique is similar to

A+B bidding in which the contractors bidding on a lane rental project estimate the number of

days that a lane will be closed during the work and use this in their bid process (FDOT 2015e).

The contract is awarded based on the lowest responsible bid calculated using the

following formula:

A+ (B x LRC) (2-1)

where

A = Bidder's total estimate for all contract bid items (expressed in dollars).

B = Total number of days subject to lane closure, as defined previously, required to

complete all contract work.

LRC = Lane rental cost these costs can be variable and applied to one or more lanes

during a construction project (WSDOT 2015).

The lane rental cost is based on the estimated cost of delay to the travelling public during

the rental period. LRC is deducted from the monthly progress payments. The rental fee rates are

27

mentioned in the bidding proposal in terms of dollars per lane per time period, which could be

daily, hourly or fractions of an hour.

The lane rental method is also extensively used internationally. The method has a major

advantage based on past studies—i.e., the reduction in any or all of the following—construction

time, maintenance time, and rehabilitation time—and the consequent reduction in public impact.

A limitation for the lane rental method encountered by many countries is the lack of contractor

experience in this type of contracting approach (Hancher 1999).

28

CHAPTER 3

METHODOLOGY

Data Extraction

Data for the 2016 report were obtained from the Webfocus database maintained by

FDOT. Information was gathered on all completed projects (via “Pass to Comptroller” status),

and projects were filtered to those with letting dates between 7/13/2006 and 3/25/2015. The

projects were gathered over a span of eight years and eight months.

Next, the projects were filtered to include only those with contracting methods related to

this research (A+B bidding, lump sum contracting, NEB, I/D, and D-B) as well as those

classified as DBB only (to be used as the basis of comparison for performance evaluation).

FDOT classifies D-B in two parts: D-B major and D-B minor. D-B major includes projects like

limited access facilities, buildings, major bridges etc. D-B minor included projects that were

excluded from D-B major under the section 337.11(7) of Florida Statutes.

For the purpose of analysis, all projects were filtered to ensure that only construction-

based projects were investigated. The dataset obtained from the FDOT database included a

descriptive column named “Work Mix Description.” Using this variable, the projects were

filtered accordingly.

FDOT provided data on a few projects that were terminated and hence were filtered out

for the purpose of analysis. Figure 3-1 provides a flowchart of the filtering process used in this

study.

29

Figure 3-1. Data filtering process for analysis.

Data Analysis

The FDOT database provided a massive collection of data concerning cost and time.

Project costs were recorded under several distinct categories: original contract amount, current

contract amount, estimated contract amount, and estimate paid to date. Original contract amount

is the total amount shown in the contractual agreement, which is often equivalent to the low bid

price under conventional design-bid-build contracting. Current contract amount is equal to the

original contract award price plus any change orders. Estimated contract amount is the engineer’s

estimate used to help the DOT set a budget and evaluate bidders. Estimate paid to date is the

actual total amount paid to the contractor by the department after the project is completed.

Similar to cost, project times were also stored under different categories: original contract days,

current contract days, and days used. Original contract days are the engineer’s estimated contract

duration, which is used as a benchmark for bid evaluation. Current contract days are the present

30

contract duration after accounting for change orders. Days used reflect the actual time taken by

contractors to finish the project.

Although the aforementioned cost and time categories are employed by FDOT in

monitoring project performance in a multitude of ways, the researcher decided to use current

contract days/period as well as days used to assess time performance of the contracting methods.

Current contract amount/cost and estimate paid to date were used to evaluate the performance of

the contracting methods in terms of cost.

The time analysis was performed using the current contract period (i.e., the present

contract duration including change orders) and days used (i.e., actual duration of the project).

The percent change of days for each individual contracting method was calculated using the

abovementioned data points:

Percentage change of days= [ ∑(Days used) − ∑(Current contract period) ]

∑(Current contract period)

(3-1)

The percent change of days for each individual contracting method was also calculated

using the current contract period (i.e., the present contract duration including change orders),

days used (i.e., actual duration of the project) and number of projects in order to calculate the

mean change in duration from another perspective. This formula is similar to the ones used in the

two reports discussed in this study and provides a mean for the change in duration for the 2016

project from another perspective. The results were obtained by using the formula immediately

below, and were not compared to the 2007 results.

Percentage change of days= ∑(Days used − Current contract period)

Current contract period

Number of projects

(3-2)

31

The average days saved for individual contracting methods were calculated using the

abovementioned data points and the number of projects:

Average days saved= [ ∑(Current contract period) − ∑(Days used) ]

Number of projects

(3-3)

The cost analysis was carried out using the current contract cost (i.e., the present value of

the contract after including change orders) and estimate paid to date (i.e., the actual cost paid for

the contract). The percent change of actual divided by the current cost for each individual

contracting method was calculated using the following formula:

Percentage change of cost= [ ∑(Actual cost) − ∑(Current contract cost) ]

∑(Current contract cost)

(3-4)

The percent change of cost was also calculated using the current contract cost (i.e., the

present value of the contract after including change orders), estimate paid to date (i.e., the actual

cost paid for the contract) and number of projects in order to calculate the mean change in cost

from another perspective. This formula is similar to the ones used in the two reports discussed in

this study and provides a mean for the change in cost for the 2016 project from another

perspective. The results were obtained by using the formula immediately below, and were not

compared to the 2007 results.

Percentage change of cost=

∑(Actual cost − Current contract cost)

Current contract costNumber of projects

(3-5)

32

The average cost saved for the individual contracting methods was calculated using the

following formula:

Average cost saved= [ ∑(Current contract cost) − ∑(Actual cost) ]

Number of projects

(3-6)

The comments from the 2007 report were analyzed to gain an understanding of the

implementation of alternative contracting. The comments were then compared to those from the

2016 report. The comments in both the reports were obtained by interviewing owners, designers,

contractors, and inspectors. The results from the 2007 report were also analyzed and compared to

the results obtained from the 2016 report. The Florida Statutes were analyzed from 2007 to 2016;

changes made during this span were noted, and their impacts were analyzed.

33

CHAPTER 4

RESULTS

The 2007 report had 1561 projects completed using DBB only, 66 projects using D-B,

372 projects using lump sum, 121 projects using I/D, 85 projects using A+B, and 128 projects

using NEB (Figure 4-1). The projects were gathered over a span of eight years and two months

from January 1998 to March 2006.

Figure 4-1. Distribution of all projects by Alternative Contracting Method (2007 report).

The number of projects for the 2016 report were filtered through the process explained in

the methodology chapter. A total of 2721 projects were retrieved, among which 1654 projects

were completed using DBB, 147 projects using D-B (minor), 86 projects using D-B (major), 728

projects using lump sum, 73 projects using I/D, 21 projects using A+B, and 12 projects using

NEB.

According to project work type, the largest group represented was resurfacing projects,

totaling 813. The second-largest group was other projects, which amounted to 532. Following

other projects were miscellaneous construction, bridge repair, and traffic operations, totaling

395, 325, and 309, respectively. To provide added detail, the numbers of projects per contracting

34

method and work type are tabulated in Table 4-1, with contracting method presented in the

columns and work types in rows.

Table 4-1. Distribution of all Projects by Contracting Method and Work Type.

Project

Work Type

Description

Design-

Bid-

Build

Design-

Build

(Minor)

Design-

Build

(Major)

Lump

Sum I/D A+B

No

Excuse

Bonus

Total

Bridge

Construction

55 8 9 4 5 2 0 83

Bridge Repair 243 10 4 46 5 1 0 309

Interstate

Construction

(new)

3 2 0 1 0 0 0 6

Interstate

Rehabilitation 4 0 2 0 0 0 0 6

Maintenance

Other 4 0 0 4 0 0 0 8

Miscellaneous

Construction 192 39 12 149 3 0 0 395

New

Construction 27 4 5 5 1 1 0 43

Other 376 25 19 93 14 5 0 532

Reconstruction 41 3 7 7 10 3 2 73

Resurfacing 511 23 5 233 28 5 8 813

Traffic

Operations 130 15 14 158 6 1 1 325

Widening &

Resurfacing 44 6 5 27 1 1 0 84

Unknown 24 12 4 1 0 2 1 44

Total 1654 147 86 728 73 21 12 2721

The projects were divided based on the project contracting methods previously listed,

with a further subdivision of the D-B category to include minor and major work. A total of seven

project contracting method groups were investigated: DBB, D-B minor, D-B major, lump sum,

I/D, A+B, and NEB. Figure 4-2 shows the distribution of the number of projects according to

those contracting methods of interest.

For the purpose of analysis, all 2721 projects were filtered to ensure that only

construction-based projects were investigated. The dataset obtained from the FDOT database

included a descriptive column named “Work Mix Description.” Using this variable, the projects

were filtered accordingly. Projects excluded from the analysis had work mix descriptions such as

Bridge-Painting, Drainage Improvements, Landscaping, Traffic Ops Improvement, Toll

35

Collection, Signing/Pavement Markings, Traffic Signals, Lighting, Safety Project, Overhead

Signing, Traffic Signal Update, Toll Collection, Signing/Pavement Markings, Traffic Signals,

Lighting, Safety Project, Overhead Signing, and Traffic Signal Update. A total of 157 such

projects were excluded from DBB, and 125 such projects were excluded from Lump Sum. There

were three projects that had been terminated, of which two were from DBB and one was from

lump sum. Consequently, these projects were considered dataset outliers and were excluded from

the analysis. The exclusion of these projects changed the total number of projects for DBB from

1654 to 1495 and lump sum from 728 to 602. The final number of projects analyzed was 2436.

Table 4-2 and Figure 4-2 illustrate this paring down of projects.

Table 4-2. Distribution of All Projects by Alternative Contracting Method.

Contracting Method

Original

Number of

Projects

Removed

by

Description

Removed

as Dataset

Outlier

Final Total

Analyzed

Design Bid Build 1654 157 2 1495

Design Build (Minor) 147 - - 147

Design Build (Major) 86 - - 86

Lump Sum 728 125 1 602

Incentive/Disincentive 73 - - 73

A+B 21 - - 21

No Excuse Bonus 12 - - 12

Total 2721 282 3 2436

Figure 4-2. Distribution of Projects by Alternative Contracting Method.

36

To analyze the performance of the methods precisely, the project categories were further

classified based on their current contract cost (i.e., the present value of the contract after

including change orders). Collectively analyzing projects of different sizes in terms of current

contract amount cannot convey the true story because large projects exert a disproportionate

influence on the results. The value of that variable would not be interpreted the same way for

different cost categories. For example, if the percentage change of actual cost over current cost is

10% for projects under $1 million, then the best interpretation is that the actual cost is

approximately $100,000 (10% of $1 million) more than the current cost. Similarly, if the

percentage change of actual cost over current cost is 10% for projects above $20 million, then

the best interpretation is that the actual cost is approximately $2 million (10% of $20 million)

more than the current cost. Hence, it was necessary to categorize the projects based on current

cost. Furthermore, as shown, a large majority of the projects were “small” in terms of current

contract amounts. It was more meaningful to evaluate the performance of the contracting

methods according to different cost categories.

37

CHAPTER 5

DISCUSSION

A+B

FDOT reduced the number of A+B projects over the past nine years. The 2007 report

noted that there were 85 A+B projects, whereas the 2016 report noted 21 A+B projects (Figure

5-1), a reduction of 75.29%.

Figure 5-1. Comparison of Number of A+B Projects.

For A+B, the 2007 report noted that instead of saving time, the time was extended on

projects by an average of 56 days (13.21%) per project (Figures 5-2 and 5-3). The report also

noted that the contractors would bid low on the time component to earn the job. The 2016 report

noted that A+B had an average savings of 44 days (9.12%) per project (Figures 5-2 and 5-3). The

difference in the results of the change in duration calculated using the formula used in the 2016

report and the secondary formula introduced in Chapter 3 were not that different. The 2016

report noted time savings of 9.12% while the new formula noted 7.97% time saving (Figure 5-2).

The 2016 report included the participant responses to interviews and to the survey conducted

prior to interviews. The report classified the participants into three categories viz. designer,

contractor and inspector. The time analysis shows that over the past nine years A+B has become

38

the time saving method it was intended to be, instead of a method requiring time extension,

which suggests that it is currently performing better on the time parameter.

Figure 5-2. Comparison of Change in Duration for A+B in Percentage.

Figure 5-3. Comparison of A+B Time Saving in Days.

The number of projects in 2016 were also classified based on the time they were

completed. For A+B, 14 projects were completed early, six were on time, and one finished late

(Figure 5-4).

39

Figure 5-4. Project classification based on project completion.

The 2007 report noted that there were cost overruns of $956,942 (9.25%) per project

(Figures 5-5 and 5-6), while the 2016 report noted that there were cost overruns of $679,947

(4.54%) per project (Figures 5-5 and 5-6). The cost overruns have been reduced by $276,995 per

project over the past nine years which suggests that A+B is currently performing better on the

cost parameter. The 2016 report noted a cost overrun of 4.54 % while the new formula noted a

4.47% cost overrun (Figure 5-5).

Figure 5-5. Comparison of Change in Cost for A+B in Percentage.

40

Figure 5-6. Comparison of A+B Cost Saving in Dollars.

The projects in 2016 were classified based on the cost at the completion of the projects.

For A+B, seven projects finished with cost underruns, one at current contract cost, and 13

finished with cost overruns (Figure 5-7).


Overall the performance of A+B has improved despite the reduction in the number of

projects over the nine years. The reason behind this improvement might be the better

41

implementation of the method over time as compared to 2007, a time when it was relatively new.

The way the FDOT records the data on A+B might be another reason behind the change as some

interviewees pointed out that when the time bid was lower than the FDOT official estimate, the

contract was considered a success if the contractor finished the contract within the original

contract time.

Lump Sum

There was a rise in the number of projects using lump sum from 372 in 2007 to 603 in

2016 (Figure 5-8). The 2007 report noted concerns regarding the type of projects assigned by

FDOT under the lump sum contracting method. Most interviewees agreed that projects with

well-defined risks worked best under lump sum.

Figure 5-8. Comparison of Number of Lump Sum Projects.

The 2007 report noted that time was extended by an average of eight days (6.89%) per

project whereas the 2016 report noted that there was a time saving of one day (2.60%) per

project (Figures 5-9 and 5-10). Based on the time analysis the performance of lump sum has

improved and it is performing the way it was intended to perform. The 2016 report noted time

savings of 2.60% while the new formula noted a 2.73% time saving (Figure 5-9).

42

Figure 5-9. Comparison of Change in Duration for Lump Sum in Percentage.

Figure 5-10. Comparison of Lump Sum Time Saving in Days

In 2016, lump sum had 320 projects that finished early, 242 projects that finished on

time, and 40 projects finished with time extensions (Figure 5-11).

43


The 2007 report noted that there was a cost overrun of $19,142 (1.54%) per project

compared to cost savings of $19,285.09 (1.30%) per project in 2016 (Figures 5-12 and 5-13).

Lump sum is performing better in 2016 compared to 2007 based on the cost parameter. The 2016

report noted cost savings of 1.30% while the new formula noted a 3.21% cost saving which was

a considerable difference (Figure 5-12).

Figure 5-12. Comparison of Change in Cost for Lump Sum in Percentage.

44

Figure 5-13. Comparison of Lump Sum Cost Saving in Dollars.

In 2016, 472 lump sum projects finished with cost underruns, 29 finished at current

contract cost, and 101 projects finished with cost overruns (Figure 5-14).


Over the past nine years the cost overrun has changed to cost savings and the time

extension has changed to time savings. This suggests that the performance of lump sum has

improved over the past nine years based on cost and time. The 2016 report showed few concerns

regarding the issue of well-defined risks. The interviewees suggested that the scope of the

45

projects under lump sum must be well defined. Most of the interviewees felt that the project

types assigned by FDOT were appropriate for lump sum. The 2016 report noted a few other

issues, one of which was regarding changing the scope of work—i.e., adding or removing. It was

difficult to make such changes to a lump sum contract and to account for the change financially.

Another issue regarded the percentage of plan quantity items that needed a better definition

according to the interviewees. Comparing the views of the interviewees from the 2007 report and

the 2016 report, it seems that FDOT has used the lump sum contracting method for appropriate

projects with well-defined risks. This appropriate use of lump sum might have been the reason

behind the improvement in its performance. The increase in the number of projects suggests that

the FDOT is getting accustomed to lump sum and has refined its implementation over time,

which probably contributed to the performance improvement.

No Excuse Bonus

The number of NEB projects decreased considerably over the past nine years. The 2007

report noted that the number of NEB projects was 128. The 2016 report showed that the number

of projects decreased to 12 (Figure 5-15), a 90.625 % decrease.

Figure 5-15. Comparison of Number of No Excuse Bonus Projects.

46

The time performance improved from an average savings of 11 days (3.02%) per project

to 50 days (11.04%) per project (Figures 5-16 and 5-17). The 2016 report noted time savings of

11.04% while the new formula noted an 11.72% time saving (Figure 5-16).

Figure 5-16. Comparison of Change in Duration for No Excuse Bonus in Percentage.

Figure 5-17. Comparison of No Excuse Bonus Time Saving in Days.

In 2016, NEB had 11 projects that completed early, one project that finished on time, and

none of the projects had time extensions (Figure 5-18).

47


The cost performance also improved from an average cost overrun of $538,085 (7.99%)

per project to an overrun of $120,764 (1.37%) per project (Figures 5-19 and 5-20). The high cost

overrun as reported in 2007 might have been the reason behind the considerable reduction in the

number of NEB projects over the past nine years. The 2016 report noted cost a overrun of 1.37%

while the new formula noted 0.60% in cost overruns (Figure 5-19).

Figure 5-19. Comparison of Change in Cost for No Excuse Bonus in Percentage.

48

Figure 5-20. Comparison of No Excuse Bonus Cost Saving in Dollars.

In 2016, NEB had four projects that finished with cost underruns, none of the projects

finished at current contract cost, and eight projects finished with cost overruns (Figure 5-21).


Still, based on the time and cost analysis, the performance of NEB improved over past

nine years. The opinions remain the same as mentioned in the 2007 report. It seems that FDOT

has not addressed these issues in the past nine years which suggests that the improvement in the

performance of NEB might just be due to the smaller sample size, or perhaps the appropriate use

of NEB on bridge projects rather than paving projects, as suggested in the 2007 report, might

49

also have played a role in this improvement. Experience with implementation of this method

over time might have affected the performance of NEB. It seems like NEB is the most

contentious method among the alternative contracting methods discussed in this study, and this

also could have contributed to its falling out of favor with the department.

Incentive/Disincentive

The number of projects using incentive/disincentive decreased over the past nine years

from 121 in 2007 to 73 in 2016 (Figure 5-22). There was a reduction of 39.67% in 2016

compared to 2007, but the views regarding I/D have not changed considerably in the past nine

years. The use of I/D as a standalone method has decreased, but it is used with other methods in

combination, mostly on DBB projects. The reports compared here focused on evaluating the

performance of standalone contracting techniques and excluded combinations. The reason for

this exclusion is that there are many different combinations used by FDOT, and they continue to

change, which makes them difficult to evaluate statistically. Also, unless one can gather a

statistically significant number of projects containing the identical combination of contracting

methods, there is no way to draw any meaningful conclusions.

Figure 5-22. Comparison of Number of Incentive/Disincentive Projects.

50

The time performance has improved from a time saving of one day (0.32%) per project in

2007 to 35 days (10.42%) per project in 2016 (Figures 5-23 and 5-24). The 2016 report noted

time savings of 10.42% while the new formula noted a 12.21% time saving (Figure 5-23).

Figure 5-23. Comparison of Change in Duration for Incentive/Disincentive in Percentage.

Figure 5-24. Comparison of Incentive/Disincentive Time Saving in Days.

In 2016, there were 58 I/D projects that finished early, 11 finished on time, and four

finished with time extensions (Figure 5-25).

51


The cost performance has also improved from a cost overrun of $539,430 (12.46%) per

project in 2007 to $151,947.62 (2.46%) per project in 2016 (Figures 5-26 and 5-27). The cost

overruns have reduced by $387,482.38 per project which implies that the performance of I/D has

improved based on cost. The 2016 report noted an average cost overrun of 2.46% while the new

formula noted a 0.59% cost saving which was a considerable difference as cost overrun turned to

cost saving (Figure 5-26).

Figure 5-26. Comparison of Change in Cost for Incentive/Disincentive in Percentage.

52

Figure 5-27. Comparison of Incentive/Disincentive Cost Saving in Dollars.

In 2016, there were 40 I/D projects that finished with cost underruns, none finished at

current contract cost, and 33 finished with cost overruns (Figure 5-28).


The 2007 report mentioned that I/D was not an appropriate method for paving projects.

The 2016 report noted that the number of paving projects was still substantial, but no suggestions

were received in the interviews regarding that issue. This leads to the conclusion that FDOT

53

solved its problem with implementation of I/D on paving projects or that the reduction in the

number of projects has rendered the problems trivial. The 2007 report suggested that the use of

I/D would be beneficial on projects exceeding $10 million. The 2016 report noted that I/D was

extensively used on projects with current contract amounts ranging from $1 million to $10

million, the use of I/D on projects exceeding $10 million was minimal. The interviews did not

reveal any suggestions or comments as to why that might be. This suggests that either FDOT has

improved the use of I/D for projects between $1 and $10 million or that the number of projects

has decreased so considerably that the issue is ignored.

Design-Build

Design-build was comparatively new to FDOT when the 2007 study was completed and

the use of D-B has increased since then. The 2007 report noted that there were 66 D-B projects

compared to the 233 in 2016 (Figure 5-29), a 253% increase.

Figure 5-29. Comparison of Number of Design-Build Projects.

The 2007 report noted that D-B had average time extensions of 30 days (7.08%) per

project compared to the average time savings of six days (1.39%) per project as noted in the

2016 report (Figures 5-30 and 5-31). The time performance has improved over nine years which

54

suggests that it is performing the way it should. The 2016 report noted time savings of 1.39%

while the new formula noted a 2.85% time savings (Figure 5-30).

Figure 5-30. Comparison of Change in Duration for Design-Build in Percentage.

Figure 5-31. Comparison of Design-Build Time Saving in Days.

In 2016, D-B had 111 projects that were finished early, 96 were completed on time, and

26 projects were completed with time extensions (Figure 5-32).

55


The 2007 report noted that there was an average cost overrun of $558,552 (4.45%) per

project. The 2016 report noted that there was an average cost overrun of $135,470.11 (1.69%)

per project (Figures 5-33 and 5-34). The cost overrun reduced by $423,081.89 per project over

the past nine years which suggests that it performed better even on cost. The 2016 report noted

cost overruns of 1.69% while the new formula noted a 1.45% cost saving which was a

considerable difference as cost overrun turned to cost saving (Figure 5-33).

Figure 5-33. Comparison of Change in Cost for Design-Build in Percentage.

56

Figure 5-34. Comparison of Design-Build Cost Saving in Dollars.

In 2016, D-B had 132 projects that were finished with cost underruns, 33 were completed

at current contract cost, and 68 projects were completed with cost overruns (Figure 5-35).


The 2007 report noted that the administration of D-B and DBB was quite similar, which

has changed much over the years. Because D-B was quite new for FDOT, the 2007 report did not

suggest any particular type of projects suitable for D-B; it mentioned only that D-B was good for

large projects, which was quite vague. It also mentioned that it was good for bridge projects in

57

general. The 2007 report mentioned that there were problems with projects that might include

large portions of right-of-way or utilities. The 2016 report agrees that D-B is not ideal for

projects with high quantities of right-of-way and utilities. This leads to the conclusion that FDOT

was unable to find a solution to the problems reported in the 2007 report regarding projects

including considerable right-of-way or utilities. Over the past nine years, the use of D-B has

increased considerably, which has revealed some new problems regarding the design part of D-

B. According to the 2016 report, the designers think that FDOT is overly stringent about the

design criteria, leaving the designers with few choices and preventing them from being

innovative. FDOTs move to more low-bid D-B projects limit the money the design-builder

spends on the design part and focuses more on the build part of D-B. Comments indicate that this

monetary limitation reduces the time a designer would spend on innovating on the project which

leads to a concise time allocation for the design part in the project. This also prevents designers

from being innovative. The 2007 report mentioned the relationship between FDOT and the

designer not being as good as with the other methods, which might be the emerging point of the

conflict that has developed today.

The designer works with the FDOT on most of the delivery systems and so works hard to

curry favor with FDOT. D-B is a method where the designer is on the opposite side of the

FDOT, teamed with a contractor, which disturbs the traditional relationship between the designer

and the FDOT. Comments indicate that while this system improves the relationship between

most of the entities involved in the projects i.e. FDOT, designer, and contractor, designers see D-

B as hurting their relationship with the owner (FDOT).

When the same entities cross paths under other contracting method, all entities that have

worked together under D-B seem to honor the relationships that they developed while working

58

on the D-B projects and hence the overall relationships within the transportation industry seem to

be improved based on the comments as a result. The number of D-B projects increased

considerably in 2016 compared to 2007. This considerable increase might be the reason behind

the reduction of projects using A+B, NEB and I/D. This change in the proportions of the

different contracting methods happened even though NEB and I/D were performing better than

D-B in 2007. This suggests that the FDOT was not terribly particular about what projects on

which they used D-B. Based on comments, FDOT increased the use of D-B, neglecting the better

performance of A+B, NEB and I/D which may have performed better for the same project types

and could have saved considerable taxpayer time and money.

59

CHAPTER 6

CONCLUSION AND LIMITATIONS

Conclusion

SEP-14 has allowed the state DOTs to use and analyze the performance of alternative

contracting methods. The need for the state DOTs to utilize these alternative contracting methods

and evaluate their performance is paramount due to the growing population and depreciating

infrastructure. This makes it necessary for the state DOTs to conduct performance evaluation

studies like the Ellis et. al. (2007) report and Minchin et. al. (2016) report. These reports provide

a sense of how the methods performed when the study was conducted. This thesis provides a

comparison of the two reports which creates a link between them and provides a better sense of

why the performance changed.

The change in the number of projects over the past nine years provides an overall idea of

how the FDOT is using these alternative contracting methods in response to the issues at hand.

The comparison of the number of projects in 2007 and in 2016 is provided in Table 6-1, and

Figure 6-1 gives a graphical representation of the comparison.

Table 6-1. Comparison of Number of Projects.

Contracting

Method

Number of Projects

2007 report 2016 report

DBB 1561 1495

D-B 66 233

Lump Sum 372 603

I/D 121 73

A+B 85 21

NEB 128 12

60

Figure 6-1. Comparison of Number of Projects.

FDOT database provided a wide variety of data, but the data used in this study were only

related to three parameters: number of projects, cost and time. Cost and time analysis were

performed using these data for the five alternative contracting methods discussed in this study.

Based on the comparison, A+B has improved time performance which demonstrates time

savings in 2016 compared to the time extensions displayed in 2007 (Figures 6-2 and 6-3). Lump

sum also appeared to be improving as the time extensions in 2007 changed to time savings in

2016 (Figures 6-2 and 6-3). NEB was performing the way it was intended to in 2007, but in 2016

NEB had an increase in the time saving see (Figures 6-2 and 6-3). I/D displayed time saving in

2007 which was the purpose behind its use, but in 2016, I/D demonstrated a meaningful increase

in the time savings (Figures 6-2 and 6-3). D-B displayed a noticeable improvement in its time

performance as in 2016 it displayed a time savings compared to time extensions in 2007 (Figures

61

6-2 and 6-3). The results of the time performance of D-B noted in 2016 display the fact that it is

performing the way it was intended to.

Figure 6-2. Comparison of change in duration in Percentage.

Figure 6-3. Comparison of Time Savings in Days.

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The cost analysis of A+B concluded that it was performing better as the cost overruns

had reduced in 2016 as compared to 2007 (Figures 6-4 and 6-5). The purpose of A+B is to

reduce time which increases the cost, so A+B is expected to have cost overruns. Lump sum

demonstrated cost savings in 2016 as compared to cost overruns in 2007 (Figures 6-4 and 6-5).

NEB was performing as it was intended in 2007 based on cost, but in 2016 the cost overruns

were reduced which concludes that it is performing better in 2016 compared to 2007 (Figures 6-4

and 6-5). I/D also demonstrated a reduction in the cost overruns in 2016 as compared to 2007

(Figures 6-4 and 6-5). The use of I/D is intended to display cost overruns and time savings. D-B

has reduced cost overruns in 2016 compared to 2007, showing an improvement in its

performance (Figures 6-4 and 6-5).

Figure 6-4. Comparison of change in cost in Percentage.

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Figure 6-5. Comparison of Cost Savings in Dollars.

The results of this study show that all alternative contracting methods evaluated here are

performing better based on cost and time analysis now than they were nine years ago. The results

from this study show that FDOT evaluates the performance of alternative contracting techniques

at intervals which are effective for research purposes and can provide data from enough projects

for a thorough analysis of most of the alternative contracting methods. FDOT should focus on

the issues that are pointed out in these evaluations and work towards mitigating them as

compared to just reducing the number of projects for any delivery system or contracting method

that encounters problems. This study shows that FDOT increased the number of D-B and Lump

sum projects and reduced the number of projects using A+B, I/D, and NEB. The results of this

study show that if FDOT had focused on mitigating the issues that were encountered in the 2007

report, the performance of the methods other than D-B could have improved, which could have

eventually lead to a reduction in cost and time. The cost and time savings would be beneficial for

both FDOT and the travelling public.

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Limitations

One of the limitation of this study is that it analyzes only the five alternative contracting

methods, that were common to the two reports, standing alone. There are many various

combinations being used in the field that are not considered in this study. The study focuses only

on the transportation industry in the state of Florida, so it would be less relevant to other states in

the United States and other countries. This study excluded certain types of projects which were

not considered as construction projects as mentioned in the methodology. This study did not

analyze the projects based on project size distribution or type of project, nor did this study

statistically evaluate the performance differences.

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CHAPTER 6

RECOMMENDATIONS

Based on the analyses discussed in the previous chapter, the author gives the following

recommendations for the five alternative contracting methods analyzed in this study if

implemented would improve current contracting practices at FDOT:

FDOT should change the way they record data for A+B. A project should be recorded as

successful only if it meets the timeline the bidder provided and not if it simply achieves the

original contract duration.

FDOT should address the concerns regarding lump sum as mentioned in the 2016 report,

such as changing the scope of work on a lump sum project, and educating the industry about

lump sum as a contracting method compared to a payment provision.

For NEB, FDOT should add milestones to the projects and graduated bonuses could be

awarded for every milestone reached on the project rather than awarding a huge bonus at the end

of the entire project. This keeps the contractor motivated to allocate additional resources to the

project even after missing a single milestone as they can reach the rest of the milestones and

achieve the bonus.

For I/D, FDOT should keep using it for projects with current contract amounts ranging

from $1 million to $10 million. They should also focus on refining the implementation of this

method for projects with current contract amount under $1 million and above $10 million.

FDOT should be more selective in their use of D-B and focus more on A+B, NEB, I/D,

and any other alternative contracting method that performs better. They should start

redistributing the projects towards all methods and use D-B only for the type of projects for

which it is suitable.

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LIST OF REFERENCES

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Contracting for the Twenty-first Century, Fifth Edition, AASHTO Subcommittee on

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Alternative Contracting Methods to Accelerate Project Completion. Transportation Research

Board of the National Academies, Washington, D.C.

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Contracting Research” FDOT Final Report BDV31-977-40, Tallahassee, FL.

Shr, J., and Chen, W. (2004). ”Setting Maximum Incentive for Incentive/Disincentive Contracts

for Highway Projects.” Journal of Construction Engineering Management, 130(1), 84–93.

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BIOGRAPHICAL SKETCH

Dev Shah was admitted to the master’s program at the M.E. Rinker, Sr. School of

Construction Management in 2015. While pursuing a master’s degree, he worked on a research

team lead by Dr. R. Edward Minchin Jr. and completed a research project as part of this team. He

published a book as part of a class with three professors and other classmates at the University of

Florida. Prior to getting admitted to this program he received a bachelor’s degree in civil

engineering.

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