Innovative Contracting Techniques
HISTORY OF
INNOVATIVE CONTRACTING
AND
INNOVATIVE FINANCING
Cordell M. Parvin
Innovative Contracting Techniques
Legal Issues
• It is Clear that Disputes and Litigation
Follow Any Type of Change or
Innovation.
– In the case of Innovative Contracting
Disputes Will Arise Because They
Affect Opportunities for Contractors
– Innovative Contracting Techniques
Affect Liabilities of Contractors
– Contractors Generally Resist Change
Innovative Contracting Techniques
Legal Issues
• Types
– Is the Innovative Techniques Legally
Permissible?
– Disputes Over Award; Factors Other
Than Low Bid
– Disputes Over New Standards
Innovative Contracting Techniques
TRB Task Force
Studied:
– Bidding Procedures
– Materials Control
– Quality Considerations
– Insurance and Surety Issues
Innovative Contracting Techniques
TRB Task Force
• September 1989 Workshop
– Two Days
– Industry Participants
Innovative Contracting Techniques
TRB Task Force
• Recommendations
– Cost-Plus Time Bidding
– Warranties
– Constructibility
– Performance Specifications
– National Center
– Value Engineering
Innovative Contracting Techniques
SEP-14
• Initiated February 1990
• No Longer Experimental
– A+B Bidding
– Lane Rental
– Warranties
Innovative Contracting Techniques
FHWA Report
Objective: Investigate Innovative Contract
Practices to:
• Determine Effects of Various Contract
Management Methods on:
– Construction Quality
– Pavement and Bridge Performance
– Costs
– Risk to Contractual Parties
Innovative Contracting Techniques
FHWA Report
Objective: Investigate Innovative Contract
Practices to:
• Recommend Contract Management
Methods With Greatest Potential to
Improve Quality and Performance and
Can Be Promoted for Implementation in
a Quality-Oriented Contracting System
Innovative Contracting Techniques
FHWA Report
Objective: Investigate Innovative Contract
Practices to:
• Develop Instructional Guide or Guides to
Select and Implement the Chosen
Contracting Approaches and to Educate
the Highway Construction Community
Innovative Contracting Techniques
FHWA Report
Innovative Contracting Practices Studied
• Quality Based
– Quality Assurances (QA)
Specifications
– Performance-Related Specifications
(PRS)
– Construction Warranties
Innovative Contracting Techniques
FHWA Report
Innovative Contracting Practices Studied
• Time Based
– Incentive/Disincentive (I/D) Provisions
– Cost-Plus-Time or (A+B) Bidding
– Lane Rental
– Design-Build
– Indefinite Delivery/Job Order
Contracting (JOC)
Innovative Contracting Techniques
FHWA Report
Innovative Contracting Practices Studied
• Multiple Bases (Quality, Cost, Time)
– Value Engineering (VE) for Design and
Construction
– Partnering
– Alternate Bids (Design Alternatives)
– Privatization/Build-Operate-Transfer
(BOT)/Build-Transfer-Operate (BTO)
Innovative Contracting Techniques
FHWA Report
Other Innovative Practices
• Design-Build Warranty
• A+B Bidding + Warranty
• A+B+C Bidding
Innovative Contracting Techniques
FHWA Report
Legal Points
• Incentive/Disincentive
– No Legal Barrier
– Road User Costs May Be Included in
Liquidated Damages
Innovative Contracting Techniques
FHWA Report
Legal Points
• A+B Bidding and Lane Rental
– No Longer Experimental
– Conforms to Lowest “Responsible”
Bid
– No FHWA Restriction on Lane Rental
Innovative Contracting Techniques
FHWA Report
Legal Points
• Design-Build
– Legal Barriers Limit Use
– Brooks Act - Type Procurement of
Design
– Lowest Responsible Bidder
– 1996 FHWA Chief Counsel Office
Opinion
Innovative Contracting Techniques
FHWA Report
Legal Points
• Quality-Based
– QA - Used in Almost All States for
Procurement
– Performance Specifications - Not
Discussed
– Warranties - Have Been Restricted
Because of Opposition and Bonding
Issues
Innovative Contracting Techniques
FHWA Report
Legal Points
• Quality-Based - GOA Report Barriers
– Difficulties in Attributing
Responsibility for Failures
– External Factors Beyond the
Contractor’s Control
– Reluctance by Sureties to Bond LongTerm Warranties Except for Larger
Well-Financed Firms
Innovative Contracting Techniques
FHWA Report
Legal Points
• GAO Recommendations
– Relatively Short Warranty Periods
– Target or Restrict Warranties
– Use End-Result or Performance
Specifications
– Develop Model Warranty Language
and Terms for Specific Project Types
Innovative Contracting Techniques
Innovative Financing
Pre-TEA-21
Consisted of Various Programs in
Title 23, ISTEA and National Highway
Designation Act
Innovative Contracting Techniques
TEA-21 Innovative Financing
• Financing Includes
• Transportation Infrastructure Finance
and Innovation Act of 1998 (TIFIA)
Innovative Contracting Techniques
TEA-21 Design-Build
•
•
•
•
•
•
Specifically Authorizes Design-Build
Greater Than $5,000,000 for ITS
Greater Than $50,000,000 for Others
Regulations Within 3 years
Effective in 3 Years
SEP-14 Continues Until Then