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A Framework for Optimizing Alternative Contracting Methods in Conjunction with IDIQ Contracting Procedures: A Means to Maximize Value-for-Money

Description:

Transportation agencies are increasingly implementing alternative contracting methods (ACMs) to deliver their transportation projects. It includes the use of project delivery methods such as design-build (DB), construction manager at-risk (CMR) or construction manager/general contractor (CMGC), and design-bid-build best-value, (DBB-BV), as well as emerging contracting approaches like alternative technical concepts (ATCs), A+B bidding, lane rental, incentive/disincentive provisions, and indefinite delivery/indefinite quantity contracting. This movement has been spurred by the FHWA’s Special Experimental Project No. 14 – Alternative Contracting (SEP-14) program, which allows the use of federal funds to evaluate promising ACMs on selected projects. It has also brought an increase in research initiatives on the use of ACMs. The problem is that ACMs are usually individually studied disregarding the fact that they are part of larger procurement strategies that combine multiple contracting methods. The existing literature provides no guidance on how to combine ACMs at the project level to optimize the benefits of these valuable tools and maximize value-for-money. NCHRP Synthesis 473: Indefinite Delivery/Indefinite Quantity Contracting Practices found that the lack of guidance on this matter is considerably affecting DOTs’ ability to take full advantage of the benefits provided by IDIQ contracting.

NCHRP Synthesis 473 also found that IDIQ techniques can be used in conjunction with a wide range of ACMs to enhance and increase the benefits usually attributed to this contracting approach. For example, the acceleration of the project delivery period has been identified by most DOTs as the most important benefit provided by IDIQ contracting, and it could be reduced even more if IDIQ is combined with DB, as has been done by the Minnesota and Florida DOTs. Likewise, contingent on the specific needs of each Task Order (each project under the contract), an IDIQ contract might allow the use of lane rental, incentive/disincentive, ATCs and other special provisions. Thus, besides providing for an indefinite quantity of supplies or services on an as needed basis, IDIQ allows DOTs to quickly customize provisions on a Task Order basis according to the requirements of each project. However, the lack of guidance on how to effectively combine ACMs on IDIQ contracts has led DOTs to use standard sets of provisions equally applied to all Task Orders, limiting the flexibility provided by this type of contracts and the contracting capabilities of transportation agencies.

The federal government has executed IDIQ contracts for delivering multiple DB, CMGC, and/or DBB-BV projects of a similar nature. In fact, the US Naval Facility Engineering Command has awarded nationwide DB IDIQ contracts with a capacity of over $200 million to design and build specialty projects like medical or communications facilities with estimated Task Order amounts of $20 million. These IDIQs provide contract offices with a pool of available provisions to tailor Task Orders to meet specific requirements. Thus, there is a base of experiential information that can be used to identify effective practices at the federal level, which can be adapted to meet the needs of state transportation agencies.

The DOT members of the NCHRP Synthesis 473 panel indicated that there are a number of key procedural issues preventing many states from taking full advantage of the ability of IDIQ to be combined with other ACMs. The following are a few of the major issues identified in the synthesis:

· Can agencies legally combine ACMs and IDIQ contracts?

· What is the industry perspective on combining ACMs and IDIQ procurements?

· What types of repetitive projects are best suited for IDIQ procurement with ACM delivery?

· How does the use of ACMs on an IDIQ contract impact the NEPA and permitting process during Task Order project development?

The challenges demand a framework that assists the agency to capture the benefits accrued by permitting ACMs on IDIQ contracts without violating the public trust and commitments that may have been made during project development. Ultimately, a sound business case must be made for each ACM-IDIQ as well as when and where including an ACM provision in IDIQ procurement is appropriate. This ultimately requires a methodology to identify the costs associated with implementing ACM-IDIQs and a common approach to identifying a return on investment so the agency can optimize their use across each annual program.

The proposed research should address the following questions:

· What ACMs are appropriate for use on IDIQ construction and maintenance contracts?

· What are the appropriate procedures for accepting, reviewing and evaluating design submittals during IDIQ procurement?

· What are the appropriate practices in contractually implementing ACMs on IDIQ contracts?

· Are there procedures for evaluating the optimal mix of ACM usage in IDIQ contracts?

· What impact does increased ACM-IDIQ usage have on the agency’s non-IDIQ program?

· How does an agency optimize its single project procurement program with an IDIQ program to provide the best mix of each type of contract?

· What changes should be made to the project development life cycle to best benefit from the optimal mix of project delivery methods including traditional DBB?

Objective:

The main research objective is to benchmark the state-of-the-practice in using ACMs under IDIQ contracts and combine it with existing research on construction procurement and project delivery procedures, processes, and policies. This study will assemble a set of effective practices and develop a guidebook that can be utilized by agencies to implement ACM-IDIQ contracts based on local statutory and/or policy requirements. The guidebook should provide a framework for optimizing the use of the full suite of ACMs across the agency’s annual program. The guidebook should include a methodology to compare delivery of projects on both a single project and IDIQ basis. It should also incorporate guidance that allows DOTs to be able to justify the selection of ACM-IDIQ delivery on a basis of potential environmental/social benefits, as well as time and cost savings.

Related Research:

NCHRP Synthesis 473: Indefinite Delivery/Indefinite Quantity Contracting Practices.

Final Report for SHRP 2 C 12: The Effect of Public-Private Partnerships and Non-Traditional Procurement Processes on Highway Planning, Environmental Review, and Collaborative Decision Making.

NCHRP Synthesis 379: Selection and Evaluation of Alternative Contracting Methods to Accelerate Project Completion.

Tasks:

Specific Tasks of the research to accomplish the main objective include:

· Task 1 – Benchmark the state-of-the-practice by federal, state, and local agencies in ACM use in IDIQ procurement for both horizontal and vertical projects. Survey public agencies to determine if there are any using a rational methodology to optimize their annual project delivery program with regard to ACMs.

· Task 2 – Review the legal issues involved with combining ACMs in IDIQ procurements with respect to statutory competition constraints, design liability, and other salient issues that pose potential barriers to implementation of the concept. Identify remedies, if any, that have been successfully implemented. Prepare a white paper documenting the results of tasks 1 and 2.

· Task 3 – Based on the results of Tasks 1 and 2, prepare a research work plan that describes the details of the research methodology and methods for identifying potential effective practices and developing authoritative conclusions that will lead to the accomplishment of the research objectives and the final framework.* *The plan shall include a detailed description of any statistical analysis methods, qualitative research instruments and a justification that is well grounded in the literature to their use.

· Task 4 – Develop a rational methodology for quantifying an optimum combination of traditional, ACM, and ACM-IDIQ project delivery for a typical DOT annual program. Validate that methodology with actual case study data drawn from 3 to 5 state DOT programs approved by the NCHRP project panel.

· Task 5 – Execute the research work plan and prepare an interim research report that articulates the data collection and analysis as well as emerging conclusions, effective practices, lessons learned and a proposed outline for the guidebook; case study report; draft language; spec language; and legislative language.

· Task 6 – Prepare the draft guidebook for implementing IDIQ contracts on construction projects delivered with DBB, CMGC, and DB. The guide will also cover the Task 4 methodology and provide instructions for implementing the proposed framework for an agency’s overall annual program. Incorporate review comments as required and validate the guidebook’s efficacy with a case study DOT. The guidebook should also address the use of A+B bidding, incentive/disincentive, lane rental, ATC, and no-excuse incentives provisions in IDIQ contracts.

· Task 7 - Publish the final guidebook and a final research report that details the full results of the research.

Implementation:

Regardless of the lack of literature on IDIQ, the NCHRP Synthesis 473 found that at least 32 DOTs are using this contracting approach for the procurement of construction and maintenance services – a number that has increased since the publication of the synthesis report. Likewise, the number of SEP-14 workplans associated with IDIQ contracting has increased 120% during the last four years in comparison to those received by the FHWA between 2007 and 2012. The growing number of IDIQ users has increased the need for formal research efforts aimed to gain a better understanding of IDIQ contracting to ensure an effective implementation of these techniques. This study is intended to maximize value for taxpayers’ money by allowing DOTs to take full advantage of the potential benefits of IDIQ contracting.

The major DOTs’ motivations to incorporate IDIQ into their procurement practices are the reduction of the project delivery period, the greater flexibility in quantity and delivery scheduling, the ability to provide a quick response during emergencies, and the ability to efficiently use available year-end funds. Based on the experience of those DOTs that have already implemented ACMs with IDIQ, the payoff of this research will be a significant enhancement of these benefits with additional savings in construction costs and time.

Sponsoring Committee:AFH15, Project Delivery Methods
Research Period:24 - 36 months
Research Priority:High
RNS Developer:Douglas D. Gransberg, PhD, PE – Gransberg & Associates, Inc. Jorge A. Rueda, PhD – Auburn University Matthew Scott Stanford, PE – University of Colorado Boulder Girum S. Awoke, PhD, PE – Montgomery County Department of Transportation Eric Kahlig, PE – Ohio Department of Transportation
Date Posted:11/07/2017
Date Modified:12/28/2017
Index Terms:Project delivery, Construction projects, Procurement, Contract administration,
Cosponsoring Committees: 
Subjects    
Highways
Administration and Management
Construction
Law

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