Road Construction Alternative Contracting Methods

Do you ever get stuck in road construction traffic on your daily commute and wonder why it seems like they’ve been repaving the same half-mile stretch of road for years? I know I have. I’m also the first to complain when the roads on my daily route start to deteriorate and the potholes grow large enough to swallow a couple of Buicks whole. Luckily there are a number of alternative contracting methods being used for road construction projects intended to shorten construction time or reduce traffic impacts.

Cost + Time Contracts

Cost + Time contracting, also known as A + B contracting, is used to encourage contractors to complete the work in as few days as possible. The cost or A portion of the bid is just like a standard bid and includes all prices and quantities for labor and materials. The time or B portion takes the number of days the contractor estimates it will take to complete the work multiplied by a predetermined user cost established by the owner. The cost and time, or A and B amounts, are added together and the contractor with the low bid wins. When this contracting method is used the contractor typically gets an incentive for finishing ahead of schedule. If a project runs over the number of days bid by the contractor they are typically assessed a fine and also have to pay any liquidated damages for not completing the work on schedule.

Lane Rental Contracts

Lane rental contracting rewards contractors for minimizing lane and shoulder closings during peak traffic times. This method is similar to cost + time contracting. The bidder submits a standard bid and adds their estimated user cost based on their anticipated amount of lane closures multiplied by the rental rate established by the owner. Once construction is underway, the total amount of lane closures are monitored and the user costs are calculated based on the lane rental fees. Once the project is completed the actual closures are compared to the contractor’s original bid. If the actual costs for lane closures are less than what was bid then the contractor is awarded a bonus equal to the difference between the two. If lane closures exceed the amount bid by the contractor then they have to pay back the difference in user costs.

Incentives/Disincentives Contracts

Incentives/Disincentives contracts are used to encourage contractors to complete a project early based on a pre-established contract time. A contractor submits a standard bid for the work and is paid an incentive based on a daily amount for the total number of days a project is completed early. If a contractor exceeds the completion date they must pay back the daily amount for each day over. This contracting method can be used as a standalone but is often combined with cost + time and lane rental contracts.

No Excuse Contracts

Another contracting method designed to shorten construction time is the no excuse contract. Bonuses can be linked to specific milestones or the final completion date. In a no excuse contract, no consideration is given for weather delays or any unforeseen conditions typically found in standard contracts. If a contractor completes a project on or before the specified completion date they are awarded a considerable bonus. If construction goes beyond the specified date then no bonus will be awarded.

All of these methods encourage contractors to develop and use construction methods that speed up construction or reduce the impact on traffic. They work best when completion time is the main concern and delays from unknown site conditions and utility relocations won’t be a major factor in completing the project.


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