Performance Contracting Framework
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Enhanced Low Bid Awards
Traditionally, the majority of construction contracts have been awarded using the low bid process. It has been noted for certain special types of projects that the Enhanced Low Bid process may be more effective than the traditional low bid process. A sample Enhanced Low Bid process is shown in the figure below.
Figure 7. Enhanced Low Bid Process
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Enhancements are focused on embedding additional measures into Owner Agency program plans and tightening the contract requirements by establishing prequalification standards for the contractor. The States that cannot exercise best-value procurement can potentially benefit from an Enhanced Low Bid process.
State (Owner Agency) Program Plan
The State (Owner Agency) may establish a program plan based on a thorough evaluation of project requirements. The plan may include some of the following elements deemed applicable:
- Establishing the roles and responsibilities for all parties involved in the construction contract and identifying the major regulatory elements of the work;
- Defining the contractor's pre-qualification criteria by assessing financial responsibilities and work performance capabilities;
- Establishing and requiring a Partnering relationship with stakeholders;
- Establishing Incentive programs and measures to promote the contractor's effort and contribution toward improved work methods;
- Establishing Incentive and Disincentive programs and measures to hold the contractor liable for work slippage and non-compliance issues.
- Outlining prequalification questionnaires that would clearly reveal the needed information.
- Establishing a State DOT evaluation report with ratings of a contractor's performance of a contract upon completion of the project, addressing his/her performance in safety, quality, schedule, cost, innovation, customer satisfaction and his/her relationship with State representatives, subcontractors, addressing dispute resolutions, change orders, etc. This evaluation report rating would be maintained by the State DOT to be used as a basis for future prequalification criteria.
- Establishing a self reporting process with ratings prepared by the contractor on his performance upon completion of the project, addressing his/her performance in safety, quality, schedule, cost, innovation, customer satisfaction and his/her relationship with State representatives, subcontractors, addressing dispute resolutions, change orders, etc. This evaluation report rating would be maintained by the State DOT to be used as a basis for future prequalification criteria.
Upon establishing any of the above measures and including them in the State DOT's program plans, the traditional low bid process can be enhanced by tightening the contract requirements and establishing prequalification standards for the contractor.
Contractor Pre-Qualification Selection Criteria and Process:
Currently there is a wide range of prequalification criteria used by State DOTs across the country. The most common practice is the prequalification method based on the contractor's financial capacity and some related experience. Most States have developed questionnaires included in the application process addressing financial statements, experience, and equipment. Depending on the State agency, these questionnaires can be a simple one page form up to a comprehensive booklet with extensive guidelines. These questionnaires are rated differently by each State. Example rating methods used include:
- No defined rating system - This method should be discouraged as it does not provide any valuable information.
- Pass or Fail - This rating method does not provide a good scale as to how well the contractor is meeting the qualification criteria. This rating method could also be unfair to selection of the right contractor for the project.
- Equally weighting each question - This method does not allow full coverage of project specific concerns.
- Systematic rating scale of "5" excellent to "1" unacceptable based on specified criteria. This method may be more effective than the other rating systems.
The improvement of the prequalification selection process will largely depend on improving the questionnaires to reflect the right type of information and by using a more robust rating system. Based on the size and the type of projects, the prequalification selection criteria can be enhanced as the complexity increases through each of the following types as described below. If the State DOT uses any Enhanced Low Bid process then they may need to go through the FHWA SEP-14 process (please refer to section if this frame work on the SEP-14 process). The State DOT can use one of the following types of prequalification processes that suits their project and/or organization need.
As it has widely been practiced in the traditional low bid process, the small construction projects not exceeding $500,000 in price may only be subject to a simplified financial questionnaire including the company's relevant experience and available equipment.
Major projects can benefit from a more comprehensive questionnaire to be established by the State DOT covering the needs of the project in the areas of safety, quality, schedule, cost, innovation, customer satisfaction, dispute resolution, change orders, etc.
The contractor shall provide written documentation to demonstrate his/her ability to perform the type of work or a similar type. The contractors shall provide their list of projects with work performed within the last five years with detailed scopes of work. The contractor must be able to demonstrate his/her ability to manage the size of the work in terms of the construction contract dollar value and manpower to perform the work. The State officials need to verify to see if the contractor is able to meet bonding and insurance requirements. The State officials shall assess the contractors' documentation as outlined in the sample IFB Section M provided in the following section, per the rating scale shown in Table 5. The scoring may vary according to its relative importance to the project. There are several scoring options available; however the five-level scoring as shown in section M.3 Qualification Evaluation Standards Table 6 provides a broad, fairly objective range for rating different categories.
State agencies that are not restricted with their low bid process may benefit from developing a two-phase assessment procedure to short list the number of contractors during phase I process.
Phase I - During Phase I, the State officials will verify to see if the contractor is able to meet the bonding and insurance requirements. The State officials will evaluate the contractor's documentation to determine their abilities based on type and size of work. The contractors that cannot demonstrate their ability to perform either the type or the size of the work will be disqualified for further evaluation under Phase II.
Phase II -The qualified contractors under Phase I shall be further subject to the requirements listed in Section L.X under a pre-qualification package and Section M as listed below for final selection.
This two-phase process should provide time savings for both the State officials, who will review fewer documents during Phase II, and for the disqualified contractors that will not be subject to the Phase II procedures.
The sample materials provided are additional materials to be used for Enhanced Low Bid versus the traditional Low Bid.
Example Section L Additional Materials
L.X Contract Award
The owner Agency intends to award a single contract to the qualified Offeror with the lowest acceptable bid.
L.X Pre-Qualification Package
For qualification purposes the Offeror shall:
- Submit qualification resumes for all key project personnel. The resumes should address their pertinent qualifications, relevant experience and specialized training. All key personnel resumes are subject to approval/disapproval by State officials. The State official may additionally require a personal interview with qualified applicants as deemed necessary.
- Submit the corporate safety plan addressing the safety and health plan in regard to regulatory compliance and their employees' disciplinary actions program plan.
- Submit the Company's Accident summary list including: total numbers of Fatalities; Incident Rate with man-hours worked for each year of the last five years.
- Provide company's EMR for the last 5 years.
- Submit copies of all safety/environmental enforcement actions that resulted in convictions or findings against the company and man-hours worked for each year of last five years.
- Provide the Company's history of relevant or similar jobs completed.
- Submit the Corporate Environmental Program.
L.X Proposal Prices
Example Section M Additional Materials
The contract shall be awarded to the qualified Offeror with the lowest acceptable price.
M.2 Rating For Prequalification
The owner Agency will use the following table to rate the prequalification evaluation criteria:
The Technical Rating Scale is as follows:
Table 5. Technical Rating Scale
|1||Unacceptable ||Fails to meet minimum requirements; major deficiencies which are not correctable.|
|2||Poor ||Fails to meet requirements, significant deficiencies that may be correctable.|
|3 ||Acceptable ||Meets requirements; only minor deficiencies which can be clarified. |
|4 ||Good ||Meets requirements and exceeds some requirements; no deficiencies.|
|5 ||Excellent ||Exceeds most, if not all requirements; no deficiencies.|
For example, if a factor has a point evaluation of 0 to 20 points, and (using the appropriate Rating Scale) the Owner Agency evaluates as "good" the part of the proposal applicable to the factor, the score for the factor is 16 (4/5 of 20).
M.3 Qualification Evaluation Standards
The Owner Agency will use the table below in evaluating Offerors' qualifications.
Table 6. Draft Evaluation Criteria
|M.3.1|| || || || || |
|M.3.2|| || || || || |
|M.3.3|| || || || || |
|M.3.4|| || || || || |
|M.3.5|| || || || || |
|M.3.6|| || || || || |
|M.3.7|| || || || || |
M.3.1 Evaluation Criteria for Resumes for Key Personnel
The key personnel resumes shall be reviewed by the Owner Agency's designated person for competency, relevancy or similar type of experience.
M.3.2 Evaluation Criteria for Corporate Safety Plan
The Owner Agency's designated person shall evaluate the contractor's Corporate Safety Plan for their compliance with local/State/Federal rules and regulations and the company's consideration of safety of its employees and the general public. The contractor's Corporate Safety Plan at the minimum shall address their safety policy, commitment to safety, detailed disciplinary action to be taken with respect to employees violating safety requirements, personnel safety responsibilities, personnel safety training, personal protective equipment, accident / incident reporting procedure and investigations, emergency procedures guidelines, and their safety incentive plan.
M.3.3 Evaluation Criteria for Company's Accident Rate
The Owner Agency's designated person shall evaluate the Company's accident summary list including: Lost Time Accidents, total numbers of Fatalities; Incident Rate with man-hours worked for each year of the last five years in comparison with similar type projects within the area or the State. A good safety record with a low incident rate generally is clear evidence of company's commitment to safety.
M.3.4 Evaluation Criteria for Company's EMR
The Owner Agency's designated person shall evaluate the submitted Company's EMR (experience modification rating) from its insurance provider. An EMR below 1.0 means it is better than average. An EMR below 0.8 or 0.7 is even better. Many owners may consider not allowing the contractor to bid if their EMR is above 1.0 or 0.8.
M.3.5 Evaluation Criteria for Company's Safety/Environmental Violations
The Owner Agency's designated person shall evaluate the submitted Company's safety/environmental violations received from any government agencies such as OSHA and EPA. Generally issued citations are cause for alarm. The Owner Agency may further request the company's OSHA records (OSHA Log 300) for all its work related injuries for the past several years. The owner Agency can also review the company's history of OSHA inspections as posted on the OSHA website searchable by company's name.
M.3.6 Evaluation Criteria for Company's History of Similar Jobs
The Owner Agency's designated person shall evaluate the submitted Company's similar jobs while considering the relevancy to the type, size (dollar value and man-power) committed to the project in order to evaluate the Company's capability.
M.3.7 Evaluation Criteria for Corporate Environmental Program
The owner Agency's designated person shall evaluate the contractor's Corporate Environmental Program for their compliance with local/State/Federal rules and regulations and the company's consideration of environmental issues addressing its employees, the job site, general public and its impact within the surrounding environment. The contractor's Corporate Environmental Program at the minimum shall address their environmental policy, commitment to the environment, detailed disciplinary action to be taken with respect to employees violating environmental requirements, personnel responsibilities, personnel environmental training, personal protective equipment, environmental accident / incident reporting procedure and investigations, emergency procedures guidelines.
M.4 Price Criteria
The owner Agency will only consider prices from Offerors which the owner Agency has determined are qualified under M.3. The owner Agency shall award the Contract to the qualified Offeror with the lowest acceptable price.