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Arrow Performance Contracting for Construction on M-115 in Clare County, MI

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Economic Analysis

A key aspect of HfL demonstration projects is quantifying, as much as possible, the value of the innovations deployed. This entails comparing the benefits and costs associated with the innovative project delivery approach adopted on an HfL project with those from a more traditional delivery approach on a project of similar size and scope. The latter type of project is referred to as a baseline case and is an important component of the economic analysis.

For this economic analysis, MDOT supplied most of the cost figures for the as-built project. The assumptions for the baseline case costs were determined from discussions with MDOT.

Construction Time

Using conventional methods, MDOT estimated the construction time for this project as 127 calendar days. One of the proposal evaluation criteria under the PCfC best-value selection process was the baseline open–to–traffic date with incentives for early opening to traffic and construction cleanup and removal compared to this baseline. The actual construction on this project was completed in two phases. Phase I, which included placement of the two precast bridges, started on May 27, 2008 and was completed on July 1, 2008. Phase II included drainage work, milling, rubblizing, curb and gutter work, HMA paving, shoulder work, plantings, slope restoration, corrugations, and pavement markings. Phase II started on August 18, 2008, and was completed on October 16, 2008. Total actual construction time was 94 calendar days.


No traffic was detoured for this construction. During installation of the two precast bridges, self–adjusting temporary signals were used to control single–lane traffic. During construction of the rest of the project, 11–ft–wide (3.3–m–wide) temporary traffic lanes were used by the contractor to provide two–way traffic. As a result of these innovations, the average delay time experienced on the project was 2 minutes and 16 seconds, compared to a delay time of 10 minutes for conventional construction.

Construction Costs

Table 10 presents the differences in construction costs between the baseline and as–built alternatives. All as–built costs were obtained from MDOT's Web site at (project number 84169). The baseline cost was determined from the engineering estimates for the construction project. These engineering estimates were based on a nearly identical project constructed on M–115 in 2007. Because the baseline cost estimate is inexact, the information presented is a subjective analysis of the likely cost differential rather than a rigorous computation of a cost differential. Other assumptions were made in selecting significant cost factors and determining some unit costs, as noted in table 10.

Table 10. M–115 capital costs calculations.
Cost Category Baseline As Built (PCfC)
Preliminary Design and Engineering1
$ 28,156
$ 102,299
June 2008 Bridge
June 2008 Roadway
July 2008 Bridge
July 2008 Roadway
August 2008 Roadway*
September 2008 Roadway*
October 2008 Roadway** Pay Item Total Roadway4
Mobilization (5%) Roadway4
Traffic Control (7%) Roadway4
Contingencies (3%) Roadway4
$ 2,551,065
$ 127,553
$ 178,575
$ 76,532
$ 590,470
$ 725,400
$ 501,511
$ 170,156
$ 179,111
$ 1,038,844
$ 1,110,489
$ 716,444
Construction Engineering1
$ 165,8193
$ 73,248
$ 175,370
Open to Traffic
Construction and Cleanup Completion
Pavement Ride Quality
Worker Safety During Construction
Work Zone Crashes
Motorist Delay
$ 98,000
$ 37,100
$ 130,000
$ 5,000
$ 20,000
$ 50,000
Total Cost $3,792,057 $5,161,128
1 Estimates of as–built values provided by MDOT.
2 MDOT estimate for preliminary design and engineering.
3 MDOT estimate for construction engineering.
4 MDOT project estimates.
5 Baseline engineering estimates not applicable for bridge because they were not expected to be replaced, only repaired.
* Drain work, milling, rubblizing, curb and gutter, HMA leveling, shoulders, plantings, slope restoration.
** HMA top, shoulders, corrugation, pavement markings.

User Costs

Generally, three categories of user costs are used in an economic life–cycle cost analysis: vehicle operating costs (VOC), delay costs, and crash– and safety–related costs. The cost differential in delay costs was included in this analysis to identify the differences in costs between the baseline and as–built alternatives. Since no detours were included in this project, VOC is not applicable for this analysis.

The following baseline information was available for M–115:

  • Based on the data provided by MDOT, the ADT on M–115 was 5,940 with 14 percent commercial traffic.
  • The average delay time on this project was 2 minutes and 16 seconds (2.27 minutes).
  • MDOT estimates delay costs of $15.31 per hour for automobiles and $27.02 per hour for commercial trucks, which are the numbers used with the Construction Congestion Cost (CO3) software program for this project.
  • MDOT CO3 output for this project using traditional construction methods yielded a weekday delay cost of $6,810 per day and a weekend delay cost of $9,686 per day (information provided by MDOT and shown in appendix B).

Assuming that traditional construction would have impacted traffic for an estimated 127 days, this results in a user delay cost differential of $969,228 – $358,050 = $611,178, as shown below:

  • Traditional construction: [6,810 x 5 weekdays/week + 9,686 x 2 weekend days per week] x (1/7) days/week x 127 days = $969,228.
  • PCfC construction: 5,940 x [0.86 passenger cars/day x 15.31 delay cost/hour + 0.14 commercial trucks/day x 27.02 delay costs/hour] x 2.27/60 hours delay x 94 days = $358,050.

Three other comparable projects were constructed between 2004 and 2006 on M–115 and US–10 in Clare County and M–115 in Osceola County. Sixteen crashes (excluding animal crashes) were recorded during construction on these three projects. Two crashes were disabling injury crashes, while 14 were property damage or minor injury crashes. Based on 2004 National Safety Council values, disabling injury crashes are valued at $49,700 per crash while property damage and minor injury crashes are valued at $7,400 per crash. Thus the crash–related cost on these three projects was estimated as $49,700 x 2 + $7,400 x 14 = $203,000, resulting in an average of $67,667 for traditional construction. Since no crashes (excluding animal crashes) were reported on this project, this results in a crash–related cost differential of $67,667.

Initial Cost Summary

From a construction cost standpoint, traditional construction methods would have cost MDOT about $1,369,071 less than PCfC construction. However, the PCfC techniques saved $611,178 in user costs related to traffic delays and $67,667 in user costs related to crashes, for a total savings of $678,845 in user costs. In this construction project, the initial construction costs of the PCfC construction was $690,226 higher than that of traditional construction methods. The higher initial cost is more than offset by the lower life–cycle costs as shown below.

Initial Cost Summary

As part of the PCfC, the contractor was required to provide a minimum warranty of five years. Due to the flexibility provided to the contractor under the PCfC, the contractor chose to mill the existing HMA layers and rubblize the PCC beneath the HMA layers and placed an ASCRL prior to placement of the new HMA overlay. This procedure is expected to result in improved performance and service life of the pavement as compared to traditional construction methods. The RFP only required the contractor to perform full–depth repairs at the deteriorated areas prior to placing the HMA overlay. To quantify the benefits of the improved performance and service life of the as–constructed pavement versus the baseline pavement, LCCA was performed using a deterministic approach (i.e., no variability in costs, ages, etc. was considered). Life–cycle costs were computed in the form of NPV which is defined as follows:

Life-cycle costs were computed in the form of NPV

A summary of the various costs and the applicable timeline is shown in table 11. MDOT's Pavement Design and Selection Manual, downloaded from MDOT's website was used. For the as-built project, the facility type chosen was "Low Volume" and the fix type chosen was "HMA Overlay on Rubblized Concrete."

For the baseline pavement, the age of the first preventive maintenance treatment was reduced from 6 years to 5 years as compared to the as–built pavement to account for the difference in expected performance. The service lives of 11 years and 20 years for the baseline pavement and the as–built pavement are from page 7 of the MDOT Manual for "Repair and HMA Resurface on Composite or Concrete" and "HMA over Rubblized Concrete," respectively. For the reconstruction or HMA overlay at age 11 of the baseline pavement, the estimated costs of the current construction project (without including bridge costs) were used. As far as the bridges are concerned, MDOT considers the baseline and as–built projects to have an equivalent service life, and were not considered in the LCCA. A discount rate of 3.1% was used based on 2005 MDOT data as specified in the MDOT manual.

The LCCA analysis, summarized in table 11, shows that the baseline project will cost MDOT and the users of the roadway $7,801,876 in terms of NPV based on a 20–year analysis period. By comparison, the as–constructed project will cost $6,150,201 in terms of NPV, for a total savings of $1,651,675. Additional safety features such as rumble strips are expected to reduce crashes over the life of the pavement, making this innovative contracting approach even more significant over the long term.

Table 11. Summary of LCCA cost computations (20–year analysis period).
Cost Category Age (yrs) Baseline Pavement Service Life (11 years As Built (PCfC) Pavement Service Life (20 years)
Preliminary Design and Engineering, Construction, Construction Engineering, and Incentives
Delay–Related User Costs
Crash–Related User Costs
$ 969,228
$; 67,667
$ 358,050
$ 0
Preventive Maintenance (MDOT Manual)
11.12 lane–mile @ $27,192 per lane–mile
5 (baseline)
6 (as–built)
$ 302,375
$ 302,375
Preventive Maintenance (MDOT Manual)
11.12 lane–mile @ $44,891 per lane–mile
9 (as–built)
$ 499,188
Reconstruction or HMA Overlay
(Preliminary Design and Engineering,
Construction [Roadway Pay Item,
Mobilization, Traffic Control, Contingencies], Construction Engineering)
Delay–Related User Costs
Crash–Related User Costs
11 (baseline)
$ 102,043
$ 127,553
$ 178,575
$ 76,532
$ 165,819
$ 969,228
$ 67,667
Salvage Value (2 of 11 years remaining life for baseline pavement) 20 –$ 582,107   $ 0
Net Present Value of All Costs   $ 7,801,876 $ 6,150,201
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Mary Huie
Center for Accelerating Innovation

This page last modified on 04/04/11

United States Department of Transportation - Federal Highway Administration