Background for Pavement Warranties
"What are they and why should they be used"
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In the past fifteen years the use of pavement warranties has gained more interest in the United States, due in part to the reported European success of warranties in improving the quality of highways. Warranties have been successfully used in the highway industry to protect investments from early failure. The use of warranties in the U.S. is being driven by a variety of factors including the desire for improved pavement performance and internal pressures to reduce field staffing assigned to oversee the construction program.
In the U.S., warranty specifications have been part of a developing process for many years. Referring to the specification development continuum (see figure below), States and local governments basically started without any specifications with the exception of a few local governments who utilized some warranties, also referred to as maintenance guarantees in the 1900's. In the 1920's governmental authorities began utilizing method type specifications, defining each step in the construction process. In the early 1980's the Quality Control/Quality Assurance (QC/QA) specifications, now referred to as Quality Assurance Specifications, were developed to enable the sharing of responsibilities for the construction of pavements. Following that were end result type specifications which allowed agencies to specify what they wanted the final product to resemble. Warranties entered the specification arena in the early 1990's to assist the States in accelerating quality construction, improving pavement performance, increasing contractor innovation, and responding to reductions in available resources for agency field personnel. As with any developing process, there will be future advances made to meet the needs of the paving community.
Figure 1. Specification Development Continuum.
Before 1991, the Federal Highway Administration (FHWA) had a policy restricting the use of warranties on Federal-aid projects. The rationale for the restriction was that FHWA statues prohibited the use of federal funds in maintenance activities. Many believed that the use of warranties would effectively result in Federal-aid funds participating in maintenance costs. However, the desire for innovation in highway contracting practices resulted in legislation to encourage the use of warranties by agencies for highway projects.
The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA) offered more independence by enabling the FHWA to delegate many of the project decisions to the States. The new regulations allowed States to utilize their own polices and procedures for Federal-aid projects located off the National Highway System (NHS). Under these conditions, agencies could use warranty clauses that were developed in accordance with their own procedures. Many agencies were interested in the use of warranties for highway construction projects but were not ready to undertake such a practice without greater FHWA involvement.
In December of 1991, a Transportation Research Board (TRB) task force evaluating innovative contracting practices documented its findings in Transportation Research Circular Number 386 "Innovative Contracting Practices". Subsequently, the task force requested FHWA to establish a project for evaluating some of the more project specific recommendations. FHWA responded by initiating Special Experimental Project No. 14 (SEP-14) activities that encouraged a number of highway agencies to use and to evaluate promising innovative contracting practices with the objective of enhancing the quality of highways. Included among these innovative practices were the use and the evaluation of warranties by eight States on a variety of Federal-aid highway projects.
On August 25, 1995, FHWA published an Interim Final Rule (IFR) for warranties for projects on the NHS, eliminating the restriction on the general use of warranties. The IFR states that "warranty provisions shall be for a specific construction product or feature and routine maintenance items are still not eligible." The IFR also prohibits warranties for items not within the control of contractors. The provisions of the IFR were adopted as a final rule on April 19, 1996. The FHWA's policy for warranties is codified in 23 CFR 635.413.
Approximately 35 states have varying degrees of experience with the use of some form of warranty provisions on Federal-aid highway projects. The use of warranties may be permitted or prohibited by the State's statutes or administrative policies. Several States require the use of warranties, where appropriate. For example, Michigan enrolled Senate Bill 303 of 1997 to include the following provision for development of warranties on State trunk line construction projects: "Of the amounts appropriated for state trunk line projects, the department shall, where possible, secure warranties of not less than 5-year full replacement guarantee for Contracted Construction Work."
In 1999, the Ohio Legislature passed House Bill 163, which required the Ohio Department of Transportation (DOT) to utilize construction warranties on at least one-fifth of its capital construction projects. By 2005, the Ohio Revised Code 5525.25 changed the minimums to maximums, in other words, not more than one-fifth of the DOT's capital construction projects are bid requiring a warranty. For newly constructed pavements, the warranty period requirement was at least seven years, now it is not more than seven years.
In September 2002, a panel of Federal, State, and local government and industry representatives traveled to Spain, Germany, Denmark, Sweden, and Great Britain for a "European Asphalt Pavement Warranties Scan." The findings from this scan are summarized in a November 2003 FHWA report.
In May 2003, the Michigan DOT hosted a "Pavement Warranty Symposium" for States that have significant experience with pavement warranties. The current use of pavement warranties is illustrated in Figure 2 and is also summarized in spreadsheets on FHWA's warranties web page.
Figure 2. Use of Pavement Warranties in the U.S.
It is intended that this paper will provide agencies the information to gain an understanding of pavement warranties and provide insight on why they are used. This document has been arranged to present various considerations that should be addressed in all warranty programs, independent of the source of funding or routes.
A discussion on warranties brings with it the complexities of several other aspects of specialized subject areas such as QC/QA, bonding, contracting, and monitoring, and utilizes numerous technical terms, or expressions, having very specific meanings. The highway language, moreover, is continually changing to keep pace with advances in technology and contracting methods. The following discussion of terms is provided to serve as a general reference to address the fact that some of these terms are not well understood and their use is subject to a variety of different interpretations.
In accordance with NCHRP Synthesis 195, warranty is defined as a guarantee of the integrity of a product and the maker's responsibility for the repair or replacement of the deficiencies. A warranty is used to specify the desired performance characteristics of a particular product over a specified period of time and to define who is responsible for the product. Warranties are typically assigned to the prime contractor but may be passed down to the paving contractors as pass-thru warranties.
There are no formal national definitions for the types of warranties, but we generally refer to two types of warranties in the highway industry: materials and workmanship warranties and performance warranties. Particular attention should be given to the difference between the two warranty types because the risk allocation, particularly for design liability, varies a great deal.
Warranties are applicable to new construction, rehabilitation, or preventive maintenance type projects for both Hot Mix Asphalt (HMA) and Portland Cement Concrete (PCC) projects. Project selection criteria for pavement warranty projects should include the evaluation of the existing subgrade conditions, particularly when considering preventive maintenance projects.
Warranties are not appropriate for addition to contracts after the fact, to address substandard materials or operations performed by the contractor. Warranties are intended to increase pavement performance by addressing quality during construction, not as maintenance agreements for covering maintenance costs or activities (see the section on PPC).
- Warranty Period
The warranty period is the pre-specified time for the duration of the warranty and will vary by the type of warranty. Based on the European experiences, warranties should be long enough to provide the agency assurance of pavement performance, but not so long as to unnecessarily increase contract prices generally due to increased contractor risk. This balance between agency risk and contractor risk has to be considered. An agency should use pavement performance data from their pavement management system (PMS) to assist in making the determination of an appropriate warranty period.
Table 1. Summary of Typical Warranty Periods for Each Type of Warranty
|Warranty Type||Warranty Period|
|Materials and Workmanship||2 - 4 years|
|Performance||Short-Term||5 - 10 years|
|Long-Term||10 - 20 years|
- Materials and Workmanship Warranties
Materials and workmanship type warranties require the contractor to correct defects in the pavement caused by elements within their control and assume no contractor responsibility for the design. The warranties are generally related to preventive maintenance treatments such as crack sealing and chip and seal coats and range from 2-4 years in duration, depending on the specific treatment. Materials and workmanship warranties follow an agency's current standard specifications for the specific treatment. Acceptance of these warranted projects is in accordance with an agency's normal practices.
Materials and workmanship type warranties have not reported any ascertainable increase of construction costs of the projects. These warranties have not had the reporting that is associated with performance warranties and as such, limited information is known. To date, the limited reporting indicates limited success, such as in Colorado and Michigan.[6,9]
- Performance Warranties
Performance warranties require the contractor to assume additional responsibility for the actual pavement performance over a specified length of time. Performance warranties are generally grouped into two classifications of short-term or long-term warranties.
- Short-Term Performance Warranties
The warranty period for short-term performance warranties generally ranges from 5 years to 10 years depending on the pavement type and the design of the project. These warranties include specific agency pavement performance criteria to be achieved. Project specifications for short-term warranties include the minimum materials and construction requirements acceptable to the agency.
Typically for short-term warranties, the agency is responsible for the structural design requirements of the pavement and the contractor is responsible for the mixture design. The warranty program utilizes the contractor's Quality Control Plan (QCP) and procedures to address construction details. The agency is responsible for the evaluation of the pavement over the warranty period. Final acceptance of short-term warranty projects is not until the specified warranty period has been completed.
Short-term performance warranties across the country are now reporting successes such as in Indiana and Wisconsin.[10,5] Successes are being reflected in improved smoothness and lower surface deformation (rutting) values as well as reduced incidents of other types of pavement distresses on HMA pavements. Performance of short-term PCC warranty projects is still under evaluation.
- Long-Term Performance Warranties
The warranty period for long-term performance warranties generally ranges from 10 years to 20 years. For long-term warranties, the contractor has additional responsibility to meet the minimum materials, structural, and mixture design requirements for the pavement. The contractor's QCP and procedures are used to address the construction details. The agency is responsible for the evaluation of the pavement over the warranty period. Final acceptance of long-term warranties is not until the specified warranty period has been completed. Long-term performance warranties in New Mexico and Virginia are in the early stages of performance evaluation.
- Pavement Performance Contracts (PPC)
Pavement performance contracts in Europe have utilized long-term performance warranties, with the addition of enhanced maintenance responsibilities over the course of the warranty period. The contractor engages in maintenance activities that would not only aim to meet quality levels, but also maintain the as-built quality. The payment mechanisms available under the PPCs have potential to be attractive to both the agency and the contractor.
Brief Comparison of Warranties
Table 2 is intended as a summary of the different types of pavement warranties based on the information presented in the Definitions section.
Table 2. Aspects of Pavement Warranties
| ||WARRANTY TYPE|
|Materials & Workmanship||Performance|
|Type of specifications||Agency's current standard specifications for specific treatment||Agency specified minimum materials and construction requirements acceptable for project||Agency specified minimum structural design, mixture design, materials, and construction requirements acceptable for project|
|Agency responsibility||Design, evaluation||Structural design, evaluation||Evaluation|
|Contractor responsibility||Correct defects in pavement caused by elements within their control||Mixture design, QCP, and pavement performance for warranty period||Structural design, mixture design, QCP, and pavement performance for warranty period|
|Acceptance of project||In accordance with agency's normal practices||Initial: construction activities.|
Final: after specified warranty period is completed
|Initial: construction activities.|
Final: after specified warranty period is completed
Criteria for materials requirements are dependent on the length of the warranty period. Contractor should have greater control of material selection to compensate for amount of risk taken.
International Scan Findings:
The 2003 report entitled "Asphalt Pavement Warranties Technology and Practice in Europe" summarizes the observations, findings, and recommendations gleaned from the European scan. The lessons learned are relevant to this discussion in that the European and U.S. transportation communities are quite similar in terms of political, financial, and resource challenges that they face.
The European host countries have a long history of warranties on pavement construction. These countries have employed material and workmanship warranties for decades. Although their warranty programs have developed independently through either government specification or industry promotion, all of the countries believe that warranties have improved the quality of their highway systems.
- Materials and Workmanship Warranties
At a minimum, all of the host countries use materials and workmanship warranties on their traditional contracts. These warranties ensure that the contractor will build the pavement as specified by the owner and fix any defects resulting from the use of inferior materials or improper installation. Depending on the country, the highway agencies may seek a remedy of defects from either the prime contractor or the asphalt contractor, if the prime is not the asphalt contractor.
On projects designed by the highway agency, the typical warranty periods vary from 1 year to 4 years in duration. Performance indicators including rutting, cracking, and durability are used on materials and workmanship warranties.
- Performance Warranties
Performance warranties are used on traditional contracts as well as on design-build contracts. A performance warranty includes material and workmanship, but since the contractor is responsible for some or all of the pavement design, it includes performance of the complete asphalt pavement.
The host countries use a 5-year warranty period for performance warranties. Although the design life of asphalt pavements is much greater than 5 years, that period provides for adequate performance measurement of the product without unduly burdening the contractor to warranty the product for the entire design life. In addition to rutting, cracking, and durability, performance measures of smoothness and friction are often used.
Performance warranties allow for contractor innovation in mix design and/or material installation. The host countries described varying levels of innovation that stemmed from the use of performance warranties, but all countries described a greater level of innovation than was available through material and workmanship warranties.
- Best Value Procurement
All the host countries use best value procurement in lieu of low bid. Best value procurement involves awarding the contract on technical and/or performance items in addition to cost. Best value criteria include safety, innovation, and environmental impact. The bidding of additional years of warranty may also be included as a best value criterion. In some cases, prequalification was used as a filter in the best value process. Although the best value criteria and weights varied, all of the hosts stated that it was critical to their warranty program. For warranties to function effectively, highway agencies and the industry must have a higher level of trust and greater confidence in the contractor's ability to perform. Best value procurement is one mechanism to promote this trust and confidence.
- Alternative Contracting
Similarly to the United States, the European hosts are dealing with growing capital project needs, as well as a backlog of maintenance needs. They are also dealing with a shortage of staff and a changing role of government. All of the host countries are looking at alternative contracting as a mechanism to increase innovation without creating a burden on highway agency staff. PPCs and design-build-finance-operate (DBFO) contracts are extending warranty contracts up to 35 years and assisting with the growing needs.
- Pavement Performance Contracts (PPC)
PPCs extend performance warranties to include a warranty period that is closer to the design life of the pavement. In a PPC, the contractor is responsible for designing, constructing, and maintaining the performance of the pavement to pre-specified levels. All of the host countries are employing or experimenting with some variety of pavement performance warranties with warranty periods of 11 years to 20 years. In some instances the highway agencies are promoting PPCs, however in others the industry is the catalyst. In all of the host countries, the PPCs are developing with close government and industry collaboration.
Depending on how the contractor proposes to build the pavement, the maintenance can include a number of items from filling of isolated potholes and minor pavement re-marking to a complete mill and overlay of a significant section of pavement. The highway agencies are simply looking to the industry to provide a pavement that performs to pre-specified standards. The PPCs allow for much more innovation from the industry, however, the industry must be willing to take a substantial risk. The contractors must have design, construction, and maintenance competencies to compete for PPCs.
- Design-Build-Finance-Operate (DBFO) Contracts
A couple of highway agencies are changing from service providers to owners and managers of the highway system. A small fraction of the highway network is turned over to the private sector for long-term financing, operation, and maintenance. The terms of the DBFO contracts range from 25 years to 30 years and there are experiments with even longer periods. Drivers for the use of DBFO contracts range from a lack of public funding to a belief that private financing and maintenance delivers a higher quality product and provides benchmarks for public sector performance.
It should be noted that none of the host countries are using PPCs or DBFO contracts as a panacea for their transportation needs. Rather, they are taking a balanced contracting approach through the use of a variety of the warranty contracts described in this document.
Pavement Warranty Considerations:
This section is intended to address some of the issues that need to be taken into consideration when using pavement warranties.
- Cost Effectiveness
The short and long-term cost effectiveness of warranties is an issue that all agencies have to address. Evaluations from short and long-term HMA warranties reported by agencies across the country have shown an increase in the initial construction costs of the project by 3 percent to 15 percent.[5,6] The increased costs of the warranty are directly related to the increased risk perceived by the contractor. Typically as contractors gain experience in warranties, construction costs decrease due to a better understanding of risk and the use of innovative construction techniques.[6,8,9] Cost effective innovations have been utilized to speed up construction activities without sacrificing quality. Shifting the project related decisions to the contractor provides freedom to make cost effective decisions.
There is generally an increase in costs to the agency in the monitoring, verification, and reporting of the contractor's operations during the period of the warranty over that of conventional projects. These costs have generally been subsidized by the agencies, but it does need to be considered in the overall operations of the warranty program. A report from Wisconsin includes a discussion on assessing the cost effectiveness of a warranty program.
- Improved Performance
Projects built with performance warranties have reported measurable improvements in performance by the Wisconsin and Indiana highway agencies.[5,10] These agencies found the performance of HMA short-term warranty projects exceeded that of equivalent non-warranted projects when evaluating distresses of smoothness and rutting. HMA pavements with fewer defects are safer over a longer period of time, which can be directly related to reducing delays and congestion on the facility and are cost effective over the warranty period.
Some agencies, such as Colorado and Michigan, have reported less than desirable results with their warranty program, particularly with their materials and workmanship type warranties, which caused the re-evaluation of the program to address the needs of the agency.[6,9]
- Industry Concerns
Often there is an initial resistance from the highway construction industry when implementing new methods or changes to an existing contracting process. The partial or complete shifting of responsibility for performance to the contractor may be viewed as an economic risk. However, accompanying the shift in responsibility, there should also be more freedom for contractor innovation. The warranty program needs to include allowing the contractor to make decisions about the design and construction that today are made by the agency. Creating the balance of benefits and understanding the newly established responsibilities of the warranty program is facilitated through the buy-in and support of the industry.
Risk is directly related to industry's knowledge of process, knowledge of materials, and knowledge of quality work. If the agency warranty specifications are developed with an understanding of the availability of materials and the abilities of industry to provide a quality product, risk is not an issue. Risk does become an issue when the existing agency/industry procedures do not include the basic tenets for good quality control systems and project selections.
- Partnering for Bonding Policy Changes
One integral part to all warranties is the ability of industry to secure the appropriate bonding to accomplish the work and not tie up excessive bonding authority far into the future. This is clearly an area where the industry and agency need to come together in mutual support. Currently agencies vary on the methods in requiring bonding on their projects, which includes a level, stepped or straight-line depreciation liability over the length of the warranty. Another approach is a guarantee program that is tied into the prequalification procedures in lieu of special bonding for the warranty items. An example of a guarantee program being used is in Florida. No matter which alternative is selected, partnering with the bonding companies is required to ensure their knowledge of the program is concurrent with the agency goals.
- Agency Concerns
As with any new program or change to an existing system, there may be a need for an initial realignment of resources within an agency to develop a warranty program. To some extent, concerns that industry may have could also be reflected within an agency in terms of risk, culture, and contracting practices.
A shift in responsibilities may cause a similar reaction for an agency as with the industry. Agency resistance stems from a perceived lack of control. Current methods or prescriptive type specifications lend themselves to the agency's engineer having direct control of a project using the specification book as the baseline authority. Under a warranty specification, the engineer has less ability to control details of the project. The agency will need to make adjustments in their pavement specifications, field inspections, contract acceptance, and verification procedures.
The agency risk is also related to industry's knowledge of process, knowledge of materials, and knowledge of quality work. If the agency warranty specifications are developed with an understanding of the availability of materials and the abilities of industry to provide a quality product, risk is not an issue. Risk does become an issue when the existing agency/industry procedures do not include the basic tenets for good quality control systems and project selections.
Moving toward a pavement warranty program is not only an administrative change, but often also a change in the agency's culture. The highway agency will need to address the concerns and perceptions of their engineers and technicians. Some of the resistance could be related to job security and the capability of the personnel to take on different responsibilities. In reality, most agencies are being reduced in size in terms of personnel and resources. In an attempt to supervise larger construction budgets, agencies are stretching personnel to cover more projects leading to the potential for less involvement of personnel than in the past. The shift in responsibilities afforded by a warranty program has the potential for the agency to reallocate resources and personnel to the role of product evaluation and acceptance.
For materials and workmanship and short-term performance warranties, contracting should continue the low bid method in accordance with the agency procedures. For long-term performance warranties, although low bid contracts have been utilized, it is recommended that agencies develop best value/prequalification type procedures to ensure the capabilities of industry to construct and to manage the contracts. For some States, this may necessitate legislation changes and participation in the SEP-14.
While there are several choices in the types of warranties that can be used for pavements, the most benefit can be gained through the use of long-term performance warranties. Performance warranty specifications have been documented to reduce the life cycle costs of the facility by improving the performance of the pavements. To continue the trend toward improved pavement performance it is important to examine and to implement the best practices and lessons learned by agencies in the United States and abroad. The successful use of pavement warranties is dependent upon the understanding of contracting methods and risk, as well as the support of the parties involved.
This document will be supplemented by additional information and activities. The following is a brief summary of what is anticipated in the short term.
- Planned FHWA Activities
FHWA intends to continue supporting and encouraging the use of pavement warranties throughout the United States. The following activities are planned:
This document is the first in a series of documents intended to provide agencies with an understanding of implementing a warranty program. The second document will discuss the selection procedures for pavement warranties and will include specification development, bonding or guarantee issues, project selection, acceptance and verification procedures for warranty projects. In addition, warranty experiences from various states will be also included. The third document will be centered on implementation and management of the pavement warranty program and will include examples of agency programs as well as examples of warranty specifications for both HMA and PCC pavement projects.
There will be a series of regional workshops designed to assist in the implementation of the program. FHWA will develop a workshop to provide an opportunity to train and support agencies interested in implementing pavement warranties.
- Technical Working Group
Depending on the progress of current warranty evaluation efforts, FHWA may also coordinate a technical working group and hold a symposium workshop to bring agencies together in order to exchange information on best practices.
- National Cooperative Highway Research Program (NCHRP) Project 10-68
The NCHRP project 10-68 entitled "Guidelines for the Use of Highway Pavement Warranties" is intended to develop program related guidelines for the project level application of pavement warranties by March 31, 2008.
Referenced materials in this guidance information include the following documents: