FHWA Briefing

A Summary of the Florida DOT February 17, 2006 Meeting with the Florida Highway Industry "Commitments Made are Commitments Kept"

Background

The Florida Department of Transportation (FDOT) is experiencing a dramatic increase in project construction cost that is directly related to rising petroleum costs, availability of materials (Earthwork, asphalt, concrete, steel, etc.), and diminishing labor pool needed for road and bridge construction work. Compounding the increases in cost, the FDOT has noticed an increasing number of non-competitive contracts where the Department has either received no/single bids or received two bids. In January letting, 16 out of the 28 projects let have two or less bidders. The impact of these cost increases has resulted in the deferral of project phases in the five years program to offset rising right of way and construction costs. Moreover, FDOT recognizes a widening gap between bid amounts of advertised projects and the estimated costs in their Work Program. This trend is becoming a public affairs issue. Therefore, FDOT summoned a one-day summit of key partners and stakeholders to develop a strategy to address these challenges. FDOT greatly believes in the statement " Commitments Made are Commitments Kept"

Talking Points:

On February 17, 2006 FDOT convened a one-day summit in Orlando, Florida, which was attended by Florida DOT District and Central Office leaders, Florida Transportation Builders Association (FTBA) member contractors, consultant firms, and FHWA division/HIF Office representatives. Break out sessions were conducted to allow the groups to brainstorm on the findings and come up with potential short-term and long-term solutions to the challenges.

Findings:

FDOT identified a number of local/global factors contributing to cost increases.

Local Factors:

• Construction market saturation. Hot market in both public and private sector resulting in limited contractors available for construction projects.
• Labor and material shortage within the State.
• Project requirements in terms of hours of work, night work, delayed start, and asphalt warranties.
• Hurricanes disrupted petroleum supplies, rebuilding will add to demand. Additional work recovering from 8 hurricanes.

Global Factors:

• Fuel cost increases affect hauling, excavation, paving, and fuel related work.
• Major increase in cost of construction using steel affects bridge, guardrail, and steel related materials.

Task:

Breakout groups were charged with developing short-term and long-term strategies to reduce the cost increases. Below are some of the strategies reported by the groups:

Short Term

• Develop letting plans that group projects together, such as ITS and resurfacing projects. Develop leading indicators to best determine letting opportunities.
• Explore opportunities for using state borrow materials and materials owned by other agencies.
• Expand partnering to dealings with local government and also encourage partnering between local government and developers before NPO.
• Value Engineer almost all project; the return on investment is worthwhile.
• Break-up large projects into smaller projects to increase competitive bidding that may result in cost savings.
• Reduce testing if not required
• Institute flexible design/better engineering to reduce costs and delivery of program
• Reduce producer/contractor requirements for low risk materials/work
• Use alternative construction methods like base bids with options.
• Revise/relax standards on resurfacing projects and focus on core product
• Increase time to replace structurally deficient bridges and relate resurfacing requirements to volume of traffic.
• Realign risk profile; FDOT should assume most of the project related risks or share some of then to reduce cost.
• Index materials and weather.

Long Term

• Ease laws on right of way for advance purchase and work with local agencies to preserve the right of way.
• Utilize more of the available state owned properties to reduce cost.
• Whenever possible, lump minor projects into one to reduce costs.
• Simplify construction contract process, documentation and administration.
• Explore the opportunity for use of alternate price index. Encourage the industry to come up with acceptable price index.
• Work to expand industry capacity - advertise/search for additional contractors, research options to increase labor pool and address materials shortages.
• Re-examine internal project management and cost estimating processes - identifying best practices and training on best practices, adding a performance measure on DOT "dashboard" on cost estimating, bids over a tolerance (15%) level compared to the estimate have to be approved by Secretary.

The FDOT Secretary of Transportation will establish a committee to evaluate the above short and long term suggestions and determine which suggestions that have the most potential in reducing the cost of construction. Monitoring procedure will also be established to keep track of the impact. A report on the process and result will be mailed to all attendees.