Best-Value Alternative Bidding (A-D) Evaluation

October 21, 2008

On June 22, 2006, FHWA approved Iowa DOT's request to evaluate a Best–Value (A–D) Alternative Bidding technique under SEP–14. FHWA approved a two year trial of this technique (October 1, 2006 to September 30, 2008) with an analysis to be sent to FHWA by December 31, 2008.

Background

In traditional low–bid contracting, the Contracting Authority has made pre–letting choices on their willingness to pay additional cost for one design or material over other designs or materials. The Contracting Authority must limit the choices the contractors may bid on without knowing if the actual cost differential between the alternative designs or materials. Due periods where material costs are rapidly fluctuating (such as they have over the past 3 years), the costs of key material components often change between the time of design and the bid letting.

Best Value Alternative Bidding Procedures

In Best Value Alternative Bidding, the Contracting Authority expands the choices of designs or materials it is willing to award, and includes the basis for low bidder selection of these designs and materials in proposal. This allows the designer to expand the number of options a contractor can bid, allowing the contractor to bid the options that are most economical for that contractor.

In Best–Value Alternate Bidding, the proposal has Alternative Sections. The proposal will also list a dollar value (Alternative Differential) that the Contracting Authority has pre–determined it will pay for each Alternative Section over the Base Alternative Section. For each set of alternatives, the contractor will be allowed to bid ONE Alternative Section (e.g. either the Base Alternative Section or Better Value Alternative Section. The basis for determining the low bidder for consideration for award will be the contractor who submitted the lowest Bid Total for minus the sum of the Alternative Differentials for that contractor (e.g. A – D) Bidding.

Best Value Alternative Bidding Usage

• During the first 18 month of the evaluation period the Iowa spent time making presentations on Best–Value Alternative Bidding. Because of the time to develop projects for letting, projects using the Best–Value Alternative Bidding technique no projects utilized Best Value Alternative Bidding until May 2008.
• Sioux County, May 2008 – The first project for which we took bids was Sioux County, STP–E–7055(617)—8V–84, a trail project. Because of fluctuating HMA binder prices the designer wanted the contractor to have the option to bid either a PCC trail or a HMA trail. However the designer felt that a PCC trail would have a longer life than the HMA so the Best–Value Alternative Bidding was an ideal solution to allow contractor to bid either option and expand the number of bidders on the project. Bids for this project were received on May 20. A predetermined Alternative Differential of $75,000 was included in the proposal for the PCC alternative. Six contractors bid the project, two HMA contractors and four PCC contractors. A PCC contractor submitted the lowest overall bid, so the Alternative Differential did not affect which contractor was recommended for award of the contract.
• Audubon County, June 2008 – The second Best–Value Alternative Bidding project was in the June 17, 2008 letting. This project was a trail in Audubon County where the contractor was given an option to bid either a PCC trail or a HMA trail. Like the Sioux County trail, the designer felt that a PCC trail would have a longer life than the HMA. Five contractors bid the project. Four bid the PCC alternate and one bid the HMA alternate. The HMA contractor submitted the lowest dollar bid ($357,386) but the contract was awarded to a PCC contractor who submitted the best bid considered the longer pavement life ($377,499 – $28,900 = $348,599).
• Warren County, August 2008 – The third Best–Value Alternative Bidding projects was in the August 19, 2008 letting. This project was a resurfacing of a Warren County road. One contractor bid the PCC alternate and two contractors bid the HMA alternate. One of the HMA contractors submitted the lowest dollar bid ($1,081,454) and was awarded because their bid was lower than the PCC contractor bid considering the Alternative Differential ($1,226,141 – $167,500 = $1,098,641).

The Iowa DOT feels the Best–Value (A–D) Alternative Bidding procedure will provide a good tool for bidding projects in Iowa. In discussions with other state DOT we have discovered many states use a similar contracting method to bid PCC versus HMA since the large price increases for HMA Binder. Therefore the Iowa DOT is requesting permission that Best–Value (A–D) Alternative Bidding be allowed as an approved bidding technique for federal aid projects let by the Iowa DOT.