Commonwealth of Kentucky
Transportation Cabinet
April 8, 2008

Mr. Jose Sepulveda
Division Administrator
Federal Highway Administration
P. O. Box 536
Frankfort, KY 40602

RE: Special Experimental Project No. 14 (SEP-14)
Evaluation of Alternate Pavement Bidding

Dear Mr. Sepulveda:

Attached for your review is a document evaluating Pavement Type Selection and Alternate Pavement Bidding in Kentucky from February 2006 to present. This report was generated in response to your letter dated February 22,2006 requesting an evaluation of the alternat~ pavement type process and bid adjustment factors.

This report indicates that the use of alternate pavement bidding in select areas in the state increases the number of bidders and subsequently reduces the overall unit bid prices through competition thus creating a cost savings to the Cabinet.

Please advise if supplemental information is needed.

O. Gilbert Newman, P.E.
State Highway Engineer

Attachment

cc: R. Polly
D. Kratt
P.Looney

Analysis of Alternate Pavement Bidding
Kentucky Transportation Cabinet
April 4, 2008

I. Introduction

On February 22, 2006 the FHW A Kentucky Division Office gave written approval for the Kentucky Transportation Cabinet (KYTC) Pavement Type Selection Policy. The Pavement Type Selection Policy included language that allowed the Cabinet to utilize alternate pavement bidding with a bid adjustment on projects where engineering and economic analysis did not indicate a clearly preferred alternate; Three projects were bid using this procedure in 2006. This report will summarize the results and analyze the impacts and benefits to the Cabinet.

The three projects selected for initial use of this experimental bidding procedure were: (1) Item Nos. 3-10.15 & 10.16, 1-65 in Simpson County; (2) Item No. 2-100.3, Breathitt Parkway Extension in Christian County; and (3) Item No. 5-326.01, Shelbyville Bypass in Shelby County. Table 1 provides information regarding the alternate pavement designs and bid adjustment values for each project. Table 2 lists the actual bids provided by contractors and the Cabinet Engineer's estimates. Each project attracted at least two bidders. The Simpson and Shelby County projects attracted both asphalt and concrete bidders. The low bidder on each of these projects was under the Engineer's estimate. Appendix A includes the unit bid tabs for each ofthe projects discussed in this report.

II. Project Analysis

1-65, Simpson County (4/28/06)
The project on 1-65 attracted two bidders: 1 asphalt and 1 concrete. The low bidder was an asphalt contractor and was 1.34% below the Engineer's estimate. In order to identify the impact of alternate pavement bidding on cost to the Cabinet unit prices for similar projects in close proximity were compared. Several projects have been let to construction both before and after the alternate bid project on 1-65 in Simpson County. These were all interstate widening projects let within one year plus or minus of the alternate bid. Table 3 calculates the cost savings to the Cabinet by utilizing alternate pavement bidding and consequently introducing a second bidder. A similar analysis was performed and is presented in Table 4 that shows the impact of not bidding alternate bids on a subsequent section of 1-65 in Simpson County. The introduction of a second bidder by allowing alternate bidding indicated a savings of $531,862 to the Cabinet. Likewise, by not allowing an alternate bid and having a single bidder on the project let to construction in February 2007 it can be shown to have cost the Cabinet an additional $1,733,952.

Shelbyville Bypass, Shelby County (3/31/06)
The Shelbyville Bypass project attracted five bidders: 1 asphalt and 4 concrete. The low bidder was a concrete contractor and was 6.34% below the Engineer's estimate. Three of the four concrete contractors submitted bids that were lower than the single asphalt contractor. This project was full–depth construction on new alignment. A subsequent Interstate widening and overlay project was let in Shelby County in May 2007. This project (5-2006.01) was to overlay an existing concrete pavement and widen from four to six lanes for approximately five miles. It was let as an asphalt project and had a single bidder that was 2.84% more than the Engineer's estimate.

Breathitt Parkway, Christian County (3/31106)
The Breathitt Parkway project attracted two bidders: 2 asphalt and no concrete. The low bidder was 4.16% below the Engineer's estimate. This project was full–depth construction and was the shortest of the three projects at 1.77 miles in length. The difference in the bid adjustments was also the least at $174,131. It was unable to be determined why no concrete bid was submitted on this project. It should be noted from Table 1 that the difference in pavement thickness between the two alternates was the least for this project.

III. Bid Adjustment Impact
The bids were analyzed to determine the impact of the bid adjustment values on the outcome of the overall low bidder. For the two projects that attracted both an asphalt bidder and a concrete bidder, the difference in the overall low asphalt and iow concrete bids were greater than the difference in the bid adjustments. It can be concluded that while the bid adjustments did play a role in the process they did not actually determine which contractor was the low bidder. A comparison of the unit bids of the alternate paving items only in each of the projects indicates that the contractor with the lowest total for these items in each case was the low overall bidder (see Table 2).

IV. Summary and Conclusions
Between August 2005 and November 2007 five projects were let and awarded on 1-65 in Simpson and Warren Counties. Item Number 3-10.15/10.16 was the only project let with alternate pavement bids. Three of the five projects had a single bidder. The two projects that had multiple bidders had a net difference of -$1,698,754.74 between the Engineer's estimate and the low bidder. The three projects that were single bid had a net difference of +$896,410.64. The sum of the net differences for the five projects was $2,595,165.38. (See Table 5) It can he concluded that the introduction of a second bidder created a significant savings for the Cabinet.

The two projects that attracted both asphalt and concrete bids ultimately were awarded to the pavement contractor who had the lowest total for the alternate. paving items. The differences between the low asphalt and low concrete bids for both projects were greater than the differences between the bid adjustments. It can be concluded that the bid adjustments helped to attract multiple bidders. It can also be concluded that by themselves the bid adjustments did not affect the award of the projects.

In summary, it appears that utilization of alternate pavement bidding increased the numbers of bidders on the selected projects. The increase in competition 1owered the overall bid prices and created a cost savings for the Cabinet.

TABLE 3. Calculated Costs Savings From Alternate Bidding

This table attempts to show the savings realized by the Cabinet on the alternate bid project that was let to construction on April 28, 2006 (Item # 3–10.15). A 6–lane widenirig project was let and awarded to construction in August 2005 (Item No. 3–9.00) to a single bidder. The actual bids show above under the column 8/26/05. The actual bids from the asphalt bidder on the alternate pavement project that was bid in April 2006 (3–10.15) are listed under the column 4/28/06. Average unit bid prices seen by the Cabinet on most project for asphalt pavement increased rather dramatically between August 2005 and April 2006. This was in large part due to the rising cost of liquid asphalt. The Asphalt Index for August 26, 2005 and April 28, 2006 are shown above. This is a relatively good indicator of the cost increase that would be expected between those dates. The second set of numbers above was an assumed increase in asphalt prices that the Cabinet would have expected for the April 2006 bid based purely on the price of liquid asphalt. The calculated costs are all higher than the actual bid prices from the April 2006 bid. One reasonable explanation for this difference was the presence of a second bidder due to the project being bid with alternate pavements (concrete and asphalt). The third column of numbers projects a cost savings as the result of the lower bid prices for the project let in April 2006. This project was ultimately awarded for $56,917,016. A potential savings of $531,862 was realized.

TABLE 4. Additional Costs Due to Single Bid

This table shows three projects that were let on 1-65 in Simpson and Warren Counties. The projects let on 8/26/05 and 2/16/07 were bid with asphalt only and were single bid. The project let on 4/28/06 was bid with alternate pavement designs and had 2 bidders. This table shows the potential cost to the Cabinet of not bidding the 2/16/07 project with alternate pavements. The increase in unit price that would be expected due to the change in the asphalt index was $2.77 per ton. However, the actual unit bid prices all exceeded this increase. The cost to the Cabinet is listed in the "Additional Cost" column. The total being $1,733,952.15.