Skip to contentUnited States Department of Transportation - Federal Highway Administration FHWA Home
Federal Highway Administration Research and Technology: Coordinating, Developing, and Delivering Highway Transportation Innovations


FHWA Home > Research > POA > Federal Highway Administration Research Project-For more projects go to: > PMSS Project Details


PMSS Project Details


Project ID:FHWA-PROJ-11-0035
Project Name: Performance-Based Contractor Prequalification as an Alternative to Performance Bonds
Status: Active
Last Name:Bradbury
First Name:Richard
Office: Office of Infrastructure Research and Development
Team:Infrastructure Analysis and Construction Team
Roadmap/Focus area(s): Infrastructure Research and Technology Strategic Plan and Roadmap
Project Description:This study investigates the costs and benefits of performance bonding versus replacing performance bonding, to various degrees, with performance-based contractor prequalification. The scope of the study covers all types of contracts for all types of work that are awarded by State highway agencies. The research involves the collection, organization, and analysis of data and information from State highway agencies, contractors, and sureties. The research product is a recommendation on the cost effectiveness of performance bonds, and if applicable, guidance for State highway agencies that wish to develop and transition to a performance-based contractor prequalification system and recommendations for how such systems can best be implemented.
Start Date: April 27, 2011
End Date: May 1, 2013
Below are the key project objectives:
(1) Document the benefits and cost of the current system of performance bonding in highway construction.
(2) Quantify the benefits of replacing currently required performance bonds on some highway construction projects with a rigorous performance-based contractor prequalification system. 
(3) Provide State highway agencies with guidance on the development and implementation of the prequalification system.
Background Information: National Cooperative Highway Research Program (NCHRP) Synthesis 390, Performance-Based Construction Contractor Prequalification, reported that under the current system of performance bonding, “a contractor with a marginal track record but the same level of financial assets will receive the same bonding capacity, and hence the same opportunity to bid, as another contractor with a record of exemplary performance. This creates a situation in which the agency is subsidizing marginal performance, which in turn reduces the incentive for top performers to continue to superior performance.  Therefore, a contractor prequalification system that directly rewards good past performance and encourages poor performers to improve is needed to rectify this unintended consequence.”
Test Methodology: Data collection and analysis
Expected Benefits:The results of the research under this contract may make a case for replacing performance bonds with contractor prequalification, or in some other way recommend changes to derive greater benefits from using performance bonds or alternate methods of financial assurance.
Deliverables:1. Name: Final report on guidance and recommendation for using replacing performance bonding with performance-based contractor prequalification.
Product Type(s): Research report
Description: Final report based on the annotated outline and detailing the work carried out in Tasks A through G, documenting the entire research and making a strong case, if applicable, for replacing performance bonding with performance-based contractor prequalification.
2. Name: TechBrief – Brief summary of the findings for replacing performance bonding with performance-based contractor prequalification.
Product Type(s): Techbrief
Description: The TechBrief shall include the recommended performance-based contractor prequalification model program and provide guidance for its implementation.
3. Name: PowerPoint Presentation
Product Type(s): Other, Promotional materials
Description: A PowerPoint slideshow will be prepared for presenting the results of this study to the highway agencies.
Keywords: Performance Based Specifications
Data Collection
Subject Areas: Construction