Alternative Contracting Methods
The Federal Highway Administration (FHWA) supports the deployment of Alternative Contracting Methods (ACMs) to accelerate project delivery, encourage the deployment of innovation, and minimize unforeseen delays and cost overruns.
In traditional highway construction contracting (design-bid-build), cost is generally the one criterion that determines the winning bid. As State and local agencies strive to meet customer needs, factors such as quality, delivery time, social and economic impact, safety, public perception, and life-cycle costs have gained in importance. Since the 1990s, the FHWA has been supporting the use of these innovative alternative contracting methods to help achieve these goals.
State-of-the Practice (Operational) ACMs
Additional Operational ACMs
- Additive (or Deductive) Alternate Bidding
- Alternate Pavement Type Bidding (AD/AB)
- Alternative Technical Concepts
- Cost-plus-time (A+B) bidding
- Lane Rental
- Warranties
State-of-the-Art (Experimental) ACMs (under construction)
Background
Use of an ACM represents a holistic shift in transportation project delivery, moving from traditional design-bid-build methods to innovative procurements that focus on achieving project goals better, faster, and smarter while ensuring quality long-lasting infrastructure.
Historically, government contracts are awarded to the lowest responsive and responsible bidder. While bidders aim to offer the lowest price, going too low can result in increased costs later. When a bidder underestimates the scope of work, they may deliver lower-quality work and seek contract changes, leading to delays and cost overruns. On large, complex projects, these impacts can be significant.
Since 1990, FHWA has allowed Federal-aid recipients to test innovative yet competitive contracting techniques that do not always follow standard Title 23 procurement requirements. Agencies have used this flexibility through the years to innovate and test these ACMs to deliver their projects while ensuring procurements remain fair, competitive, and efficient.
Under FHWA's Special Experimental Project No 14 (SEP-14), methods like Indefinite Delivery/Indefinite Quantity (ID/IQ), Construction Manager/General Contractor (CM/GC), and Design-Build (DB) proved to be effective project delivery options and have since been codified in regulation. Other methods, like Progressive Design-Build (PDB), Fixed Price Variable Scope for Design-Bid-Build (FPVS-DBB), and Best Value for Design-Bid-Build (BV-DBB) show promise for future projects.
FHWA's flexible contracting options ensure Federal-aid projects remain competitive, fair, and efficient while giving recipients the tools to choose the best method for each project.