Michigan Department of Transportation Initial Report for Innovative Contracting Practices
"Accepted for Traffic" Incentive
August 2, 2006
Table of Contents
Background & Purpose
Evaluation of the Outcomes
A. Special Provision for "Accepted for Traffic" Incentive from the I-94 Project.
B. Progress Clause from the I-94 Project.
C. Survey Form.
D. Compiled Survey Results.
Contract ID: IM 82022-45684A
MDOT Bid Item No.: 0409-601
Federal Project: IM 0482(127)
Federal Item: KK1359
Project Description: 6.02 miles of reconstruction of mainline and ramps, drainage work, signing, lighting, concrete barrier wall, valley gutter, patching and diamond grinding on I-94 from Pelham Road to Wyoming Avenue with 20 bridge reconstructions in the cities of Dearborn, Allen Park and Detroit, Wayne County, Michigan.
Prime Contractor: Dan's Excavating, Inc.
Purpose & Background:
The purpose of this report is to document the initial results (through the bidding process) of an innovative contracting method used by the Michigan Department of Transportation (MDOT) called an "Accepted for Traffic" Incentive. The concept was developed based on research about innovative contracting practices used by MDOT on other projects and innovative practices used by other states. This particular concept was approved for use on a reconstruction project along I-94 in Wayne County, Michigan by the Michigan Division of the Federal Highway Administration (FHWA) under the provisions of Special Experimental Projects No. 14 (SEP-14). This initial report is a requirement of the SEP-14 work plan, as approved by the FHWA.
In 2004 and 2005, MDOT reconstructed approximately 6.02 miles of I-94 through the cities of Dearborn and Allen Park, on the western approach to the City of Detroit. The scope of work also included the reconstruction and rehabilitation of several bridges throughout the divided freeway corridor. The project was broken into two primary stages between the reconstruction of westbound and eastbound I-94. A minimum of two lanes of traffic in each direction was maintained on the bound not under construction during peak hours and days, with more extensive lane restrictions during non-peak hours and weekends. Temporary crossovers that were constructed during the fall of 2004 were utilized to shift traffic from one roadway to another during staged construction.
This section of I-94 carries approximately 92,000 vehicles per day and is the main link between Detroit Metropolitan Airport and downtown Detroit. It also serves as a major trade corridor, linking industrial and commercial activities across the state and nation with the international border crossings to Canada in Detroit and Port Huron, Michigan. Within the corridor, there are also access points to several tourist destinations, such as the Henry Ford museum, and industrial centers, such as the Ford Motor Company's River Rouge Plant.
The metropolitan Detroit area has become the center of a number of national special events. In July, 2005, the Major League Baseball All Star Game was played at Comerica Park in downtown Detroit. In February, 2006, the National Football League's Super Bowl XL was played at Ford Field in downtown Detroit. These two events, in addition to their related pre-event activities, other regularly scheduled special events, such as the North American International Auto Show, and general tourism industry attention to the area, brought a significant economic boost to the State of Michigan. A safe, reliable and well operating transportation system was essential to the success of these events and the area's ability to attract future events and tourism.
This section of I-94 was already scheduled to be reconstructed, due to its age and poor condition. The upcoming national special events added a sense of urgency to complete the work prior to the events, and in such a way as to not interfere with smooth traffic flow during the events. As such, MDOT considered various ways to expedite the work schedule and ensure that no construction work interrupted the flow of traffic along this corridor between the airport and downtown.
MDOT first considered more traditional methods of expediting construction schedules, but determined that they may not be as effective at achieving the objectives as the "Accepted for Traffic" incentive. A simple expedited schedule, one that defines an early completion date and specifically articulates in the progress clause that the schedule is expedited, was deemed not likely to be effective, as there would be no significant consequences for failure to complete the project on time. Traditional calendar day incentive/disincentives, A+B incentive/disincentives or lane rental type incentive/disincentives were thought to be more effective at expediting the work, however none would guarantee completion for any particular major event. To MDOT staff, it seemed implausible to pay an incentive to the contractor, even if the project was completed in an expedited fashion, if it was completed the day or week after a major special event. In other words, the reasons for the incentive - avoiding negative economic impacts, improving traffic flows and avoiding negative perceptions related to the special events - would not be accurately aligned with the payment of the incentive under traditional techniques.
MDOT researched other innovative contracting practices used across the country and in particular considered the concept of a "No Excuse" incentive, which MDOT piloted on a project along US-127 in Jackson County, Michigan in 2002. The concept of a "No-Excuse" bonus or incentive was based on a method used predominantly by the Florida Department of Transportation (FDOT). The concept provides an "all or nothing" incentive for completing a project by a specified date. This seemed to have promise for the I-94 project, as incentives could be tied to the specific special events of the All Star Game and Super Bowl XL.
With approval from the FHWA in 2004, MDOT developed a special provision for "I-94 Accepted for Traffic Incentive" based on the MDOT US-127 project and FDOT contract language. This special provision was used in combination with the contract progress clause (See Appendices A and B). The special provision and progress clause established incremental "Accepted for Traffic" incentives that were based on user delay costs for the following critical milestones:
|Open to Traffic||"Accepted for Traffic" Incentive|
|July 7, 2005||$2,000,000|
|December 22, 2005||$2,000,000|
The "Accepted for Traffic" Incentive dollar values were mutually exclusive; that is, the contractor's ability to earn the second incentive payment was independent of the whether or not he met the first incentive date. Both incentive dates required completion of reconstruction work in specified stages and all lanes open to traffic.
The first date was set several days before the Major League Baseball All Star Game, and the second date, prior to the Christmas holiday travel period, which was immediately followed by the North American International Auto Show and Super Bowl related events. In both instances, failure to meet the Accepted for Traffic date not only meant the incentive payment would not be made, but also imposed the assessment of daily user delay costs to encourage opening to traffic as soon as possible for the major events should the incentive date not be achieved.
The incentive amounts were determined in large part on the generally accepted practice that the maximum incentive on a project should be no more than 5% of the total construction cost. In this case, the Engineer's estimate was approximately $80,000,000, and so a total incentive of 5% or $4,000,000 was chosen. The amount was divided evenly between the two critical open to traffic dates, as the department viewed both special events to be of equal concern.
Typically, incentive projects have some relationship to estimated daily user delay costs caused by the inconvenience of the construction. While a direct derivation of user delay costs was not used on the I-94 project for this purpose, MDOT did feel that the $2,000,000 incentive for each open to traffic date was justified in relation to the estimated daily user delays. Daily user delays were computed to be in excess of $200,000 per day based on traffic volumes during normal travel days. Peak travel times during special events may result in even higher user delay costs, although there was no specific data on which to rely for this computation. The MDOT further considered the economic impact of the special events for the region, estimated by the regional convention and visitors bureau to be over $400 million. The negative impact on travel avoided by having I-94 fully open to traffic could be justified if having I-94 fully open to traffic resulted in avoidance of even a 1% decrease in economic activity, such as traveler decisions not to attend related events. This reasonable assumption further supports the determination of $4 million of incentives to ensure that the road was open to traffic.
Based on previous research for the US-127 project, MDOT learned that for the "No Excuse" Incentive projects completed in Florida one major concern by Florida contractors and FDOT staff was how to handle legitimate delays due to extra work. MDOT also solicited comments from the Michigan road building industry regarding the draft specifications, and they shared the same concerns. Specifically, it seemed unreasonable to expect the contractor to absorb the impact of a significant change in the amount or type of work after he had set a course to expedite his progress based on the original project work and completion date. However, at the same time, the completion date could not be changed, as it was attached to an event outside the control of the department.
As a result of this feedback from the construction industries in Florida and Michigan, MDOT's specification augmented the Florida specification to allow for consideration of extra work. The special provision and progress clause did not permit the extension of the "Accepted for Traffic" milestones under any circumstances. However, the special provision was written to allow for payment of extra costs to keep the project on schedule to meet the above "Accepted for Traffic" Incentive dates. The extra costs would only be eligible when a controlling item of work was affected by delays, increased quantities, or extra work that the Contractor could demonstrate was beyond their control. These terms were used on the US-127 project and helped allay fears by the construction industry that the department could add extra work in the final days before the "Accepted for Traffic" dates and thereby eliminate the possibility of the contractor being paid the incentive. However, on the US-127 project, there were no instances in which payment for acceleration was required or requested. The same terms were incorporated into the I-94 "Accepted for Traffic" provisions based on the perceived need for them and the absence of problems with their use on US-127.
The special provisions and progress clause were approved in August, 2004. The project was advertised and the bids were received at a special bid letting on September 17, 2004. There were a total of three bidders, two of which were joint ventures. Two of the submitted bids were under the Engineer's estimate (9.55% and 5.65% below) and the third was 2.78% over the Engineer's estimate. In the analysis of the bids, there was no evidence of irregular bids or material unbalancing.
The contract was awarded to the lowest responsive bidder at an amount of $75,638,397.91, which was 9.55% ($7,983,533.91) under the Engineer's estimate of $83,621,931.82. There were no formal complaints or issues regarding the innovative contracting provisions raised by Contractors during the advertising and letting of the contract.
Evaluation of the Outcomes:
Based on the analysis of the bids, there is no evidence that the "Accepted for Traffic" Incentive provisions had any unacceptable affects on the bidding process for the I-94 project. A sufficient number of contractors bid on the project, and all bids were less than or within an acceptable range of the approved Engineer's estimate. There was no evidence of unbalancing or other irregularities in the bid prices. Therefore, it can be concluded that the risk associated with the "Accepted for Traffic" Incentive provisions was not significant enough to dissuade contractors from bidding on the project; nor did contractors feel compelled to build significant extra costs into their bids to account for any risk associated with the "Accepted for Traffic" Incentive.
In addition to analysis of the bids, MDOT developed a five question survey regarding the impact of the "Accepted for Traffic" Incentive provisions on the bidding process in order to obtain more specific feedback from the construction contracting industry. The survey form can be found in Appendix C. The survey was distributed in the spring of 2005 to the low bidder and their primary subcontractor for paving and to the four firms involved in the two unsuccessful bidding joint ventures. A total of 5 responses were received, from everyone except the primary subcontractor of the successful low bidder. The compiled survey results can be found in Appendix D.
All respondents agreed that the "Accepted for Traffic" Incentive caused them to approach the preparation of their bids differently than they would have for a non-expedited type of project. In general, this meant they put more effort into determining their work schedule, labor needs and coordination of subcontractors. In one response, from an unsuccessful bidder, there was a thought that subcontractors increased their quotes to cover the higher risk. Another unsuccessful bidder noted that the incentive was so high that it required the contractor to plan to achieve it, and consequently to lower his bid by the incentive amount so as to bid more competitively. The contractor had to anticipate that the costs associated with accelerating the work will be returned to him during the contract through the incentives, and therefore not treat the incentive as a "bonus".
All respondents indicated that the "Accepted for Traffic" Incentive caused them to approach the preparation of their bids differently than they would have compared to other contracts with more traditional acceleration provisions and incentives. Again, the attention to schedule in the bidding process was a key aspect of how this bidding process differed. The unsuccessful bidders again noted the high risk being placed on the contractor and one of them noted the judgment call that had to be made on whether or not to remove the acceleration cost from their bid in order to be competitive, assuming they would achieve full incentive.
All respondents agreed that the incentive amounts, $2 million for the July 7th open to traffic date and another $2 million for the December 22nd open to traffic date, were sufficient to warrant the effort to accelerate the schedule. One unsuccessful bidder noted that the incentive was too big. With such a high value, he noted that the incentive amount only represents risk to the contractor and not any true incentive. This respondent also felt that the number of bidders was reduced because of the high incentive amount, since this risk level would be a "company killer" for some firms if the incentive was not achieved.
This suggests that this type of incentive favors the larger contractors who can assume more risk in the preparation of their bids. It should be noted again that two of the three bidders were joint ventures. This may have occurred as a result of the high incentive dollar amount and risk associated with the "all or nothing" aspect of the "Accepted for Traffic" Incentive. It would appear that the contractors who formed joint ventures for this bid were trying to spread the risk across more than one prime firm. It should also be noted that both joint ventures were unsuccessful, perhaps indicating a higher degree of uncertainty with being able to deal with the risk associated with the "Accepted for Traffic" Incentive.
In general, the respondents indicated that the specifications for the "Accepted for Traffic" Incentive were clear, and were about as clear as other types of incentive provisions. There was one comment that the definition of "completion of all work" was not clear enough and needed to be more specific, i.e. did it include punch list items, extra work, etc.
Other comments offered by all the respondents pointed more towards the contractors' concerns that the language, while clear, was not fair. The "all or nothing" aspect and the possibility of a last minute change in work, weather conditions or interpretation by the project engineer put the contractor in an unfair position even though he may have put forth adequate effort to accelerate the work in order to substantially meet the open to traffic objectives.
This report has documented the results of the bidding phase of an innovative contracting method used by the Michigan Department of Transportation called an "Accepted for Traffic" Incentive on a reconstruction project along I-94 in Wayne County, Michigan. The concept was developed based on research about innovative contracting practices used on other projects in Michigan and by other states. MDOT prepared specifications which modified a model developed in Florida to include provisions for allowing extra compensation to accelerate work in the event of legitimate extra work from unforeseen conditions without compromising the "Accepted for Traffic" Incentive completion dates. Based on the bidding outcomes and survey information from the bidders, the "Accepted for Traffic" Incentive appears to have achieved the objective of this innovative contracting method within the context of the bidding phase.
This innovative contracting method was selected because it was extremely important for MDOT to meet the critical open to traffic dates and have traffic flowing uninterrupted for the key special events of the Major League Baseball All Star Game and the National Football League's Super Bowl XL. As a result of the "Accepted for Traffic" Incentive provisions, it was clear that all bidders recognized the importance of these dates and spent more time planning their work schedules and resource allocation during the bidding phase, which is a desirable affect from the owner's perspective for a high profile project such as this.
All of the bids were in an acceptable range of the Engineer's estimate, however all contractors uniformly commented that they thought the "Accepted for Traffic" Incentive provisions were unfair to the contractor by placing so much risk for last minute changes in work, weather or the engineer's interpretation that would negate the incentive that they planned to achieve. This was perceived to be a very high degree of risk for the contractors, although apparently not so high that they were unwilling to bid on the project.
It appeared that the contractors managed this high degree of risk by intentionally planning to meet the open to traffic dates so as to achieve the full incentive amounts. They then reduced their bid amounts by this incentive amount so as to bid more competitively on the project. This is generally an unconventional approach to bidding highway construction projects. From the owner's perspective, though, this is not necessarily a negative outcome, as the key objective of being open to traffic for the special events becomes paramount to the contractor, as his planned schedule and cost structure is geared to meeting the specified open to traffic dates. However, the bid prices do not truly reflect the cost of the work in this scenario. Only the final contract cost with the incentives paid would reflect the true costs.
It also appeared that only one bidder was either a large enough company or comfortable enough to shoulder that entire risk by himself. The other two bidders, both unsuccessful, were joint ventures, presumably formed to be able to spread the risk across the assets of two companies. If used on a regular basis, the "Accepted for Traffic" Incentive could have a long term negative affect on the industry as a whole. It would not be in the public's best interest to effectively exclude viable contractors of smaller size from construction work due to the high risk associated with this type of incentive. Therefore, such an incentive should probably be used only in select situations where the public interest relative to the economic impact associated with special events or key open to traffic dates is high enough to outweigh the tendency this contracting method has to favor larger contractors capable of assuming higher degrees of financial risk.
A final report will be issued in the near future which will include the information contained herein as well as analysis of the actual project schedule and project costs and feedback from the contractor and project engineer on project execution and administration with the "Accepted for Traffic" Incentive provisions.
P.E. Michigan Department of Transportation
Deputy Region Engineer - Metro Region
Appendix A. Special Provision for "Accepted for Traffic" Incentive from the I-94 Project.
Michigan Department of Transportation Bureau of Highways
Special Provision for I-94 Accepted for Traffic Incentive
Metro: WRE 1 of 4 08/06/04
a. Description. The Department will pay the Contractor a Lump Sum Incentive if the work in the contract is Accepted for Traffic on or before the Accepted For Traffic Incentive Dates specified in the contract progress clause and subject to the conditions set forth below.
"Accepted for Traffic" for the July 7, 2005 Incentive Date shall mean completing all contract work required for Stage 3/ 3a, making both eastbound and westbound I-94 suitable for three lanes of traffic, and providing all access required by the plans and Maintaining Traffic Special Provision for the period from July 8, 2005 to July 13, 2005 (Stage 4).
"Accepted for Traffic" for the December 22, 2005 Incentive Date shall mean completing all contract work with the exception of landscaping, Stage 5/ 5a/ 6 slope restoration, and Stage 5/ 5a/ 6 permanent pavement markings, and making all lanes and shoulders (including ramps and affected local roads), suitable for use by traffic.
The Accepted for Traffic Incentive Dates indicated in the contract progress clause will not be adjusted for any reason, cause, or circumstance whatsoever, regardless of fault, save and except in the instance of a catastrophic event (i.e., natural disaster or a declared state of emergency).
The parties anticipate that delays may be caused by or arise from any number of events during the course of the contract. These include, but are not limited to, work performed, work deleted, change orders, supplemental agreements, delays, disruptions, differing site conditions, utility conflicts, design changes or defects, time extensions, Extra Work, right of way issues, permitting issues, actions of Suppliers, Subcontractors or other Contractors, actions by third parties, shop drawing approval process delays, expansion of the physical limits of the project to make it functional, weather, weekends, holidays, suspension of the Contractor's operations, or other such events, forces or factors sometimes experienced in highway construction work.
Such delays or events and their potential impacts on performance by the Contractor are specifically contemplated and acknowledged by the parties entering into this Contract, and shall not be grounds for extending the Accepted for Traffic Incentive Dates indicated in the contract progress clause.
Extensions of Time for impacts to the contract and the contract completion date will be allowed per Subsection 108.09 of the 2003 Standard Specifications for Construction, but no extensions will be allowed for the Accepted for Traffic Incentive Dates indicated in the contract progress clause.
Additional compensation for costs incurred by the Contractor required to keep the project on schedule to meet the Accepted for Traffic Incentive Dates may be allowed for schedule delays, increased quantities, and Extra Work subject to the following conditions. For the purpose of the following, the term "Major Item of Work" shall be as defined in Subsection 101.03 of the 2003 Standard Specifications for Construction.
Cost Increases due to Schedule Delays
Cost increases due to schedule delays will be considered if the delays relate to a Major Item of Work, affect completion of the controlling operation as defined in the Contractor's approved Critical Path valid at the time of the delay, the delays are not the fault of the Contractor, the increased costs are necessary to meet the Accepted for Traffic Incentive Dates in the progress clause, and one or more of the following conditions are met:
- Right-of-way or right-of-entry required to perform the controlling operation was not available when stipulated in accordance with the contract provisions.
- Utilities were not moved as indicated in the contract documents and the presence of these utilities created a delay in the controlling operation.
- Other related contracts were not completed to a point where construction on the controlling operation could proceed
- Suspension of the work ordered by the Engineer for reasons not provided for in the contract.
The Contractor must also fully justify the additional costs required to keep the project on schedule without any adjustment in the Accepted for Traffic Incentive Dates. Only actual direct costs above those which would be necessary to complete the work will be considered. Examples of such actual direct cost increases include but are not limited to, concurrent work operations, additional personnel, additional work shifts, overtime, and 24 hour work days.
These cost increases must also be fully justified by the Contractor and approved by the Engineer prior to performing the work involving the delay. No cost increase will be allowed for overhead. Failure of the Contractor to meet any of the above requirements and provide the required justification, will result in no payment being made for additional costs incurred to keep the project on schedule because of the alleged delay.
Cost Increases for Increased Quantities
Cost adjustments for quantity increases required to meet the Accepted for Traffic Incentive Dates will be considered if the increases are to a Major Item of Work, the increase affects completion of the Contractor's controlling operation(s) as defined in the Contractor's approved Critical Path valid at the time the quantity increase occurs, the quantity increase is required to meet the Accepted for Traffic Incentive Date(s), and the quantity increase qualifies as a Significant Change as defined in Subsection 103.02 B of the 2003 Standard Specifications.
The Contractor must demonstrate that the quantity increase meets the Significant Change criteria as it relates to the controlling operation. The Contractor must also fully justify the adjusted unit price due to the quantity increase relative to keeping the project on schedule without any change in the Accepted for Traffic Incentive Date (s). Only actual direct costs above that which would be necessary to complete the work will be considered. Examples of such actual direct costs include, but are not limited to, concurrent operations, additional personnel, additional shifts, overtime, and 24-hour work days.
These cost adjustments must be fully justified by the Contractor and approved by the Engineer prior to performing the work involving the quantity increase. No cost adjustment will be allowed for overhead. Failure of the Contractor to meet these requirements and provide the justification as stated herein will result in no additional payment of any cost adjustment related to increased quantities to meet the Accepted for Traffic Incentive dates.
Cost Increases for Extra Work
Extra Work shall be as defined in Subsection 101.03 of the 2003 Standard Specifications for Construction. Cost increases for Extra Work will be allowed if the Extra Work is required to complete a Major Item of Work, the Major Item of Work is shown to affect the controlling operation as defined in the Contractor's approved Critical Path valid at the time the Extra Work is to be done, and the Extra Work is required to meet the Accepted for Traffic Incentive Date (s) shown in the progress clause.
The Contractor must bear the burden to fully justify the cost of any Extra Work prior to performing the Extra Work, including additional cost relative to keeping the project on schedule without any adjustment in the Accepted for Traffic Incentive Date(s). Examples of additional costs for Extra Work that will be considered are costs for concurrent operations, additional equipment, additional personnel, additional shifts, overtime, longer work days, longer work weeks, or any other means that affect the Extra Work unit price.
Failure to provide the Engineer with justification for the additional costs of Extra Work, and failure to reach agreement on the price for the Extra Work prior to undertaking the Extra Work, will result in the Contractor being paid for the Extra Work by force account. If the Contractor is being paid for by force account, the Contractor will not receive any payment for additional costs to keep the project on schedule because of the Extra Work.
As conditions precedent to the Contractor's entitlement to any Accepted for Traffic Incentive, the Contractor must make the project "Accepted for Traffic" and open the project to traffic in accordance with the contract provisions on or before the Accepted for Traffic Incentive Dates in the progress clause. "Accepted for Traffic" will be as determined by the Engineer in accordance with the Standard Specifications and this document, and the Contractor shall obtain approval from the Engineer before the project can be considered "Accepted for Traffic."
The determination regarding whether or not the Contractor meets the Accepted for Traffic Incentive Dates will be made separately for each of the two dates provided in the contract progress clause. The Contractor is eligible for an incentive payment for making the project "Accepted for Traffic" on or before either of the two Accepted for Traffic dates in the contract progress clause.
The Contractor shall have no right to any payment whatsoever under this Special Provision, if the Accepted for Traffic dates in the contract progress clause are not met.
Should this provision conflict with any other provision of the contract, the contract shall be interpreted in accordance with this provision.
b. Measurement and Payment. The Contractor shall be paid an Accepted for Traffic Incentive for making the project "Accepted for Traffic" as described in the second and third paragraphs of this special provision, by the dates indicated in the contract progress clause. These incentives will be paid using the followingcontract items (pay items).
|Contract Item (Pay Item)||Pay Unit|
|Accepted for Traffic Incentive (July 7, 2005)||Dlrs|
|Accepted for Traffic Incentive (December 22, 2005)||Dlrs|
Appendix B. Progress Clause from the I-94 Project.
Progress Clause: Start work within five (5) calendar days after receiving Notice of Award, or on the date agreed upon with the Engineer. In no case, shall any work be commenced prior to receipt of formal notice of award by the department.
This project is on an expedited schedule. The Contractor is expected to mobilize sufficient personnel and equipment and to work the required overtime to maintain the expedited schedule. It is anticipated that seven day work weeks will likely be required during the life of this contract, and that work during the winter months will be necessary to meet the project schedule.
There will be no seasonal suspension of work activities during the winter. The Contractor is responsible for all means to protect the work from the weather, and for all costs associated with cold weather construction. All costs of cold weather construction and complying with the requirements of the 2003 Standard Specifications for Construction for working during cold weather and on wet and frozen ground, shall be included in the Contractor's bid for the applicable items of work.
Additionally, the Contractor shall be required to continually monitor the in-place concrete temperatures in the field throughout curing to ensure the concrete does not freeze and achieves adequate strength gain.
Contract work shall be completed according to the following schedule:
1-The project shall be "Accepted for Traffic" as defined in the Special Provision for I-94 Accepted for Traffic Incentive, by July 7, 2005.
2- Slope Restoration associated with Stage 3/ 3a shall be completed by July 7, 2005.
3-The project shall be "Accepted for Traffic" as defined in the Special Provision for I-94 Accepted for Traffic Incentive, by December 22, 2005.
4- Stage 5/ 5a/ 6 slope restoration and Stage 5/ 5a/ 6 permanent pavement markings shall be completed by May 15, 2006.
5- Landscaping shall not begin until 2006, and shall be completed by September 19, 2007.
6- The entire contract shall be completed by September 19, 2007.
Failure to complete the work specified in number 1 above by the July 7, 2005 will result in the assessment of user delay costs of $100,000 per day from July 8, 2005 to July 13, 2005, inclusive. Failure to complete the work specified in number 3 above by December 22, 2005 will result in the Contractor being assessed user delay costs of $20,000 per day until the work is completed.
Failure to complete the work specified in numbers 2, 4, 5, and 6 above by the dates indicated, will result in the assessment of liquidated damages in accordance with subsection 108.11 of the 2003 Standard Specifications for Construction.
Additionally, the Department will pay the Contractor a lump sum incentive in the amount of $2,000,000.00 if the Contractor makes the project "Accepted for Traffic" as defined in the I-94 Accepted for Traffic Incentive Special Provision, on or before the July 7, 2005 Accepted for Traffic date.
The Department will also pay the Contractor a lump sum incentive in the amount of $2,000,000.00 if the Contractor makes the project "Accepted for Traffic" as defined in the I-94 Accepted for Traffic Incentive Special Provision, on or before the December 22, 2005 Accepted for Traffic date.
Additionally, the Contractor must take two mandatory safety breaks in 2005, each two days in duration. The dates for these breaks shall be agreed on with the Engineer and shown on the Contractor's Critical Path Network.
During the Easter (4/8/05- 4/10/05), Thanksgiving (11/23/05- 11/27/05), and Christmas (12/22/05- 12/26/05) holidays, no additional lane closures (other than permanent lane closures already in place for staging) are allowed and the Contractor's work operation shall not interfere with the through movement of traffic.
The following provisions also apply to this contract:
1-The low bidder (s) for the work covered by this proposal will be required to meet with Department representatives to work out a detailed progress schedule. The Region Engineer will arrange the time and place for the meeting. The named subcontractors for Designated and/ or Specialty Items, as shown in the proposal, are recommended to be at the scheduled meeting if such items materially affect the work schedule.
2-The progress schedule shall be in accordance with the applicable contract provisions. The two Accepted for Traffic dates contained in this progress clause shall be shown, as well as the contract completion date.
3- The low bidder (s) will be required to submit a Critical Path Method (CPM) network schedule to the Engineer for approval prior to beginning work. The Critical Path shall meet the requirements of the Special Provision for Critical Path Network Schedule (03P102C).
4- All local noise and dust ordinances shall apply to this project.
Appendix C. Survey Form.
"Accepted For Traffic" Incentive Questionnaire
|Date:||March 10, 2005|
|Contract ID:||IM 82022-45684A|
|MDOT Item No.:||0409-601|
|Project Description:||6.02 miles of reconstruction of mainline and ramps, drainage work, signing, lighting, concrete barrier wall, valley gutter, patching and diamond grinding on I-94 from Pelham Road to Wyoming Avenue with 20 bridge reconstructions in the cities of Dearborn, Allen Park and Detroit, Wayne County, Michigan.|
|Prime Contractor:||Dan's Excavating, Inc.|
|Owner Agency:||Michigan Department of Transportation|
|Project Engineer:||Brian Scharboneau, P.E., Delivery Engineer - Taylor TSC|
The purpose of this questionnaire is to evaluate the effectiveness of the "Accepted for Traffic" incentive provisions used to accelerate the progress of the subject highway construction project. The results may be shared with other transportation agencies or used to improve the concept of "Accepted for Traffic" incentives for future applications. Thank you for your time in providing this valuable feedback.
Completed by: Name: (optional)
1. a. Did the concept of the "Accepted for Traffic" incentive provision cause you as a bidder to approach the preparation of your bid differently than for a normal (non-expedited) construction schedule? ( Y / N )
b. If Yes, what difference in approach did you take?
2. a. Did the concept of the "Accepted for Traffic" incentive provision cause you as a bidder to approach the preparation of your bid differently than for other typical accelerated construction schedules with incentives? ( Y / N )
b. If Yes, what difference in approach did you take?
3. Were the incentive amounts sufficient to warrant an effort to accelerate the schedule to achieve the "Accepted for Traffic" dates? ( Y / N ) If No, please explain.
4 a. Were the specifications for the "Accepted for Traffic" incentive sufficiently clear to prepare your bid? ( Y / N ) If No, please explain.
b. How would you rate the clarity of the "Accepted for Traffic" incentive provisions to your experience with other incentive/disincentive provisions? (Please circle your ratings below.)
|Traditional Calendar Day I/D||More Clear||Same||Less Clear|
|A+B Calendar Day||More Clear||Same||Less Clear|
|Lane Rental||More Clear||Same||Less Clear|
5. Are there any other thoughts you have on the positive or negative aspects of the "Accepted for Traffic" incentive provisions (including the Progress Clause) as it relates to the bidding of the subject project?
Appendix D. Compiled Survey Results.
|Survey Questions:||Successful Low Bidder Response||Unsuccessful Bidder 1 Joint Venture Contractor 1 Response||Unsuccessful Bidder 1 Joint Venture Contractor 2 Response||Unsuccessful Bidder 2 Joint Venture Contractor 1 Response||Unsuccessful Bidder 2 Joint Venture Contractor 2 Response|
|1. a)||Did the concept of the "Accepted for Traffic" incentive provision cause you as a bidder to approach the preparation of your bid differently than for a normal (non-expedited) construction schedule? Y / N||Yes.||Yes||Yes||Yes||Yes|
|1. b)||If Yes, what difference in approach did you take?||"Accepted for Traffic" incentive provision requires more pre-bid schedule coordination than normal (non-expedited) construction projects.||Schedule Review, Increase in Work force or overtime needs||We prepared a detailed construction schedule and spent more time prior to the bid with our sub-contractors to make sure all bidders had a complete scope and understanding of the work and time allowed to perform the work.||This was basically a NO Excuse type of clause. There are too many unknowns and items not in the control of the contractor. This is a high risk clause depending on the amount of money involved. If things go wrong on a project through no fault of the contractor, a company could go bankrupt. With the incentive amount of $2 million for each date, we had to insure we met the accepted for traffic date and I think our subcontractors added money to t heir quotes making us noncompetitive in the bid.||You have to decide whether to take the incentive out of your cost. Because it is all or nothing and the disincentives are high, you almost have to take the incentive. This now means you have to get because the money is out of cost It is not a "Bonus" as many think|
|2. a)||Did the concept of the "Accepted for Traffic" incentive provision cause you as a bidder to approach the preparation of your bid differently than for other typical accelerated construction schedules with incentives? Y / N||Yes.||Yes||Yes||Yes||Yes|
|2. b)||If Yes, what difference in approach did you take?||Pre-bid CPM schedules were developed to assist our team in determining that the "Accepted for Traffic" dates required by the contract were attainable.||Same||It is impossible to allow in our bid, the lost of delays beyond the contractors' control. With the "No Excuses" clause in the special provisions the contractor is taking risk beyond its control||On this job, with such large disincentive the schedule must be met. Since the schedule has to be met, the incentive will be earned. If you know you will earn the incentive, then you have to make a judgment to keep the money in the bid or take the money out of the bid in order to stay competitive. This concept favors the largest contractors as they can shoulder more risk.||Because this is all or nothing, it is not paid by the day. You are taking a large amount out of your bid.|
|3. a)||Were the incentive amounts sufficient to warrant an effort to accelerate the schedule to achieve the "Accepted for Traffic" dates? Y / N||Yes.||Yes||Yes||Yes|
|If No, please explain.||NA||The incentive money was way too high. If the contractor decides to remove the money from the bid to stay competitive, then the value of the incentive money only represents risk and not any true incentive. The number of bidders was reduced because the incentive amounts were so large and bidders knew the money had to come out of their bids, thus making the bid a potential company killer if the incentives were not achieved irregardless of who was at fault.|
|4. a)||Were the specifications for the "Accepted for Traffic" incentive sufficiently clear to prepare your bid? Y / N||Yes.||See comments at end of questionnaire.||No||Yes||No|
|In No, please explain.||The Special Provisions state "completing all contract work with the exception of landscaping. This language leaves a lot of discretion of contract work. Does this mean final acceptance including punch list. Delays or changes, extra work?||We did not have any problem understanding the provision where as we often have problems with others.||The problem is because it is all or nothing. An inspector, engineer could make 1 minor thing mean job not accepted to pay incentive.|
|4. b)||How would you rate the clarity of the "Accepted for Traffic" incentive provisions to your experience with other incentive/disincentive provisions?|
|Traditional Calendar Day I/D||Same.||More Clear Same||Less Clear||Same|
|A+B Calendar Day Incentive||Same.||More Clear Same||Less Clear||Same|
|Lane Rental||More Clear.||More Clear Same||Less Clear||More Clear|
|5.||Are there any other thoughts you have on the positive or negative aspects of the "Accepted for Traffic" incentive provisions (including the Progress Clause) as it relates to the bidding of the subject project?||We feel that the simple requirement of the full width opening of a specified number of traffic lanes per roadway direction, with allowable minimums of lanes required for traffic maintenance during construction, is less confusing than lane rental provisions. We feel that the A+B Calendar Day incentive provisions are fairer to the contractor than the drop dead dates for incentive. Missing a drop dead date by a matter of hours due to last minute inclement weather (that won't allow for pavement markings for example), after the contractor has expended his resources is patently unfair.||3 Page 2 of 4-3rd paragraph, 2nd line should have the work "may" changed to "will". May is not definite. Page 2 of 4, 1st paragraph of Cost Increases due to Schedule Delays the word "or" needs to be placed after "Major Item of Work". Based on the definition of Major item of Work, a controlling operation of the critical path is not necessarily a major item of work. The word "or" needs to be placed between each of the parameters establishing the justification. In the 4th paragraph of the same section, prior justification and approval must be granted. This requirement is not reasonable or possible on highly expedited schedules; the MDOT process does not provide for this to happen. Notification of intent and ongoing discussion to agreement should be a requirement on both parties. Page 3 of 4 -Cost Increases for Increased Quantities, 1st paragraph, Non-major items of work have had quantities been in place within the original proposal. The definition of major item needs to incorporate those items that meet the definition based on final quantities. Third paragraph, the requirement for approval and justification prior to performing of work does not equate to the terms expedited or accelerated. See previous comment.||This no excuse language requires the contractor to add cost to their bid to allow for factors that would not normally be added. There is a great potential for disputes between the department and contractors of what is final acceptance. When the contractor says or when the department formally accepts. When $2 million dollars are at stake based on one calendar day, it creates disputes.||An incentive of $500,000 per stage would have been more than adequate for this schedule. The majority of contracts of this size seem to be tailored to a select few contractors, and therefore these contractors control the majority of the MDOT budget in the highway market. In general we believe the No Excuse provisions are unfair and cost MDOT far more than it realizes due to reduced competition.||With all or nothing incentive, one minor thing that has no impact could mean no incentive. Punch list work for example. Rocks on grade, bolts loose, anything like that could lead to disagreements which is not the intent of the spec. The intent is to get the job open for the public. I don't like this type of incentive for this reason.|