Considering Cost and Time Clarifies the Picture

Written by  John Obr

TxDOT and other DOTs across the country are exploring innovative contracting methods for select transportation projects, which consider factors in addition to “low bid.” Innovative contracting methods can speed project completion, reduce inconvenience to the traveling public, and provide a clearer vision of what’s expected from the contractor.

A+B or Price+Time bidding factors in the time the contractor believes is needed to complete the project, in addition to “low bid.” Road-user costs are considered as well, which is especially important in busy traffic areas where construction delays create congestion impacting motorists and business owners.

A+B bidding isn’t new. TxDOT explored A+B bidding beginning in the mid-1990s with some success, but there is a renewed interest in the value of letting contracts based on cost, along with the additional factors of time and road-user costs.

A+B contracts are let based on a formula that considers the dollar amount of the bid along with construction speed and efficiency. Contractors are then rewarded with incentives for meeting on-time performance measures and compressing timelines. By considering price and time in the bidding process, there is a greater potential for additional efficiencies from the contractors and early project completion.

The benefits of A+B bidding are real, but the opportunities to reap those benefits are limited. For example, projects considered high risk are exceptions to innovative contracting opportunities such as A+B bidding. It also is important to both TxDOT and contractors that project risks be minimized to capitalize on the A+B contracting.

Utah is an example of a state that has embraced A+B bidding, which they refer to as Price+Time contracting. However, Utah reports that only 6.6 percent of all contracts were awarded with time as the deciding factor. Utah cites its $1.6 billion, Interstate 15 Reconstruction project as a Price+Time success story. The project was estimated at five years. The winning bid estimated and completed the project in three years, one year faster than any of the other bidders. By including the time element into the bidding process, Utah was able to quantify the costs of delays and encourage contractor innovation.

Contractors who meet on-time performance measures gain an advantage over those who are not able to complete projects on schedule. Construction impacts to the traveling public are minimized, as well as impacts to nearby businesses. Part of the overall strategy to use innovative contracting procedures is to reduce cost and user delays. Incentives are given for completion prior to the days bid in the contract, whereas disincentives are given for completion after days bid.

After all, time is money, and with A+B bidding, we have a method to assess bids based on important variables in addition to cost.

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