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Chapter 4.1

Modify Risk Transfer Approaches


Summary

Though it uses outside contractors to build Texas roads, the Texas Department of Transportation (TxDOT) is ultimately responsible for the quality of those roads. Currently, TxDOT’s bidding process does not allow the agency to consider a contractor’s past performance in awarding the contract, and they only require contractors to have a performance bond through completion of the work. TxDOT performance bonds do not apply after completion of the work, although that is the case in many states. It is important that TxDOT be both able to consider past performance, and to require in certain cases that contractors provide warranty coverage after completion of the project.


Background

Traditionally, the state transportation department is responsible for quality control in highway construction. This means that the transportation department identifies and assures that defects are eliminated in materials and contractors’ workmanship. To ensure that construction meets quality standards, state departments of transportation such as TxDOT provide detailed quality control oversight, including onsite inspection and materials testing, and oversight of all work performed by contractors. The TxDOT requirements include that the work will be “observed, tested and inspected by the Engineer” and the Engineer will decide all questions relating to “quality and acceptability of materials furnished and work performed.” Under inspection requirements, the requirements also state that “No work shall be done nor materials used without suitable supervision or inspection.”[1] Performing this level of quality control requires considerable TxDOT resources.

Texas’ procurement rules have fostered this approach. The procurement statutes require low-bid awards for construction projects with less emphasis on contractor qualifications and capabilities. Texas Transportation Code Chapter 223 relates to bids and contracts for highway projects; section 223.001 specifies competitive bids will be used for contracts that improve a highway or materials used in the construction and maintenance of highways. In the most recent legislative session, these competitive statutes were reorganized but this did not change the fact that TxDOT has been required to award to the lowest bidder since 1925.[2] As a result, TxDOT procedures for construction contracts do not allow a contractor’s past or present performance to be used as selection criteria. These rules and procedures emphasize the need for quality control by TxDOT. Using this traditional approach, any increase in construction requires a proportional and significant increase in inspection activity.

Alternatives to this approach can assure quality without a direct increase in inspection hours. These alternatives allow departments of transportation (DOTs) to manage increasing workloads with fewer staff; contractors are given more control over materials and workmanship at the same time they are held responsible for delivering a product that meets agency standards. The role of the owner (the DOT) becomes a quality assurance check along with the power to impose penalties and disincentives on the contractor if standards are not met.[3] TxDOT is now starting to make changes to shift responsibility for quality control to the contractor and suppliers.

Historically at TxDOT many of the materials testing programs included direct sampling and testing of the work performed by the contractor on-site at the project or at a supplier’s plant for control of the construction job. These programs are now shifting to sampling and testing by the supplier or contractor and reduced sampling and testing by TxDOT. TxDOT employees are moving their efforts to monitoring techniques and programs where particular material suppliers go through a certification process that is periodically updated independent of a particular construction project. For example, in 1993 the Construction Division testing employees sampled every lot of pavement markers at the suppliers’ warehouses and shipped the samples to Austin for testing. Now the only step is quality monitoring by sampling at the suppliers’ warehouses at a reduced rate. In addition, TxDOT streamlined the actual test method, reducing the number of employees needed to perform the process from three to one.[4]

These changes, which shift responsibility to the contractors and suppliers, have helped TxDOT manage its oversight of construction projects with limited resources. Long-term warranties and pre-qualification of bidders are two additional methods to manage oversight of projects.


Warranties

A warranty is an assurance that a product will serve its useful life and that if it does not, the provider will replace the product or pay to return it to its proper condition. For almost all government-funded projects, including highway construction, the only form of protection is the performance bond. This bond provides assurance that the materials and workmanship of the contractor will be good during the project and often up to one year after project completion and acceptance.[5] If the materials and/or workmanship fail to meet the requirements and the contractor does not make appropriate corrections, the insurance company that issued the bond is required to take whatever actions are necessary to make the required repairs. In contrast, since a construction contract warranty may cover up to the useful life, it may cover materials and workmanship for one to 20 years depending on the project.

The use of warranties in highway construction has met significant resistance in the United States from contractors and, initially, insurance companies and transportation departments. When discussing the use of warranties, contractors express concerns about the ability of small firms to obtain the necessary coverage and, therefore, compete effectively. The contracting community has also opposed widespread implementation of warranties based on increased risks and the costs for warranty bonds. Insurance companies were initially resistant to the idea of warranties primarily due to concerns about determining the long-term viability of the entities they are insuring. However, as the demand for warranties has increased the insurance companies have been willing to write the policies.[6] It is important to have a surety bond or other guarantee to back-up the warranty in the case where the contractor fails to perform or is no longer in business.

Historically, federal highway policies took the position that guarantees or warranties were not eligible for federal reimbursement as capital costs, based on the opinion that guarantees or warranties were part of maintenance rather than construction. The lack of funding resulting from this policy inhibited the use of warranties. However, in 1996 the Federal Highway Administration (FHWA) published a Warranty Final Rule indicating that warranty provisions for a specific construction product or feature are eligible for federal reimbursement. The rule excludes routine maintenance items and prohibits the use of warranties for items not within the control of contractors.[7]

Although the US has been slow to adopt widespread use of warranties, a 1998 report states that warranties and turnkey contracting are being tested in some form by almost half of the state DOTs as a means of insuring schedule and cost control.[8] Further, a FHWA technical publication in 1997 reports positive benefits for the use of warranties especially for certain hot-mix asphalt pavements and other products where the contractor has sufficient control of the quality.[9]

In Texas, state law specifies that performance bonds are conditioned on the faithful performance of the work in accordance with the plans, specifications, and contract documents.[10] Therefore, no warranty provisions are included in department performance bonds and once TxDOT accepts the work, the contractor has no further obligations.[11]

The use of warranties by TxDOT to date has included material warranties for striping and reflective sheeting and for mechanical and electronic equipment, as well as for microsurfacing and in-place rehabilitation of flexible pavement.[12] The Texas Turnpike Authority Division of TxDOT (TTA) in their April 2000 Request for Qualifications for exclusive developer agreement contracts on the State Highway 130 Turnpike has stated they may require the developer to “warrant the workmanship or performance of the Project and/or to maintain and preserve Project assets for a specified period of years.”[13]

TxDOT staff has expressed concerns on using warranties believing it might be difficult to develop and enforce warranty contract provisions over long periods of time. The department understandably wishes to avoid lengthy and costly litigation over warranties.[14]


Benefits of Warranties

The notion behind warranties is that they motivate the contractor to do a better job if they have an ongoing responsibility for the quality of the work. The contractor is motivated because he or she does not want to incur the expense of correcting problems during the warranty period.[15]

The major potential benefit of warranties for owners is higher quality with lower costs over the life of the product (life-cycle cost). Warranties also lower the owner’s risk by providing assurance that the contractor will correct early failures from material or workmanship that may have escaped notice during construction. Warranties also induce a higher concern for quality by contractors, designers and suppliers of transportation facilities and systems. When warranties are used in association with performance-related specifications, they provide the contractor with the incentive to pursue more innovative technologies and methods for highway projects, leading to economic benefits for all parties involved in the highway construction process.[16] However, TxDOT experience indicates that not all contractors are ready to try new methods, some choosing to rely on traditional methods.[17]

While not routinely used by DOTs in the United States, the use of long-term warranties is a common practice in Europe and has been based on providing an end result.[18] Warranties may have a higher initial cost, because contractors may increase their initial bids to include contingency funds for correcting problems during the warranty period. However, warranties may result in lower life-cycle costs than those of traditionally contracted projects because there is an improvement in the quality of the initial project. Some industry experts believe that in practice, even the initial cost of a warranted contract is comparable to that of a non-warranted contract, allowing the DOT to obtain a warranty at no additional cost.[19]


Criteria for warranties

Because warranties shift some of the responsibility from the governmental entity to the contractor, the contractor must have sufficient control over materials and workmanship in order to assure that all contract performance requirements are met. In order to hold the contractor accountable, the DOT must clearly define the contractor’s design and construction responsibilities and the monitoring procedures and standards to be used during the warranty period.[20] Since warranties do not replace quality control, appropriate quality control processes must still be in place for warrantied projects.

While long-term warranties are not appropriate for every contract, four criteria can be used to determine appropriate opportunities for their use:

  • Projects or work items have material and workmanship performance attributes or failure thresholds that can be explicitly defined in the specification and measured in the field. For example, predetermined stress values can be measured on pavement during yearly inspections to determine what repairs if any are necessary.
  • Factors not under the contractor’s control will have minimal effect on the work during the warranty period or can be distinguished from the warranted work. For example, a maintenance guarantee for bridge painting is not applicable to rusting areas where the steel was not painted under the warranted contract.
  • Insurance companies are available to offer long-term warranty bonds to a sufficient number of qualified bidders.
  • There are opportunities to develop and incorporate innovative technologies in materials, equipment, and construction processes. One such example would be using special polymers in pavement material to reduce wear. This approach emphasizes specifications based on performance rather than materials used.

The types of projects that frequently meet these criteria include high-volume-restricted access highways (interstate, tollroads), bridges (decks, painting, expansion dams), and asphalt pavement.[21]


Current use in the U.S.

Use of warranties in the United States is still developing, pioneered by states such as California, Missouri, Michigan, and Washington. Some of the original proposals accepted in 1991 for use of warranties included Michigan DOT for a 2-year warranty on bridge painting contracts and Missouri DOT for a 3-year warranty for asphalt rubber concrete pavement.[22] (See Exhibit I for further examples of warranty use by DOTs.)

Exhibit I

Highway Use of Warranties

Product
Range of Warranties
States
Asphaltic Concrete / Rubberized Asphalt
3-8 Years
AL, CA, CO, FL, IN, ME, MI, MO, OH, NW, WI
Asphaltic Crack Treatment
2 year
MI
Portland Cement Concrete Pavement
5 years
WI, MI
Bridge Components
5-10 years
WA, ME
Bridge Painting
2-10 years
IN, MA, ME, MI, NH
Chip Sealing
1-2 years
CA, MI
Intelligent Transportation System Buildings
2-3 years
VA, NC
Landscaping, Irrigation
1 year
WY
Microsurfacing
2 years
CO, MI, NV, OH
Pavement Marking
2-6 years
FL, MT, OR, PA, UT, WV
Roofing
10 years
HI

Source: October 1998 AASHTO Contracting 2000; (www.aashto.org/info/primer/primer_1-18.html).

Agencies Using Warranties

State DOT
Products
Range of Warranties
California
Rubberized Asphalt Chip Seal
1 year

Rehabilitation using rubberized asphalt Projects let in 1993
2 projects; 3 and 5 years
Colorado
Microsurfacing
3 projects; 1 year
Indiana
Pavement Rehabilitation:Initial project let during 1996, additional 8 in 1998
1 project; 5 yearsplus 8 projects
Maine
(1) Bridge Deck Joints, Waterproofing membrane(2) Bearings, Paint, Signs, Luminaries, Pavement, Concrete surface, box girder, pier protection
Design/Build: (1) 10 years, (2) 5 years
Michigan
Bridge Painting:Began using warranties on state-funded bridge painting contracts in 1990 and on a select number of Federal-aid projects under SEP-14 beginning in 1991.
25 projects; 2 years

Concrete pavement repair SEP-14,both projects let in 1992.
2 projects; 2 years
Missouri
Rehabilitation using rubberized asphaltSEP-14 projects let 1991, 1992
5 years
Montana
Pavement marking Projects let in 1992, 1995.
2 projects; 4 years
Nevada
Microsurfacing
2 years

Resurfacing using rubberized asphalt
5 years
New Hampshire
Bridge painting
2 years
New Mexico
(1) Structures(2) Pavement
(1) 10 years (2) 20 years
North Carolina
Epoxy pavement marking
4 years
Utah
(1) Entire project(2) Optional long-term: Pavement, Structures, Slope, Embankment Stability, Drainage facilities
Design-build contract(1) 1 year (2) 5 years + up to 5 years

Agencies Using Warranties (continued)

State DOT
Products
Range of Warranties
Virginia
(1) Entire Project(2) Toll equipment and software
Design-Build Contract(1) 5 years (2) 2 years
Washington
Installation of bridge expansion joints
Initial SEP-14 project let in 1991.
2 projects; 5 years
Wisconsin
HMA paving Awarded in 1995 construction season.
3 projects; 5 years

Sources: October 1998 AASHTO Contracting 2000; (www.aashto.org/info/primer/primer_1-18.html)and Nossaman, Guthner, Knox & Elliott, LLP, Highway Warranties.

Warranties to date have typically been for one to five years, striking a balance between the costs saved in maintenance and problem correction with the extra cost of the warrantied contract. Reports from a number of states indicate that warranties have a positive effect on the work that contractors perform, but if the contractor is unfamiliar with procedures in the construction of the project problems may arise.[23] Problems relating to a new approach to completing the work will decline as the construction industry becomes more familiar with warranties. As contractors and DOTs gain more experience with warranties, the length of the warranties may be extended as well. (Some warranties are for as long as 20 years, as in the New Mexico example below.)

FHWA reasoned that highway warranties could help prevent unnecessary maintenance and repair costs resulting from poor construction methods or poor quality materials. The use of highway warranties could also enable states to try new products that do not yet have an adequate performance record, since the contractor would bear the risk of failure of the product during the warranty period.[24]

Three examples of the more recent warranty provisions were included in design-build contracts: Maine DOT in 1997 for the Bath-Woolwich Bridge with both five and ten-year warranty items; Utah’s one-year full warranty plus the option for a long-term warranty up to ten years, and in 1998, Virginia DOT for a tollway crossing contracted to assure the project is free of defects for five years.[25]

One of the most high profile warranty projects is the 1998 contract between the New Mexico State Highway and Transportation Department and Koch Materials. It extends for 20 years after the final segment of the $295 million Corridor 44 project is completed in November 2001 by Koch’s subcontractors CH2M Hill Inc and Flatiron Structures. In this contract Koch assumes subbase-to-surface risk for a major asphalt highway without having full control of its design and construction plus it has guaranteed to pay for the upkeep and repair for 20 years without recourse to public funds. The Koch warranty is the first of its kind in the United States.[26]


Pre-qualification-based Bidding

A frequently cited cause of contract problems is that the contractor is selected solely based on low bid. The traditional design-bid-build approach for construction does not easily allow for the quality of previous work to be included in the contractor selection process. Most DOTs prequalify bidders, but primarily on the basis of financial stability. In contrast, a more comprehensive use of pre-qualification requires review of both quality and performance factors.[27]

Pre-qualification is valuable when using warranties to ensure selecting a contractor who not only has the capability to perform a quality construction job but also can be relied upon to promptly and effectively perform warranty responsibilities. This is important for two reasons. First, a quality job reduces the amount of subsequent repairs that will be needed and second, having a quality contractor reduces the likelihood of relying upon a surety to enforce a warranty.


Texas’ Pre-qualification Process

TxDOT’s process to pre-qualify contractors includes several steps and the amount of information provided by the contractors varies depending upon the size and complexity of the projects they will bid on. The formal pre-qualification process requires that a form known as a Confidential Questionnaire be submitted along with a complete set of audited financial statements and details relative to assets, liabilities and equity and affidavit of financial condition. The Confidential Questionnaire requires a variety of information including all of the assets and liabilities of the entity. This form must be submitted 10 days prior to the date bids are to be opened. A new statement must be filed annually.[28]

If the project is estimated to cost less than or equal to $300,000 or the project pertains to specialty items, the requirements for audited financial statements may be waived. A Bidder’s Questionnaire (BQ) is then completed which contains essentially the same information as the Confidential Questionnaire, but excludes the audited financials and detailed financial questions. The BQ states that eligibility to bid and bidding capacity of a firm is determined by past performance on projects, experience, expertise, financial condition, and equipment availability.[29] TxDOT has further clarified that the eligibility to bid and bidding capacity for contractors submitting a BQ is based upon the balance sheet submitted, which may be either a compiled or certified public accountant reviewed balance sheet, and the amount of experience obtained by a potential bidder.[30]

Regardless of the form submitted, in order to bid a project, a firm must have an available bidding capacity equal to or greater than the estimated cost of the project. Four levels of bidding capacity, which range from $300,000 to over $1,000,000, are issued by TxDOT based on the assessment of the pre-qualification information. Increases in bidding capacities for pre-qualified contractors, who submitted a Confidential Questionnaire, are based on financial capability. Increases for contractors, who submitted a BQ, are based solely on contractor experience and the number of projects completed up to a maximum bidding capacity is $1,000,000. Financial capacity is considered only if the bidding capacity is greater than $1,000,000.[31]

TxDOT staff indicates that their technical pre-qualification process for Intelligent Transportation System projects for contractors and subcontractors has produced excellent results.[32] TxDOT’s post-contract evaluation is limited to ensuring that the work has been performed in accordance with the specifications, so that the work can be approved and accepted by the engineer in charge.[33]

TxDOT personnel indicate that they believe that policies and procedures have been implemented that address contractor quality and timeliness. When combined with the low-bid process, the TxDOT staff believe the needs of the state are met without the need to use more controversial methods. Quality standards are included in the specifications for each contract; if the contractor fails to meet those standards, he is assessed penalties ranging from reducing the item payment amount to contract termination. To address timeliness, TxDOT increased its use of critical path method scheduling for construction contracts, adjusted liquidated damages to use the level of inconvenience to the traveling public to determine the costs associated with project completion delays and initiated a form of bidding, called A+B, that incorporates the time to complete the construction job as an evaluation criterion.[34]


Current Practices

The American Association of State Highway and Transportation Officials (AASHTO) recommends that seven different types of information be required to prequalify contractors. This information includes items such as detailed financial statements, experience and performance, ownership or control, equipment to be used, and updated information when a corporate or affiliate change or reduction of 10 percent of the firm’s assets occurs. Once obtained this information must be reviewed and analyzed by the DOT.

FHWA does not require DOTs to implement a pre-qualification process, but if they do, the process must be approved by FHWA and conform to its competitive bidding policy, which requires that no procedure may restrict competition or prevent submission of a bid.[35]

As of 1987, the most recent data available, pre-qualification was required by 39 state DOTs. In the eleven states without pre-qualification, the DOTs generally conduct some form of post-bid qualification or evaluation, which may be less structured than pre-qualification.

Although many states, including Texas, gather much of the information suggested by AASHTO, the primary requirement to submit construction bids is the ability to secure a Performance Bond for a project. Even though in many DOT pre-qualification processes one of the required items is the quality of prior work performed, it is not normally a criteria that is used to make the pre-qualification assessment.[36]


A New Pre-Qualification Approach

Since the quality of prior work is not routinely used to pre-qualify contractors, the DOTs in the United States focus their efforts on quality control procedures used during the project. In practice, many DOTs use a materials quality control procedure called lot-by-lot pay factor adjustment. Using this procedure, a DOT may chose to inspect each shipment or lot delivered or to inspect a sample of the lots. If the lot meets the quality standard, it is accepted and paid for. If the lot does not meet the standard, it may be rejected completely and not paid for, or may be accepted under certain conditions and the payment reduced accordingly. Using this process provides DOTs with information on contractor performance, but the DOTs infrequently use this information as part of the future selection of contractors.

In contrast, some engineers envision a contracting system where the past performance would be used to adjust a contractor’s pre-qualification rating. Under this type of system, the emphasis shifts from looking solely at specific products to looking at the contractor’s overall performance, using the AASHTO-suggested information more effectively. Numerous factors such as record of timely performance, quality control, job-site safety, and maintenance of work zones could all be considered in the pre-qualification process. These factors could be used as an adjustment to determine the selected bidder under the assumption that higher performing contractors require less oversight by the DOT, thereby reducing the overall project cost.[37]

The Ontario Ministry of Transportation, for example, developed an innovative approach to contractor pre-qualification by evaluating the contractor in four areas: quality, safety, timeliness, and contract execution. Each area is given a weight: quality counts for 60 percent, safety and timeliness 15 percent each, and contract execution 10 percent. The contractor is rated on performance of work performed during the previous three years with more weight given to recent projects. The result is a numeric calculation called a performance index. Contractors that are not satisfied with their performance index are allowed to appeal the ministry’s decision to attempt to improve their rating. The performance index is used to either increase or decrease the amount of work a contractor can be given on the basis of their performance index calculation.[38]


Recommendations

A. The Texas Department of Transportation (TxDOT) should increase its use of warranties.

TxDOT should begin implementing warranties in a sample of new construction contracts with appropriate associated surety provisions. The use of warranties could be extended as TxDOT and the contracting and insurance communities develop experience and expertise. Since warranties are only as good as the contractor and insurance company involved, TxDOT should develop strict pre-qualification guidelines to ensure that the state receives the maximum benefit.

TxDOT should determine warranty length based on its experience, construction practices and the project involved. Life cycle cost analysis should be used to determine when to use warranties. Appropriate quality control processes should remain in place for these projects.

TxDOT should conduct analysis of warranties in high volume restricted access road projects (interstate highways, toll roads, and bridges.) TxDOT should also analyze warranties for specific areas within larger projects such as asphalt concrete pavement, bridge decks (travel lanes on a bridge), bridge painting, and bridge expansion dams (joints). Warranties are also appropriate for Intelligent Transportation System (ITS) projects that incorporate new technological features.

For those contracts that combine both the design and construction into one contract (such as the TTA exclusive developer agreements), TxDOT should always include as part of the bidding process an option for an extended warranty for items such as pavement so that life cycle cost analysis can determine cost effectiveness.

B. The TxDOT should enhance its current construction contractor pre-qualification process.

TxDOT should establish a more formalized process to establish stricter initial pre-qualification criteria plus follow-up, on-going evaluation to assess the quality of the work performed. Each project should be evaluated after completion and a performance index compiled for each contractor. This performance index can be used to either increase or decrease the amount of work a contractor can be given on the basis of the pre-qualification limit, similar to the levels that TxDOT is currently using. A higher performance index will allow bidding on larger jobs. To reduce the expected concerns by the contractors, this information should not be used to adjust bid prices. The qualifications should be tiered so that specialized expertise is only necessary if that element is included in the particular bid under consideration.

The process should be simple and straightforward to minimize the administrative effort required of both contractors and TxDOT.


Fiscal Impact

The fiscal impact from these recommendations cannot be estimated. However, TxDOT should realize long-term savings from both the use of warranties and an improved pre-qualification process.

The major benefit anticipated from the use of warranties is increased quality of the products with a lower life-cycle cost. Although the initial costs may be higher, warranties may lower maintenance costs by correcting early failures from material or workmanship that may have escaped notice during construction. Warranties also allow for new products to be introduced earlier and reduce extensive acceptance testing and evaluation.

An improved pre-qualification process should yield projects with fewer problems performed by the most competent contractors with less enforcement effort required by TxDOT. Changing the pre-qualification process would have some initial costs; however, the cost would depend upon how TxDOT implements the recommendation. A more rigorous pre-qualification process combined with an on-going evaluation component will provide a much higher assurance that the low bidder will provide a quality product.


Endnotes

[1] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 7; “1993 Texas Department of Transportation English Standard Specification Book, Part 1,” Section 5.1 and 5.9 (http://www.dot.state.tx.us/business/specs.htm). (Internet document.)

[2] V.T.C.A., Transportation Code §223.001; and letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[3] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News (November–December 1999), p. 11.

[4] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 1.

[5] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News (November–December 1999), p. 11.

[6] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News (November–December 1999), p. 11; Transportation Research Board, Transportation Research Circular, “Innovative Contracting Practices,” December 1991, p. 36; Federal Highway Administration, “Contract Management Techniques for Improving Construction Quality,” FHWA-RD-97-067 (http://www.tfhrc.gov/pavement/rd97_079.html). (Internet document.)

[7] Nossaman, Guthner, Knox & Elliott, LLP, Highway Warranties.

[8] American Association of State Highway Transportation Officials, The Changing State DOT (1998), p. 11.

[9] Federal Highway Administration, “Contract Management Techniques for Improving Construction Quality,” FHWA-RD-97-067, p. 1. (http://www.tfhrc.gov/pavement/rd97_079.html). (Internet document.)

[10] V.T.C.A., Government Code §2253.021(b)(3).

[11] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 8.

[12] Letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[13] Texas Turnpike Authority, Request for Qualifications to Construct, Maintain, Repair, Operate and Participate in the Financing of the SH 30 Turnpike Through an Exclusive Development Agreement (February 21, 2000), p. 15.

[14] Letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[15] Utah Technology Transfer Center, “Warranty Best Practices Guide,” p. 5 (http://www.ic.usu.edu/IC-Overview/Warranty/warranty%20implimentation%20best.htm). (Internet document.)

[16] Utah Technology Transfer Center, “Warranty Best Practices Guide,” p. 5 (http://www.ic.usu.edu/IC-Overview/Warranty/warranty%20implimentation%20best.htm). (Internet document.)

[17] Letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[18] Utah Technology Transfer Center, “Warranty Best Practices Guide,” p. 4 (http://www.ic.usu.edu/IC-Overview/Warranty/warranty%20implimentation%20best.htm). (Internet document.)

[19] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News 205 (November-December 1999), p. 11.

[20] Transportation Research Board, Transportation Research Circular, “Innovative Contracting Practices,” Number 386, December 1991, p. 21; Utah Technology Transfer Center, “Warranty Best Practices Guide,” pp. 1-3 (http://www.ic.usu.edu/IC-Overview/Warranty/warranty%20implimentation%20best.htm). (Internet document.)

[21] Utah Technology Transfer Center, “Warranty Best Practices Guide,” pp. 1-3 (http://www.ic.usu.edu/IC-Overview/Warranty/warranty%20implimentation%20best.htm). (Internet document.)

[22] Transportation Research Board, “Innovative Contracting Practices,” Transportation Research Circular, Number 386, December 1991, p. 39.

[23] Utah Technology Transfer Center, “Warranty Use in the United States,” pp. 1-5 (http://www.utaht2.usu.edu/projects/Innovative Contracting/Best Practices/WarrantyUSA1.htm). (Internet document.)

[24] Nossaman, Guthner, Knox & Elliott, LLP, Highway Warranties, p. 1.

[25] Nossaman, Guthner, Knox & Elliott, LLP, Highway Warranties, pp. 3-6.

[26] Public Works Financing, Koch Signs 20-year State Highway Warranty, July/August 1998, p. 1.

[27] Transportation Research Board, “Innovative Contracting Practices,” Transportation Research Circular, Number 386, December 1991, p. 21.

[28] Texas Department of Transportation, “Confidential Questionnaire,” December 1999.

[29] Letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[30] Texas Department of Transportation, “Confidential Questionnaire,” December 1999.

[31] Texas Department of Transportation, “Bidder’s Questionnaire,” December 1999; letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[32] Letter from Charles W. Heald, P.E., executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 28, 2000.

[33] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 7; “1993 Texas Department of Transportation English Standard Specification Book,” Part 1, Section 5.12 (http://www.dot.state.tx.us/business/specs.htm). (Internet document.)

[34] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 5.

[35] U.S. Department of Transportation, Federal Highway Administration, “FHWA Contract Administration Core Curriculum Course, Chapter IV-A, Bonding and Prequalification,” June 22, 1999 (http://www.fhwa.dot.gov/infrastructure/progadmin/contracts/cor_IVA.htm). (Internet document.)

[36] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News (November-December 1999), p. 13; U.S. Department of Transportation, Federal Highway Administration, “FHWA Contract Administration Core Curriculum Course, Chapter IV-A, Bonding and Prequalification,” June 22, 1999 (http://www.fhwa.dot.gov/infrastructure/progadmin/contracts/cor_IVA.htm). (Internet document.)

[37] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” Second Edition, October 1998 (http://www.aashto.org/info/a_into.html). (Internet document.)

[38] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News (November-December 1999), p. 13.