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Chapter 4.2

Use Alternative Bidding Methods to Speed Construction Projects


Summary

Texas Department of Transportation (TxDOT) road construction work performed by highway contractors is awarded on a low-bid basis. Federal law has been changed to allow states to experiment with other kinds of bidding. TxDOT is using some innovations like incentive and disincentive clauses and factoring in construction time as a part of the bidding process. State law currently precludes the use of the major new option known as design-build. This method allows a single entity to do both the engineering design and the construction, saving time, lowering costs and speeding construction.

Studies have demonstrated that design-build can reduce construction costs time by between 10 and 33 percent. Simply speeding up construction that is to already occur by this amount will add between $68 million and $121 million in today’s dollars to the overall state economy over a 20-year time period.


Background

To help TxDOT fulfill its responsibility for the state’s overall highway transportation system, private sector contractors construct highways with department oversight. For fiscal 2000, projected contract letting (construction) is $2.9 billion, including contracted preventive maintenance. Construction contracts are generally paid over three or more years. Currently, after the department completes the design, the construction contractors are selected based on the submission of the “lowest responsive bid;” this process is known as design-bid-build.[1]


Traditional Contracting Processes

Because the highway sector in the United States is largely directed by the federal and state departments of transportation (DOTs), the contracting practices are considered by some to be the most conservative of the construction industry. Although the actual construction technologies, methods and materials have advanced, until recently the contracting processes have remained the same.

The traditional approach to contracting highway construction projects is dictated in large part by the Federal Highway Administration (FHWA), although recent changes now allow more innovative methods. This traditional process has been for the owner (normally the state DOT) to fully complete the design and then prepare a bid package that is awarded to the low bidder (known as design-bid-build.) The pay items are established on a unit-price basis and the requirements for construction are spelled out in very detailed specifications.[2]

The most frequently stated potential disadvantages of design-bid-build focus on the higher commitment of time and oversight by the owner, less input from the contractor into design, more time needed to complete projects, and the possibility of an adversarial relationship between the government agency and the contractor.[3]


Current TxDOT System

TxDOT relies on this lowest responsive bidder system in awarding contracts. In fact, this has historically been one of the basic rules of Federal-aid contracting, although, as discussed below, there are new options allowed under federal law. Based on the principle of competitive sealed bids with award to the lowest responsive bidder who meets specific conditions of responsibility, this traditional competitive bidding system has served the public well over the past century. Low bid methods are believed by many in the industry to produce the lowest initial cost. The highway contracting community is very comfortable with the low bid approach.[4]

Current TxDOT contracting practices are tightly controlled and monitored to assure fairness and minimize risk. As part of the lowest responsive bidder procedures, transportation agencies have developed practices that detail exactly what is built, how it is built, the materials to be used, how traffic is maintained during construction, and testing procedures. The specifications that guide this type of highway contracting are known as “method” specifications in that they frequently prescribe how the work is to be performed, to minimize risk for the department. On a statewide basis, the TxDOT Construction Division spends approximately 6,000 to 10,000 man-hours per year researching, writing, and modifying these specifications.[5] Calculation of the lowest responsive bid follows a complex set of regulations designed to eliminate uncertainties.[6]


TxDOT project size

Over the last five years, the average TxDOT construction contract was $2.2 million, rising to about $2.7 million in 1999. The department has about 2,600 active contracts, averaging 126 days each, at any one time. From 1997-1999, 89 percent of contracts let (representing 27 percent of total contract costs) were for less than $2 million. (These figures exclude locally let maintenance contracts.[7]) In contrast to these smaller projects, during 1995-1998 only five projects were let in excess of $50 million, and nine such large projects in 1999.[8] Although it is important to continue to provide work for smaller contractors to ensure a competitive industry, there is a considerable amount of effort involved in mobilizing, inspecting and managing each of these contracts.

The smaller average contract size comes partly as a result of the planning process. While the specific TxDOT planning and programming decisions are made by the three-member Texas Transportation Commission (TTC) based on input from TxDOT staff, local government officials and the public, there is a complex allocation process that supports those decisions. TxDOT currently divides available revenues into 34 federal/state and state-only funding categories. While each category has a specific purpose or mandate, there are three general groupings: statewide categories—funding categories that are either programmed for projects across the state by TxDOT headquarters divisions using various ranking indices (e.g., the cost effectiveness index) or directly allocated for priority projects by TTC; district bank balance categories-funding allocated to TxDOT’s districts by established formulae and programmed through project selection processes developed by each engineering district; and local bank balance categories-funding allocated to metropolitan planning organizations according to population for certain federal programs such as federal surface transportation planning. Programmed projects are identified and selected through each metropolitan area’s transportation improvement plan’s development process.[9]

This complex allocation process can encourage districts to pursue piecemeal approaches to project completion. The cost effectiveness index (CEI) is the most widely used index and determines the ratio of TxDOT’s project costs to an estimated dollar value of travel timesaving created by a project.[10] The cost efficiency index can favor breaking candidate projects into smaller components to compete more effectively for the available funds. TxDOT’s description of this process is one that “allows the maximum flexibility to each district to structure projects in the most economical package possible while maintaining minimum statewide fiscal restraint.” A primary concern in TxDOT’s current allocation process is spreading funding across the state.[11]


Innovations in Contracting Processes

A 1991 Transportation Research Board circular on innovative contracting practices clearly showed the struggle to change contracting practices in the highway industry by pointing out, “Innovation involves risk. Government contracts are intended to avoid risk.”[12] The major barriers to innovation in highway contracting are resistance to change, concerns about risks both in contract selection and construction, and cost.

FHWA and the American Association of State Highway Officials (AASHTO) have recently started exploring more innovative contract practices. Highway officials in some parts of the country have come to the conclusion that the lowest initial cost provided by the low-bid selection process may not be the lowest overall cost. A white paper initiated in 1996 by the AASHTO Subcommittee on Construction-Contract Administration Task Force stated that “While the low bid system has served the public well, it has not always optimized the overall quality of the final product and it is not necessarily the most efficient way to procure services for all types of highway contracts.” The resulting Contracting 2000 Techniques for Non-Traditional Contracting Methods produced from this subcommittee included incentive/disincentive provisions, cost-plus-time bidding and several variations of design-build.[13] Some of the reasons for exploring new types of contracts include downsizing of DOTs, and the increased pressure to complete projects quickly without raising taxes or sacrificing quality.[14]


Cost-Plus-Time Bidding

A very valuable tool in speeding project delivery is bidding based on cost plus time (“A+B” bidding). A+B focuses on the lowest initial cost but also factors in the time needed to complete the project, especially important in busy traffic areas where construction delays create substantial congestion. The “A” component is the traditional unit-price construction bid. The “B” component is the number of days required to complete the project as estimated by the bidder. For award consideration only, the bid price is viewed as a combination of the actual construction cost and a time cost factor, calculated by multiplying the estimated time of the project by a set daily user cost. Payments for work performed are based on the “A” component as in a straight low-bid selection, but there may be incentive components as well. [15]

According to AASHTO, 27 states and the District of Columbia have used the A+B method under Special Experimental Projects No. 14 provision (SEP-14) at FHWA. (SEP-14 encourages states to use non-traditional or innovative contracting practices.) Of these, Maryland, Missouri and North Carolina have been the most active users. California used the A+B Method to reconstruct critical bridges damaged in the Los Angeles earthquake.[16]

A+B contracting was first used by TxDOT in 1997, using the formula (A) + [(B) x (daily road user cost).[17]

According to a 1998 TxDOT report, the advantages of A+B bidding include:

  • consideration of the time component of a construction contract;
  • favorable treatment of contractors with most available resources to complete the project;
  • incentives for contractors to compress the construction schedule; and,
  • greater potential for early project completion.

TxDOT policies recognize that A+B bidding is not applicable to all projects and that there must be a balance between the benefits of early completion and any increased cost of construction. To ensure that TxDOT can take advantage of the faster contract completion, before the project is bid, all right-of-way must first be acquired and utilities adjusted or relocated.[18]

The TxDOT guidelines state that road-user cost may be considered for the following types of projects:

  • projects that add capacity (may include grade separations);
  • projects where construction activities are expected to have an economic impact on local communities and businesses; and,
  • rehabilitation projects in very high traffic volume areas.[19]

In addition to the criteria listed above, department guidelines state that a secondary evaluation can be made considering issues relating to utility relocations and right of way clearing, availability of inspection forces, and 25 percent of the estimated daily road-user cost must be greater than the contract administrative liquidated damages.[20]

TxDOT has not made extensive use of A+B bidding. As noted in a May 2000 report, through 1997 there were 10 such contracts awarded by TxDOT; subsequent to that date there have been only 3 with the last one let July 1999.[21] Interviews with Construction Division staff indicate that the decision to use A+B is made by each district. According to TxDOT, one barrier to using A+B has been the calculation of delay costs. Previously they exclusively used computer modeling to calculate the delay cost, and have recently published a manual calculation method prepared by the Texas Transportation Institute for use by the districts in certain situations.[22] One example that was highlighted in an Engineering News Records article of a prime A+B project was the last A+B project awarded. This was in the San Antonio area for a $50 million Interstate 10-Loop 410 project where the contractor faces $22,500 day in potential liquidated damages for each day after the 805 allotted, but could also win the same amount in bonuses for early completion of up to 45 days. A vice-president for the contractor stated that the A+B method would save 25 percent off of the schedule.[23]


Incentives and Disincentives

A closely related and more widely used tool is inclusion of incentives and disincentives in contracts. Incentives may take forms such as extra payments if projects are completed early. Disincentives are frequently liquidated damages. Provisions for the assessment of liquidated damages are included in all TxDOT contracts. Liquidated damages are pre-agreed charges to the contractor if criteria such as completion dates are not met. The schedule of administrative liquidated damages was most recently revised in April 2000 for inclusion in those contracts scheduled for letting in July 2000. Those projects that are delinquent are to be assessed liquidated damages. Construction Division information indicates that 6 percent of all active TxDOT projects, representing approximately 4 percent of the department’s overall construction budget, are currently behind schedule.[24]

There are two levels of liquidated damages used by the department: the standard administrative liquidated damages, and road user cost (RUC). RUC is a function of hourly traffic volume and roadway configuration, calculated by specialized computer software or manually based on tables. In the last five years, TxDOT developed a course and conducted training on computer traffic simulation methods for determining these costs. In February 2000 they issued a study to the districts on the manual methods for determining road user costs.[25] The criteria for use of RUCs are the same as those for A+B bidding. The percentage of RUC to be included in liquidated damages can be a default cap of 25 percent of the calculated RUC or adjusted based on unique features of the project. The current value of time calculation for Texas is $15.70 per hour for passenger cars.[26]

Since 1996 the department has used incentive clauses on 12 contracts, and two years ago developed standard incentive/disincentive provisions that may be used by the districts in their contracts.[27]


Design-Build

In design-build, the highway department contracts with a single entity to provide design and construction services. Design-build has been popular in the private sector for many years, especially in vertical construction and turnkey facilities such as power plants. Design-build is just beginning to make its way into highway construction. Until the billion dollar I-15 project in Utah for the Olympics, the major design-build highway projects in the United States had primarily been for the new generation of tollroads: E-470 in Colorado, Transportation Corridor Agencies’ projects in Orange County California, Pocahontas Parkway in Virginia, and the private tollroads SR91 in Orange County and Dulles Greenway in Virginia. These are all developed and operated by non-DOT agencies or private entities.


Federal Approval

FHWA officials may approve design-build contracts in accordance with the experimental program already in existence (SEP-14). As of May 2, 2000, 142 design-build projects in 27 different states have been approved by FHWA.[28]

The recent federal highway legislation known as TEA-21 provides a modification of Title 23, US Code, which will eventually allow states to use design-build contracting on a limited basis. According to Section 1307(e) of TEA-21, FHWA is required to develop design-build regulations by June 9, 2001. After the final rules are published, states will be able to use design-build for a qualified project using any procurement process permitted by applicable state or local law without specific FHWA approval. A qualified project is one exceeding $50 million estimated cost for highway projects and Intelligent Highway System projects of over $5 million.[29]

Other areas of transportation are adopting design-build as well. The newly enacted $40 billion aviation bill has a provision permitting design-build on up to seven airport projects funded by federal Airport Improvement Program grants.[30]


Texas Law Prohibits Design-Build

Under state law, TxDOT is prohibited from using design-build by the requirement to accept the lowest responsive bid for construction work. Texas Transportation Code Chapter 223 relates to bids and contracts for highway projects and subchapter 223.001 specifies competitive bids will be used for contracts that improve a highway or for materials to be used in the construction and maintenance of highways. In the most recent legislative session the statutes were reorganized but this did not change the fact that TxDOT has been required since 1925 to award to the lowest bidder.[31] For project design, there are the requirements of the Professional Services Procurement Act for a two-step, qualifications-based selection and price negotiation process.[32]

In 1998, as required by Senate Bill 370 of the 75th Legislature, TxDOT prepared a review of cost and time savings suggestions. TxDOT suggested that design-build may be appropriate to shorten the final stage project development time for emergency projects, since construction can begin before design is complete. Design-build might also be used when the contractor becomes the operator/lessor of the facility or if a special project were authorized with special or unanticipated funding. The department has urged caution with design-build, however, because in their view “this option allows contractual relationships between a designer and builder that may not promote the best design, proper construction processes or best materials utilized.” TxDOT believes that design-build costs will be “at or above average,” although they do not supply data to support this view. They also propose the need to have “close control to ensure that inferior materials are not used in the project merely to shorten time or increase profits for design-build contractors.”[33] The issues previously expressed by TxDOT highlight the need to take a different approach with a design-build contract than that used for traditional design-bid-build.


Design-Build in Laredo

Although TxDOT is not currently using design-build contracts, there are innovative examples of this method in Texas. The first private toll road in Texas opened in October 2000—the 21.2 mile, $51 million Camino Columbia, which runs from near the existing Solidarity Bridge, some 20 miles northwest of Laredo, east through ranch land to Interstate 35. This road will provide an alternative to crossing the border at Laredo and add additional capacity for truck traffic to and from Monterrey, Mexico’s center of US trade. Camino Columbia, Inc., formed by area landowners in 1989 to develop the road, will charge a toll of $3 for cars and from $12 to $20 for trucks.[34]


Design-Build Pros and Cons

The foremost objective for using design-build is saving time. Design-build also is generally considered the method which allows the contractor maximum flexibility for innovation in the selection of design, materials and construction methods while giving the owner the advantage of dealing with a single entity responsible for the project. Other potential advantages of design-build include:

  • assignment of design and construction to a single party, allowing construction to start before design is complete;
  • a single point of contact and corresponding accountability for quality, cost and schedule;
  • reduction of administrative and inspection costs;
  • reduction or elimination of change orders and claims due to errors and omissions; and,
  • expertise not available in-house (such as Intelligent Transportation Systems).[35]

Further, adding a warranty, as is common, promotes quality and performance during the warranty period.[36]

The disadvantages of design-build contracting primarily include less direct control over the project, a more complex process, and difficulty in converting to performance-based approach. There are several varieties of design-build and they can be combined with other project delivery systems.[37]

Some members of the highway construction industry are opposed to the design-build method of contracting, believing it will put smaller firms at a competitive disadvantage. Design-build requires significant effort and expense in preparing proposals and some feel it would be difficult for unsuccessful firms to stay competitive. The industry also has many concerns about the shift in responsibility required with the use of warranty provisions in design-build contracts. Some engineering associations also have concerns regarding professional liability issues.[38]

However, by granting greater discretion to contractors, design-build contracts may actually allow small construction firms to subcontract into large projects in which they might otherwise never have had an opportunity to participate. Also, relatively small construction firms can contract jointly with engineering firms to provide the expertise required under a design-build contract, which may actually result in greater competition. Experience in other states also indicates that large projects are in reality done by local subcontractors. When the E-470 Authority in Colorado entered into a $321 million design-build contract in 1995 with Morrison Knudsen and Fluor Daniel, they subcontracted all of the construction work to local contractors.[39] Finally, TxDOT will have to recognize that the contractor environment will have to be monitored and use its contract discretion to strategically award contracts to preserve competition.


Texas Design-Build Work Group

The Senate formed a Design-Build Work Group to receive comments from professionals who would be affected by any change in statute permitting the use of that method by TxDOT and the Department of Criminal Justice. Some of the concerns expressed have included:

  • assurance that other procurement options are available in addition to design-build;
  • uniformity of statutes regarding design-build;
  • uniform criteria for selection of design-build team;
  • contractor discrimination and biased selection; and,
  • assurance that small and minority contractors will be able to participate on state design-build projects.[40]

To answer these concerns, it must be stressed that design-build should not be used for the majority of DOT construction contracts. In those cases that do not meet the design-build criteria, other contract processes should be used. If desired, the agency can specify a certain amount of the work to be subcontracted to increase participation by smaller subcontractors and to meet any Historically Underutilized Businesses (HUB) requirements. This contracting process, just like those now in existence, must have guidelines in place and appropriate oversight.


Appropriate Use of Design-Build

Design-build may be appropriate for projects meeting the following criteria:

  • Low-end projects including overlay or basic reconstruction projects of less than $5 million with little or no room for innovative design but with strict time constraints. These projects are usually emergency situations where right-of-way, utility and environmental issues have been resolved.
  • Mid-level projects between $5 million and $20 million including those where design-build is used to bring in new technology in which TxDOT staff do not have sufficient expertise. These projects include bridge reconstruction or Intelligent Transportation Systems with a large incentive for innovation. Key factors for using the design-build approach here are the potential for time savings and the need for outside expertise.
  • Mega-projects including those that previously would have been done by being subdivided into many small projects but now can be funded through the design-build contractor, through a bond issuance, or with other special financing. These projects tend to be time-dependent and very complex in design. In Utah this technique will enable the design-builder to design and construct a project in 4.5 years when it would have taken 10 years under the traditional design-bid-build process.[41]

The Transportation Corridor Agencies (a public tollroad authority in California), that have done more transportation-related design-build projects than any other agency in the United States, agree that design-build is an effective method for delivering projects but they do not intend to use it in every circumstance. Their real-life list of advantages includes: simplified project management, substantial time savings, better control of cost, re-allocation of risk (reduces change orders), and is well received by financial institutions.[42]

The Transportation Corridor Agencies (TCA) compared construction schedules for two of their projects. TCA’s San Joaquin Hills Transportation Corridor project, a combination of design-bid-build and design-build contracts, was delivered 6 percent ahead of schedule. TCA’s Eastern Transportation Corridor project, 100 percent design-build, was delivered 23 percent ahead of schedule. In contrast, the average construction projects in their region of California are 16 percent over schedule.

A study by the Journal of Construction Engineering and Management compared design-build vs. design-bid-build. Design-build was found to provide 6 percent lower cost, 12 percent faster construction speed, 33 percent faster delivery speed, 5.2 percent cost growth, and 11.4 percent less schedule growth for the projects studied.[43]


Recommendations

A. State law should be amended to permit the Texas Department of Transportation (TxDOT) to use design-build contracting.

Design-build would require amending Chapter 223 of the Transportation Code. For Texas Turnpike Authority (TTA), Subchapter F, Chapter 361 of the Transportation Code would require an amendment. The language of any new proposed legislation should allow TxDOT the ability to use design-build for any projects it deems in the best interest of Texas taxpayers subject to regulations for use of Federal funds where applicable.

Design-build contracting should be phased into use at TxDOT. TTA is the logical starting point for pilot design-build programs as the authority already has the ability to use other contracting methods (please see the discussion of TTA elsewhere in this report).

B. TxDOT should increase the use of A+B bidding.

Existing, reasonable TxDOT criteria allow A+B bidding. The department’s current approach, however, discourages this method, and should be changed to encourage wider use. The Construction Division’s recent release of the manual calculation method may increase use of A+B bidding by districts. If the calculation of road user costs continues to be a hindrance, however, the Construction Division should provide the expertise to directly assist districts in preparing the calculations.

C. TxDOT should create standardized procedures to determine appropriate use of alternative delivery methods.

TxDOT needs to implement an evaluation process to determine which projects are the best candidates for alternative delivery methods. Selection should be tied to project scope and complexity, cost-effectiveness, timely delivery and appropriate risk transfer. Criteria for selecting appropriate projects include:

  • strict selection based on low bid is not practicable or not advantageous;
  • cost may not be the sole award criteria;
  • financial packaging considerations (e.g., revenue bonds);
  • time is a critical factor; and,
  • the project is large and complex, or involves special expertise such as Intelligent Transportation Systems.

The selection process should focus on whether or not design-build or some other alternative approach will allow TxDOT to realize all project goals cost effectively and within desired time constraints. Time-critical projects are especially appropriate for incentive and disincentive provisions in contracts. The decision to use an alternative delivery method should be made as early in the process as possible. In design-build contracts, for example, maximum time savings occur when project construction begins when the design is less than 50 percent complete.[44]

TxDOT should develop a design-build contract form and appropriate performance criteria, which should accompany any request for proposals. Further, TxDOT should develop guidelines for (1) prequalification of potential bidders, (2) fair and balanced evaluations including separate evaluations of cost and qualitative issues, (3) appropriate submission requirements, and (4) use of lump sum contracts for competitive selection where feasible.[45]

D. TxDOT should look for opportunities to aggregate projects.

In order to increase efficiency, TxDOT should develop larger projects, thus reducing the number of contracts that need to be administered as well as allowing the use of alternate delivery and new financing methods such as GARVEEs (discussed elsewhere in this report.) Projects need to be at least $50 million to take advantage of the TEA-21 permission to proceed with design-build contracts without special Federal Highway Administration (FHWA) permission. In the years 1995-1997 there was only one $50 million project; in 1998 and 1999, there were four and nine, respectively.

TxDOT must review alternative financing, other delivery methods, and project size together as part of their project selection process.


Fiscal Impact

Implementation of these recommendations could result in savings in construction costs to the Department, but the effect cannot be estimated. TxDOT could reallocate any reduction in costs to additional projects. In addition, there are economic benefits to drivers from cutting construction time discussed below as well as broader economic benefits.

Although the average construction contract over the last year was approximately $2.7 million, alternate project delivery methods are better suited for larger projects. Looking at projects of at least $2 million, the average size between 1996-1998 was approximately $6.5 million, and over $8 million in 1999. Reducing project completion time 12 percent from the 1999 average of 267 days could save an average 32 days. In addition to direct cost savings to the department from lower construction costs, cost to drivers that result from construction delays would also be reduced.

Design-build contracts will probably be used for even larger contract amounts and could result in significant cost savings. For example, TTA contracts now under consideration range from $200 million to $900 million with correspondingly longer construction periods. The projects under current consideration total over $1.8 billion, so a 6 percent cost savings would be on the order of $110 million. For 1999 there were nine TxDOT projects over $50 million that would have been candidates for design-build projects based on size. The awarded amount for those projects totaled over $585 million. Cost savings using Design-build on these combined projects could have ranged from 6 to 12 percent, or from $35 million to $70 million.

Additionally, these alternative contracts could result in reduced inspection and oversight effort. Design-build has also been found to have less frequent change orders, leading to corresponding cost and administrative savings.

Design-build contracting has broader economic effects than just the costs and completion time associated with TxDOT operations. For example, consider two hypothetical construction projects that would, under traditional design-bid-build contracting, take three years (36 months) to complete and cost $50 million each, for a total of $100 million. Design-build contracting on these two projects would result in a total cost of $94 million as a result of the projected 6 percent cost savings and would be completed in 32.4 months if completion time was cut by 10 percent. This means the people of Texas would benefit from design-build contracting on two traditional $50 million projects in two ways. First, the projects would be completed sooner. Second, $6 million would be freed to support other road construction projects in the state.

The net economic benefits of design-build are much more profound than the mere reallocation of $6 million in construction funds. Roads have a large effect on productivity in our economy with one comprehensive study indicating that every dollar spent on roads results in a 29 cent increase in productivity.[46] Due to the savings in road construction, design-build yields more road surface and productivity for the economy, saving money that can then be invested for further productive uses in the economy. Additional productivity also results from the completion of two projects 3.6 months earlier than otherwise. Finally, there is some positive economic boost from speeding up construction. Over twenty years, the net present value of all these net benefits of design-build contracting is on the order of an estimated $67.6 million.

The net benefits from design-build are even greater if construction time is shortened by more than 10 percent. Using the same example as above, with two hypothetical $50 million design-bid-build projects, if using design-build contracting shortens the length of time for construction by one-third (33 percent) to 24 months instead of 36, the net-present value of this more efficient contracting method increases to an estimated $121 million. Once again, a large proportion of these net benefits accrue from an additional $6 million road investment made possible from cost savings from design-build contracting.


Endnotes

[1] Texas Department of Transportation budget and organization information provided in response to information requested by Hagler Bailly Services, Inc.

[2] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News 205 (November-December 1999), p. 10.

[3] Donn E. Hancher, “Contracting Methods for Highway Construction,” TR News 205 (November-December 1999), p. 10; Design-Build Institute of America, The Design-Build Process for the Civil Infrastructure Project.

[4] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[5] Texas Department of Transportation, Construction Division’s response to information requested by Hagler Bailly Services, Inc., June 7, 2000, p. 3.

[6] Transportation Research Board/National Research Council, “Innovative Contracting Practices,” Transportation Research Circular, Number 386, (Washington, DC December 1991), p. 5.

[7] Texas Department of Transportation responses to information requested by Hagler Bailly Services, Inc., June 2, 2000 and June 7, 2000.

[8] Spreadsheet provided by Texas Department of Transportation in response to information requested by Hagler Bailly Services, Inc., January 20, 2000.

[9] Funding Category Workshop Manual, Texas Department of Transportation, (Austin, Texas, November 2, 1999). Reference issue paper entitled “Planning, Programming, and Highway Funding Allocation Processes” for a detailed discussion of the current Texas Department of Transportation funds allocation process.

[10] See issue paper entitled “Planning, Programming, and Highway Funding Allocation Processes” for a detailed discussion of the current Texas Department of Transportation funds allocation process and the use of the cost efficiency index.

[11] Letter from Kirby W. Pickett, P.E., deputy executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 21, 2000.

[12] Transportation Research Board/National Research Council, “Innovative Contracting Practices,” Transportation Research Circular, Number 386, (Washington, DC December 1991), p. 19.

[13] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[14] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[15] Texas Department of Transportation, Contract Administration Handbook for Construction Projects, “Daily Road-User Costs, Incentives and “A+B” Bidding,” (Austin, Texas, May 3, 2000), pp. 3-4.

[16] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[17] Texas Department of Transportation, “Review of Cost and Time Savings on Highway Construction and Maintenance Contracts” as required by S.B. 370, 75th Legislature, November 17, 1998, p. 2; and modified according to letter from Kirby W. Pickett, P.E., deputy executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development Division, Texas Comptroller of Public Accounts, August 21, 2000.

[18] Texas Department of Transportation, Review of Cost and Time Savings on Highway Construction and Maintenance Contracts (Austin, Texas, November 17, 1998), p. 2.

[19] Texas Department of Transportation, Contract Administration Handbook for Construction Projects, “Daily Road-User Costs, Incentives and “A+B” Bidding,” (Austin, Texas, May 3, 2000), p. 1.

[20] Texas Department of Transportation, Contract Administration Handbook for Construction Projects, “Daily Road-User Costs, Incentives and “A+B” Bidding,” (Austin, Texas, May 3, 2000), p. 1.

[21] Texas Department of Transportation, A+B Bidding Report, (Austin, Texas, May 2000).

[22] Interview with Construction Division personnel: Elizabeth Boswell, Head of Construction Section; Katherine Holtz, Head of Materials Section; Bob Hundley, Contract Claims; and Scott Nichols, Contract Letting and Processing, Austin, Texas, May 25, 2000.

[23] “Work Thrives in San Antonio,” Engineering News-Record, June 5, 2000, p. 16.

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

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

[26] Ginger Daniels, David Ellis, and William Stockton, Texas Transportation Institute, “Techniques for Manually Estimating Road User Costs Associated with Construction Projects,” (http://tti.tamu.edu/research/planning/407730.stm). (Internet document.)Memorandum from Thomas Bohuslav, director, Construction Division, Texas Department of Transportation, to District Engineers, February 18, 2000.

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

[28] Federal Highway Administration Spreadsheet “Design Build Projects Approved Under SEP-14,” May 2, 2000.

[29] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[30] “Washington Observer: Airports,” Engineering News Record, May 1, 2000, p. 11.

[31] V.T.C.A., Transportation Code §223; and letter from Kirby W. Pickett, P.E., deputy executive director, Texas Department of Transportation, to Clint Winters, Research and Policy Development, Texas Comptroller of Public Accounts, August 21, 2000.

[32] V.T.C.A., Government Code, Chapter 2254, Subchapter A.

[33] Transportation Research Board/National Research Council, “Innovative Contracting Practices,” Transportation Research Circular, Number 386, (Washington, DC December 1991), pp. 6-7.

[34] “Influx of Design-Build Plans Enter Texas Highway Future,” Engineering News Record, April 24, 2000, p. 16.

[35] Utah Technology Transfer Center, “Design-Build Best Practices Guide,” (http://www.utaht2.usu.edu/projects/InnovativeContracting/BestPractices/Design-Build.html). (Internet document.)

[36] Utah Technology Transfer Center, “Design-Build Best Practices Guide,” (http://www.utaht2.usu.edu/projects/InnovativeContracting/BestPractices/Design-Build.html). (Internet document.)

[37] Hagler Bailly Services, Inc., Project Delivery Methods: Major Issues Related to Selection, July 30, 1999, p. 7.

[38] American Association of State Highway Transportation Officials, “Primer on Contracting 2000,” 2nd Edition, October 1998 (http://www.aashto.org/info/primer/primer_1-18.html). (Internet document.)

[39] Telephone interview with Steve Richards, project manager, Morrison Knudsen, August 18, 2000.

[40] Senate Committee on Intergovernmental Relations Design-Build Work Group Meeting minutes, April 5, 2000 and April 19, 2000.

[41] Utah Technology Transfer Center, “Design-Build,” (http://www.utah2.usu.edu/IC/IC-Overview/ICTDesign-Build.html). (Internet document.)

[42] Russell Zapalac, P.E., director, Design & Construction for Transportation Corridor Agency presentation on “Design/Build Lessons Learned” November 1999.

[43] Construction Industry Institute survey reported at November 1997 Design-Build Institute of America convention on Design-Build, April 1998.

[44] Utah Technology Transfer Center, “Design-Build Best Practices Guide,” (http://www.utaht2.usu.edu/projects/Innovative). (Internet document.)

[45] Design-Build Institute of America, The Design-Build Process for the Civil Infrastructure Project, pp. 7-8.

[46] M. Ishaq Nadiri and Theofanis Mamuneas, Federal Highway Administration “Contributions of Highway Capital to Output and Productivity Growth in the U.S. Economy and Industries,” August 1998 (http://www. fhwa.dot.gov//////policy/gro98cvr.htm). (Internet document.); a summary is also available at (http://www.fhwa.dot.gov//////policy/nadiri2.htm). (Internet document.)