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Chapter 4.7

Open More Roadway Maintenance to Competition


Summary

Texas Department of Transportation (TxDOT) has several pilot projects for roadway maintenance. However, unlike some other state’s pilots, these are of limited scope and duration. TxDOT should create another pilot which is broader in scope and longer in duration and which includes construction responsibilities as well as maintenance. In addition, TxDOT should take advantage of the Comptroller’s proposed Competitive Government Act to increase the amount of maintenance that is done by private firms.


Background

Maintaining the state’s road infrastructure and supporting facilities is a core mission for TxDOT. On March 4, 1998, TxDOT reorganized to provide the maintenance function more focus and support within a very decentralized agency by re-establishing a separate Maintenance Division.[1] Maintenance Division responsibilities include the maintenance program, maintenance contracts, vegetation management program, rest area program, departmental architectural services and ferry operations.[2]

TxDOT maintenance employees work in each of the 25 districts, primarily at the district office or maintenance section level. Maintenance work exclusive of architectural services and ferry operations are categorized into three areas:

1) routine maintenance

2) preventive maintenance and

3) major maintenance.

All three maintenance categories may be performed with state staff or by contract. Section 223.042 of the Transportation Code requires that a minimum of 50 percent of maintenance be provided by a contractor, but “only if the department determines that a function of comparable quality and quantity can be purchased or performed at a savings by using private sector contracts.”[3] In 1999, contract maintenance accounted for 54 percent of all maintenance spending,[4] compared to 35 percent of maintenance spending in 1993.[5]

The following table indicates annual TxDOT contracted maintenance expenditures:[6]

Table 1

Fiscal Year
1993
1994
1995
1996
1997
1998
1999
Total
$161,233,125
$141,545,876
$204,532,208
$234,316,625
$204,756,377
$383,884,302
$438,856,954

Source: Texas Department of Transportation.

NOTE: These figures exclude the preventive maintenance contracts let through construction

that are included in 50 percent requirement for contracting.

A draft version of TxDOT’s “Maintenance Manual” identifies the planning and budgeting sources for routine, preventive and major maintenance as follows:

Guidelines for Contracted Work

Routine Maintenance
Preventive Maintenance
Major Maintenance
Contracts are developed as routine maintenance contracts through the Construction Maintenance Contract System and may be locally let if estimated to cost less than $300,000.
Contracts are normally programmed through the Transportation Planning and Programming Division as contracted preventive maintenance projects.
Contracts are developed using the Design Division 2-R standards and are normally programmed through the Transportation Planning and Programming Division as major maintenance program projects.

The following definitions distinguish between maintenance types within the class of activities: [7]

Travelway Maintenance

Routine Maintenance
Preventive Maintenance
Major Maintenance
Strengthening the pavement structure for the current and projected future traffic usage
Restoration of pavement to serviceability
Work performed to prevent major deterioration of the pavement

Shoulder and Side Approach Maintenance

Routine Maintenance
Preventive Maintenance
Major Maintenance
Restoration of shoulder to its originally constructed condition including: recondition, rebuild, level-up and overlay
All shoulder work to prevent major deterioration of the pavement
All shoulder work to restore to its originally constructed condition and/or to strengthen the pavement structure for the current and projected future traffic usage

Roadside Maintenance

Routine Maintenance
Preventive Maintenance
Major Maintenance
All work to maintain the roadside, such as maintenance and operation of rest areas and picnic areas, litter removal, mowing, placing herbicides, tree and brush trimming and removal, and repair and upgrading of guard rails
None
None

Drainage

Routine Maintenance
Preventive Maintenance
Major Maintenance
Replace, repair and install curb, gutter, riprap[8] and underdrain; clean, repair or replace culverts, storm sewers and erosion controls; reshape drainage ditches and channels
Remove debris and siltation from channels to prevent damage to structures or flooding of roadways, repair or replace slopes and/or riprap to prevent damage to structures or embankments
Construct new drainage channels, modify drainage structures to increase drainage capacity (only to correct a maintenance or safety problem or to protect public or private property)

Structures

Routine Maintenance
Preventive Maintenance
Major Maintenance
Repair of substructures, superstructures, decks, joints, approach slabs, and railing and spot painting, repair and operate movable bridges, install temporary bridges, repair and install fender systems
Steel structure cleaning and repainting or install other coatings, install bridge deck protection, joint cleaning and sealing, or replacement
Bridge rehabilitation, reconstruction, or replacement, replacement of structures only as a result of major disaster when no other funds or programs are available

Emergency Operations

Routine Maintenance
Preventive Maintenance
Major Maintenance
Traffic during accidents including traffic control, removal of debris and spilled cargo, snow and ice control, assist traffic during other natural disasters such as floods, tornadoes, hurricanes and fires, removal of debris from the roadway after natural disasters
None
Stabilize and remediate of travelways and structures damaged by accidents or natural disasters


Maintenance Contracts

TxDOT began outsourcing maintenance in the 1970s with mowing contracts. TxDOT now processes approximately 1,400 contracts a year statewide. The average contract is approximately $90,000, and several contracts exceed $1 million. The average duration is one year with variation from 45 days to two years.[9] TxDOT districts let all contracts up to $300,000, which represents about 75 percent of the contracts.[10]


Total Maintenance Pilot Projects

TxDOT has two award-winning contracts: one in Dallas (400 lane miles) and one in Waco (800 lane miles).[11] The Texas Quality Initiative “Making a Difference Award” was presented to the Department on September 7, 2000. On November 15, 2000, the Department received a gold award for “The Total Maintenance and Operations Contracts” presented by the National Quality Initiative.[12]

In these contracts, payment is based on performance measures. Benchmarks include documentation of work completed, condition assessments and accidents/incidents reported in work zones. These programs were based on Virginia’s model for total maintenance contracts, except that the Texas projects are contracted on a low-bid basis and do not involve capital work.[13]

The level of liability coverage needed for these projects effectively limits qualified bidders to only large firms. Because this is still a relatively new concept, only two firms bid on the Dallas and Waco projects. When more data become available and firms become more comfortable with the concept, competition will likely increase.

Cost thresholds on the Dallas and Waco projects were set using prior costs and quantities. TxDOT took the average TxDOT cost to perform the work and added 20 percent for profit, insurance, etc. The bids came in below the TxDOT estimate.

The Dallas and Waco contracts last for five years with a 3-year renewal clause and a 2 percent increase for inflation at the renewal. The contract pays out on a monthly basis as a lump sum contract with graduated payments—more up front for start-up and more on the back-end as an incentive to complete ongoing projects.[14]

The winning contractor (VMS of Richmond, Virginia) included some liability protection in the contracts. “TxDOT files claims for all federal emergency relief with FHWA. If the damage is not federally reimbursable or not insured, VMS will pay the first $50,000, and TxDOT will pay the remainder.”[15]

The contractor is responsible for monthly condition inspections and reporting. However, TxDOT also does inspections and monitors maintenance conditions through its regular monitoring systems.

TxDOT considers the Dallas and Waco pilots “demonstration projects” and is waiting to get feedback from snow and ice clearing efforts over the next two to three years to make further evaluation.[16]


Comparison of Virginia and Texas Total Maintenance Projects

VMS, Inc., the contractor on the Dallas and Waco projects, is also the contractor on the Virginia DOT (VDOT) project cited by TxDOT for emulation. VMS’ President, Mick Masucci, indicates that the Virginia program remains unique among the 13 contracts his company has with state DOTs in Virginia, South Carolina, Utah, Texas, Mississippi and Alaska. Significant differences between the projects in Virginia and Texas include:

  • The Virginia project uses a life-cycle approach to roadways, including capital work such as bridge repair and major roadway rehabilitation. The VMS contract with TxDOT, on the other hand, is limited to routine maintenance duties. By having total roadway responsibility, VMS can exploit opportunities to perform capital work identified as future needs. VMS finances this strategy by shifting funds between budget years, as long as savings exceed the cost of capital. State agencies are not usually able to use this strategy because of budget constraints and allocation processes that create separate funds for construction, maintenance, bridges and other types of transportation projects.
  • TxDOT’s Dallas and Waco contracts are much more defined in services, methods and materials than the VDOT contract with VMS. VMS contends the TxDOT approach limits the potential to save money, as it hampers the potential for contractor innovation. The VDOT contract simply defines desired outcomes as “consistent with national standards,” which provides VMS the maximum opportunity for innovation.

VDOT and VMS indicate the following as the key competitive advantages VMS enjoys over VDOT:[17], [18]

  • VMS can enhance vendor competition by providing bonding, loans and other services VDOT cannot offer to start-up companies. This has helped VMS build its vendor base, which is now approximately 450-500 contractors.
  • VMS can offer vendors multi-year contracts, which gives vendors a longer time to recover any costs associated such as acquiring or relocating equipment. VMS is able to do this because the nature of their contracts assures them continued funding, while VDOT projects are subject to more uncertainty.
  • District boundaries do not influence the size or location of VMS projects. For example, VDOT would bid four contracts for sweeper service to cover a 250-mile section of highway that crosses four districts. VMS may bid only one contract for the entire job, or may break it into whatever size offers the lowest project cost.


Alternative Maintenance Options

In May 9, 2000, the Texas Turnpike Authority (TTA) included an innovative option of requiring the developer to offer “long-term highway warranty, maintenance and preservation” in its “request for qualifications” for the SH130 Turnpike Project.[19] The TTA concept combines the privatized maintenance elements of Waco, Dallas and VDOT projects with a means of motivating the contractor to build highways for the best overall lifecycle costs. By having the developer maintain the road for a specified number of years, the developer is encouraged to build in a level of quality that supports long-term results, not short-term profits.


Texas Competitive Government Act

The Comptroller in her December 2000 e-Texas Report recommended to the legislature sweeping legislation aimed at injecting more competition into Texas state government. Issue paper CG-1 contains recommendations that could affect TxDOT’s future maintenance direction if it is made law by the legislature. The CG-1 recommendation states:

State law should be amended to establish a Competitive Government Act. This act would establish a comprehensive statewide system to ensure that, as a general rule, government performs no function when a private business can do that function better and at a lower cost.

....The act should include a legislative intent clause as follows:

It is the intent of the Legislature to limit the size of state government and to use public funds as effectively and efficiently as possible in the performance of essential governmental functions. This intent is based on a philosophy that government should perform no function when a private business can do that function better and at less cost.

In addition, the act should:

Require agencies and universities to inventory their commercially-available activities....and to report this information in their strategic plans. These inventories should specifically tie positions to functions or services. All agencies and universities should be required to compile a list of their commercially available activities by June 1, 2002 and report this information electronically to the Governor’s office.

Require state agencies to include in their strategic plans a plan for subjecting a targeted percentage of their commercially-available activities to competition. The Council on Competitive Government, working with agencies would establish a reasonable percentage target and identify competitive projects. The results of agency efforts should be reported to the CCG as completed and summarized in subsequent strategic plans.

Allow agencies or divisions to distribute a portion of any cost savings resulting from a competition to the employees involved in the competition process. This would occur only if the incumbent employees win the competition. The Texas Incentive and Productivity Commission already has a process in place to certify the cost savings and facilitate the distribution of financial rewards.

TXDOT already contracts out a little over half of its maintenance work. While this is positive step, it still leaves nearly half of the state’s highway maintenance work performed by a government monopoly despite the presence of hundreds of private firms that could potentially do the work.


Recommendations

A. TxDOT should create another outsourced highway maintenance pilot, or renegotiate one of the existing projects, to include all aspects of highway maintenance.

The pilot project should include all areas of highway maintenance, such as capital work and bridge maintenance, within the project scope. The project should focus on lifecycle costs and encourage vendor innovation. The term of the maintenance coverage should be of adequate duration and the highway segment of sufficient size to provide meaningful evaluation for the viability of the concept.

B. TxDOT should target additional maintenance work for public-private competition under the conditions set forth in the Comptroller’s e-Texas report in issue CG-1.


Fiscal Impact

These kind of competitive projects could have a tremendous impact on long-term agency operations, based on the attention focused on this area, and provide opportunities to re-examine fundamental aspects of highway construction and maintenance operations, but the timing and magnitude cannot be estimated.


Endnotes

[1] “History of the Maintenance Division,” by Joe S. Graff, P.E. director, Texas Department of Transportation Maintenance Section, Austin, Texas, July 1998. (Agency document.)

[2] Texas Department of Transportation, “Maintenance Division,” (http://www.dot.state.tx.us/insdtdot/orgchart/mnt/mnt.htm). (Internet document.)

[3] 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, September 14, 2000.

[4] Interview with Joe S. Graff, P.E., director, Maintenance Section, Maintenance Division, Texas Department of Transportation, Austin, Texas, January 26, 2000.

[5] “Major Equipment Fleet,” Texas Department of Transportation General Services Division, January 1999. (Agency report)

[6] E-mail from Jefferson Grimes, manager, State Legislative Affairs, Texas Department of Transportation, September 22, 2000.

[7] “Maintenance Manual”- Draft, Texas Department of Transportation, Austin, Texas, December 1999.

[8] “Riprap” is “a quantity of broken stone used for foundation, revetments of embankments, etc.”, from The Random House Dictionary of the English Language, Second Edition Unabridged, Random House, New York, NY, 1989, p. 1660.

[9] Interview with Zane Webb, P.E., director Maintenance Division, Texas Department of Transportation, Austin, Texas, February 7, 2000.

[10] Interview with Joe S. Graff, P.E., director Maintenance Section, Maintenance Division, Texas Department of Transportation, Austin, Texas, January 26, 2000.

[11] Interview with Zane Webb, P.E., director Maintenance Division, Texas Department of Transportation, Austin, Texas, February 7, 2000.

[12] 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, September 14, 2000.

[13] Telephone interview with Nicholas J. Masucci, President/CEO, VMS, Inc., Richmond, Virginia, June 9, 2000.

[14] Interview with Zane Webb, P.E., director Maintenance Division, Texas Department of Transportation, Austin, Texas, February 7,2000.

[15] 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, September 14, 2000.

[16] Interview with Zane Webb, P.E., director Maintenance Division, Texas Department of Transportation, Austin, Texas, February 7,2000.

[17] Telephone interview with Nicholas J. Masucci, President/CEO, VMS, Inc., Richmond, Virginia, June 9, 2000.

[18] Telephone interview with Dennis Shea, Transportation Maintenance Engineer, Virginia Department of Transportation, Richmond, Virginia, April 17, 2000.

[19] Texas Turnpike Authority, RFQ # 86-RFP5005 SH 130 Turnpike - Exclusive Development Agreement, May 9, 2000, p. 15, (ftp://ftp.dot.state.tx.us/pub/txdot-info/tta/contract/rfp5005.pdf).(Internet document.)