Indefinite Delivery/Indefinite Quantity project selection framework using stochastic techniques

The use of Indefinite Delivery/Indefinite Quantity (IDIQ) contracting by state transportation agencies for the procurement of repetitive construction and maintenance services has been growing during the last few years. An IDIQ contract is a multi-project, multi-year mechanism to permit an agency to essentially hire a contractor on a stand-by/as-needed basis to provide a specified set of construction services. A study conducted for the development of the National Cooperative Highway Research Program (NCHRP) Synthesis 473: IDIQ Contracting Practices found that at least 32 departments of transportation (DOT) are using IDIQ contracts for the procurement of construction and/or maintenance projects. As part of the development of Synthesis 473, surveys were sent to all state DOTs asking about their IDIQ contracting practices, their perceived benefits and drawbacks, and the challenges faced during the implementation of this alternative contracting method. The analysis of survey responses showed that state transportation agencies are satisfied with the benefits they are obtaining from IDIQ contracts, but they do not know whether or not they are paying a premium for its benefits. A close look at the issue revealed that the agencies do not have the tools to reliably quantify the cost implication of using IDIQ contracting. This dissertation constitutes the first research initiative intended to address this issue through the development of an IDIQ project selection framework based on the comparison between the estimated costs for a given project if procured under IDIQ versus the costs if traditional Design-Bid-Build (DBB) techniques are used. The proposed framework combines a qualitative assessment of a candidate project’s scope with a stochastic analysis of its construction costs. Once a transportation project’s scope is deemed a suitable candidate for IDIQ contracting (qualitative assessment), the final decision is made using a comparison between the estimated cost of the IDIQ project and its cost if procured through traditional DBB methods (stochastic analysis). Thus, the decision making framework proposed in this study provides public transportation agencies with a tools to both identify and justify delivering a given scope of repetitive work using IDIQ based on the agency’s perception of a reasonable cost for the benefits offered by IDIQ contracting. This dissertation also describes research efforts conducted to identify opportunities to improve IDIQ contracting procedures currently in use by state DOTs to increase budget control and optimize project construction costs. It should be noted that many of the findings of this research have already been implemented by the Minnesota DOT and are currently in use in the field