Michigan Demonstration Project: Performance Contracting for Construction on M-115 in Clare County, MI

Federal Highway Administration2013PDFTech ReportRao, ShreenathMallela, JagannathHoffman, GaryApplied Research Associates, Inc.United States. Federal Highway Administration. Office of InfrastructureLord, ByronHuie, MaryUnited States. Federal Highway AdministrationMichiganUnited StatesEconomic analysisDisincentivesContractingMetrics (Quantitative assessment)State highwaysFinal ReportAs part of a national initiative sponsored by the Federal Highway Administration under the Highways for LIFE program, the Michigan Department of Transportation (MDOT) was awarded a $1 million grant to demonstrate the use of innovative technologies for construction contracting using performance contracting for construction (PCfC). This report documents the contracting methods used to encourage and reward contractor innovation on construction of M-115, a two-lane rural highway in Clare County near Mt. Pleasant, MI. This report includes contracting details of the construction project with specifics on the incentives and disincentives MDOT offered to encourage the contractor to meet or exceed MDOT requirements for performance measures such as early opening to traffic, early construction and cleanup completion, pavement performance, ride quality, worker safety during construction, reduced work zone crashes, and reduced motorist delays. The report also describes the project construction and steps the contractor took to earn incentives. Details of the experiences of MDOT and the contractor are also included. MDOT\u2019s overall conclusion was that the project was successful and the agency would use performance-based contracting on future projects when appropriate. The as-constructed roadway added $1,369,072 to the initial cost of the project. The incremental initial costs after considered user-costs was $690,226. However, the warranty resulted in the contractor constructing a roadway with potentially improved long-term performance as compared to that specified in the request for proposal (RFP). The life-cycle cost analysis (LCCA) showed that the baseline project will cost MDOT and the users of the roadway $7,801,876 in terms of net present value (NPV) based on a 20-year analysis period. By comparison, the as constructed project will cost $6,150,201 in terms of NPV, for a total savings of $1,651,675. Through the use of PCfC, the project was completed with minimal disruption to the traveling public, and provided MDOT with a safer, smoother pavement with a 5-year warranty, and lower life-cycle costs.104