Bob G McCullouch

An Analysis of Cost Overruns and Time Delays of INDOT Projects

A commonality among state Departments of Transportation is the inability to complete projects on time and within budget. This project assessed the extent of the problem of cost overruns, time delays, and change orders associated with Indiana Department of Transportation (INDOT) construction projects, identified the reasons for such problems, and finally developed a set of recommendations aimed at their future reduction. For comparison purposes, data from other states were collected and studied using a questionnaire instrument. The analysis of the cost overrun, time delay and change order data was done using an array of statistical methods. The literature review and agency survey showed that time delays, cost overruns and change orders are generally due to factors such as design, unexpected site conditions, increases in project scope, weather conditions, and other project changes. The results of the agency survey showed that with regard to the problem of cost overruns, INDOT has an average rank compared to other states. Between 1996 and 2001, the overall rate for cost overrun amounts for INDOT projects was determined as 4.5%, and it was found that 55% of all INDOT contracts experienced cost overruns. It was determined that the average cost overrun amount and rate, as well as the contributory cost overrun factors differ by project type. The average cost overrun rates were as follows: bridge projects -- 8.1%, road construction -- 5.6%, road resurfacing -- 2.6%, traffic projects -- 5.6%, maintenance projects -- 7.5%. With regard to time delays, it was found that 12% of all INDOT contracts experience time delays, and the average delay per contract was 115 days. With regard to change orders, the study found that the dominant category of reasons for change orders is “errors and omissions”, a finding which is suggestive of possible shortcomings in current design practices The statistical analyses in the present study showed that the major factors of cost overruns, time delays, and change orders in Indiana are contract bid amount, difference between the winning bid and second bid, difference between the winning bid and the engineer’s estimate, project type and location by district. Besides helping to identify or confirm influential factors of cost overruns, time delay and change orders, the developed regression models may be used to estimate the extent of future cost overruns, time delay and change orders of any future project given its project characteristics and any available contract details. Such models can therefore be useful in long-term budgeting and needs assessment studies. Finally, the present study made recommendations for improving the management of projects and the administration of contracts in order to reduce cost overruns, time delays and change orders.

Cost Savings Analysis of Performance-Based Contracts for Highway Maintenance Operations

Highway agencies around the world are undergoing major changes in their traditional maintenance practices, including the privatization of entire sections of highway routine maintenance activities. Performance-based contracts (PBC) are an option in such privatizing efforts. This paper presents a methodology to estimate the likelihood and amount of cost savings associated with the application of PBC for highway maintenance operations. Using data on maintenance contracts from around the world, we develop models that can be used to compare several contracting methods and include variables such as contract duration, activity type, and contract size. We find that large projects with strong competition, long duration and extension periods, long outsourced road sections that incorporate crack sealing, pothole repair, illumination repair/maintenance, and mowing activities, favor outsourcing under PBC. Our methodology can be useful to transportation agencies for making decisions about the use of PBC and other methods of maintenance outsourcing at the preplanning phase.

Analyzing the Duration and Prolongation of Performance-Based Contracts Through Hazard-Based Duration and Zero-Inflated Random Parameters Poisson Models

Performance-based contracts (PBCs) for roadway maintenance are emerging as a promising contracting approach that offers highway agencies enhanced project control and greater assurance of accountability and product quality. The duration of a PBC is typically longer than that of a traditional contract. Under a PBC, the contractor bears greater risk and responsibility for the final product and is obliged to undertake any required maintenance after the product is completed. A PBC period is typically considered prolonged if both the road agency and the contractor agree that the contract should be extended beyond the original completion date. This paper examines the relationships between PBC duration and prolongation on one hand, and the factors that affect these outcomes on the other hand, while accounting for unobserved heterogeneity. For the PBC duration model, a number of hazard-based function types are estimated. The Weibull model with gamma heterogeneity is found to provide the best fit. For the PBC prolongation model, a zero-inflated random parameters Poisson model is developed to estimate the probability and extent of PBC prolongation. Random variations in the parameter estimates are duly investigated. The size of the contract and whether the contract scope of work includes certain maintenance activities, among other factors, are found to influence the duration and prolongation of PBCs. This paper also computes and interprets elasticities and marginal effects, to shed more light on the individual effects of the influential variables.

Influence of Highway Project Characteristics on Contract Type Selection: Empirical Assessment

The selection of appropriate type of contract for a highway maintenance project can be influenced by project attributes such as the expected cost and duration. However, the expected project cost and planned duration depend on other project attributes and also depend on each other. These simultaneous relationships complicate the identification of the appropriate contract for a highway maintenance project. While previous research has provided insight into the factors that affect project cost and duration, the validity of the findings may have been stymied by a lack of explicit consideration of the simultaneous relationships between project duration and cost. In this paper, we develop a framework based on a three-stage least-squares model to identify the most appropriate type of contract given the project’s attributes while explicitly accounting for the simultaneity between project cost and duration. The framework can also be used to estimate the expected contract duration and cost on the basis of the projec...

AN INITIAL EVALUATION OF DESIGN-BUILD HIGHWAY PROJECTS PERFORMED BY THE INDIANA DEPARTMENT OF TRANSPORTATION

Design-Build has been an effective contracting method in the private and public arenas. State departments of transportation (DOTs) have used this contracting method on various projects for a variety of reasons. The Indiana Department of Transportation (INDOT) has used this contract delivery method on a few projects with mixed responses from those involved in the process. INDOT therefore felt that an evaluation of the Design-Build program was appropriate to determine its future use in Indiana. This report gives an historical perspective of Design-Build and how the program has been received and perceived by INDOT; describes the projects survey and the data collected from the designer and contractor perspectives; relates the experiences of other DOTs with Design-Build; provides a somewhat limited comparison with the Design-Bid-Build approach; and makes recommendations for INDOTs future Design-Build practices.

Level of Service Program for INDOT Operations

The Joint Transportation Research Program serves as a vehicle for INDOT collaboration with higher education institutions and industry in Indiana to facilitate innovation that results in continuous improvement in the planning, design, construction, operation, management and economic efficiency of the Indiana transportation infrastructure. NOTICE The contents of this report reflect the views of the authors, who are responsible for the facts and the accuracy of the data presented herein. The contents do not necessarily reflect the official views and policies of the Indiana Department of Transportation or the Federal Highway Administration. The report does not constitute a standard, specification or regulation. INDOT has used an inspection program named Maintenance Quality Survey (MQS) to perform a state‐wide inspection of their roadway assets, right‐of‐way to right‐of‐way. This inspection requires two two‐person teams approximately 18 months to complete as it determines the condition of individual features and produces a grade for each one. Results from this program were used to define a work program. INDOT uses the software Work Management System (WMS) for their operations. A WMS feature that has not been utilized is the Level of Service (LOS). LOS establishes performance standards for activities and then uses an inspection program to evaluate compliance with these standards. The objective of this project was to develop a LOS program at INDOT that utilizes WMS. One key component of this program is a statistical based inspection program that inspects and grades random roadway segments. The development of this inspection program required determining the number of samples per sub‐district, the features to inspect, defining the pass/fail criteria for each feature, and field training and testing. Another key part is to develop the required WMS LOS data tables. Outcomes from the LOS program will be an improved inspection program, a data driven tool that can be used to perform LOS analyses resulting in improved work planning. Looking at operation activities from a LOS perspective provides opportunities to balance resources better and improve the planning aspect. One benefit being experienced with the implementation of the inspection program is inspection personnel time savings in collecting the LOS data. Introduction In 2008 the JTRP study SPR-3130, Performance Based Contracting for Roadway Maintenance Operations, revealed the state agencies that have developed a Level of Service (LOS) program benefit. A LOS program can evaluate and determine maintenance performance values for the components of the Indiana Department of Transportations road network. In other …

AN EVALUATION OF THE COST-EFFECTIVENESS OF WARRANTY CONTRACTS IN INDIANA

In a bid to ensure cost-effective highway construction practices, highway agencies constantly seek ways to accelerate project design and delivery through implementation of innovative contracting and procurement practices. The concept of warranties, which is one of such promising practices, involves a shift of the burden of construction quality control, product performance and product maintenance from the owner to the contractor. As such, warranty projects are expected to enhance product quality and service life, and ultimately, reduced life-cycle cost. The expected benefits of warranty projects, however, could be offset by their historically higher construction costs. It is therefore necessary to evaluate the costs and benefits of warranty contracts vis-a-vis traditional contracts so that the more cost-effective practice can be identified. The present study reviewed the state of warranty practice in highway pavement construction in Indiana and elsewhere, collects data on warranty and traditional contracts, and carried out statistical analyses to evaluate the relative costs, effectiveness and cost-effectiveness of these two alternative contracting practices. Effectiveness was measured in terms of average pavement condition and pavement service life, and costs were expressed in annualized costs per lane-mile. All costs were adjusted for inflation and economy of scale. The study confirmed that the warranty contracts generally have higher agency costs than traditional contracts, but produced pavements that were superior to their traditional counterparts in terms in average pavement condition (rutting, cracking and roughness) and service life. It was determined that the typical projected treatment life of warranty contract pavement was 25 years while similar traditional contract pavements had a service life of 15 years. Also, the average construction period and resulting workzone user costs were lower for warranty contract pavements. The medium-term cost-effectiveness analysis showed that when the analysis is carried out over a relatively short period of 5-years (the typical warranty period), the warranty pavement contracts are not as cost-effective as their traditional counterparts. However, the long-term cost-effectiveness analysis (which used treatment service life as the analysis period) clearly indicated that the warranty contracts are generally more cost-effective than traditional contracts. The study results suggest that the superiority of warranty projects over traditional projects is more discernible when both cost and effectiveness are viewed over the entire life of the pavement treatment.