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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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Suggested Citation:"Appendix B - ACT Descriptions." National Academies of Sciences, Engineering, and Medicine. 2022. Systematic Approach for Determining Construction Contract Time: A Guidebook. Washington, DC: The National Academies Press. doi: 10.17226/26537.
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B-1   A P P E N D I X B ACT Descriptions ACT-1: A+B What Is It? A+B (or cost-plus-time) has become one of the most widely used ACTs for shortening construction time, especially in time-critical projects, and is often accompanied with I/D provisions for meeting the accelerated project delivery requirement and minimizing traffic delays. In A+B contracting, the winning bidder is the group that turns in the lowest total combined bid for the cost (A) and time (B) required to complete the project. When to Use It? The use of A+B is a desirable alternative contracting strategy when agencies are trying to accomplish early project completion (Actis et al. 2014) and takes advantage of contractors’ ingenuity by utilizing their realistic estimates of construction schedule. Why Not to Use It Alone? The A+B bidding strategy is very common within receiving agencies, especially in local urban districts, and has become one of the most widely used alternative contracting techniques for shortening construction time, especially in time-critical projects, and is often accompanied with I/D provisions for meeting the accelerated project delivery requirement and minimizing traffic delays (Choi et al. 2011). However, one notable disadvantage of A+B is that contractors often intentionally bid low on time and costs, which later results in the failure to complete the project on time and on budget (Chini et al. 2017; Choi et al. 2011; Christiansen 1987). A+B implementation experiences to date indicate that the effectiveness of A+B contracting is debatable largely due to inherent inaccuracy in letting contractors specify project duration during the bidding. Thus, it is not recommended to implement A+B bidding alone for transportation projects. What Does It Do? In A+B contracting, the winning bidder is the one who turns in the lowest total combined bid for cost (A) and time (B) required to complete the project. In symbols, TCB = A + B (B-1) B = CT X DRUC (B-2)

B-2 Systematic Approach for Determining Construction Contract Time: A Guidebook where TCB = project total combined bid price in $; A = project bid price for construction cost in $; B = project bid price for time-dependent costs in $; CT = contract time in the number of working (or calendar) days; DRUC = daily road user delay cost in $ per day. How to Use It? In sum, the B value of the contract time determined by the agency serves as the maximum allowable contract time and must be specified in the PS&E packages. The contractor’s bid for the B value establishes the contract time in calendar days after accounting for weather, holidays, and other non- workdays. The three primary reasons for using calendar days instead of workdays in A+B bids are: • It reduces disagreements regarding when a day should not be counted due to inclement weather, because all calendar days are counted. • It encourages the contractor to find ways to make up for days lost to weather. • It allows for the contractor to innovate in order to complete work during the winter months. In A+B bidding, fixed completion date contracts are discouraged because the number of actual days the contractor bids and the completion date are likely to conflict. References Actis, C., Unkefer, D., and Lewis, J. (2014). Alternative Contracting Methods: Alternative Technical Concepts. FHWA, U.S. Department of Transportation. Chini, A., Ptschelinzew, L., Minchin Jr., R. E., Zhang, Y., and Shah, D. (2017). “Industry attitudes toward alternative contracting for highway construction in Florida.” Journal of Management in Engineering, 34(2), 04017055. Choi, K., Kwak, Y. H., Pyeon, J.-H., and Son, K. (2011). “Schedule effectiveness of alternative contracting strategies for transportation infrastructure improvement projects.” Journal of Construction Engineering and Management, 138(3), 323–330. Christiansen, D. L. (1987). “An analysis of the use of incentive/disincentive contracting provisions for early project completion.” Transportation Management for Major Highway Reconstruction, Special Report, 212, 69–76.

ACT Descriptions B-3   ACT-2: Incentive/Disincentive (I/D) What Is It? I/D provisions use a monetary award to incentivize contractors to accelerate the project coupled with monetary penalties to discourage contractors from delaying the project. The I/D may be used as a stand- alone method or combined with other alternative contracting strategies, such as the aforementioned A+B, to accelerate project schedules. When to Use It? I/D provisions can be used when an agency needs to accelerate work and reduce project duration to reduce the negative impact from the construction work. According to guidelines developed by Jaraiedi et al. (1995), I/D is appropriate for projects with the following conditions: • Construction will cause severe economic impact on local businesses. • Traffic will be severely impacted by the construction. • Lengthy detour or a detour on substandard road is unavoidable. • Emergency services are impaired to an area for a prolonged duration. • Construction will increase the safety risks of the road users and/or construction crews. Why Not to Use It Alone? Despite the effectiveness of I/D on accelerating the project, poorly determined contract time could result in extra costs for the agency that exceed its benefit. Overestimation of contract times can lead to contractors receiving incentive fees with little effort. This practice resulted in a situation in which 99 percent of the contractors in 35 states who contracted with I/D provisions received an incentive bonus, which supports the assertion that overestimation of contract time is prevalent. How to Use It? Incentives and disincentives are assessed on a daily basis and are established by the agency based on the estimated road user cost (RUC) and other costs from prolonged construction. The amount of I/D is usually a constant daily value, though some state DOTs, such as Florida DOT, also have escalating daily I/D values. References Jaraiedi, M., Plummer, R. W., and Aber, M. S. (1995). “Incentive/disincentive guidelines for highway construction contracts.” Journal of Construction Engineering and Management, 121(1), 112–120.

B-4 Systematic Approach for Determining Construction Contract Time: A Guidebook ACT-3: A+B+I/D What Is It? A+B+I/D is A+B bidding with I/D provisions. The winning bid is the one with the lowest cost-plus-time bid, and the contractor will be rewarded if the project can be completed earlier than the project duration in the bid and penalized if the project is delayed over this project duration. When to Use It? The best-use scenario of A+B+I/D contracting technique is similar to A+B and I/D, which is when an agency needs to accelerate the work and reduce the project duration. It is more applicable than both A+B bidding alone and conventional low-price bidding with I/D provisions. Pros and Cons Following is a list of pros and cons of the A+B+I/D contracting method compared with the conventional contracting method: 1. Pros • Reduces contract time and construction-induced delays with almost no addition in cost. • Encourages contractors to leverage innovative means of reducing contract time with accelerated production rates. • Enables contractors to involve careful front-end planning, and contract time is more realistic in comparison to the contract time set by the contracting agency. • Lowers agency risks by transferring them to the contractor with disincentive clauses. • Eliminates the selection of inefficient contractors. • Results in higher project bids because contractors expect to receive incentive bonuses, an advantage for agencies trying to reduce costs to the public. 2. Cons • Has potential to increase the frequency and magnitude of contract change orders, which can result in substantial delays in contract time. Therefore, it is crucial to identify any potential risks associated with third-party conflicts (e.g., design uncertainties, ROW, utilities) before going into the procurement stage, and the project must be relatively free of the third-party conflicts. • Has potential to increase contract time and cost to the contracting agency if not effectively implemented.

ACT Descriptions B-5   Why Use It? Because I/D can be a supplement to some disadvantages of A+B because I/D provisions can motivate contractors to meet the schedules (Choi et al. 2011), A+B bidding with I/D provisions has become one of the most widely used alternative contracting techniques for shortening construction time, especially for time-critical projects. Generally, A+B combined with I/D provisions is known to increase costs for both agencies and contractors, but agencies benefit from construction time saved for road users, and the contractors benefit from incentive bonuses. In fact, contract time determination (CTD) for this A+B+I/D best-value procurement contracting method has relied to a great extent on the experience and judgment of the contracting agency engineers tasked with estimating the project duration, road user costs, and realistic I/D rates (Choi et al. 2016). How to Use It? The following general guidelines are recommended when determining contract times for A+B+I/D bidding: • Accurate estimation of contract time during the project scoping phase is of the utmost importance. • Contract times should be determined after considering accelerated production rate assumptions that account for any additional resource commitments necessary to achieving early completion of the contract work. • Use of historical production rates and innovative scheduling tools (e.g., CA4PRS) should be considered when conducting time-cost trade-off analyses to determine the most feasible and efficiently balanced construction and traffic control options. • The value of the daily road user cost (DRUC) should be established by the receiving agency and the estimated DRUC incorporated into the B value in the A+B bidding. • It is important to adjust the calculated DRUC downward to establish a realistic DRUC, typically ranging from 50 percent to 100 percent of the original estimate, with some variation in cases where the estimated DRUC is fairly high. • The DRUC should not exceed the liquidated damages; otherwise, it may be more economical to pay the liquidated damages rather than finish within the project duration bid. • The contract time should be determined by the receiving agency because it serves as the maximum allowable time for the project. It establishes a baseline for monetary incentives. • When A+B is used in conjunction with I/D provisions, the intent is for the contractor to bid a reasonably shorter B duration to win the project. It is important for district engineers to determine a reliable B contract time in order to ensure that contractors receive the appropriate amount of compensation for their additional effort. • The maximum number of allowable working (or calendar) days should be specified in the PS&E packages in order to lessen the impact that the B value has on competitive bidding. • Use of A+B bidding as a stand-alone method to achieve interim milestones should be avoided, because there are more effective methods for achieving this goal, such as establishing I/D. • When the contract time is defined in calendar days, the project duration estimate should also consider typical weather conditions during the time the project is executed.

B-6 Systematic Approach for Determining Construction Contract Time: A Guidebook • When coupled with I/D provisions, determination of the maximum time allowed for the project during the advanced planning stages should be based on CPM methods, with the agency assuming accelerated production rates. • In A+B+I/D bidding, fixed completion date contracts are discouraged because the number of actual days the contractor bids and the completion date are likely to conflict. References Choi, K., Kwak, Y. H., Pyeon, J.-H., and Son, K. (2011). “Schedule effectiveness of alternative contracting strategies for transportation infrastructure improvement projects.” Journal of Construction Engineering and Management, 138(3), 323–330. Choi, K., Lee, H. W., Bae, J., and Bilbo, D. (2016). “Time-cost performance effect of change orders from accelerated contract provisions.” Journal of Construction Engineering and Management, 142(3), 04015085.

ACT Descriptions B-7   ACT-4: No-Excuse Bonus (NEB) What Is It? A no-excuse bonus (NEB) provision offers a contractor a substantial bonus if the contractor can complete the project or reach a project milestone by a calendar date predetermined by the agency. The “no excuse” means that no time extensions are awarded for unforeseen conditions or inclement weather except for catastrophic events or reasons directly attributed to the agency. When to Use It? The NEB contracting method should be used with caution and is only recommended when the following conditions are met: • Project is an emergency with tight time constraints that conventional contracting methods may not be able to achieve. • Project completion before a specific time frame will provide substantial benefit to the public, either as saved road user cost (RUC) or other reduced public inconveniences. • Project has a large budget, high complexity, and very high traffic volume. Pros and Cons The following is a list of pros and cons of the NEB contracting method in comparison to other contracting methods: 1. Pros • Provides stronger incentives to ensure the acceleration of construction. • Eliminates potential disputes by requiring contractors to waive the rights to claim extensions for inclement weather or other unforeseen risks. • Forces contractors to have better coordination and/or use more innovative techniques. 2. Cons • Requires higher incentives than I/D to attract bids. • Increases agency costs. • Might cause more quality issues due to the tight schedule. • Strains agency-contractor relations. Why Use It? The purpose of this contracting method is to encourage contractors to complete the project before a critical calendar date, after which traffic will be severely impacted or catastrophic inconveniences will occur if the project is still not finished. Typical examples of NEB critical dates are dates before major traffic-generating public events, major holidays, or school openings.

B-8 Systematic Approach for Determining Construction Contract Time: A Guidebook How to Use It? In many states, the NEB contracting has no disincentives tied to the delay of completion, which raises concerns that contractors will reduce their efforts at the point when they realize they will not meet the deadline (Chini et al. 2017). Thus, it is recommended that NEB be combined with I/D to deter schedule delay. References Chini, A., Ptschelinzew, L., Minchin Jr., R. E., Zhang, Y., and Shah, D. (2017). “Industry attitudes toward alternative contracting for highway construction in Florida.” Journal of Management in Engineering, 34(2), 04017055.

ACT Descriptions B-9   ACT-5: Lane Rental (LR) What Is It? Lane rental (LR) provisions add a rental fee as disincentive to the contractors in order to minimize road user impacts. The fee is assessed based on the sum of time that each lane was obstructed or closed due to the construction. When to Use It? LR is more appropriate for a project when the following conditions are met: • Lane closure will cause severe traffic congestions (e.g., in a major urban area). • Lane closure will cause severe economic impact on local businesses. • Project has low risks of third-party conflicts (ROW, utility, etc.). • Project scope is unlikely to change, and design uncertainty is low. Pros and Cons LR has many similarities with I/D with regard to the best-use scenarios. However, though comparable to I/D, there are a few differences for the LR provisions: • Contractors are granted more flexibility on how to balance reducing traffic impact with accelerating construction. • The focus is more on reducing traffic impact than accelerating the project schedule. • LR requires extra oversight to document lane closure durations. Why Use It? The intent of LR is to encourage contractors to optimize their work schedule to minimize the impact to traffic, both in terms of reducing the number of lanes closed and the duration of each closure, while providing the flexibility to allow contractors to produce the best-value bid proposal using their ingenuity; if the price of a bid with more lane closures is far cheaper than the extra RUC, it might be a better solution. How to Use It? During the bidding process, the contractor determines the number of lane closures required to complete the work and includes this lane closure plan in the bid proposal. The unit lane rental amount should be estimated by state DOTs based on daily or hourly road user costs and can be varied between daytime and nighttime, as well as weekday and weekend, to reflect the fluctuation of the traffic demands. The agency can also set a maximum number of lane closures allowed using special provisions to provide an upper limit on the traffic impact to the public.

Abbreviations and acronyms used without de nitions in TRB publications: A4A Airlines for America AAAE American Association of Airport Executives AASHO American Association of State Highway Officials AASHTO American Association of State Highway and Transportation Officials ACI–NA Airports Council International–North America ACRP Airport Cooperative Research Program ADA Americans with Disabilities Act APTA American Public Transportation Association ASCE American Society of Civil Engineers ASME American Society of Mechanical Engineers ASTM American Society for Testing and Materials ATA American Trucking Associations CTAA Community Transportation Association of America CTBSSP Commercial Truck and Bus Safety Synthesis Program DHS Department of Homeland Security DOE Department of Energy EPA Environmental Protection Agency FAA Federal Aviation Administration FAST Fixing America’s Surface Transportation Act (2015) FHWA Federal Highway Administration FMCSA Federal Motor Carrier Safety Administration FRA Federal Railroad Administration FTA Federal Transit Administration GHSA Governors Highway Safety Association HMCRP Hazardous Materials Cooperative Research Program IEEE Institute of Electrical and Electronics Engineers ISTEA Intermodal Surface Transportation Efficiency Act of 1991 ITE Institute of Transportation Engineers MAP-21 Moving Ahead for Progress in the 21st Century Act (2012) NASA National Aeronautics and Space Administration NASAO National Association of State Aviation Officials NCFRP National Cooperative Freight Research Program NCHRP National Cooperative Highway Research Program NHTSA National Highway Traffic Safety Administration NTSB National Transportation Safety Board PHMSA Pipeline and Hazardous Materials Safety Administration RITA Research and Innovative Technology Administration SAE Society of Automotive Engineers SAFETEA-LU Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (2005) TCRP Transit Cooperative Research Program TDC Transit Development Corporation TEA-21 Transportation Equity Act for the 21st Century (1998) TRB Transportation Research Board TSA Transportation Security Administration U.S. DOT United States Department of Transportation

Transportation Research Board 500 Fifth Street, NW Washington, DC 20001 ADDRESS SERVICE REQUESTED ISBN 978-0-309-09463-4 9 7 8 0 3 0 9 0 9 4 6 3 4 9 0 0 0 0

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Contract time affects the cost of construction, traffic disruption and public inconvenience, the economic impact of projects to the surrounding areas, and schedule risks.

The TRB National Cooperative Highway Research Program's NCHRP Research Report 979: Systematic Approach for Determining Construction Contract Time: A Guidebook provides state departments of transportation guidance for producing consistently credible, reliable, and defensible contract time estimates.

Supplemental to the report is NCHRP Web-Only Document 298: Developing a Systematic Approach for Determining Construction Contract Time, a spreadsheet-based Toolkit, a Technical Memorandum, and a Presentation.

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