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Specifications For Road Construction And Maintenance With Warranty Contracts Q Li A Kumar & S De Silva Civil & Geological Engineering, RMIT University, Melbourne, Australia Summary: Several road agencies around the world are exploring the use of warranty type contracts in road construction and maintenance. International practices show that the specifications used in warranty type contracts are significantly different to the conventional approaches. In this paper, some key issues in developing specifications for warranty contracting are identified. The issues addressed include criteria for product selection, duration of the warranty, performance indicators and thresholds, quality control/quality assurance, remedial actions, conflict resolution team, warranty bond and payment, etc Keywords. Warranty, specifications, road construction, maintenance 1 INTRODUCTION Budgetary constraints and increased public awareness of road conditions have encouraged road agencies to examine alternative road construction contracting methods. In the last decade, various innovative contracting processes, such as design-build, A+B Biding, lane rental, warranty and job order contracting have been implemented in road construction industry (UTTC 2000). International practices indicate that warranty contracts can reduce on-going maintenance costs, encourage contractors’ innovation, and eventually benefit road users (Kumar 2001, Russell et al 1999). This paper is intended to address some key issues in developing specifications for warranty road construction and maintenance. Warranty is a guarantee of the integrity of a product and of the makers’ responsibility for the replacement or repair of deficiencies. Historically, warranties are widely used in manufactured products. European road agencies have used various types of warranty road contracts for almost two decades. Table 1 gives a summary of current warranty practices in several European countries. Table 1 European warranty practices Country Structural design QA/QC Warranty Warranty terms period Austria State approved Contractor 2-5 years Warranty bond Denmark State Contractor 5 years min 5% retention France Contractor Contractor 10 years Failure paid by contractor Germany Contractor (within state QA-State 4-5 years 5% retention established limits) QC-Contractor Norway State Contractor 3 years 15% warranty bond Sweden Joint Contractor 3-5 years Failure paid by contractor (Source Stephens et al 1998) In North America, the first modern warranty contract for road construction was used in the North Carolina Department of Transportation for a pavement marking project in 1987. Since then, more and more state highway agencies in North America have started to adopt this approach. Until 1997, over 240 warranty projects have been completed in the United States (Russell 9DBMC-2002 Paper 012 Page 1 et al 1999). In Australia and New Zealand, several state road agencies have started to adopt the process on a trial basis in recent years. 2 TYPES OF SPECIFICATIONS IN ROAD CONSTRUCTION AND MAINTENANCE 2.1 Method and material-based specifications Traditionally, method and material-based specifications have been used by highway agencies to control construction and maintenance quality. In theory, these specifications reduce job delays and contract claims, and contract compliance is easily determined. However, there are two major disadvantages. Firstly, it gives no opportunity and motivation for contractors to improve the construction processes or the final constructed product. Secondly, full-time presence of experienced personnel from contracting agencies is required for proper enforcement. 2.2 Quality control/quality assurance specifications Quality control/quality assurance was developed to primarily improve the method and material-based processes. As used in industrial manufacturing, the specifications, based on representative sampling and statistical acceptance procedure, outline contractors’ strategies and procedures for controlling quality. Contractors are allowed to use preferred means and method to provide the end result to meet the statistical acceptance requirements of the owners. To some extent, it can take advantages of the contractors’ experience and innovation. The constraint of quality control/quality assurance specifications is that the specifications are absolute acceptance and rejection. In reality, there is a gray area in which the product is below the acceptance criteria but still provides value to the owners. This largely depends upon the type of product. 2.3 Performance–related specifications Performance–related specifications were developed to provide an improvement over quality control/quality assurance specifications. Performance–related specifications describe the desired levels of fundamental engineering properties that are predictors of performance and appear in primary performance relationships. The specifications intend to quantify and link the properties of the materials and construction process to the performance of the end product. However, researchers (Ohrn & Schexnayder 1998) have acknowledged that the primary relationships involved in developing performance–related specifications were more complicated than anticipated. More work is required in establishing performance prediction models that can realistically quantify the effects of the variation of material properties and construction quality on the performance of the end product. 2.4 Warranty specifications Under an ideal warranty contract, the specification is expressed directly in terms of desired performance parameters and thresholds at various times throughout the warranty period. The contractors are given the freedom of materials selection and construction methods. Under current practices, warranty specifications are generally written as a combination of quality control/quality assurance specification and performance-related specification (Russell et al 2000). The details are addressed in the following sections. 2.5 End result specifications Transportation Research Board (TRB) described the end result specifications as “specifications that required the contractor to take the entire responsibility for supplying a product or an item of construction. The highway agency’s responsibility is to either accept or reject the final product or apply a price adjustment that compensates for the degree of compliance with the specifications” (Benson 1995). Generally, the specifications can be found in Design-Build-Operation, Design-Build-Operation- Transfer contracting approaches. The distinctive difference between end result specification and performance–related specification is that the former focuses on the measurements of the end product and the latter measures the indicators of material properties and quality during the construction process. Under an end result specification, the contractor takes fully responsibility in deciding what to do and how. 3 POTENTIAL BENEFITS AND CONSTRAINTS OF USING “WARRANTY” IN ROAD CONSTRUCTION AND MAINTENANCE 3.1 Potential benefits When using warranty specifications, the final product is assessed in terms of performance parameters directly related to the road users. Therefore, contractors are expected to provide a safe and usable roadway for public rather than to simply meet prescriptive standards on construction materials and methods. In comparing with traditional contracting processes, warranty contracting relocates some post-construction performance risks between the contractor and contracting agency. Therefore, a higher accountability for construction quality is passed on to the contractor. Contractors are in a better position to manage the day-to-day quality due to their direct relationship with suppliers 9DBMC-2002 Paper 012 Page 2 and subcontractors and their direct control over construction activities. They have more interest in adopting a new construction method if it offers possible competitive advantage. Theoretically, a higher quality is more likely to be achieved by using warranty contracting. Under this process, contractors have to a large extent, the freedom to select materials and construction methods. Therefore the agency is no longer simply purchasing the contractor’s labor, equipment, and material, but is also ultilising contractor’s experience and innovation. The process stimulates contractors to improve their construction techniques in order to maximise profits. Any cost savings arisen from such innovation will also be passed on to the agency and the community. International practices shows that warranty contracting decreases the demands on owner’s human and physical resources (Russell et al 2000, Stephens et al 1998). Due to contractors taking responsibility of quality control/quality assurance, there are less demands on daily in-field inspection during construction period. In post-construction stage, the situation is also improved because contractor has to repair and correct possible deficiencies during the warranty period. 3.2 Problems and constraints Current warranty specifications are the combination of quality control/quality assurance specification and performance–related specifications. Although extensive work has been done to predict performance behavior of pavements, the relationships are still being tested and verified. Theoretically, the length of warranty period is generally determined by the “time to identify the deficiencies of the end products”. However, in some cases, the determination of the duration of the contract is based on the discussion between the contracting community and the owner. The warranty periods vary from 2 to 20 years. As agencies gain more experience, the duration may be changed. Experiences in other industry sectors, such as the pipeline industry, indicate that even though warranty specifications are detailed, installation in some cases may not occur to these specifications. Therefore, the construction supervisors may still play an important role in quality assurance in critical works such as gas industry. Compared to traditional approaches, warranty processes prolong the contracting duration that does increase contracting administration tasks for both agencies and contractors. Most agencies ask for bonds or retain parts of the bid amount for the warranty works. Small contractors may be eliminated from the market due to financial incapability for warranty projects. Even for large companies, ongoing increased outstanding warranty obligations may result in difficulties to get bond for new projects. In general, warranty approach is new for the road construction industry. With the increase of warranty type contracts, its long- term impact on cost savings and performance of end product will be better identified. 4 KEY ISSUES IN DEVELOPING WARRANTY SPECIFICATIONS FOR ROADWORKS Previous research (Russell et al 1999) has proposed a framework with eleven key elements for warranty specifications. However, some important issues in developing a warranty specification should be further investigated. 4.1 Product selection criteria In current practices, the warranty products for road construction and maintenance include asphalt pavement, chip seal, micro- surfacing, concrete pavement, bridge components, bridge painting, pavement marking, etc. Generally, the product for warranty should have the following attributes (UTTC 2000): a) Performance of the product is measurable and quantifiable. The failure thresholds can be well defined in the specification. b) The warranty work is wholly controlled by the contractor, and allows the contractor to select optimal design, construction process and material. c) The factors beyond contractor’s control have minimal impact on the warranty product, or the possible defects associated can be well identified. 4.2 Duration of warranty The warranty periods vary from 2 to 20 years. It is generally accepted that five years is an acceptable evolution period to assure the performance of an asphalt product, without overburdening the contractors. Typical warranty periods for chip seal and micro surfacing are about 3 and 2 years, respectively. In some cases, the warranty period is determined by dialogue between agency and contracting community. However, care should be taken whether the agreed period is appropriate for deficiency identification. A comprehensive reviewing of past maintenance records is essential before finalising the agreement. 4.3 Warranty bond and payment Most agencies ask for bond or retain some percentage of contract amount for remedial work guarantee. In Indiana, USA, a bond is required. The amount is based on the cost to remove and replace the warranty asphalt work. Michigan, USA, keeps 9DBMC-2002 Paper 012 Page 3 10% of the contract lump sum price of the contract item as the bond. Similar to Michigan, partial contract price is withheld in Ohio, however, the percentage is varied based on the course thickness (as given in Table 2). Table 2 Percent of retainment versus course thickness in Ohio Course thickness Percentage 2.0 inches (50mm) or less 90% 2.1 to 4.0 inches (51 to 100mm) 60% 4.1 inches (101mm) or more 30% (Source ODOT 1999 b) Table 3 Michigan warranty payments versus year Period Year Payment as % of Contract LSUM 1 0 2 1 3 2 4 3 5 4 (Source MDOT 1995) According to a survey conducted by Stephen et al. (1998), the bond issue is one of the major concerns in contracting community. Small and medium size contractors believed that they would face financial difficulties with accumulative bond requirements. The bond agents also expressed concern on their long-term financial conditions from prolonged project duration. It suggests that an ongoing dialogue on bond issue between highway agencies and contracting community will be critical for successful implementation of warranty approach. Warranty payment can be made annually. Normally, the payment is made based upon an annual inspection of the pavement made by the agency to determine its condition relative to the warranty performance criteria. In Michigan, the performance payments are made within 30 days after the anniversary date of the acceptance of the pavement construction. The percentage of payment for each year is given in Table 3. 4.4 Conflict resolution team Study undertaken by Russell et al (1999) found that half of the state agencies in North America had a conflict resolution team in warranty projects. The scope of the team includes all issues related to material selection, quality control plan, distress rate, and remedial works. This team is especially useful for partial reconstruction, chip seal (spray seal), and micro-surfacing projects. In these projects, the contractor has to accept pre-existing conditions that may result in the damage of the warranty products. Indiana (USA) conflict resolution team consists of two contractor representatives, two department representatives, and a fifth person mutually agreed upon by both parties. In case of dispute, the team will give a final recommendation by a majority vote in which each member has an equal vote. The cost for the fifth member will be equally shared between the agency and the contractor. 4.5 Performance indicators and thresholds The selection of performance parameters is important in developing a warranty specification (Kumar 2001). For road users, ride quality and safety are two major concerns. The agency, in addition, expects that the products contribute to low life-cycle cost. Performance indicators should include the above expectations. The performance indicators generally fall into three categories: safety, ride quality, and quality performance. Skid resistance is generally accepted as an appropriate safety measure for pavement running surface. Standard methods such as the friction number test, have been used world wide. One widely used measure of ride quality is Present Serviceability Index (PSI). The drawback of this approach is that it is based on subjective opinion of the evaluation panel. With the promotion of the World Bank models, there is a growing interest in the highway industry for using International Roughness Index (IRI). This objective measure can be acquired by standard equipment at highway travel speed. 9DBMC-2002 Paper 012 Page 4
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