U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
202-366-4000
The traditional design-bid-build delivery system in the United States has generated construction specifications with detailed quality control requirements. Quality assurance historically has been performed by State highway agency staff. Only recently have contractors been allowed to develop their own quality control plans. The scan team explored how international organizations develop and execute formal quality control plans, and specifically who is responsible for the plans. The primary method used to assure that materials meet contract requirements was also explored. The scan team found that quality control and quality management plans are being developed primarily by the contractor. There is a heavy reliance on International Organization for Standardization (ISO) methods, and contractors can be rated on their quality management plans before project award or through postproject reviews. Most countries pointed to their use of qualifications and past performance in procurement as remedies for dealing with substandard work.
The scan team found that quality control and quality management plans are developed primarily by the contractor. All countries except Germany noted that contractors have a significant level of input into the quality plan development. In Germany, the owner specifies the required quality control in the contract in a similar fashion to the majority of U.S. highway agencies. All of the other countries require ISO 9000 (or 9001) certification, and contractors must develop the project quality plans in conjunction with their companies’ certified quality procedures.
Ontario has evolved toward use of more contractor quality control since the 1990s and, as previously noted, also relies on consultants for administering quality assurance. The evolution has involved prioritization and increasing responsibility of the contractors. Initially, Ontario required specific quality control plans for each contract, which was described in a comprehensive specification. However, this was very labor intensive to develop and review. Later, Ontario evolved to a generic quality control plan and required an appendix to address specific project requirements. Now it requires contractors to have a quality control (contract compliance) plan for prequalification.
In the Netherlands, and similarly in Finland, the contractor is responsible for developing its own quality plan in accordance with its ISO-certified processes. Only the table of contents is prescribed in the contract documents. Each contractor submits a quality control plan. The quality plan of the selected contractor needs approval by Rijkswaterstaat before the design or building process starts. Contractors are responsible for showing how the completed work meets the quality levels (prove the quality). Daily records are available for review, as well as other project quality documentation. Copies of the documentation are provided upon completion of the work.
The Scottish Executive has the contractor propose its quality plans in the procurement of its design-build projects. The Scottish Executive provides a specimen design that includes the basic footprint for the project. The contractor is selected on the basis of the quality of the proposal meeting a prespecified threshold, the lowest price, and an evaluation of how the time taken for construction impacts the public. Contractors are required to be ISO certified. They must develop and comply with an established quality control plan. They also require the subcontractors and suppliers to provide an accepted quality control plan. The contractor’s designer also observes the work and certifies that the completed work complies with the design requirements.
Contractors in England are also required to be ISO certified. They are required to use both an internal business quality assessment process and to establish a project-specific quality control process. The Highways Agency uses the Capability Assessment Tool (see Chapter Two) rating, which is based on the technical and financial capabilities and previous experience for each contractor. The DA can observe all quality control activities and documentation prepared by the contractor. The DA does not duplicate the testing. The contractor provides a certificate of completion to the DA that documents that the work is acceptable and meets design requirements.
PennDOT Material Lab ISO Certification Program
The Pennsylvania Department of Transportation obtained ISO 9000 certification of its materials testing laboratory in April 2002, followed by the construction unit of Engineering District 10 in June 2002. Several maintenance units at district engineering offices have attained ISO 14001 certification, and all districts expect to be certified by the end of 2005. These achievements are the first steps to raise the awareness of certification and quality in the industry. PENNDOT is now considering certifying other areas, such as additional district construction and design units, and is also looking at certifying the asphalt pavement supply line process. DOT hopes to expand this quality initiative across all partners to incorporate more accountability and capability to produce a high- quality end product.
For more information on PennDOT’s ISO certification program, visit PENNDOT.
Materials testing generally follows the contractor’s proposed quality plan and uses a variety of methods, including acceptance (assurance) tests completed as work progresses or as end result measurements to assure that materials meet contract requirements. Germany has the most prescriptive testing procedures, while England and Scotland have the most end result-based procedures.
In Germany, the State periodically observes contractors’ quality control activities. The quality control activities are specified in the bidding documents. Suppliers must certify their products. A contractor must supply a complete set of documentation of its testing and certification to the State. Also, the contractor generally must warrant the work for 5 years. If defects are identified, the contractor must perform an investigation to determine the cause and generally is responsible for any defects.
Ontario uses a combination of end result and acceptance tests as work proceeds. Acceptance is based on a contractor’s quality control tests. Most tests are performed during the process rather than on the completed work. Generally, quality assurance test results are not immediately shared with the contractor. Officials said this is to avoid contractors depending on quality assurance test results to control their process. The Ministry of Transportation in Ontario uses a private lab to perform quality assurance testing. The ministry tenders for lab services by at least two test labs per provincial region. These are 3-year tenders to provide continuity. The contractors also use qualified labs for the quality control tests. A reference lab is available if differences in test results exceed an established threshold.
In the Netherlands and Finland, contractors are primarily responsible for ensuring that the materials meet the required quality levels, and they provide certifications and test results. Tests are conducted as work progresses. All work is subject to owner review, but separate tests normally are not conducted. The set of checks by the owner consists of a mixture of system checks, process checks, and product checks. Most tests are standardized and the contractor has to use the standards. Most standards are legally enforceable. A mix of acceptance tests can be implemented, mostly during the work progress.
In Scotland and England, the contractor performs the required tests at the frequency required by the tender documents and documents the results. The documentation is available for review by the PM or ER in Scotland and the DA or DR in England. Any nonconforming results or work must be reported on a noncompliance report.
NCHRP 10-58(02)
The National Cooperative Highway Research Program is conducting a study on using contractor-performed tests in quality assurance (NCHRP 10-58(02). The objective of the study is to develop procedures to assist State DOTs in effectively using contractor-performed tests in the quality-assurance process. The final report is due in 2006. For more information on the project, go to Final Report
When asked about the remedies for nonconforming work (not meeting a standard) and substandard (unsatisfactory) work, most of the countries pointed to their use of qualifications and past performance in procurement (see Chapter Two). However, a few specific examples for dealing with these items in the course of the project were cited, the primary method being to withhold payment.
Ontario uses a combination of contract reductions for price adjustment based on quality, and contract administrator-determined reductions for nonconforming work. The ministry reserves the right to have unsatisfactory work removed. All work in Ontario has a 1-year warranty, but officials said this is not often invoked.
In Germany, the construction supervisor observes work, noting and documenting deficiencies. The work is determined to be acceptable before payments are made. Payment deductions and charges for abatement are allowed up to the extent of complete new construction.
In the Netherlands and in Finland, the contractor is responsible for rebuilding the work to bring it into conformance. Negative price adjustments are possible, but rarely used. Instead, these agencies prefer to rely on their extensive use of quality criteria in their prequalification and procurement programs.
In Scotland, nonconformities are reported on nonconformance reports and must be addressed before project completion. The Scottish Executive does not dictate how contractors must correct deficiencies, but it assures that the deficiencies are addressed. The Highways Agency system is similar for design-build projects, with the contractors’ incentive being to maintain their KPI score so they will be offered future work. For DBFO projects, the emphasis is on proactively addressing all concerns early in a partnering environment. The funding companies will get involved quickly if the DA indicates performance issues are occurring. The Highways Agency also has a formal system of actions, notifications, and remedies.
The scan team was particularly interested in methods for identifying, quantifying, and documenting contract change impacts on time, costs, and quality of the following:
Given the complexity of designing and constructing a highway project, contract changes are virtually inevitable. Managing the capital construction of highway projects requires the coordination of a multitude of human, organizational, technical, and natural resources. Quite often, the engineering and construction complexities of such projects are overshadowed by economic, societal, and political challenges. The scan team was particularly interested in the international agencies’ requirements and methods for identifying, quantifying, and documenting contract change impacts on time, costs, and quality of work. The innovative methods to manage change that the team found were presented in the discussion of project delivery methods, procurement methods, and payment methods. Otherwise, the contract change processes were found to be quite similar to those seen in the United States, with some differences in the level of authority for changes and the use of consultants for administration.
All of the countries stated that their goal is to minimize contract change. Much of the motivation for implementing the innovative project delivery methods in England, Scotland, and the Netherlands (see Chapter Two) stems from a need to control contract change and cost growth. The policy of the Highways Agency is to avoid initiating any changes after contract award. If this becomes necessary, the Highways Agency will pay additional costs for the changed situation. Finland also has a policy to avoid any changes that will result in a change in the cost or completion date, and the scheduled completion date typically is not negotiable.
The scan team asked all of the country representatives to approximate contract cost growth as a percent of total awarded contract value. Table 8 provides approximate average cost growth percentages from contract award through project completion. These values are explained in more detail below.
| Country | Approximate Cost Growth From Contract Award to Project Completion |
|---|---|
| Ontario | +10-12% |
| Germany | +15% |
| England | +0-27% |
| Scotland | +4%* |
| The Netherlands | +10% |
| Finland | +5% |
* for design-build delivery
The Ministry of Transportation in Ontario had the most accurate measures of cost growth and also quantified the reasons for this growth. Total contract increases range from 9 to 18 percent, with an average of 10 to 12 percent. This includes 5 to 10 percent for changed conditions, 3 to 5 percent for overruns due to errors in estimated quantities, and 1 to 3 percent for material and time bonuses and price indexing (0.3 percent due to price adjustment clauses).
The other countries provide more approximate values for cost growth. Germany provided different values for Bavaria and North Rhine-Westphalia. In Bavaria, the final contract cost is normally within 90 to 110 percent. Ranges from 80 to 200 percent have been experienced. In North Rhine-Westphalia, final costs grew an average of about 15 percent. In Scotland, the tendency-to-overrun figure is plus 4 percent, underpinned by the Scottish Executive ensuring that changes are minimal, if any, to avoid changes. In the traditional Dutch contracts, the average contract growth was about 10 percent. Not enough statistical information is available on the new contracts, and the Dutch have found that the numbers vary. Finnish contracts generally are completed on the established date. The average growth is 0 to 5 percent. England witnessed very poor performance in its traditional design-bid-build contracts, with average growth of up to 27 percent. The new design-build and ECI contracts have yielded very little growth, but officials did not provide a definitive average cost increase.
Costs for these changes are substantiated in much the same manner as in the United States. Germany uses unit-price contracts almost exclusively, so when a change is needed, the State uses unit prices or hourly wage agreements. Germany uses lump-sum agreements when necessary. An increase or decrease in unit prices is negotiated when quantities increase or decrease beyond 10 percent of the estimated value. In Ontario, the contractor submits costs, and the construction administration consultant estimates a cost independently and determines fair payment. In the Netherlands, the contractor is required to propose any change order costs for the agency to review. The agency has a large database of costs and numerous technical experts. In addition, the contractor is responsible for establishing the basis of prices for the projects in its price proposal, which is used to review change order costs. When change orders are unavoidable in Scotland, the cost is negotiated between the PM and the contractor. The ER theoretically has some authority for authorizing minor changes, but in practice the PM for the Scottish Executive approves all changes. Similarly in England, the change is negotiated between the DA within delegated limits and the contractor.
Quite often, innovations can be realized during construction to improve the quality of a project. The scan team explored the methods available internationally to allow the contractor to change construction concepts during design or construction for the betterment of the project. The team found that all of the countries have mechanisms that allow for change proposals after award in traditional design-bid-build projects in much the same manner that they are allowed in the United States. It also found that changes after award in design-build projects are the right of the design-builder as it develops the design, but these changes must conform to the owner’s original request and design-builder’s proposed design.
Change proposals in traditional contracts internationally follow the some process used in the United States. All countries involved in this scan allow these change proposals. In Ontario, for example, contractors are allowed to propose changes after the award of contract and present associated costs. These are analyzed by the design consultant for technical merit. The contract administration consultant evaluates them for cost impacts. For normal changes, prices are based on contract unit prices, adjusted unit prices, agreed lump sum, or force account. The Ministry of Transportation will then evaluate the proposals for scope changes and have the final approval. The ministry has formal cost reduction incentive provisions for post award changes. Savings are shared equally after deductions for each party’s costs. The Canadian system is representative of what was found in the other countries.
In design-build contracts, the design-builder is still completing the final design after award. The contract allows the design-builder to make changes to its design, but only if these changes meet the agency’s request for proposal requirements and the design-builder’s proposed scope. If the scope of a change does not meet these original contract documents, the design-builder must follow a similar process for proposing changes as described above for the traditional process. In Scotland, for example, the design-builder’s proposal must meet the design requirements established by the Scottish Executive. The contractor provides the final design and is free to make any changes as long as they meet the minimum design required and does not deviate from the accepted proposal. If the Scottish Executive allows a change to a standard less than the specimen design, it shares the savings, but it strives to not make any changes. In the Netherlands, the design-build contract specifications are much more performance oriented. This means that construction concepts may be changed, but only if they meet these performance requirements and only if only the rules of the contractor’s quality system are followed. All changes have to be reported, and any conceptual changes have to be approved by the government.
The countries studies all attempt to manage change at the lowest level possible to keep the process efficient. In Ontario, for example, the majority of changes are handled at the project level. Of the major issues, 75 to 85 percent are resolved at the regional level, 15 to 20 percent are handled by headquarters, and about 1 to 5 percent go to the legal system (lawyers, arbitrators, courts, etc.). The highest-level engineer outsourced is at project manager level, and $30,000 is the highest level of approval that an outsourced person can be involved in. In one instance in Germany, increases of up to 25 percent of the original contract amount may be approved autonomously (up to €200,000). Increases beyond these thresholds must be approved by the superior office, the construction division.
The Dutch and Finish change approval process is very stringent. In traditional Dutch contracts, the supervisor at the project prepares a contract change. This supervisor has authority for small, prescribed matters. Substantial changes are approved by an agency official, most likely a member of the regional director’s staff. Sometimes senior project managers are granted special authority for changes, but it requires special appointment. Contract changes always have to be prepared by two agency officials. Finland also has a stringent change process. It elevates from the field any changes outside of the original project scope because the agency is held to a fixed budget. This may contribute to Finland’s low average cost growth.
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