Chapter 4: Warranty Evaluation

Warranty evaluation occurs during the warranty period of the contract. Critical items that need to be evaluated during the warranty period include allocations of responsibilities for operation and maintenance, criteria and thresholds for performance evaluation, and triggers for corrective action under the terms of the warranty. More globally, agencies must continuously evaluate and improve their warranty programs. This chapter reports on the warranty evaluation process in the European host countries. Although this chapter focuses on material and workmanship and short-term performance warranties, many of the performance evaluation criteria and evaluation techniques are similar to those used in the long-term performance warranties and maintenance contracts described in chapter 5.

Responsibilities for Operation and Maintenance

Historically, warranties have not been allowed in the United States, in part because they can be considered “maintenance,” and federal funds could not be used for maintenance as discussed in chapter 1. Since the 1990s, however, U.S. warranty evaluation programs have been allowed to include maintenance in warranty contracts. Table 4.1 provides maintenance definitions for discussion. The definitions have been adapted from NCHRP 451—Guidelines for Warranty, Multi-Parameter, and Best-Value Contracting.

The European host countries all consider preventive maintenance part of the contractor's responsibilities under both material and workmanship warranties and short-term performance warranties. In standard contracts, the warranty contractors are responsible for any maintenance correlating to the correction of defects stemming from material and workmanship related issues or poor performance under normal conditions. A number of important issues must be considered during operation and maintenance of the warranty period, including determination of traffic loads and climatic conditions and emergency repairs.

Unexpected traffic loads or differing climatic conditions are not a major concern in any of the host countries. The German Federal Ministry of Transport makes no adjustments during the 4-year warranty period. It factors its extensive historical climatic and traffic data into the design process. Traffic loads are projected for the life of the pavement and not adjusted for in the warranty period. The Danish and Swedish philosophies are less stringent and include a negotiation phase with the warranty contractor if the counts are outside of the limits set on traffic and loads. The same negotiation philosophy is used if climatic conditions vary. In all host countries, Acts of God are a responsibility of the owner.

Emergency maintenance or repairs are typically performed by the warranty contractor in order to minimize coordination of future warranties on the repair work, but the emergency repairs may be contracted to a separate entity depending on the country and the specifics of the contract. Costs for maintenance stemming from an accident are charged to the owner of the vehicle causing the accident. Charging the owner or his/her insurance company is common practice throughout the European host countries.

Performance Indicators and Thresholds

Clear and equitable performance indicators and thresholds are a primary key to success in European and U.S. warranty systems. The European host countries rely on their pavement management systems (PMS) to measure the warranted project and use the historic PMS data to determine the thresholds. Therefore, the indicators used to measure warranty project performance are the same indicators that are collected on pavements regularly throughout the country. The majority of indicators are consistent from country to country, with some exceptions because of the particular measurement instruments employed and the types of deterioration problems commonly encountered within each country. The thresholds are somewhat less consistent from country to country. They vary primarily depending on the climatic conditions, the materials available in each country, and the types of deterioration commonly encountered within each country. For example, Sweden does not measure friction on the majority of its roads because the use of studded snow tires maintains a high coefficient of friction on the asphalt. However, rutting is a common problem because of these same studded tires.

Table 4.2 summarizes the performance indicators specifically mentioned by the European host countries. The research team attempted to collect data for both the types of performance indicators and their corresponding thresholds from each of the host countries. However, complete data collection was not possible given the short time of the research, the language barriers, and the varying nature of indicators and thresholds within the countries.

As seen in table 4.1, all of the host countries use durability and deterioration as performance measures. The definitions of these two measures vary slightly, but all note a visual inspection for conditions of longitudinal cracking, transverse cracking, and/or alligator cracking, potholes, raveling, and joint separation. With the exception of Sweden as previously noted, all of the host counties use friction as a performance indicator. Since the German Ministry of Transport uses prescriptive designs with materials and workmanship warranties, it does believe that it needs to use other performance indicators. Denmark, Sweden, and the United Kingdom are using short-term performance warranties and allow more innovation in the final design, and therefore employ additional indicators that correlate to design performance. IRI, rutting, and texture are all measures that incorporate design performance with material and workmanship performance. Denmark and Sweden use the greatest number of performance indicators in their systems. As these owners move toward longer warranty periods, they are using a greater number of performance indicators and measuring more frequently, as discussed in chapter 5.

Performance Measurements

All of the European host countries rely almost exclusively on their PMS to evaluate the performance of warranted products. For example, the U.K. PMS involves annual inspections, and the Spanish PMS includes surface inspections every 6 months with bearing capacity inspections annually. The German Federal Ministry of Transport also uses a local visual inspection on a weekly basis for normal roads, thrice weekly for Auto Bahns. Regarding specific performance measurements for warranties, all of the countries conduct at least a visual inspection at the end of the construction period. The German Federal Ministry of Transport uses an additional visual inspection at the end of the warranty period. The Danish Road Directorate typically performs an initial inspection at the end of construction, a 1-year inspection, and a 5-year inspection. The Danish Road Directorate also reserves the right to perform inspections whenever necessary.

The European host countries use a similar array of reference guides and equipment as found in the United States, which is displayed in table 4.3.

The host countries employ varying lengths of inspection. Table 4.4 describes the varying lengths of inspection for a selected number of inspections. The length of pavement evaluation varied somewhat from project to project, but table 4.4 describes the length that the host countries most commonly use.

Corrective Action

There may be instances when corrective actions are required under terms of the warranty. For example, the German Federal Ministry of Transport noted that 1 percent to 2 percent of the projects require significant corrective action that invokes the warranty and about 25 percent of the projects require some preventive maintenance, but the work is minor. The owner must then consider the communication of the corrective action to the contractor, the consequences of noncompliance, the conditions that might void the warranty, owner participation in corrective action, and dispute resolution.

The communication of defective items varies slightly from country to country. In Germany, the Ministry of Transport deals with only the prime contractor. The Spanish Road Association uses separate maintenance contractors during the warranty period. These maintenance contractors must repair defects and seek recovery from the warranty contractor. In this manner, the Spanish government is shielded from defects covered under the warranty. The Danish Road Directorate suggests the corrective action in accordance with traditional measures. In some cases, the actual measures will be subject to negotiation, but the agency has a strong position. The British Highways Agency relies on the county representative to initiate the action, but there does not appear to be a fixed procedure.

All countries have stringent penalties for noncompliance with required corrective actions. As previously noted, all countries have the ability to consider the failure to correct defective items in future procurements through project-based prequalification and/or best-value selection. All of the host countries point to this procurement latitude as a primary factor in the success of their programs. Spain, Germany, and the United Kingdom reserve the right to completely debar the contractors from bidding on future work. The German Federal Ministry of Transport requires both construction and warranty period bonds. The German Federal Ministry of Transport will call either bond if necessary and can invoke penalties or withhold payments during construction. These actions do not affect the warranty performance requirements. The Danish consequences vary with the nature of the noncompliance. As a general rule, the cost of the measures reasonably relates to the actual importance of the noncompliance issue. During construction, they typically use levels of (1) warning, (2) extended warranty period, (3) remedy action or deduction in payment, and (4) rejection of product. During operations, they rely on the warranty bond and the implications on future performance. The United Kingdom relies solely on future qualification for additional contract work and does not use bonds, as discussed in chapter 3.

Conditions to void warranties are rare and are negotiated in Europe when they are encountered. Acts of God and accidents are the only cases that were noted as a cause for voiding a warranty in all of the European host countries. Before a warranty becomes completely void, the European hosts are likely to participate in the corrective action as described below. There is a much greater sense of community, shared responsibility, and negotiation than what is found in the U.S. industry.

Owner participation in corrective action varies with the European host countries. The Spanish Road Association and the British Highways Agency typically only participate if the repairs are forced by Acts of God. The Swedish National Road Association will participate if “non-normal” conditions arise. The German Federal Ministry of Transport participates if the repairs are caused by Acts of God or if the owner caused the problem through (1) defective specification, (2) errant special instructions, (3) defective owner-provided materials, or (4) the problems are caused by a previous contractor.

The Danish philosophy for participation in corrective action is unique. In effect, they prorate the repairs on the pavement. If a pavement failure occurs within the 5-year warranty period, they give the contractor credit for the useful life they have already received. However, all repairs have a new 5-year warranty. Also, if it can be justified that the traffic load is higher than the designed technical solution, both parties are supposed to be responsible for the failure to some degree. The contractor is assumed to have some foresight in the problem given the expertise upon which it was selected. The remedial action and related cost are settled by negotiations. The Danish tradition is that the owner and the contractor can split the difference if it was shared responsibility. An example was provided where the contractor paid 7/11th of the costs and the owner paid the other 4/11th for the cost of the remedial action.

Negotiation is the most common mechanism to resolve disputes. There seems to be a long tradition of resolving disputes without taking legal action. However, the agencies are in a strong negotiating position because of the implications to the contractor for future work. The Swedish and Danish rely almost exclusively on negotiations. The German system provides for arbitration. The U.K. system provides for adjudication (use of outside experts, panels, etc.), and ultimately legal action, but this is rarely invoked.

Program Performance Evaluation and Industry Input

The U.S. research team was interested in how the European host countries evaluate and continuously improve their warranty programs. The hosts were asked to provide comparisons for performance of asphalt warranted pavements to that of nonwarranted pavements. However, none of the hosts had such data available since all of their projects have warranties and their warranty programs have been in existence for so long that they do not have data for comparison. It turns out that the host countries rely on their private sector partners to indirectly measure the program performance and assist in continuous improvement.

As discussed throughout this report, there is a great sense of partnership and collaboration among the European highway agencies and the private sector. There is also a culture of continuous improvement that has been fostered by the move toward International Organization of Standardization (ISO) quality systems. Each host country provides opportunities for industry input into the warranty programs, and the agencies use this input to improve their practices. In Spain, there is opportunity for the industry to negotiate with the Spanish Road Association on different aspects of large contracts after they are first advertised and before bids are accepted. The German Federal Ministry of Transport uses a board composed of the agency, industry, and academia to establish test procedures and standards. It operates in a similar fashion to the TRB except that in addition to research, the group also develops and maintains specifications. The Danish Road Directorate uses a standards board composed of agency, industry, and consultants, and addresses issues annually. Similarly, the Swedish National Road Association employs agency, industry, and consultant input, but in a less formal manner. In the United Kingdom, the contractors can comment or propose changes annually. There is a working group composed of consultants, contractors, and the agency. All of these methods provide valuable input into continuous improvement of the host countries' warranty programs.

Innovation in Products and Processes

Contractor innovation is difficult to achieve in standard material and workmanship warranties and in short-term performance warranties. The German system of material and workmanship warranties allows for virtually no flexibility or opportunity for innovation. Standard Danish warranty contracts specify materials and pavement thickness, leaving little incentive for innovation. Even in the Danish example of offering extended service life for a lower average annual cost provided in chapter 3, the contractors must propose preapproved pavement designs. These designs must also go through a rigorous approval process with the Danish Road Directorate. The contracting environment in Spain does not allow the contractor flexibility to innovate at will. If a contractor identifies an innovative material or technology, the idea is submitted to the Spanish Road Association for approval.

The Swedish system provides for a little more innovation. The agency designs a cross-section and recommends mixtures to be used. At the time of bidding, the contractor can propose an alternate cross-section and alternate mixtures. For a completely unknown approach, the agency may ask for an extended warranty of 1 or 2 years. The U.K. short-term performance warranty system using design-build contracts perhaps allows for the most innovation, but there is still little incentive for the design-builder to take such risks. In U.K. design-build contracts, the contractor is required to use standard specifications for the design and construction. The contractor can propose an alternate solution but the British Highways Agency is cautious about accepting any unproven material. The contractor must apply to the Highways Agency for a deviation. The Highways Agency reviews the proposal and data provided and then agrees or disallows the proposed deviation. The typical evaluation of deviations takes 3 to 6 months.

All of the material and workmanship warranties and short-term performance warranty programs provide little incentive for innovation, and therefore all of the countries are experimenting with alternative contracting methods to increase program performance. Chapter 5 describes alternative contracting methods, particularly PPCs and long-term performance warranties, in detail.

Conclusions

Transparent warranty evaluation processes are a key to any warranty program's success. The longevity of the European host countries' warranty programs has allowed for a large amount of industry input over the years. As discussed throughout this report, there is a great sense of partnership and collaboration among the European highway agencies and the private sector. This partnership is evident in the entire warranty evaluation process from the allocation of responsibilities for maintenance to the resolution of disputes.

All of the European host countries allocate preventive maintenance to the contractors. Standard warranty contracts do not allocate routine maintenance to the contractor, but this is done in alternative contracting methods as discussed in chapter 5. Unexpected traffic loads or climatic conditions are not a major concern of the highway agencies, but they will negotiate warranty terms in cases of extreme conditions. The warranty contractor typically performs emergency maintenance required during the warranty period.

The European host countries determine the performance indicators and thresholds from historical data in their PMS. The PMS is employed to measure performance indicators in each of the host countries. Since monitoring occurs on all of the warranted pavements in conjunction with the entire network, there is little additional effort required to implement the warranty evaluation. Deterioration, durability, friction, IRI, profile, and rutting are among the most common performance indicators. The thresholds vary from country to country and project to project, but they are all consistent with historic expectations from their PMS. Common measurement tools include visual distress surveys, photo-logging, SCRIM, high-speed monitoring vehicles with rut bars, and noncontact laser profilometers.

Requirements for corrective actions are typically done through the prime contractor and may employ a negotiation phase. All countries had stringent penalties for noncompliance with required corrective actions. They all note the failure to correct defective items in future procurements through project-based prequalification and/or best-value selection, and they consider this to be a primary element for warranty program success. Owners may participate in costs for corrective action if the defect is not the fault of the contractor; however, there are few instances that would justify owner participation. The agencies are in a very strong negotiating position in these instances. There is a long tradition of resolving disputes without taking legal action, but arbitration or adjudication can be used if negotiations are unsuccessful.

Innovation stemming from the standard warranty programs is not widespread in standard warranty contracts. At a minimum, the agencies design a cross-section and recommend a mixture. Contractors can suggest alternatives, but these alternatives must be approved by the agencies, and they may request extended warranties on unusual requests. To enhance innovation, the agencies are turning to alternative delivery methods, as described in chapter 5.