U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590
202-366-4000
Construction management involves the oversight of the physical construction of a highway project. Before any earth is moved or any pavement is constructed, contracts are written to define the roles and responsibilities of the parties involved. During construction, records are maintained to document quality and ensure contract compliance. Inspections are conducted immediately after construction is complete and at the end of the contract warranty period. For every project that is physically constructed, a project is built on paper through the construction management process.
The scan team found that international highway organizations tend to delegate many traditional highway agency functions to the private sector to promote efficiency and satisfy the client’s requirements. The private sector partners of the international highways agencies involved in this scan do many of the construction management tasks traditionally done by State highway agencies in the United States. In conjunction with this delegation, contract payment methods are used that support alignment and trust. Quality plan implementation methods also support this delegation and alignment of goals. These construction management methods lead to long-term partnerships and collaboration between the public and private sectors.
The purpose of this chapter is to present the findings and observations from the international case studies on the construction aspects of construction management. This chapter begins with a description of construction administration, which discusses the management of construction contracts including responsibilities of administrations, progress tracking, payment, and final project closeout issues. Quality plan implementation is discussed with an emphasis on how international organizations ensure high design and construction quality of the finished product. Managing the change process is extremely important to construction management success, and techniques used to substantiate the cost of changes and minimize changes are discussed. The next topic in the chapter is day-to-day record keeping for items such as progressive inspection, testing, progress payments, project closeout, and final audit. The final topics discussed are environmental monitoring and project maintenance requirements during construction.
Contract administration involves the organization of day-to-day responsibilities for management of construction contracts, including the responsibility/authority level of contract administrators, tracking of project progress, project payment determination, project stoppage issues, and project closeout processes. The scan team found that although contract administration procedures varied by country and project delivery method, they could be used to align team goals and support partnership and trust. The team’s primary findings on contract administration stem from 1) the delegation of traditional contract administration procedures to consultants, 2) contractor reporting of progress, and 3) innovation in payment methods that make construction administration more efficient while promoting team trust and alignment.
Germany’s contract administration methods most closely resemble those in the United States. Germany relies on public sector staff to track progress and authorize payments. Since the majority of its work is procured with 100 percent of the design complete at the time of award, it can rely on unit-price bids and direct monitoring of quantities to assess progress and make payments. Germany generally does not use consultants for contract administration.
Finland and the Netherlands are also similar to the United States in their contract administration procedures. They maintain significant public sector staffs to administer construction contracts, but as described in the Staffing section of Chapter Two, they are moving toward more consultant involvement in contract administration. They are also moving toward more design-build project delivery, as discussed in the Project Delivery section of Chapter Two. Today’s practice is a mix of the traditional approach and the design-build approach with contract administration by public sector staff. Traditionally, intensive supervision was present on the construction site, making day-to-day reports. However, these countries have goals to move away from 100 percent in-house construction administration in the next 5 to 10 years, particularly as it pertains to nontraditional project delivery.
Ontario, Scotland, and England differ most from the United States in contract administration because of their use of consultants for traditional administration and their use of alternative delivery methods, which require nontraditional contract administration methods. The Ministry of Transportation in Ontario uses consultants for contract administration, as discussed in the Staffing and Procurement sections of Chapter Two. The consultant is responsible for determining compliance with the specifications. The contract administration consultants are hired at the same time as the contractor. They are viewed as an extension of the owner’s staff, but they are subjected to rigorous performance reviews to ensure performance.
The Scottish Executive also uses a consultant to provide oversight and management of the contract. The consultant is referred to the employer’s representative (ER). The ER monitors contractor compliance with the approved quality control plan. The ER also reviews technical proposals submitted by the contractor, and certifies achievement of milestones used for progress payments. The Scottish Executive also assigns an in-house project manager (PM). The PM is responsible for authorizing changes and managing risks retained by the Scottish Executive.
The Highways Agency uses consultants exclusively to perform contract administration tasks. For example, there are 14 management agent contracts (MACs) for the operation and maintenance of all roadways within an assigned geographic area. The consultants assume the traditional role of a U.S. State highway agency for contract administration, but they are private sector firms. They oversee all projects not considered major projects (less than £5 million). The MACs are long-term network management contracts of about 5 to 7 years. The Highways Agency uses a consultant as a department agent (DA) to oversee all major projects (more than £5 million). The consultant is selected early in the project development phase and assists in the fund bidding process and tender evaluation of the contractor’s proposals. The Highways Agency also establishes a department representative (DR) for major PPP/ PFI projects who is the operational works contact for the DA.
As described above, contract administration roles and responsibilities vary substantially, depending on staffing resources and project delivery methods. Consultants are used almost exclusively in the role of contract administrators by England, Scotland, and Ontario and to a lesser extent by Finland and the Netherlands. The procurement of consultants for contract administration tasks occurs early in the project in England, but not until the time of bidding in Ontario.
The scan team was interested in exploring methods of measuring work progress and the basis for determining the payment amounts. The team was particularly interested in how dollar amounts are determined when calculating acceleration costs, liquidated damages, incentives, and disincentives. The team discovered that contractors self-monitor progress and agencies take an audit role more often abroad than they do in the United States. The team also found a series of innovative payment techniques that streamline the reporting and payment process, such as milestone and lump-sum payments. The methods are being used to align the team to project goals.
The scan team found a full spectrum of progress reporting methods, including measurement of progress by detailed plan quantities, incremental milestones, or ultimate completion of work. These progress measurements were tied directly to the payment methods. In all of these cases, the contractor did more self-monitoring of progress than we see in the United States. The owners do audit these progress payments carefully, and the use of milestone or lump-sum payments makes monitoring of contractor progress much easier.
In Ontario, the contractor is responsible for submitting invoices for completed portions of work. Many items are plan quantity or lump-sum items. Examples include all electrical items by lump sum, structures by lump sum, and grading by plan quantity. Contractors are experimenting with hot mix asphalt by tonne. The traditional method of monitoring progress in the Netherlands is to have the owner determine progress after measuring the work in the field. In the Netherlands’ approach to design-build and its increasing use of consultants on traditional projects, the contractor has to report on his own progress. Progress has to be checked on an internal but independent quality system. Payments are made based on the contractor’s reports and controls of his quality system on different levels (system, process, products, etc.). In Scotland, payments are made on a vertical and horizontal measurement basis for achievement of project milestones corresponding to a schedule of prices provided by contractor.
For measured items in England, the contractor submits measurements of the portion of works completed, and the contract administration consultant verifies that portion. The contractor is responsible for tracking work completion and providing a certification of compliance upon completion of the work. The consultant (DA) audits progress on PPP/ PFI projects for the Highways Agency. Possible remedies for nonperformance range from noncompliance reports to warning notices.
Design-build in the United States primarily uses lump-sum and milestone payments rather than the traditional unit-price payment method. Since many of the individual quantities are not known at the time of award in a design-build project, unit-price payments are not feasible. The agency and design-builders agree on a milestone payment system (or schedule of values) early in the project, and use this system to monitor progress and make payments throughout the project. For more information, see Section 7.1 of the AASHTO Joint Task Force on Design-Build Report on Current Design-Build Practices for Transportation Projects
Lump-sum methods are also in use for design-bid-build delivery. The Florida DOT has developed lump-sum project guidelines for traditional contracts.
The scan team found that incentive and disincentive methods vary substantially by country, but they generally are based on time or congestion. Liquidated damages for late completion and incentive payments for early completion typically are not used in Germany. Liquated damages are used in the Netherlands, Finland, and Scotland, but the interviewees said that they were not employed very often and they typically do not use incentives for early completion. Incentive payments for early completion are used more frequently in Ontario. As a rule for time incentives, contractors capture about 75 percent of the available incentives. The Ontario Ministry of Transportation is satisfied with that percentage because it believes that meets the goal of setting an incentive to meet time requirements. The ministry establishes incentive payments based on what it believes will be required to accomplish its objectives. The ministry has developed detailed models for road user delay costs.
DBFO projects rely more heavily on incentive/disincentive payments. In Scottish DBFO contracts, the pressure is considerable to complete the project on time because the Scottish Executive does not make full payments until the roadway is complete and ready for use. In the case of the GSO/M77 project, which the team visited, it was reported that the consortium’s financial group established a liquidated damage of £1 million per month to ensure the contractor completes the project on time. For DBFO projects in England, the Highways Agency bases payment on more recent contracts on levels of congestion and safety, but it bases payment on previous contracts on shadow tolls (based on traffic flow figures). This creates an incentive system for payment. However, the project must meet basic condition requirements before the payment is determined. The contractor proposed the data collection process to measure congestion and safety, and the Highways Agency established the payment schedule. If speed and traffic volume meet certain conditions, a bonus is possible. Congestion (based jointly on speed and volume) is 95 percent of payment, and safety (reduction of personal injury rate) is 5 percent.
Arizona DOT implemented a form of incentives/disincentives for congestion in its State Route 68 design-build project. DOT used a contractual provision that required the design-builder to measure speed consistency and performance through the 20.9-kilometer (13-mile) construction work zone. The contract provided for a $400,000 travel time budget item that was drawn against if the target travel time average was exceeded. Contractual incentives and disincentives were implemented for performance above or below the contractual standard.
The design-builder elected to deploy an electronic license plate reader system developed by Computer Recognition Systems, a British company. This system used a camera and a light source to capture license plate images of passing vehicles. The license plate number was taken from the picture by image recognition software, encrypted, and sent to the central computer at the contractor’s office through a high-speed data connection. A second camera at the end of the project took a second picture, encrypted that license plate number, and sent it to the central computer. The central computer attempted to match up license plates that entered and exited the construction project limits.
Figure 10. Electronic license plate reader system on construction project.
The travel time incentive program was not very visible to the traveling public, but it is still enjoying the benefits. Because of this contractual provision, the contractor made great efforts to limit the delay to people traveling the corridor. The contractor made sure to limit the number of flagging stations throughout the project and scheduled work in such a way that it reduced impacts on the public.
For more information, Click Here.
The scan team explored approaches relating to limitations on subcontracting, such as self-performance requirements by the prime contractor, maximum, and subcontracting. The team found very few restrictions on subcontracting in the countries studied.
Many U.S. highway agencies have a minimum percentage of work that the prime contractor must perform itself. This gives the owner confidence that the prime contractor will be in charge of quality and finances, rather than subcontracting all of the work. In Ontario, prime contractors must self-perform 40 percent of the original contract value, with some exceptions for specialty items. Germany requires the prime contractor to perform 30 percent of the work on Federal projects, and 70 percent of the work it is capable of performing. The Netherlands has no subcontracting limitations as we are accustomed to in the United States, but it does require in-house skills during procurement of subcontractors and some subcontractors need approval (particularly those involving high-tech skills). Scotland, Finland, and England have no subcontracting limitations. They generally do not see prime contractors attempt to subcontract the entire project, so they do not view it as a problem. Scotland did state that the prime contractor cannot subcontract the project management portion of the project.
Germany is the only country that maintains direct approval of subcontractors. The other countries rely on the prime contractor’s internal selection system. They also rely on the fact that the prime contractor will be evaluated for performance based on the work of its subcontractors. They rely on the past performance and prequalification systems described in Chapter Two. Ontario, for example, has no required approval/prequalification of the subcontractors, but some of the major subcontractors are prequalified as a function of being in the rating pool as prime contractors and prime contractors are being evaluated on the work their subcontractors perform.
For more information on congestion-based payments in the Highways Agency, see Contract Administration: Technology and Practice in Europe.
| <<Previous | Contents | Next >> |
