Incentive/Disincentive Contracting Practices for Transportation Projects

Abstract

Timely highway construction has an increasingly significant importance. As the cost of highway improvements increases and the ability to secure new rights-of-way decreases, the nation's highways are becoming increasingly congested. Highway construction now must be accomplished within existing rights-of-way and invariably creates inconvenience and cost to the traveling public. Reducing the duration of this inconvenience and thereby reducing public cost is a key target for many state highway agencies (SHAs). Several alternative delivery methods have been used for timely delivery of projects. One of these methods is Incentive/Disincentive (I/D) Contracting. State Highway Agencies need an effective process to implement I/D contracting in their projects; the purpose of this research is to develop a simplified process for implementing I/D contracting in State Highway Agencies, using current, general guidelines. Incentive/Disincentive (I/D) contracting experience exists among various state departments of transportation. Reportedly, this alternative contracting process often occurs in reaction to the needs of individual projects; guidelines used for the creation of I/D contract parameters are under development, not fully established, and are often instituted ad-hoc rather than through a generally-applied set of principles. This research reviews and consolidates many sources of published guidance regarding the use of I/Ds in highway contracting and presents a holistic set of broad principles of project-specific I/D contracting; the purpose herein is to provide a necessary overview toward understanding how each step in the process fits within the whole. This work may be used by various departments of transportation in the U.S. or other agencies that may wish to utilize I/D contracting and generally is compatible with guidance suggested by the Federal Highway Administration (FHWA). This work is intended to complement existing, more detailed discussions presented in the references.