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by Leif Wathne, P.E., vice president of highways and federal affairs, American Concrete Pavement Association
As agencies face dwindling resources and ongoing cost increases, new approaches to pavement type selection may provide a viable solution to the challenge.
In the simplest terms, pavement type selection is the process by which pavement types or strategies are selected. The decision is a challenging one because it involves balancing short- and long-term performance with up-front and life-cycle costs.
Within highway agencies, the process of pavement-type selection is typically a formal process, guided by policies or protocols. It is generally understood that highway engineers and other transportation officials do not have a tool available to give an absolute and indisputable comparison of competitive pavement types for set conditions.
A decades old document could provide some relevant guidance for current and future practices. “An Informational Guide on Project Procedures,” produced by the American Association of State Highway Officials or AASHO (now the American Association of State Highway and Transportation Officials or AASHTO) in 1960 provides guidance that states “any decision as to paving type to be used should be firmly based.” In spite of its age, the document provides some useful and still relevant information on the topic of pavement type selection. In fact, this little known document is particularly relevant for federal aid projects, as it is referred to in current federal policy on pavement type selection (more on this later).
The document states that judicious and prudent consideration and evaluation of governing factors will result in a firm base for a decision. So what are these governing factors? According to the AASHO document, there are a whole host of them, including ones pavement designers will easily recognize, such as traffic, soils, weather, past performance, and economic comparison. But, there are also several other governing factors that may no longer be that familiar to personnel involved in pavement type selection, such as conservation of aggregates, construction consideration, availability of local materials and stimulation of competition (there are others as well).
It is significant to note that these factors, which were obviously relevant in 1960, are still key considerations today. Of particular importance to note, the 1960 AASHO document also reveals that state agencies recognized the importance of competition between industries, both in terms of spurring innovation and maximizing economic value to the owner.
One of the governing factors noted above is economic analysis. Often, this is incorporated via some sort of life-cycle cost analysis (LCCA) to establish costs of the various pavement alternatives being considered. Even though this is an important factor to be considered in pavement type selection, it is not a replacement for pavement type selection (i.e. LCCA is not synonymous with pavement type selections).
Instead, LCCA is simply a tool that should be used as part of the pavement type selection process. When discussing cost considerations, the 1960 AASHO document actually goes as far as to note that as much as LCCA is a valuable tool, doubt as to the validity arises when one pavement type “has been given monopoly status by the long term exclusion of a competitive type.”
Where Are We Now?
In recent years, concerns have arisen about the equity and effectiveness of the pavement type selection process, particularly in our current climate of ever-increasing needs, construction inflation, and dwindling resources to address the challenges. A number of organizations are addressing the issue, including the following:
There are differences among states and how they address pavement type selection. For example, roughly one-third has no formal process in place; some of the processes in place employ life cycle cost analysis, and some consider user costs.
Some states make decisions project-by-project; others make decisions programmatically, while others still make decisions at the district level. Some states use formal selection panels, others do not. There are even some states that have begun to explore the use of the free market through the bidding process to help decide pavement type, largely because of a concern about lack of equity and effectiveness of current selection processes. This is typically referred to as alternate bidding, or alternate design-alternate bidding (ADAB).
Clearly, there is a lack of uniformity among pavement type selection processes.
Federal Policies in Place
On a federal level, there are essentially two pavement-related policies in effect. The first is the 1981 Pavement Type Selection Policy Statement (23 CFR Ch1, FR Vol. 46, 195), which addresses four key issues. The second is the 1996 Pavement (Design) Policy (23 CFR Part 626, Source FR Vol. 61, 67174), which essentially states that pavement should be designed to accommodate current and future traffic needs in a safe, durable and cost effective manner.
The second policy (from 1996) has no bearing on pavement type selection; its purpose is to set pavement design policy for federal-aid highway projects. The earlier policy (from 1981) does, however have a bearing on pavement type selection.
So, what does this little known policy say? As noted, the policy addresses four key issues: evaluation, as per the 1960 AASHO Guide; life-cycle cost analysis; timeliness; and alternate bidding.
In broad strokes, the policy statement states that 1) pavement type selection should be based upon an engineering evaluation considering the factors contained in the 1960 AASHO publication titled, “An Informational Guide on Project Procedures,” 2) pavement type determination should include an economic analysis based on LCC of pavements, 3) the economic analysis and pavement type selection should be updated just prior to advertising, and 4) where [appropriate], alternate bids may be permitted if requested by the contracting agency (provided the FHWA Division Administrator approves the equivalency). (A clarification issued in November 1981 states that price adjustment clauses should not be used in alternate bidding scenarios.)
The 1960 AASHO guide referred to in section 1 of the FHWA policy mentions a whole host of guiding factors to be considered when making pavement type determinations, but of particular interest and significance today are the sections discussing “Cost Comparison” and “Stimulation of Competition.” In section V “Cost Comparison” of the document, the authors discuss the virtues of considering cost on the basis of service life or service rendered by a pavement structure, but caution that “doubt as to the validity [of such analysis] arises in the case where on[e] type of pavement has been given monopoly status by the long-term exclusion of a competitive type.”
This makes the point that a LCCA may not be meaningful where you only have one pavement type available – the cost-data is not meaningful. Moreover, it indirectly recognizes the value that competition between paving industries provides to owners. In section VI “Stimulation of Competition,” the authors state: “It is desirable that monopoly situations be avoided, and that improvement in products and methods be encouraged through continued and healthy competition among industries involved in the production of paving materials.”
Clearly, the authors of the day recognize the importance that healthy and spirited competition plays in providing value to the public. This does beg a question however: Is there currently competition between paving industries everywhere?
It is important to point out the context in which the highway officials serving on the Special Committee on Project Procedures in 1960 wrote this document. In the early days of the federal aid highway program (Federal Aid Highway Act of 1956) there were a few, but very public instances of fraud and abuse related to the vast amounts of public funds expended (Weingroff 2006).
Most of the fraud pertained to right-of-way acquisition, but there were also instances of collusion by industry and questions concerning monopolies and pavement type selection. As a result of the significant negative press surrounding these instances of neglect and abuse surrounding the “greatest public works project in history,” the public and congress started losing confidence in the entire administration of the highway program.
The Federal Bureau of Investigation, the General Accounting Office, and even the House Special Subcommittee on the Federal-Aid Highway Program (Blatnik Committee), were engaged in probing the various allegations of irregularities in the highway program. It was in this environment that the highway officials were charged with developing sound guidance regarding contract construction, pavement type selection and right of way acquisition. As the document notes, “It is imperative that all possible and proper measures be taken to ensure the tax payers of this country that they are receiving full value of every highway dollar spent… The recommendations included in this Guide are designed to keep the public confidence in the highway program at a maximum.”
It is safe to say that the guidance offered in the 1960 AASHO documents, which is directly referred to in current federal pavement type selection policy, is purposefully “loose” to allow for proper consideration of all factors in pavement type determinations, including competition.
It is noteworthy to mention that a few states recognize the benefit of competition between industries and incorporate it directly into their pavement type selection process.
In Iowa, for example, the watchword for competition is balance. Iowa DOT takes a fair and balanced approach to highway paving – it is done programmatically. This approach not only fosters competition, but it also helps ensure healthy paving industries that can afford to invest in training, research, and quality control. This in turn means better performing pavements being delivered to the agencies, and ensures that the public receives the maximum value from their highway dollar. Is this a remnant of the wisdom and guidance issued at the outset of the Federal Aid Highway Program?
Regardless, today, most highway engineers and administrators are not aware of the federal pavement type selection policy, the 1960 AASHTO document it refers to, its background, nor its intent. Conventional wisdom is that life cycle cost analysis is the answer, but this does not properly account for the consideration of some of the very important non-economic factors.
There’s also some confusion about how alternate bidding should be considered in the federal aid context, as well.
On Nov. 13, 2008, the FHWA issued a memorandum titled “Clarification of FHWA Policy for Bidding Alternate Pavement Type on the National Highway System” (http://www.fhwa.dot.gov/pavement/081113.cfm). The memorandum lists factors to be considered, including: equivalent designs; the discount rate; price adjustment factors; material quantity specifications, and other topics. The concrete pavement industry, welcomed the memorandum, which provides greater insight into this important topic.
Alternate Design/Alternate Bidding
The guidance is in response to renewed interest in alternate design/alternate bidding (ADAB) by state departments of transportation. Although FHWA has not been actively encouraging the use of ADAB, it has been allowing it under a FHWA program called Special Experimental Projects No. 14 – Alternative Contracting (or SEP14). There has been some lack of consistency in the guidance provided by FHWA in this regard, since as previously noted, the 1981 FHWA policy statement affirms in section 4 that alternate bids may be permitted if requested by the contracting agency, although subsequent guidance issued in the non-regulatory supplement of the FHWA Pavement Policy (23 CFR 626) does not encourage their use. Possibly due to this lack of clarity, there has been some inconsistency in the process by which states have tried and implemented ADAB.
In Louisiana, ADAB started in 2001 primarily because both industries (and the state) were dissatisfied with existing pavement type selection process.
Stakeholders were involved and agreed on the process, which includes LCCA, equivalent designs, bid-model (A+B+C), among other factors.
The result of implementing ADAB in the state of Louisiana has been an increase in competition, with an average of 3.4 bidders on ADAB projects vs. 2.6 bidders on all other projects since Hurricane Katrina struck in 2005. Through 2007, LaDOTD reports that the bid-price of ADAB projects have averaged 10 percent lower than estimated, while the bid-price of all other (non-ADAB) projects have been about 14 percent higher than estimated.
During a three-year period, LaDOTD reports that the cumulative savings netted to the department because of increased competition through the ADAB process was roughly $90 million (Temple, 2008).
In Louisiana, ADAB allows both paving industries to participate fairly and equitably. It considers future expenditures as part of the process, and it encourages agencies to consider user cost effects. It clearly increases the bid pool, which has proven to result in lower bid prices to the contracting agency.
The experiences have been similar in Missouri, where contractor-based pavement-type selection has resulted in increased competition, an increased number of bidders, and more competitive pricing. The process has even resulted in innovative approaches to paving projects.
Missouri DOT has let 124 alternate projects through July 2009 at a value of $1.645 billion. Since October, 2003, the alternate bidding process in MO has resulted in the average number of bidders per project rising to 5.5. The three-year average asphalt price/ton for alternate paving projects is 5.1% below that for non-alternate projects, and the three-year average concrete price/CY for alternate paving projects is 8.6 percent below that for non-alternate projects (Ahlvers, 2009
These are examples where the ADAB process has been successfully implemented and where it has worked. It is important to note however, that ADAB is not necessarily the solution to pavement type selection.
Like LCCA, it is simply a useful tool – ADAB is not a replacement for thorough and objective economic and engineering analysis. The actual measures of success should be whether the process enhances competition, increases the number of bidders per project, and encourages innovative paving practices.
As highlighted in the previous two examples, when properly implemented, ADAB can be of tremendous value to agencies, industries, and taxpayers alike, as it allows the free market to guide the decision.
What can we learn from all this?
There is much wisdom in the old process identified by AASHO’s Special Committee on Project Procedures in 1960. The issues discussed in this document as related to pavement type selection are just as relevant today as they were almost 50 years ago. The authors of this document recognized the importance that competition between (not just within) industries plays in both spurring innovation and maximizing economic value to the owner.
As much as LCCA (or ADAB) is a valuable tool to help departments of transportation make sound determinations about pavement type, its use is only valid and relevant where there is competition between industries; it cannot work effectively where “monopoly situations” exist.
Unfortunately, there are vast portions of this country where effective monopolies do exist, and the public (as well as the agencies they entrust to manage their highway resources) are not reaping the benefits that healthy economic competition can provide. Their current pavement type selection processes are not recognizing this shortcoming, and agencies continue to make selections without the benefit of the free market. This is especially worrisome in our current situation of continually dwindling infrastructure resources and ongoing increases in construction costs.
The good news is that FHWA’s current pavement type selection policy is equipped to address this serious challenge. There is no need to re-write or change federal policy – it is fine the way it is. The policy just needs to be reaffirmed and shared broadly among the stakeholders – an education campaign is in order. The policy acknowledges the process outlined in the 1960 AASHO document, and is flexible enough to allow for proper consideration of all factors in pavement type determinations, including competition. Whether this is done overtly or programmatically, or through an ADAB process really does not matter. The goal is still the same: Judicious and prudent consideration and evaluation of the governing factors that will result in a firmly based decision as to pavement type.
In order to arrive at this firmly based decision, it is important to understand the background of pavement type selection is the United States, and to acknowledge the importance a competitive marketplace plays.
 “An Informational Guide on Project Procedures: A guide for the review of certain administrative, inspection, and documentation practices in use by state highway departments with particular attention to contract construction, pavement type selection, and right-of-way acquisition, American Association of State Highway Officials (AASHO), Nov. 26, 1960.