Best Practices for Price Adjustments

Presented by . . . .

Gene Wortham, ITD

Eugene Hoelker, FHWA

Mark Richter, FHWA

Prepared by. . . .

Frances J. Hood, ITD

AASHTO Subcommittee on Construction / Contract Administration Task Force

State Transportation Agencies (STAs) Responding - 20

Connecticut Delaware Georgia Idaho Illinois Iowa Maryland Minnesota Mississippi Montana

Nebraska Nevada New Hampshire New Jersey South Dakota Virginia Tennessee Texas West Virginia Wisconsin

Best Practices for Price Adjustments Focus

• Price adjustment practices for bid items not already addressed in either standard specifications or quality assurance special provisions.

• State agency procedures and practices for work not addressed in the contract but determined to be acceptable to leave in place.

Does your State define

reasonably close conformity?

Yes: 4

No: 16

16

4

Number of STAs

Yes

No

Reasonably Close Conformity

Reasonably close conformity usually means compliance with the tolerances specified in the contract and with customary manufacturing and construction practices where tolerances are not

specified.

Reasonably Close Conformity cont.

At least one state allows the Engineer to accept variations beyond specified tolerances as reasonably close conformity where they will not materially affect the value or function of the work and the interests of the State.

Several states do not use the term "reasonably close conformity" and just use "conformity".

Does your State ever accept

work not in conformance with the

contract?

Yes: 20

No: 0

0

20

Number of STAs

Yes

No

Do you have procedures or

guidelines in place for accepting

non-compliant work?

Yes: 14

No: 6

6

14

Number of STAs

Yes

No

What is your basis of acceptance?

“Some material price adjustment guidelines and case-by-case engineering judgment"

(CT/ID/WV/DE)"

“Case-by-Case working with other sections with the most knowledge and experience." (VA/NH/TN/SD)

“Case-by-Case based on

Engineering Judgment"

(NV/NJ/MS/TX)

“Miscellaneous Deduction Help Guide to aid in understanding and calculating deductions for work that does not meet the contract but is still adequate

to meet the design purpose." (MT)

What is your basis of acceptance cont.?

“We have specifications for price adjustments for the majority of non-conformance work. We continue to add price

adjustment specifications." (MD)

“The following are considered: public safety, life cycle cost,

maintenance cost, traffic disruption, contractor cost" (NE)

“Guidelines Developed for Non-

Conforming Materials but not Non-Conforming

Work” (WI)

“Price Adjustment based on estimate of reduced service

life.” (GA)

What is your basis of acceptance cont.?

“Adjustment based on "how close", contractor good faith,

traffic impact, service life effect, past project history, political

considerations" (IL)

“Section 1501.3 Basis of Decision criteria specified for engineering judgment:

Facts and Inferences.

Inherent variations in materials and processes

Risks associated w/ small samples.

Past Experiences.

Department Procedures.

Other factors. " (MN)

“Standard price adjustment methods defined in

specifications, materials IMs and Construction Manual apply

in most instances." (IA)

Recommended Best Practice Goal

Achieve uniformity in administering price adjustments for non-conforming but

acceptable materials and work that remains in place.

Best Practices

At a minimum:

Base decision on Agency established criteria.

Consult with others in Agency with suitable knowledge and experience.

Best Practices

To mitigate inconsistencies:

Develop standard price adjustments and formalize into agency guidelines and procedures.

(See handout of agencies reporting standard price adjustments)

Best Practices

To reduce disputes:

Specify price adjustments in the contract but…..

Use judiciously - Contractors may use to their advantage (wire fence example, unbalanced bidding).

(See handout for agencies reporting specified price adjustments)

(c) 1998-2001, All rights reserved, Dougla(c) 1998-2001, All rights reserved, Douglas D. Gransberg & Keith Molenaars D. Gransberg & Keith Molenaar

THANKTHANK

YOUYOU

(A contact list of reporting agencies is provided (A contact list of reporting agencies is provided should your agency desire more information)should your agency desire more information)