Estimating Cost Discrepancies in Highway Contracts: Multistep Econometric Approach

This paper investigates the likelihood of occurrence and quantifies the magnitude and rate of discrepancies in highway project final costs with respect to their contract award amounts. Using data from Indiana, we develop a multistep econometric approach that can be used to estimate the effects of factors associated with the contract bidding process, project type, and the project physical environment on cost discrepancies in highway contracts. Estimation findings indicate that for a given project type and project year, contracts of larger size or longer duration are generally more likely to incur cost overruns. In addition, for contracts that incur cost overruns, the cost overrun rate decreases nonlinearly with increasing contract size up to a certain point after which the cost overrun rate increases with increasing contract size. Our approach allows for the possibility that cost overrun amounts are not linearly related to contract award amounts (contract size), and shows that greater analytical flexibility needs to be incorporated into any investigation of contract cost overruns. Agencies interested in improving their financial forecasts can replicate our proposed methodology using local contract data.     

Long‐Range Forecasting Highway Construction Costs

In the process of decision making for design and execution of highway construction projects, long‐range cost forecasting is one of the most significant and complicated problems. This paper describes the development of a model that enables the user to make long‐range cost projections, taking into consideration general characteristics of the highway construction industry, as well as pertinent local conditions. The model presented uses conventional statistical methods to represent the main categories of typical jobs in the highway construction industry. From these categories, a composite model is created by assigning different weights to the input elements costs and then choosing a series of indicators to predict price trends for each separate element of the composite model. Use of this model reveals that bid volume in a certain area is a factor that has significant influence upon cost forecasts. This paper is accompanied by a case study based on actual data from highway construction projects performed for the Florida Department of Transportation in the years 1968–1981.     

Neural Network Modeling of Highway Construction Costs

The objective of this research was to develop a procedure that estimates the escalation of highway construction costs over time. An artificial neural network model was developed which relates overall highway construction costs, described in terms of a highway construction cost index, to the cost of construction material, labor, and equipment, the characteristics of the contract and the contracting environment prevailing at the time the contract was let. Results demonstrate that the model is able to replicate past highway construction cost trends in Louisiana with reasonable accuracy. Future construction input costs are estimated from commercially available forecasts of indicator variables closely associated with the price of construction labor, construction equipment, and a representative set of highway construction materials. Future contract characteristics and the contracting environment that is likely to exist in the future are estimated from past trends or stipulated to be consistent with policy decisions in the future. The predictions produced by the model estimate that highway construction costs in Louisiana will double between 1998 and 2015.     

Estimating Work Zone Road User Cost for Alternative Contracting Methods in Highway Construction Projects

Highway construction often causes an additional road user cost (RUC) to motorists due to traffic flow interruption and congestion in work zones. Consequently, facility owners, such as the Florida Department of Transportation (FDOT), are often interested in using alternative contracting methods such as A+B contracting to expedite construction. Although many of these contracting methods rely on the RUC to determine incentives or disincentives, no standard method for RUC calculation is available to FDOT district engineers. In addition, existing methods are neither practical nor user-friendly for determining incentives or disincentives. This study intends to develop a RUC calculation procedure for the FDOT that focuses on using data that are easily accessible to FDOT district engineers, such as drawings and maintenance of traffic plans. The procedure is developed based on traffic analysis methods published in the Highway Capacity Manual, previous studies on user benefit analysis and work zones, and empirical data specific to Florida. Case studies are used to illustrate the procedure and to compare it with two other existing models, the Arizona model and the queue and user cost evaluation of work zone model, through correlation analysis, comparison of calculation assumptions, and data input analysis. This study shows that the suggested procedure produces consistent RUC estimates.     

Guidelines for Warranty Contracting for Highway Construction

This paper presents guidelines for implementing the construction warranty contracting method in the highway construction industry. A logical, step-by-step method for effectively applying the warranty contracting program for use in the highway construction industry is developed. Relevant issues that may present obstacles to the implementation are addressed, while the best practices, compiled from an evaluation of the current industry’s state-of-the-art practices, will assist an interested state highway agency in creating a warranty specification. In performing this research, the current use of warranty specifications among state highway agencies was examined, and an in-depth case study of the Wisconsin Department of Transportation’s warranty program was conducted.     

Planning and Scheduling Highway Construction

This paper presents a model designed to integrate the planning and scheduling phases of highway construction projects, focusing primarily on the planning aspects. The model automatically generates the work breakdown structure (WBS) and precedence network respecting job logic and stores a list of construction operations typically encountered in highway projects. The generated network can subsequently be modified to suit the unique requirements of the project being considered. An object-oriented model is developed for planning highway construction operations. The model employs resource-driven scheduling in order to suit the repetitive nature of this class of projects. It accounts for (1) resource availability; (2) multiple preceding and succeeding activities; (3) transverse obstructions; (4) activities with varying quantities of work along the highway length; (5) the impact of inclement weather on crew productivity; and (6) the beneficial effect of the learning curve. At the core of the model is a relational database designed to store available resources and their respective unavailability periods. The model enables both: (1) activities executed by own force; and (2) activities subcontracted out. The model is incorporated in a prototype software that operates in the Microsoft Windows environment and generates schedules in both graphical and tabular formats. An example project is analyzed to demonstrate the features of the developed model.     

Lighting Requirements for Nighttime Highway Construction

This paper presents the development of a practical framework for identifying the lighting requirements for nighttime highway construction activities. The framework is named Construction Visual Requirements, “CONVISUAL,” and is designed to consider and quantify the varying lighting needs for different visual and construction tasks. The framework is developed using an original and interdisciplinary approach that integrates concepts and models from construction engineering and vision science to ensure the provision of adequate lighting conditions on site that enable workers to properly see and perform their tasks safely and with satisfactory quality. CONVISUAL determines the required illuminance level for each construction activity based on its required visual tasks and the visual capacity of construction workers. A prototype of CONVISUAL framework is implemented to illustrate its unique capabilities of (1) providing a deeper understanding of the visual requirements of nighttime construction activities; (2) specifying the required illuminance levels in a scientific and systematic approach; and (3) delivering a rational justification for the specified illuminance levels.     

CONLIGHT: Lighting Design Model for Nighttime Highway Construction

The utilization of nighttime work in highway construction and rehabilitation projects has been increasing in recent years throughout the United States. In this type of projects, construction planners are required to develop and submit a lighting plan that provides: (1) adequate illuminance levels for all planned nighttime construction tasks; (2) reasonable uniformity of light distribution in the work area, and (3) acceptable glare levels to both road users and construction workers. In order to support construction planners in this vital and challenging task, this paper presents a lighting design model, named CONLIGHT, which is capable of considering the specific requirements of nighttime highway construction operations. The model is developed to enable construction planners to evaluate the performance of various lighting plans and select a practical design that complies with all lighting requirements for the nighttime work being planned. An application example is analyzed to illustrate the use of the model and demonstrate its accuracy and capabilities in generating practical lighting plans for nighttime construction and rehabilitation projects.     

Distributed Ontology Architecture for Knowledge Management in Highway Construction

The ongoing plethora of rehabilitation in the infrastructure domain requires more planning and integration during design and construction. To achieve this, there is a need for developing and using semantic (ontology-based) mechanisms for the exchange of development knowledge among all project stakeholders. This paper presents a distributed ontology architecture for knowledge management in highway construction. With every other utility tied to the highway geometry, the architecture is intended to be the base for a cross-discipline knowledge exchange in the infrastructure domain. The architecture presents highway knowledge on three levels: domain knowledge (an umbrella for infrastructure shared knowledge), application knowledge (representation of highway-specific knowledge), and user knowledge (an enterprise-specific representation of highway knowledge). The proposed architecture models highway concepts using six major root concepts: project, process, product, actor, resources, and technical topics (attributes and constraints). The architecture was developed using rigorous knowledge acquisition and ontology development techniques. It was developed as an extension for the e-COGNOS ontology. The architecture was validated through input from domain experts.     

Optimal Lighting Arrangements for Nighttime Highway Construction Projects

This paper presents a decision support system for optimizing temporary lighting arrangements in nighttime highway construction projects. The system is developed as a multiobjective genetic algorithm that is capable of: (1) maximizing average illuminance on construction sites; (2) maximizing lighting uniformity in the work zone; (3) minimizing glare to workers and road users; and (4) minimizing lighting costs. The system is designed to support decision makers in their search for practical lighting arrangements that provide various tradeoffs among these four conflicting objectives. Five decision variables are optimized in the present system, namely: number of lighting equipment, equipment positioning, mounting height, aiming angle, and rotation angle. The system is also designed to consider and satisfy all practical constraints that can be encountered in this lighting design problem. An application example is analyzed to illustrate the use of the system and demonstrate its capabilities in generating near optimal and practical lighting arrangements for nighttime highway construction projects.     

Time-Cost-Quality Trade-Off Analysis for Highway Construction

Many departments of transportation have recently started to utilize innovative contracting methods that provide new incentives for improving construction quality. These emerging contracts place an increasing pressure on decision makers in the construction industry to search for an optimal resource utilization plan that minimizes construction cost and time while maximizing its quality. This paper presents a multiobjective optimization model that supports decision makers in performing this challenging task. The model is designed to transform the traditional two-dimensional time-cost tradeoff analysis to an advanced three-dimensional time-cost-quality trade-off analysis. The model is developed as a multiobjective genetic algorithm to provide the capability of quantifying and considering quality in construction optimization. An application example is analyzed to illustrate the use of the model and demonstrate its capabilities in generating and visualizing optimal tradeoffs among construction time, cost, and quality.     

Louisiana Highway Construction Cost Trend after Hurricanes Katrina and Rita

The objective of this study was to reveal the trend in highway construction costs following Hurricanes Katrina and Rita in Louisiana. The means of measuring highway construction cost was the Louisiana Highway Construction Index, an index made up of the cost of labor, equipment, and six major materials used in highway construction. Data from projects let by the Louisiana Department of Transportation and Development from the second quarter of 2003 to the second quarter of 2007 were used to track the change in construction costs. Index values from hurricane-impacted areas (GO Zones) were compared with those in Non-GO Zones. The indices revealed that two quarters after Hurricanes Katrina and Rita, the highway construction cost jumped about 20% statewide and 51% in GO Zone. Two years after the hurricanes, the cost has stabilized to around 30% increase over the pre-Katrina and Rita period. This study provides valuable information for the state agency to estimate cost escalation in ongoing projects and to estimate future disaster response to highway construction costs.     

E-Society Portal: Integrating Urban Highway Construction Projects into the Knowledge City

Community involvement is an important factor for sustainable highway construction. Information and communication technologies provide a new and more effective approach to facilitate community involvement. However, there are too many parameters with conflicting and subjective definitions related to sustainability and too many stakeholders with varying degrees of interest and sophistication. There is a need for an effective tool to communicate project impacts on sustainability to local communities. This paper presents an ontology for stakeholder management and sustainability in highway construction. An ontology is a conceptual semantic model that attempts to capture human knowledge (both explicit and tacit) in a consistent manner. Ontologies include three main elements: a taxonomy (common vocabulary presented in concept trees), set of relationships (linking concepts across trees), and axioms (limitation/constraints on the behavior of concepts). The ontology was used to develop a portal for broadcasting highway design features to local communities. By browsing through the portal, a user can learn about project elements, the impacts of each element on sustainability issues, who is sponsoring such element, and what efforts have been made to reduce any impacts of such elements on local communities.     

Estimating Performance Time for Construction Projects

The prediction of performance time for construction projects is a problem of interest to both researchers and practitioners. This research seeks to gain insight into the significant factors impacting construction duration by developing a regression model. Data were collected for 856 facility projects completed between 1988 and 2004. These data were analyzed using Bromilow’s time-cost (BTC) model (1969) as well as multiple linear regression. The multiple linear regression model was found to provide the most acceptable prediction. As in the BTC model and previous research reported in the literature, a significant correlation was found to exist between cost and duration. However, several other factors were also identified that resulted in significantly lower than average construction durations. These include projects completed within certain management groupings, managed by a certain construction agent, and designed by in-house personnel.     

Illustrative Benchmarking Rework and Rework Costs in Swedish Construction Industry

Following several studies investigating the causes of construction rework among some projects in the Swedish construction industry, we conducted this study in cooperation with R&D West, a group of construction companies in Sweden, to measure the costs of rework in construction projects. Rework has become an endemic feature of the procurement process in construction that invariably leads to time and cost overruns in projects. Thus, in order to improve the performance of projects, it is necessary to identify the causes and costs of construction rework. The research presented in this paper identifies, analyzes, and discusses the causes, magnitudes, and costs of rework experienced in seven Swedish construction projects. The findings revealed that the costs of rework for the case study projects were 4.4% of the construction values of the observation period, and the time needed to correct them was 7.1% of the total work time. The construction errors that generated rework were further analyzed according to their origins, types, and positions, causes of construction rework were identified and discussed, and preventive actions were suggested.     

Accuracy of Highway Contractor’s Schedules

Contractors are required by the Michigan Department of Transportation (MDOT) to submit a progress schedule identifying the controlling path of activities for a construction project. During the 2000 construction season, MDOT allowed contractors to submit a progress schedule with overlapping or concurrent controlling operations. Prior to this, only one activity at a time could be controlling on the progress schedule. This paper reports on the results of a research project where the focus was to examine the accuracy of the progress schedules, which only list controlling items. Eight construction projects were studied and a determination of progress schedule accuracy was made. This was done to determine if there was an increase in accuracy of the schedules when concurrent controlling operations were used. Included in the eight projects were four without concurrent controlling activities and four with concurrent controlling activities. A comparison based upon similar projects with and without concurrent activities was made. Additionally, 22 projects were analyzed, all without concurrent controlling activities, to determine the accuracy of progress schedules for two types of projects. The comparison revealed that, in three of the four cases, the accuracy of progress schedules increased with the allowance of concurrent controlling activities. The 22 projects revealed that the accuracy of progress schedules varied considerably. It was also determined that contractors overestimated the duration of activities included in progress schedules.     

Impact of Inaccurate Engineer’s Estimated Quantities on Unit Price Contracts

This paper discusses the issue of unbalanced bid prices in unit price highway contracts. It analyzes the reasons contractors unbalance their bids and looks for ways that allow public transportation agencies to discourage this practice. It reviews the results of a study of quantity estimating accuracy of 462 transportation projects in Oklahoma, and finds that one method to reduce unbalanced bid prices is for the agency to ensure that the bid quantities used in the engineer’s estimate are as accurate as possible. Doing so reduces the need for contractors to unbalance to protect fixed costs and target profit on bid items that will underrun the quantity used in the engineer’s estimate.     

Method to Determine Minimum Contract Bid for A+B+I?/D Highway Projects

More and more state highway agencies (SHAs) have begun to consider the value of time in highway construction. The “A?(cost)+B?(time?cost)+I/D?(incentive/disincentive)” bidding concept is designed to shorten the total contract time by allowing each contractor to bid the number of days in which the work can be accomplished, in addition to the traditional cost bid. I/D are not only used to provide an incentive to the contractor for earlier completion, but also to provide a disincentive for late completion of a project. Contractors are then presented with the problem of determining the best strategy of bid estimation, including construction cost, time cost, and incentive/disincentive. SHAs are also faced with the problem of placing a maximum and/or minimum on the time bid. To provide users a useful tool to estimate project time more accurately using this advanced method, this study develops a quantified model of the price-time bidding contract. The functional relationship between the construction cost and time duration is developed based on data from the Florida Department of Transportation (FDOT). The contractor’s construction cost “A” is then combined with the road user cost and incentive/disincentive to determine the optimum low bid price and time. This optimum can then be used by the SHA to set limits on the range of acceptable time bids. Finally, several projects completed by the FDOT will be used to illustrate the validity of this model.     

Risk Allocation and Risk Handling of Highway Projects in Taiwan

Risks always exist in construction projects and often cause schedule delay or cost overrun. Risk management is a key issue in project management. The first step of risk management is risk identification. It includes the recognition of potential risk event conditions in the project and the clarification of risk responsibilities. We conducted multiple-case studies using a systematic analytical procedure to identify risks in highway projects in Taiwan, to recognize risk allocation by contract clauses, and to analyze the influence of risk allocation on the contractor’s risk handling strategies. The results show that the owner allocates risks by stipulating specific contract clauses into five kinds of risk allocation conditions. If a risk is more controllable by the contractor, the owner has a greater tendency to allocate the risk to the contractor. Risk allocation determines which kinds of risks the contractor would take and influences the contractor’s risk handling decisions. The analysis furthermore indicates that, if the probability of a certain risk event condition is uncontrollable, then with the increasing possibility of taking the risk, the contractor’s tendency of risk handling changes from actively transferring the risk to passively retaining the risk. In contrast, if a risk is controllable and certainly allocated to the contractor, the contractor tends to take the initiative to reduce the impact caused by the risk event rather than retain the risk.     

Influence of Project Type and Procurement Method on Rework Costs in Building Construction Projects

While it is widely recognized that additional costs due to rework can have an adverse effect on project performance, limited empirical research has been done to investigate the influencing factors. The research presented in this paper aims to determine the influence of different project types and procurement methods on rework costs in construction projects. Using a questionnaire survey, rework costs were obtained from 161 Australian construction projects. The direct and indirect consequences of rework are analyzed and discussed. It is shown that, contrary to expectation, rework costs do not differ relative to project type or procurement method. In addition, it was found rework contributed to 52% of a project’s cost growth and that 26% of the variance in cost growth was attributable to changes due to direct rework. To reduce rework costs and therefore improve project performance, it is posited that construction organizations begin to consider and measure them, so that an understanding of their magnitude can be captured, root causes identified, and effective prevention strategies implemented.