Cash Flow Projections for Selected TxDoT Highway Projects

In planning for contractor payments, an owner with multiple projects needs to estimate the amount of money to be paid to contractors in coming months. For an owner as large as the Texas Department of Transportation (TxDoT), one is faced with the problem of organizing the budget to ensure that there are sufficient funds for all projects. This investigation was requested by TxDoT to provide a tool to forecast future project payments. Recent account summaries of TxDoT projects from 2001 to 2003 were analyzed for creating mathematical models representing monthly payments for various projects. The data were organized into categories of project types and subcategories of project contract amount. A fourth degree polynomial regression analysis was run on the data and the regression curve, when statistically significant, was taken to be the forecast payment curve. Finally, a computer program was developed to implement the results of the investigation for TxDoT’s needs. The methodology provided will help other highway agencies to create their own equations to better predict project cash flows and trends. This investigation might also benefit researchers in projecting cash flows and trends, while also allowing for improvements.     

Analysis of Owner’s Design and Construction Quality Management Approaches in Design/Build Projects

This paper explores and classifies current approaches to evaluating quality in design/build (DB) proposals. It does so by a thorough content analysis of 78 requests for proposal (RFPs) for public DB projects with an aggregate contract value of over $3.0 billion advertised between 1997 and 2002. In most DB projects, the owner requires the DB contractor to establish a firm-fixed price on a project that has not yet been designed. Usually, the owner also fixes the project delivery period. In the traditional design/bid/build (DBB) system, quality is fixed through the plans and specifications. Thus, in DBB, with schedule and quality fixed, the cost of construction is the factor in which the owner seeks competition. Conversely, in DB, with cost and schedule fixed, the scope and hence the level of quality is the main element of competition. This paper identifies the six owner approaches to articulating DB quality requirements in their RFPs. The six approaches are quality by qualifications, evaluated program, specified program, performance criteria, specification, and warranty. These are important for DB contractors to understand so that they can craft their proposal in a manner that is both responsive to the owners’ requirements and consistent with the owner’s system to make the best value contract award decision.     

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.     

Procurement of Design-Build Services: Two-Phase Selection for Highway Projects

In the United States, public agencies are adopting the design-build (DB) delivery method for delivering highway projects after having used the traditional design-bid-build method for generations. In the 2002 design-build contracting final rule, the Federal Highway Administration (FHWA) strongly encourages the use of two-phase selection procedures for DB procurement. This paper takes a case study approach to investigating the use of a two-phase process for selecting providers of highway design-build services. Using two DB projects in central Texas as case studies, the writers have analyzed project documentation and performed interviews with 37 project participants involved in procurement, including owner representatives and legal consultants. For the first case, the writers selected the $1.3 billion SH-130 tolled expressway project in central Texas. Procurement of the SH-130 DB contract was performed before the FHWA rule on DB contracting was released. In addition, the writers examined procurement activities for the $154 million DB contract for the SH-45 SE tolled expressway, which was procured by the same owner in 2004 following procedures identified in the FHWA rule. As a result, a process was developed that included activities to be performed between the delivery method decision and the contract execution. This process model tracks the differences between the SH-130 and the SH-45 SE processes that are attributable to the latter’s adoption of the FHWA Rule.     

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.     

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.     

Pilot Study of Quality Function Deployment in Construction Projects

Quality function deployment (QFD) is a process that has been used for managing the development of new manufactured products. In this process, both spoken and unspoken needs of the customers are determined, prioritized, and translated to design parameters. Such design parameters are assigned specific target values and are frequently checked against customers’ needs throughout the development cycle to ensure customers’ satisfaction with the end product. This paper describes a pilot study in which QFD was implemented in a design-construction project. The project scope involved the preparation of a conceptual design for a modern large-size classroom for college students. The design was intended to become a model for the university’s future classrooms. The study proved that QFD could be successfully adopted in engineering-construction projects. However, the study identified a number of implementation challenges. In addition, more applications are necessary to take the process throughout the full project delivery cycle, as the pilot study involved only the preliminary engineering and conceptual design phase.     

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.     

Determination of Quality Level in Mass Housing Projects in Turkey

In Turkey, achievement of acceptable levels of quality in the construction sector has long been a problem. Great expenditures of time, money, and resources are wasted each year due to inefficient or nonexistent quality levels prevailing in the industry. The situation is even worse in the case of mass housing projects addressing to low and middle income groups. It is the purpose of this paper to identify the type of deviations resulting in rework in mass housing projects, since construction firms can only increase their profit margins by paying more attention to the deviation types. More importantly, firms can improve their images in the sector and thus, can take new projects. To achieve the objective mentioned above, data have been derived from 400 cases by means of a questionnaire containing 108 questions, and results of this survey were evaluated by several statistical techniques. It is concluded that households are not completely satisfied from the quality of products and/or services delivered within their housing units. In future studies, the causes and costs of the rework should be researched for better understanding the results together with the remedial measures being implemented.     

Benchmarking, Benchaction, and Benchlearning: Rework Mitigation in Projects

The Australian government has issued several calls to improve the performance of the construction industry. A lack of available benchmark metrics has made it difficult, if not impossible, for organizations to identify areas to target for process improvement. A significant factor that has been found to contribute to poor organizational and project performance is rework. Using the results of a questionnaire survey, the paper presents and discusses a series of benchmark metrics for the causes and costs of rework for 161 construction projects. A generic framework for benchmarking rework at the interfaces of a project’s life cycle is proposed, and unstructured interviews are used to subject the proposed framework to validation by industry practitioners.     

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.     

Quality Management Programs in the Construction Industry: Best Value Compared with Other Methodologies

The drive to maintain competitiveness by increasing performance has been an ever-present goal of industries within the global market. Although many industries have benefited from classical quality management programs such as total quality management (TQM), lean production, and six sigma, the construction industry has remained primarily unaffected. This paper analyzes these three popular programs, the basis for their success and failures, and their documented level of susceptibility in the construction industry. These programs are then contrasted to the best value system, an owner-driven quality program that has been tested recently in the construction industry and documented to produce encouraging results. On the basis of the findings, it is proposed that most quality management programs are designed to be instigated by the vendor, by improving the company’s ability to deliver a quantifiable, replicable product or service. This is significant because it indicates that although the underlying principles of the classic quality management programs are relevant to all markets, the processes and methods of application may be inappropriate for an industry that dispenses highly diverse or integrated products or services, such as construction.     

Time, Cost, and Quality in a Road Building Project

Time, cost and quality are the three factors that play a significant role in the planning and controlling of construction projects. The main barriers for their achievement are the changes in the project environment necessitating cost, time, and quality trade-offs. Literature has mainly focused on analyzing time and cost with little or no reported research focusing on models for optimizing construction time, cost, and quality jointly. Government agencies have recently started using new types of contracting methods which have placed an increasing pressure on decision makers in the construction industry to search for an optimal/near optimal resource utilization plan that minimizes construction cost and time while maximizing its quality. In this paper, a 0-1 Integer Programming model which enables meeting quality output standards and time and budget objectives respectively is developed. The clever use of binary variables allows us to solve many interesting and difficult problems and our ability to model complex problems increases tremendously when we use binary variables. A version of the model to minimize time meeting quality and cost objectives is applied to a road building project. Two alternatives versions of the model which enable to minimize cost meeting quality and time and to maximize quality meeting time and cost, are shown in an Appendix.     

Alternative Project Delivery Systems: Applications and Legal Limits in Transportation Projects

This paper presents the results of a comprehensive survey of the legal codes of all the 50 states in the United States regarding alternative project delivery systems in transportation projects. In the past decade there has been a surge of legislation allowing state transportation officials much more flexibility regarding the choice of project delivery systems. These delivery systems are usually selected based on a combination of price and quality. Specific delivery systems studied in this paper are Design-Build, Construction Management at Risk, and Public-Private-Partnership. The background and history of the emergence of these new delivery systems are studied in this paper. The research showed that in many states, alternative delivery systems may be allowed but with specific restrictions. For each state, all of these delivery systems have been researched and placed into one of the following distinguishable categories: (1) fully authorized; (2) authorized but needs extra approvals; (3) authorized for a pilot program and/or with some limitations; (4) not authorized. The output of the survey gives valuable snapshots over the status of each delivery system in regards to its legality in different parts of the country as of December 2006. Comparing the results of this survey with the surveys done previously shows that the trend is to allow states more flexibility in the choice of project delivery systems.     

Modeling the Dynamics of Heavy Equipment Management Practices and Downtime in Large Highway Contractors

Machine downtime is invariably perceived as one of the most critical problems faced by highway contractors. Attempts to reduce downtime often result in failure due to the dynamic behaviors between equipment management practices and downtime. This paper is thus intended to highlight the dynamics of heavy equipment management practices and downtime in large highway contractors and utilizes them as a framework in constructing a simulation model using a system dynamics approach. Face-to-face interviews were conducted with equipment managers from five different large highway contractors in Thailand. The finding reveals that, to be successful in alleviating downtime, contractors must view their practices on equipment management as an integration of multiple feedback processes, which are interrelated and interdependent with downtime. Based on various validation tests, the simulation model is deemed appropriate in representing the equipment management system as related to downtime of large highway contractors. The research is of value in facilitating better understanding on the dynamics of equipment management practices and downtime as well as their interdependency.     

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.     

Effects of Nonnormal Distributions on Highway Construction Acceptance Pay Factor Calculation

Percent within limits (PWL) is a commonly used quality control/quality assurance measure of highway pavement materials and construction, and it is a popular index for adjusting pay factors. However, PWL is based on the assumption of normal distribution of quality characteristics (e.g., concrete compressive strength and asphalt air voids). Skewness and kurtosis, which are common forms of statistical nonnormal distributions, can potentially bias the acceptance pay factor calculations. To examine this potential pay bias, simulations were performed to investigate the magnitude and the direction (overestimation or underestimation) of pay factor calculations. The study revealed that for both one-sided and two-sided specification limits, bias in pay factors not only did vary in magnitude but also reversed in direction over various ranges of PWL. These analyses showed that for a one-sided upper specification limit, on average, a positive skewness and kurtosis can underestimate the pay factor of an acceptable quality level population by 0.90%, and overestimates a rejectable quality level population by 3.8%. This leads to falsely penalizing acceptable products and rewarding bad products. The same was true for two-sided limits, which again varied based upon the percent of defective materials at the tails of the distribution. This is a very important issue because these biases in pay factors can easily upset the relative profit margins of the contractor. Furthermore, this may not be easily detectable without a detailed and sophisticated analysis as outlined in this paper. For multiple quality characteristics based pay factors, analyses showed that the combined magnitude of these biases was not linearly cumulative. Findings of the study indicate that bias in pay was higher for lots with fewer sublots and higher skewness and kurtosis.     

Contractor-Performed Quality Control: Is the Fox Guarding the Henhouse?

At the same time that state departments of transportation are allowing contractor-performed quality control, they are also concerned about using the contractor-reported data for acceptance and payment purposes. The question is, are we putting the fox in charge of guarding the chickens? To address this concern, a large number of asphalt and concrete projects in Kentucky were examined. The statistical analyses showed that for the most part there is no significant difference between the contractor-performed acceptance data and concomitant highway agency-performed verification data. This is obviously a very encouraging finding that is expected to enhance the level of trust between the contractors and highway agencies.     

Partnering Mechanism in Construction: An Empirical Study on the Chinese Construction Industry

Partnering and its principles have increasingly been introduced to the construction industry to improve the efficiency of project delivery. However, little research outlines the mechanism behind its application. This paper presents the findings of a study that was conducted to develop and test a partnering model that reveals the relationships between the critical success factors (CSFs) of partnering and demonstrates their importance to construction. With support of data collected from the Chinese construction industry, this study has revealed strong correlations among partnering CSFs, risk management, total quality management (TQM), use of incentives, and project performance. It is concluded that project success is the outcome of the interaction between a variety of techniques, and that partnering, associated with incentives, is a basic management method through which risk management and TQM can be strongly improved.     

Construction in Hong Kong: Success Factors for ISO9000 Implementation

This paper examines the success factors for the implementation of ISO9000 in the Hong Kong construction industry. The critical factors for construction contractors to successfully implement ISO9000 were identified. An analytic hierarchy process model was then developed to determine the relative importance among those factors. The findings showed that the top management commitment is the most critical factor for the successful ISO9000 implementation, whilst the common goal, teamworking, education and training, and the cultural changes are also the important factors.