A New Decision-Support Model for Innovative Contracting Strategies Through a Quantitative Analysis on Aspects of Project Performance

Incentive/disincentive (I/D) and cost-plus-time (A+B) are the most widely used alternative contracting strategies for responding to the dual challenge of repairing aging infrastructure systems while minimizing traffic inconvenience to the traveling public. However, little is known about their impact on project performance aspects such as project schedule and cost. The lack of both systematic studies on these strategies and the proper analytical tools to assess them now prevents state highway agencies from budgeting accurately and realistically when they are considered for implementation. This study attempts to address these shortcomings by determining the effectiveness of these strategies and by developing a new decision-support model to promote their effective application. A quantitative analysis drawing on 1,372 infrastructure improvement projects completed in California from 2000 to 2008 was conducted. The results of one-way ANOVA analyses show that I/D projects held a decisive schedule-saving advantage over the A+B and conventional projects, but that I/D increased project costs significantly more than the others because of a higher frequency of contract change orders. The results also revealed an effectiveness problem with use of A+B. When compared with conventional projects, A+B not only included extreme schedule overruns, but it also increased project costs far above the levels seen in conventional projects; both of these resulted from inaccuracies created by allowing contractors to bid on contract time. According to the analysis, the additional cost of using I/D was recouped by reduced construction time, but this tradeoff was not seen in A+B projects. The quantitative analysis provides the basis for a new decision-support model's conceptual and theoretical analysis framework to help decision-makers determine realistic incentive amounts between a contractor's additional cost growth (lower bound) and a portion of the decrease in total time savings (upper bound). To quantify the lower and upper bounds, the model employs an integrated schedule/total time savings/cost growth analysis for expediting construction and it produces two types of incentives along with the maximum incentive amount, such as closure I/Ds and daily I/Ds. The content of this study can better inform decision-makers when they select among contracting strategies for a given project and help determine the most realistic incentive amounts.