Best Practice

BEST PRACTICE:

F1−2: A+B Bidding with Incentive/Disincentive Clauses

DESCRIPTION:

A+B bidding is cost plus time bidding. A is the traditional bid amount for contract items and work to be done under the contract. B is the amount of time bid to complete the work. Time is typically bid in number of days/periods required to complete the contract or identified parts of the contract (phases), as estimated by the bidder. The value of each time unit is established by the owner and is based on user costs or other established monetary value of early completion. Therefore, B equals number of time units bid multiplied by the owner agency's established costs per time unit. The low bid is determined by the sum of the A and B values.

Many A+B contracts also include an incentive/disincentive (I/D) provision to discourage the contractor from overrunning the time bid for completing the work, and to reward the contractor if work is completed earlier than the time bid. The DOT's estimate of days or hours of lane/road closure time is critical in this practice. This baseline estimate helps an agency determine how much accelerations benefit a bid is providing to justify paying an incentive. This practice may add to project cost, thus the decision to use the I/D clause should be project specific.

This approach is best considered during the planning stage of the project so an appropriate traffic management strategy can be matched to this contract strategy. Several States have used A+B bidding, including:

• Indiana has used A+B bidding since 1996.
• Missouri has used A+B with I/D clauses extensively since 1988.
• North Carolina has used this process since 1989 and has criteria that must be met before a project is considered for A+B bidding.
• Oklahoma looks at each project on an individual basis and uses the best method of contract bidding.

REASON(S) FOR ADOPTING:

This method is used to minimize the time required to complete work thereby reducing the amount of traffic inconvenience. This practice also encourages contractor innovation related to efficient construction methods.

PRIMARY BENEFIT(S):

The A+B and I/D processes have been shown to decrease construction time, keeping user costs to a minimum.

MOST APPLICABLE LOCATION(S)/PROJECT(S):

Used most often on high traffic volume urban rehabilitation projects. Can be applied to all types of facilities and all types of work where the need is to "accelerate" the completion of the project.

RELATED BEST PRACTICE(S):
A+B and Incentive/Disincentive Clauses (Practice F1−3).

STATE(S) WHERE USED:

Indiana, Missouri, North Carolina, Oklahoma

SOURCE/CONTACT(S):

Greg Kicinski, Project Management Manager, Production Management Division, Indiana DOT
Phone: (317) 234−1534
E−mail: gkicinski@indot.in.gov