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Public agency project owners often seek innovation from the private sector to help reduce project costs and add technical enhancements. An approach that has been successful for many project owners is to allow proposers to incorporate alternative technical concepts (ATCs) into their proposals. The Intercounty Connector project in Maryland provides a recent example of this approach and the benefits that can be achieved. The Maryland experience, discussed below, is a useful model for other states facing limited budgets and a backlog of critical projects. Other examples of the use of ATCs in surface transportation projects are summarized in a chart following the discussion below.

Background

A pre-proposal ATC process allows proposers, on a confidential basis, to suggest modifications to technical requirements that would improve the project technically or reduce development costs, thus allowing the project owner to obtain a better project without increasing its cost or to gain the benefit of a cost reduction without an adverse impact on project quality.[1] Proposers are motivated to propose confidential ATCs which add value to the project owner because the ATCs can give them a competitive advantage over other proposers. Absent such a process, although the successful proposer could still share its ideas with the owner after it is selected, there is less incentive to do so once it has already won the job. Furthermore, under that approach the owner would only get the benefit of one proposer's ideas, instead of getting ideas from multiple proposers. Finally, any cost savings would not help drive down the initial pricing -- a significant consideration given that a high initial project cost may mean that the contract is never awarded.

If a project owner approves an ATC from a proposer, it is allowing a change in the RFP requirements exclusively for that proposer. This raises questions about conducting an "apples to apples" comparison of the proposals. These questions can be resolved by establishing standards for the ATCs, usually in the form of a requirement that ATCs must be "equal to or better than" the original requirements of the contract documents included in the procurement package, and that an ATC cannot produce cost savings by merely reducing quantities.

FHWA's design-build rule specifically contemplates the use of ATCs but states that ATC proposals may supplement, but not substitute for, base proposals that respond to the requirements of the RFP.[2] However, many FHWA division offices have allowed the incorporation of pre-approved ATCs directly into a proposal without options, effectively waiving this requirement. Requiring proposers to incur the cost of advancing a base design that would never be used would have a chilling effect on ATCs. Allowing ATCs to be incorporated into the proposal also results in a more efficient proposal evaluation process for owners, since they would not have to evaluate multiple alternative proposals.[3]

ATCs in Action – Improving the Maryland Intercounty Connector Project

The Maryland State Highway Administration (SHA) has taken full advantage of the ATC process in its procurement of multiple design-build contracts for the $2.5 billion, 19-mile, Intercounty Connector (the ICC) in the Maryland suburbs north of Washington, D.C. In order to avoid any uncertainty regarding the applicability of the 23 CFR 636.209 requirement discussed above, the SHA obtained a formal waiver of the requirement in connection with its procurement, under FHWA's Special Experimental Program 14 (SEP-14).[4] As part of the application, the SHA agreed to provide a summary of its experience using ATCs. The summary has been completed and is available on-line, at http://www.fhwa.dot.gov/programadmin/contracts/sep14mdeval.cfm.

The SHA used a competitive sealed proposal (or "best value") process to select its design-builders. As a part of that process, the SHA offered proposers the opportunity to ask the SHA to pre-approve proposed deviations from certain design requirements and performance specifications, with the goal of encouraging proposers to incorporate innovation and design flexibility into their proposals. The ATC would be approved only if the SHA determined, in its sole discretion, that the proposed end product with the proposed deviation was equal to or better than the end product absent the deviation. Proposers were permitted to incorporate any pre-approved ATCs into their final proposals.

The SHA summary covers three separate procurements, with seven proposers submitting a total of 130 ATCs, almost half of which were approved. The approved ATCs minimized the impact on the environment, improved the overall technical quality of the final product, and helped decrease the cost of the project. In addition, approval of ATCs during the proposal process allowed proposers to further develop their project design and construction schedules. By carefully maintaining the full confidentiality of the ATCs submitted during the proposal process, the SHA encouraged proposers to differentiate their proposals by developing creative and innovative ATCs. Proposers received innovation credit for approved ATCs, which improved their technical ratings in the best value evaluation. ATCs also allowed proposers to decrease their costs, thus allowing them to sharpen their pencils in submitting price proposals.

Specific ATCs included:

• Reconfiguring an important interchange on the western end of the project. This revision required additional environmental approvals[5] and the purchase of additional right of way[6]. The reconfiguration helped to reduce the successful proposer's price proposal and improved the proposal's technical rating. The revision also provided several benefits to the project, including:
• Reducing the interchange from a three-level interchange to a two-level interchange, thus minimizing its visibility to neighboring communities (including one historic community);
• Reducing the number of bridges in the interchange, thereby decreasing future maintenance costs; and
• Improving lane continuity on the ICC.
• Reduction of the mainline median width within the most environmentally sensitive area of the ICC. This revision was conditionally approved, pending design verification that the RFP requirements and commitments could be met and permitting agency approvals could be obtained. If the successful proposer is able to demonstrate that the reduced median meets these commitments, the reduction in median will lead to a reduction in costs due to earthwork and constructability, as well as several environmental benefits, including reduced forest, stream and wetland impacts and movement of the highway further from adjacent homes.

Additional ATCs included replacing long bridges over wash ponds with at-grade roads on improved soils, thereby removing over 300,000 square feet of bridge deck from the RFP plans, eliminating the need to relocate an existing electric transmission main crossed by the ICC, and relocating many of the planned storm water ponds to eliminate impacts to existing streams, tributaries and wetlands in the area. These and other ATCs helped to reduce the estimated cost of one of the contracts by approximately $20 million, which represented a cost savings of nearly 5 percent.

Conclusion

As the country's infrastructure continues to age and the costs of construction outpace shrinking budgets, project owners are seeking solutions that will accelerate delivery of critical projects, while keeping costs under control. The ICC experience sends a clear message that permitting proposers to include ATCs in their proposals can be an effective tool to help project owners meet these challenges and deliver cost-efficient and high-quality transportation projects.

To view the chart, please click here.

David Farkas specializes in procurement strategy and development of procurement and contract documents for large transportation infrastructure projects.  He can be reached at dfarkas@nossaman.com or 202.887.1457.