Decision-Support Framework for Quantifying the Most Economical Incentive/Disincentive Dollar Amounts for Critical Highway Pavement Rehabilitation Projects

Kunhee Choi, Eun Sug Park, Junseo Bae

Research output: Book/ReportCommissioned report

Abstract

One innovative way of reducing construction duration is to reward contractors with an early completion incentive
bonus and levy fines for delays. Although use of Incentive/Disincentive (I/D) is increasingly common, State
Transportation Agencies (STAs) often struggle to select the most appropriate I/D rates due largely to the lack of the
proper analytical methods. There is an immediate need to develop a holistic framework that is more general and
applicable to a variety of transportation projects for the determination of optimal I/D rates.

The main objectives of this study are to create a new decision-support analytical framework of optimal I/D and test
whether it can reasonably and realistically determine and justify the most economical I/D dollar amounts. This study
blends existing schedule and traffic simulation techniques with a stochastic analysis by accounting for the integration
of project schedule, Contractor’s Additional Cost (CAC) of acceleration, and total savings to motorists and to the
agency. STAs can arrive at an optimal I/D rate by employing a seven-stage methodology proposed in this study.
These steps include two adjustment algorithms that are factored on the concepts of level-of-service and net present
value. The study results revealed a strong tradeoff effect between schedule and cost, suggesting that CAC growth
rate can be analyzed by how the CAC interacts with the agency’s specified schedule goal. The robustness of the
proposed seven-stage methodology was validated with two case studies performed on real-world construction
projects.

The proposed work provides research communities and industry practitioners with the first holistic view to determine
the most economical and realistic I/D dollar amounts for a given project—an optimal value that allows the agency to
stay within budget while at the same time effectively motivating contractors to use their ingenuity to complete the
projects earlier. It can help agency engineers and decision makers make better-informed decisions and allocate more
realistic incentives, which will result in more favorable cost-benefit ratios and better use of public funds. It will
significantly reduce the agency’s expenses in the time and effort required for determining I/D rates.
Original languageEnglish
PublisherTexas A & M University System College Station
Commissioning bodyU.S. Department of Transportation, University Transportation Centers Program
Number of pages97
VolumeSWUTC/13/600451-00016-1
Publication statusPublished - Nov 2013
Externally publishedYes

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Pavements
Patient rehabilitation
Contractors
Costs
Engineers
Industry

Keywords

  • highway rehabilitation
  • innovative contracting
  • decision-support model
  • incentive/disincentive
  • contracttor's additional cost of acceleration
  • road user cost
  • level-of-service
  • net present value

Cite this

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title = "Decision-Support Framework for Quantifying the Most Economical Incentive/Disincentive Dollar Amounts for Critical Highway Pavement Rehabilitation Projects",
abstract = "One innovative way of reducing construction duration is to reward contractors with an early completion incentivebonus and levy fines for delays. Although use of Incentive/Disincentive (I/D) is increasingly common, StateTransportation Agencies (STAs) often struggle to select the most appropriate I/D rates due largely to the lack of theproper analytical methods. There is an immediate need to develop a holistic framework that is more general andapplicable to a variety of transportation projects for the determination of optimal I/D rates.The main objectives of this study are to create a new decision-support analytical framework of optimal I/D and testwhether it can reasonably and realistically determine and justify the most economical I/D dollar amounts. This studyblends existing schedule and traffic simulation techniques with a stochastic analysis by accounting for the integrationof project schedule, Contractor’s Additional Cost (CAC) of acceleration, and total savings to motorists and to theagency. STAs can arrive at an optimal I/D rate by employing a seven-stage methodology proposed in this study.These steps include two adjustment algorithms that are factored on the concepts of level-of-service and net presentvalue. The study results revealed a strong tradeoff effect between schedule and cost, suggesting that CAC growthrate can be analyzed by how the CAC interacts with the agency’s specified schedule goal. The robustness of theproposed seven-stage methodology was validated with two case studies performed on real-world constructionprojects.The proposed work provides research communities and industry practitioners with the first holistic view to determinethe most economical and realistic I/D dollar amounts for a given project—an optimal value that allows the agency tostay within budget while at the same time effectively motivating contractors to use their ingenuity to complete theprojects earlier. It can help agency engineers and decision makers make better-informed decisions and allocate morerealistic incentives, which will result in more favorable cost-benefit ratios and better use of public funds. It willsignificantly reduce the agency’s expenses in the time and effort required for determining I/D rates.",
keywords = "highway rehabilitation, innovative contracting, decision-support model, incentive/disincentive, contracttor's additional cost of acceleration, road user cost, level-of-service, net present value",
author = "Kunhee Choi and Park, {Eun Sug} and Junseo Bae",
year = "2013",
month = "11",
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volume = "SWUTC/13/600451-00016-1",
publisher = "Texas A & M University System College Station",
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}

Decision-Support Framework for Quantifying the Most Economical Incentive/Disincentive Dollar Amounts for Critical Highway Pavement Rehabilitation Projects. / Choi, Kunhee; Park, Eun Sug; Bae, Junseo.

Texas A & M University System College Station, 2013. 97 p.

Research output: Book/ReportCommissioned report

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T1 - Decision-Support Framework for Quantifying the Most Economical Incentive/Disincentive Dollar Amounts for Critical Highway Pavement Rehabilitation Projects

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AU - Park, Eun Sug

AU - Bae, Junseo

PY - 2013/11

Y1 - 2013/11

N2 - One innovative way of reducing construction duration is to reward contractors with an early completion incentivebonus and levy fines for delays. Although use of Incentive/Disincentive (I/D) is increasingly common, StateTransportation Agencies (STAs) often struggle to select the most appropriate I/D rates due largely to the lack of theproper analytical methods. There is an immediate need to develop a holistic framework that is more general andapplicable to a variety of transportation projects for the determination of optimal I/D rates.The main objectives of this study are to create a new decision-support analytical framework of optimal I/D and testwhether it can reasonably and realistically determine and justify the most economical I/D dollar amounts. This studyblends existing schedule and traffic simulation techniques with a stochastic analysis by accounting for the integrationof project schedule, Contractor’s Additional Cost (CAC) of acceleration, and total savings to motorists and to theagency. STAs can arrive at an optimal I/D rate by employing a seven-stage methodology proposed in this study.These steps include two adjustment algorithms that are factored on the concepts of level-of-service and net presentvalue. The study results revealed a strong tradeoff effect between schedule and cost, suggesting that CAC growthrate can be analyzed by how the CAC interacts with the agency’s specified schedule goal. The robustness of theproposed seven-stage methodology was validated with two case studies performed on real-world constructionprojects.The proposed work provides research communities and industry practitioners with the first holistic view to determinethe most economical and realistic I/D dollar amounts for a given project—an optimal value that allows the agency tostay within budget while at the same time effectively motivating contractors to use their ingenuity to complete theprojects earlier. It can help agency engineers and decision makers make better-informed decisions and allocate morerealistic incentives, which will result in more favorable cost-benefit ratios and better use of public funds. It willsignificantly reduce the agency’s expenses in the time and effort required for determining I/D rates.

AB - One innovative way of reducing construction duration is to reward contractors with an early completion incentivebonus and levy fines for delays. Although use of Incentive/Disincentive (I/D) is increasingly common, StateTransportation Agencies (STAs) often struggle to select the most appropriate I/D rates due largely to the lack of theproper analytical methods. There is an immediate need to develop a holistic framework that is more general andapplicable to a variety of transportation projects for the determination of optimal I/D rates.The main objectives of this study are to create a new decision-support analytical framework of optimal I/D and testwhether it can reasonably and realistically determine and justify the most economical I/D dollar amounts. This studyblends existing schedule and traffic simulation techniques with a stochastic analysis by accounting for the integrationof project schedule, Contractor’s Additional Cost (CAC) of acceleration, and total savings to motorists and to theagency. STAs can arrive at an optimal I/D rate by employing a seven-stage methodology proposed in this study.These steps include two adjustment algorithms that are factored on the concepts of level-of-service and net presentvalue. The study results revealed a strong tradeoff effect between schedule and cost, suggesting that CAC growthrate can be analyzed by how the CAC interacts with the agency’s specified schedule goal. The robustness of theproposed seven-stage methodology was validated with two case studies performed on real-world constructionprojects.The proposed work provides research communities and industry practitioners with the first holistic view to determinethe most economical and realistic I/D dollar amounts for a given project—an optimal value that allows the agency tostay within budget while at the same time effectively motivating contractors to use their ingenuity to complete theprojects earlier. It can help agency engineers and decision makers make better-informed decisions and allocate morerealistic incentives, which will result in more favorable cost-benefit ratios and better use of public funds. It willsignificantly reduce the agency’s expenses in the time and effort required for determining I/D rates.

KW - highway rehabilitation

KW - innovative contracting

KW - decision-support model

KW - incentive/disincentive

KW - contracttor's additional cost of acceleration

KW - road user cost

KW - level-of-service

KW - net present value

M3 - Commissioned report

VL - SWUTC/13/600451-00016-1

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PB - Texas A & M University System College Station

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