Overview
On September 21, 1999, the National Science and Technology Committee on Technology convened a forum of transportation officials from state and federal levels of government, as well as executives from the transportation industry and trade associations to discuss procurement reform. The focus was on procurement reform as a key to expediting the regular use of innovative materials and practices, and not as an end in itself. The goal of the workshop was to discuss why procurement reform is needed within the transportation sector; to identify the barriers to achieving it; and to suggest actions that can be taken to overcome these barriers.
This effort to revitalize and repair our nation's infrastructure using innovative materials and processes is supported by a major national initiative, the Partnership for the Advancement of Infrastructure and its Renewal (PAIR). In an earlier workshop focusing on the transportation component of this initiative (PAIR-T), current procurement practice was identified as one of the major barriers that impede the introduction and widespread use of innovative technologies. The procurement reform workshop was convened in order to explore alternative procurement strategies that were more supportive of innovation.
The Problem
Current methods used to select contractors to design, build, and maintain the national infrastructure are outdated and in need of reform. These methods were developed to ensure that the public is protected by building structures that are safe and that perform as expected; to encourage contractors to provide services at a reasonable cost to taxpayers; and to avoid preferential treatment of select contractors for government jobs. However, the administration of typical government procurement methods has, quite unintentionally, created a system that does not encourage or even allow contractors to use construction products and processes that are innovative - i.e., those that perform better, faster, or more cost-effectively than traditional approaches. Because innovations often lack lengthy performance histories, infrastructure owners are understandably concerned about how safe and reliable they are. Yet using new technologies and methods for designing, building, and maintaining public facilities is critical for advancing the state of the practice and the quality of constructed facilities in the U.S.
Barriers
The rules in use today were written for the traditional construction industry of yesteryear; their primary concerns were to protect public welfare and to prevent favoritism toward particular contractors or suppliers. Ironically, these laws sometimes have the opposite effect today. Since the system is often inflexible, slow, and administratively burdensome, contractors who have previously worked with government agencies have a distinct advantage when bidding on projects that those who have not. Moreover, new technologies and materials not originally recognized as effective or acceptable by old procurement laws are often safer and cheaper than traditional products.
Specific barriers identified at the workshop include the following.
Local field offices of FHWA do not always support innovative procurement methods even though federal policy supports these efforts. Even though much of the impetus of TEA-21 was the devolution of authority to individual states, at the working level, local field offices have not always used this increased flexibility to encourage the use of innovative products and practices.
While there are numerous studies documenting and championing different procurement approaches, they are not explicitly linked with using innovative products and practices.
Procurement laws and practices among states and jurisdictions vary significantly. To date, there is no well-recognized national policy guidance for procurement reform in transportation that explicitly targets and encourages innovation.
No parties want to assume risks that arise when projects are contracted using alternate methods, and these risks - both legal and financial - are difficult to share equitably among all project participants.
By definition, non-standard procurement methods are just that - non-standard - and therefore they take time to develop and administer. This observation, while obvious, is nevertheless important. In many cases, it is just easier to use the "tried and tested" methods.
While value engineering has been used successfully in many transportation procurements as well as in other industries, many officials and contractors are not familiar with this approach.
Procurements are often administratively burdensome and overly bureaucratic.
There are no incentives for risk-taking when bidding on or executing a project.
Government project managers micromanage projects, often stifling innovation.
The Goal: New Model(s) for Procurement
Based on this input and the discussions at the workshop, new procurement systems will have the following characteristics.
Allow infrastructure owners to take factors other than first cost into account when evaluating project bids.
Provide performance incentives to contractors to use innovative methods, materials, and technologies during completion of the project.
Allocate legal and financial risks fairly to all parties involved.
Are able to use alternative legal strategies for solving disputes in lieu of traditional litigation.
Are less administratively burdensome.
Near-Term Actions
Actions that could be implemented in a relatively short time period include the following.
Federal officials should direct their field offices to give state DOTs full flexibility in using different contracting approaches designed to encourage more innovative technologies and practices.
Infrastructure owners should establish and follow consistent goals and visions that encourage innovation when carrying out projects.
Since many officials and contractors are not familiar with value engineering, they could benefit from training in this approach from the National Highway Institute (NHI) or other venues.
The federal government and state DOTs should substantially increase the use of design/build contracts as one of the mechanisms for delivering transportation infrastructure.
The PAIR initiative should document and showcase innovative procurement approaches that encourage the use of innovative technologies and processes.
Public policy at the highest level should be focused on supporting programs that encourage innovation.
Both the pubic and private sector should encourage the use of demonstration projects, through PAIR or other programs, that showcase new construction technologies. These projects provide increased experience to the user, resulting in better understanding and thereby decreased risk.
While the missions of NASA, DARPA, and DOE are quite different from those of the USDOT, leading national transportation officials should substantially expand their acceptance of alternative contracting mechanisms ("other transaction") and encourage other levels of government to do the same.
Long-Term Solutions
These near-term actions should be reinforced by long-term actions designed to support the development of more effective procurement systems. Such long-term actions should include the following.
The federal government should commit explicitly to using innovation in transportation projects by, for instance, requiring a minimum percentage of funds for a new project to be used for innovative products, materials, or technologies.
As more case studies are amassed, the PAIR program, working with public and private stakeholders, should create a "best practices manual" on using contracting methods that encourage innovation in the transportation sector.
Owners should establish a baseline or "model codes" for new procurement systems.
Stakeholders should identify metrics and ways to measure progress toward baseline goals for these new systems.
Issues Needing Further Study
How long will it or should it take for government to create a new set of procurement guidelines and laws that promotes rather than discourages innovation? What timeframe is reasonable, keeping in mind to balance the urgency of reform with the desire to develop well-conceived alternatives to the current system?
What types of procedures should be built into a new system to create an environment where risk-taking and innovation is encouraged and rewarded? ? Should there be financial incentives? Insurance, guarantees, or warranties on new technologies? What will be needed to ensure that this fundamental shift in attitude toward risk-taking on all projects?
How large a role should the private sector have in procurement reform? What are the benefits and drawbacks of using contracting mechanisms common in private-sector construction?
Some suggested that alternative dispute resolution (ADR) be used in lieu of typical legal proceedings to resolve issues that may arise during a contract. Indeed, other federal agencies have used ADR. What examples of the use of ADR exist within the transportation community? Within other agencies? What were the benefits and limitations of using it? How did the cost and timeframe of resolution compare to the traditional legal system?
What method of education and outreach would be best for promoting procurement reform? An annual conference? A new trade journal focused on the topic? web sites and clearinghouses? Who should be the lead organization to provide this service to the community?
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