FHWA Guide to Performance Contracting for Construction Aimed to Help DOTs

Every day transportation agencies across the country face the challenge of carrying out high quality construction projects on time and within budget, all while meeting the expectations of the traveling public. Agencies contending with aging highway infrastructure need to continue to look for new methods to meet these challenges and complete projects better, faster, safer and more cost effectively. Performance contracting offers agencies an alternative to standard low-bid contracts with detailed specifications, allowing for increased innovation and problem solving.

Under a performance contract, agencies specify performance goals and contractors have flexibility in how they carry out the work to meet those goals. FHWA’s newly updated Performance Contracting for Construction: A Guide to Using Performance Goals and Measures to Improve Project Delivery offers state and local transportation departments a valuable reference, walking them through the process for using performance contracting on a typical reconstruction or rehabilitation project. The guide includes recommended processes and sample materials for:

• Project selection

• Performance goals

• Measurement methodology, including associated incentive and disincentive fee structures

• Sample enhanced low-bid and best-value awards

• Applications for FHWA’s SEP-14 program (special experimental projects using alternative contracting techniques).

Performance contracts that are awarded on a best-value basis (considering both price and non-price factors) must be approved under the SEP-14 program. Each section in the guide describes a suggested process to follow, presents lessons learned from real-world contracts and provides sample materials for project solicitations. When selecting performance contracting projects, for example, considerations include whether an agency can legally use an award process other than low-bid; if a contractor will be allowed flexibility in its approach to the project; if an agency has adequate resources to conduct performance measurement and whether the project risks are balanced by adequate rewards.

As noted in the guide, performance contracting can be applied to any size contract, not just large projects. The guide includes sample performance measures developed for use on highway construction projects. Categories include safety, construction congestion, quality, time, cost savings, customer satisfaction, environmental sustainability and innovation. Each performance measure has five levels of performance.