New Mexico’s Contract Innovation Proposal Wins FHWA Support for Experiment

AASHTO Journal, 20 March 2015

A plan by the New Mexico Department of Transportation to experiment with rating contractors’ past performance when awarding projects, rather than just take the lowest bid, has won the backing of the Federal Highway Administration.

The federal agency said this approach “can help save time and money over the life of a construction project,” and give contractors an incentive to keep project costs under control in order to help win future bids.

The FHWA said highway projects in New Mexico have typically “gone to the lowest bidder with the risk of increased cost in latter phases of the project.” But under the system that NMDOT will test, contractors will be graded with a “pre-qualification score” based on past performance, along with the actual bid, for projects that cost more than $5 million.

NMDOT Cabinet Secretary Tom Church explained: “Our goal with this program is to change New Mexico contracting from ‘low bid’ to ‘quality bid.’ This process will encourage the good contractors to continue with excellent performance and encourage the poor performing contractors to improve. In a time when all DOTs are faced with great needs and stagnant funding, it is imperative that we get the best product for the taxpayer.”

FHWA Deputy Administrator Gregory Nadeau said, “This contracting approach could provide New Mexico taxpayers with better value for their dollars. It’s also about getting the most from our federal investment.”

The yearly contractor’s rating will include construction quality, timeliness, job safety, compliance and claims records. “Since it rewards good performers and encourages poor performers to improve, NMDOT anticipates the new system will hold contractors to greater accountability and help avoid escalating costs and delays,” the FHWA said.

Under the plan, NMDOT will evaluate its new process every three years, and report to the FHWA on a regular basis to continue the federal approval. “We will closely monitor the program – this first year is data collection – and then enact the pre-qualification rule,” said Church. “Quality highway contractors fully support the program here in New Mexico.”

U.S. Transportation Secretary Anthony Foxx used the announcement to call for more experiments across the country. “We at U.S. DOT encourage others to come up with innovative ways to be more efficient, and this approach is one that we believe may help make the transportation system work better,” he said.

The FHWA said it has allowed many state DOTs “to embark on non-traditional, but carefully monitored, contracting practices aimed at streamlining the process. Many such as design-build, which allows the simultaneous design and construction of different phases of a project, have proven to be successful and are now widespread.”

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