FHWA Gives Green Light for New Mexico to Explore Innovative Contracting
WASHINGTON, March 5, 2015—The U.S. Department of Transportation’s Federal Highway Administration (FHWA) today announced approval for the New Mexico Department of Transportation (NMDOT) to use an innovative contracting approach on an experimental basis that can help save time and money over the life of a construction project.
Typically, highway projects in New Mexico have gone to the lowest bidder with the risk of increased cost in latter phases of the project. Under the new system, a prequalification score based on the contractor’s past performance will now be considered along with the contractor’s bid in awarding the job. This approach applies to projects with a cost of more than $5 million and will provide an incentive for contractors to be more reliable with cost – with an eye towards winning future bids.
“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,” said U.S. Transportation Secretary Anthony Foxx. “Providing quality construction projects will yield better and sustainable jobs for the future.”
NMDOT will capture elements of a prime contractor’s performance and calculate a yearly prequalification factor applied to future job bids. Specifically, construction quality, timeliness, job safety, compliance and claims records will be taken into account to develop the rating system. 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.
“This contracting approach could provide New Mexico taxpayers with better value for their dollars,” Deputy Administrator Gregory Nadeau said. “It’s also about getting the most from our federal investment.”
NMDOT is required to evaluate the new process every three years and report to FHWA on regular basis to continue the approval. Once FHWA has sufficiently evaluated the process, the agency will take appropriate steps for future implementation.
The state received approval to use this approach under FHWA’s Special Experimental Project No. 14 (SEP-14) for innovative contracting. Under SEP-14, FHWA has allowed many state departments of transportation 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.