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SYNOPSIS FOR MINI THESIS
 ONPERFORMANCE-BASED (INNOVATIVE)CONTRACTING FOR THE HIGHWAY SECTOR  TRIMESTER-3
By:-
SAGAR SINGH GUPTAACM 22 (Roll no:- 221060)SAMBASIVA RAO.P ACM 22 (Roll no:- 221131) 
NATIONAL INSTITUTE OF CONSTRUCTIONMANAGEMENT AND RESEARCH
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PERFORMANCE-BASED (INNOVATIVE)CONTRACTING FOR THE HIGHWAY SECTOR 
 Introduction:
The highway sector is perhaps the most conservative segment of theconstruction industry. Although highway contractors have implemented manynew construction technologies, owner-contracting methods until recently haveremained the same. NHAI have traditionally awarded highway projects to thelowest bidders after the design was completed and approved. This design-bid-build approach while providing a level playing ground for contractors has itslimitations. For example, focusing on low bids sometimes leaves too littleemphasis on product quality and time, factors that affect long-term performanceof the system. The approach is slow and does not favor a life cycle costapproach to projects.Rehabilitation, resurfacing, reconstruction, or restoration works have, since the80’s, characterized a majority of highway construction projects. These types of projects require a high-quality product and timely completion to minimize thenegative impact to the public, such as safety impacts, traffic delays andeconomic loss. The above factors and the limited amount of resources for highway construction and maintenance accelerated the search for alternativesto traditional design-bid-build contracting in the highway industry.In traditional highway construction contracting, cost is generally the onecriterion that determines a winning bid. But in recent years, all the highwayagencies around the globe strive
to meet customer needs, factors other than cost have also emerged as important: quality, delivery time, socialand economic impact, safety, public perceptions, life-cycle costs, and useof improved technologies
. So a new approach in contracting system cameinto existing.In order to accelerate highway construction and minimize the strain on highwayagencies' resources, the
Federal Highway Administration (FHWA) createdSpecial Experimental Project No. 14 (SEP-14) in 1991
to investigate
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innovative contracting methods. In general terms,
any contracting methodthat deviates from the traditional, prescriptive method can be consideredinnovative
. Four innovative contracting methods mainly have emerged as theprimary alternatives to the traditional contracting methods (main methods):warranty, design-build, cost-plus-time bidding (A+B, multi-parameter bidding),and lane rental.The main thrust of these approaches is to minimize construction time and cost,improve quality by either providing specifications for quality control andinspection or warranties, and most importantly, transfer some risk from thepublic agency to the contractor. Contractors have been hesitant to assume thisrisk in a traditional contracting setting in which the client gives the contractor detailed specifications about method and materials. Performance-basedspecifications addresses the issues of risk transfer and contractor liability inhighway construction contracts. In such contracts the client specifies the criteriafor performance while providing the contractors with more freedom andresponsibility to meet the criteria.In India the client generally NHAI defines
performance-specification-based
contracting as structuring the contract around the desired results rather thanthe method that should be used to accomplish these results. Quantifiableperformance measures, such as having a predetermined surface roughness or a certain level of strength, are included as performance specifications. This is adeparture from traditional contracting because it specifies characteristics of thedesired product rather than the method by which the end product is achieved,which is the traditional approach. Performance-based contracting allows theopportunity for innovation by giving the contractor freedom to choose theconstruction method and materials to be used, as long as the end productmeets the performance measure(s) stated in the contract.
Background:
The genesis for the FHWA's SEP-14(began in 1988, with the establishment of a Transportation Research Board (TRB) task force to evaluate InnovativeContracting Practices. The task force consisted of 23 representatives fromState highway agencies in U.S.A, all segments of the industry, and others.Its mission was to:•Compile and research information on contracting practices used byagencies in the United States and other countries;•Assess how current practices affect quality, progress, and cost; and•Suggest measures for improving contracting practices and promotingquality in construction.
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