Using Pay Adjustment Systems to Incentivize Quality Highway Construction

State departments of transportation (DOTs) are charged with overseeing the expenditure of public funds to produce high-quality infrastructure at the least cost. Many transportation agencies include pay adjustments in construction subawards as a quality assurance tool to raise the quality of the work above the minimum acceptable to extend the service life of the asset. Since pay adjustments were introduced into highway construction practice, public agencies have sought to use pay incentives and disincentives to motivate subawardors to produce work that exceeds the specified minimum. Subawardors must consider the risks and rewards of meeting these quality expectations in the competitive low-bid process in light of the costs associated with producing higher-quality work. These costs may include investments in quality control personnel and testing, quality materials, and facility and equipment upgrades and maintenance. Many agencies have found positive pay adjustments insufficient to incentivize the use of higher-quality construction materials and workmanship. Instead, many are relying on negative pay adjustments to penalize agencies for not achieving a desired level of quality. Research is needed to advise agencies on developing methods to assign or “right size” the pay adjustments needed during construction to achieve the quality needed to improve the long-term performance of agency assets. The objective of this project is to develop a practical guide, featuring a process framework, to help state DOTs establish, monitor, and adjust payment structures in subawards. This framework aims to incentivize enhanced quality outcomes for materials and workmanship in construction projects. At a minimum, the guide should be flexible enough to be applied by state DOTs regardless of local market factors and performance expectations for a given asset. The guide should incorporate and build on the terminology and risks used in the American Association of State Highway and Transportation Officials (AASHTO) R9: Standard Practice for Acceptance Sampling Plans for Highway Construction and AASHTO R10: Standard Practice for Definition of Terms Related to Quality and Statistics Used in Highway Construction.

• Record URL:
  • http://apps.trb.org/cmsfeed/TRBNetProjectDisplay.asp?ProjectID=5668
• Supplemental Notes:
  • Contract to a Performing Organization has not yet been awarded.

Language

• English

Project

• Status: Proposed
• Funding: $500,000.00
• Contract Numbers:

  Project 10-144

• Sponsor Organizations:

  National Cooperative Highway Research Program

  Transportation Research Board
  500 Fifth Street, NW
  Washington, DC  United States  20001

  American Association of State Highway and Transportation Officials (AASHTO)

  444 North Capitol Street, NW
  Washington, DC  United States  20001

  Federal Highway Administration

  1200 New Jersey Avenue, SE
  Washington, DC  United States  20590
• Project Managers:

  Weeks, Jennifer

• Start Date: 20250303
• Expected Completion Date: 0
• Actual Completion Date: 0

Subject/Index Terms

• TRT Terms: Contract administration; Incentives; Quality assurance; Road construction; State departments of transportation
• Subject Areas: Administration and Management; Construction; Highways;

Filing Info

• Accession Number: 01919276
• Record Type: Research project
• Source Agency: Transportation Research Board
• Contract Numbers: Project 10-144
• Files: TRB, RIP
• Created Date: May 21 2024 8:19PM