BACKGROUND

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. 

OBJECTIVE

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.

Accomplishment of the project objective will require at least the following tasks.

TASKS

Task descriptions are intended to provide a framework for conducting the research. The NCHRP is seeking the insights of proposers on how best to achieve the research objective. Proposers are expected to describe research plans that can realistically be accomplished within the constraints of available funds and subaward time, including time for NCHRP approvals. Proposals must present the proposers' current thinking in sufficient detail to demonstrate their understanding of the issues and the soundness of their approach to meeting the research objective.

PHASE I – Data Collection 

Task 1. Conduct a literature review to identify standards and experience regarding the use of pay adjustments and other methods of providing incentives and disincentives in construction subawards, including but not limited to pay adjustments. 

Task 2. Research and document the industry’s state of practice regarding the use of pay adjustments and other incentives and disincentives in subawards to achieve a desired quality of performance. Specifically, the research should (1) identify and discuss the specific risks and benefits of applying pay adjustments to subawards, (2) identify the gaps in knowledge and practice to be addressed in the final product, and (3) identify potential case studies for completion in Task 3.

NCHRP approval of Task Memo 2 is required before advancing to subsequent tasks.

Task 3. Develop and document a minimum of four state DOT case studies representing all AASHTO regions that illustrate different experiences in using pay adjustments in various contexts, including project types and sizes. Compare a range of subawardor bid prices and applied pay adjustments in consideration of the risks identified in Task 2.

Task 4. Prepare Interim Report 1, which summarizes the results of the four prior tasks and includes a work plan for Phase II and an annotated outline of the process framework and guide that at a minimum:    

• Recommends a continuous process for analyzing the performance of assets constructed using pay adjustments to inform future decisions on the use and setting of pay adjustments,
• Provides recommendations for setting pay factors that consider the benefits and risks to the agency and subawardor,
• Helps agencies establish the appropriate pay factor(s) for desired quality characteristics defined by an agency, and
• Presents four or more state DOT case studies illustrating various practices using pay adjustments.

The NCHRP will convene an in-person interim meeting in Washington, DC, to discuss the Task 4 deliverables. NCHRP approval of Interim Report 1 and the Phase II work plan is required to advance to Phase II. Research team travel to the interim meeting is the responsibility of the subawardor and should be integrated into the project budget.

PHASE II – Product Development and Validation 

Task 5. Establish and document the variation of pay factors required to incentivize specified material and construction quality for integration into the guide.

Task 6. Prepare first drafts of the guide and process framework for NCHRP review. The draft guide and framework are due to NCHRP at least 6 months prior to the subaward end date. 

NCHRP approval of the Task 6 deliverables is required before proceeding with subsequent tasks.

Task 7. Convene at least one stakeholder workshop with state DOT practitioners and other stakeholders to validate the contents of the documents prepared in Task 6. Workshops may be in-person or virtual.

 PHASE III – Prepare Draft and Final Deliverables for Publication

 Task 8. Prepare, at a minimum, the following:

• The guide and process framework;
• A PowerPoint presentation with speaker’s notes to share at industry meetings, conferences, and other venues to facilitate implementation; and
• A technical memo titled “Implementation of Research Findings and Products” (see Special Note K) containing a detailed implementation plan to encourage staff and executive adoption and implementation of the research results, such as pilot tests and setting new performance indices or other controls and specification limits. The plan should also recommend other research needs related to this topic and consider formatting the content for potential adoption by AASHTO as a recommended practice.

 Note: Following receipt of the draft final deliverables, the remaining 3 months shall be for NCHRP review and comment and for research agency preparation of the final deliverables.

 SPECIAL NOTES

 A. The research team should plan to make two presentations during the project to relevant technical committees at the annual meetings of the AASHTO Committee on Materials and Pavement, and the AASHTO Committee on Construction.

B. The Information and Instructions for Preparing Proposals for the Transportation Research Board’s Cooperative Research Programs were revised in May 2024. Please take note of the new and revised text which is highlighted in yellow.

C. Proposals must be submitted as a single PDF file with a maximum file size of 10 MB. The PDF must be formatted for standard 8 ½” X 11” paper, and the entire proposal must not exceed 60 pages (according to the page count displayed in the PDF). Proposals that do not meet these requirements will be rejected. For other requirements, refer to chapter V of the instructions.

D. The Information and Instructions for Preparing Proposals for the Transportation Research Board’s Cooperative Research Programs have been modified to include a revised policy and instructions for disclosing Investigator Conflict of Interest. For more information, refer to chapter IV of the instructions. A detailed definition and examples can be found in the CRP Conflict of Interest Policy for Subawardees. The proposer recommended by the project panel will be required to submit an Investigator Conflict of Interest and Disclosure Form as a prerequisite for subaward negotiations.

E. Proposals will be rejected if any of the proposed research team members work for organizations represented on the project panel. The panel roster for this project can be found at https://www.mytrb.org/OnlineDirectory/Committee/Details/7066. Proposers may not contact panel members directly; this roster is provided solely for the purpose of avoiding potential conflicts of interest.

F. Proprietary Products - If any proprietary products are to be used or tested in the project, please refer to Item 6 in the Information and Instructions for Preparing Proposals.

G. Proposals are evaluated by the NCHRP staff and project panels consisting of individuals collectively knowledgeable in the problem area. The project panel will recommend their first choice proposal considering the following factors: (1) the proposer's demonstrated understanding of the problem; (2) the merit of the proposed research approach and experiment design; (3) the experience, qualifications, and objectivity of the research team in the same or closely related problem area; (4) the plan for ensuring application of results; (5) how the proposer approaches inclusion and diversity in the composition of their team and research approach, including participation by certified Disadvantaged Business Enterprises; and, if relevant, (6) the adequacy of the facilities. A recommendation by the project panel is not a guarantee of a subaward. The National Academy of Sciences (NAS - the subawarding authority for the National Academies of Sciences, Engineering, and Medicine) will conduct an internal due diligence review and risk assessment of the panel’s recommended proposal before subaward negotiations continue.

Note: The proposer's approach to inclusion and diversity as well as participation by Disadvantaged Business Enterprises should be incorporated in Item 11 of the proposal.

H. Copyrights - All data, written materials, computer software, graphic and photographic images, and other information prepared under the subaward, and the copyrights therein shall be owned by the National Academy of Sciences. The subawardee or lower-tier subawardees will be able to publish this material for non-commercial purposes, for internal use, or to further academic research or studies with permission from TRB Cooperative Research Programs. The subawardee and lower-tier subawardees will not be allowed to sell the project material without prior approval by the National Academy of Sciences. By signing a subaward with the National Academy of Sciences, subawardees accept legal responsibility for any copyright infringement that may exist in work done for TRB. Subawardees are therefore responsible for obtaining all necessary permissions for use of copyrighted material in TRB's Cooperative Research Programs publications. For guidance on TRB's policies on using copyrighted material please consult Section 5.4, "Use of Copyrighted Material," in the Procedural Manual for Subawardees.

I. The text of the final deliverable is expected to be publication ready when it is submitted. It is strongly recommended that the research team include the expertise of a technical editor as early in the project timeline as possible. See Appendix F of the Procedural Manual for Subawardees Conducting Research in the Transportation Research Board’s Cooperative Research Program for technical editing standards expected in final deliverables.

J. Proposals should include a task-by-task breakdown of labor hours for each staff member as shown in Figure 4 in the Information and Instructions for Preparing Proposals. Proposals also should include a breakdown of all costs (e.g., wages, indirect costs, travel, materials, and total) for each task using Figures 5 and 6 in the brochure. Please note that TRB Cooperative Research Program subawards (selected proposers are considered subawardees to the National Academy of Sciences, the parent organization of TRB) must comply with 2 CFR 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. These requirements include a provision that proposers without a "federally" Negotiated Indirect Costs Rate Agreement (NICRA) shall be subject to a maximum allowable indirect rate of 10% of Modified Total Direct Costs. Modified Total Direct Costs include all salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each lower-tier subaward and subawardee. Modified Total Direct Costs exclude equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each lower-tier subaward and subcontract in excess of $25,000.

K. The required technical memorandum titled “Implementation of Research Findings and Products” should (a) provide recommendations on how to best put the research findings/products into practice; (b) identify possible institutions that might take leadership in applying the research findings/products; (c) identify issues affecting potential implementation of the findings/products and recommend possible actions to address these issues; and (d) recommend methods of identifying and measuring the impacts associated with implementation of the findings/products. Implementation of these recommendations is not part of the research project and, if warranted, details of these actions will be developed and implemented in future efforts.

The research team will be expected to provide input to an implementation team consisting of panel members, AASHTO committee members, the NCHRP Implementation Coordinator, and others in order to meet the goals of NCHRP Active Implementation: Moving Research into Practice, available at http://onlinepubs.trb.org/onlinepubs/nchrp/docs/NCHRP ActiveImplementation.pdf

L. If the subawardee is proposed to conduct less than 50% of the total effort (by time or budget), then section five of the proposal should include (1) a justification of why this approach is appropriate, and (2) a description of how the subawardee will ensure adequate communication and coordination with their lower-tier subawardees throughout the project.

M. All budget information should be suitable for printing on 8½″ x 11″ paper. If a budget page cannot fit on a single 8½″ x 11″ page, it should be split over multiple pages. Proposers must use the Excel templates provided in the Information and Instructions for Preparing Proposals for the Transportation Research Board’s Cooperative Research Programs.

N. The National Academies have an ethical and legal obligation to provide proper attribution whenever material from other sources is included in its reports, online postings, and other publications and products. TRB will review all Cooperative Research Programs draft final deliverables using the software iThenticate for potential plagiarism. If plagiarized text appears in the draft final deliverable, the research team will be required to make revisions and the opportunity to submit future proposals may be affected.