Section 4

Road User Cost Applications


4.1   GENERAL

The calculation of road user costs provides information enabling the designer to make better informed decisions in regards to staging, allowable work hours, project delivery method, and the actual design itself. Therefore, before a scheme is finalized, traffic volumes should be evaluated on a 7 day 24 hour basis. Staging should be evaluated for potential queues. Often, queues can be avoided by simply allowing lane closures only during non-peak hours. If the proposed design reveals substantial road user costs, an alternative scheme that reduces these costs may be a better choice. At other times, the queues are not avoidable, and thus an alternative project delivery method (i.e., A+B Bidding, Incentive/ Disincentive) should be considered. In all cases, the significant risks and costs associated with night operations including safety, quality, and productivity should be considered. The many applications of road user costs in projects will be discussed in the following sections.

4.2  LIQUIDATED DAMAGES

A failure to complete a project or portion of a project on time results in damages in terms of delay on the use of the Project and delay to the traveling public using the facility. A failure to complete on time also results in additional costs to the Department for engineering, inspection, and administration of the Contract.

A "liquidated damage" is a liquidated sum or specified amount of damages in the event of a noncompliance with the specifications where it is difficult or impossible to accurately estimate the damages incurred. The liquidated damages a contractor may pay include the Construction Engineering Charge, the Road User Charge, and the Lane Occupancy Charge. The purpose of these charges is intended to constitute a reasonable liquidated sum designed to compensate for the damages incurred by the traveling public and the Department. The charges are not imposed for the purpose of ensuring timely compliance with the lane closure time limits or project completion requirements in the contract documents. The charges collected are in turn intended to be used in conjunction with future capital transportation projects so as to help relieve traffic congestion and to improve travel time and convenience for the traveling public. Each component of the liquidated damages is discussed in the following sections.

4.3  CONSTRUCTION ENGINEERING CHARGE

Construction engineering costs are the costs incurred by the Department for engineering, inspection, and administration of a project. Prior to the Substantial Completion Date, the Department does not require the contractor to pay these costs. For each day of overrun in the Substantial Completion Date, the contractor will pay a Construction Engineering Charge in accordance with Subsection 108.16 of the Specifications. For each day of overrun in the Completion Date, the contractor will pay a Construction Engineering Charge equal to one-half of the value used for Substantial Completion.

4.4  ROAD USER CHARGE

Road user costs are added vehicle operating costs (VOC) and delay costs to the traveling public resulting from the establishment of construction, maintenance, or rehabilitation work zones. The procedures in this manual provide a reasonable estimate of the added VOC and delay in terms of dollars per day. If a highway facility is nearing or exceeding capacity prior to construction, only the road user costs associated with the proposed construction activity are considered. Prior to the Substantial Completion Date, the Department does not require the contractor to pay the road user costs incurred by the traveling public. For each day of overrun in the Substantial Completion Date, the contractor will pay a Road User Charge in accordance with Subsection 108.16 of the Specifications, if applicable. The Road User Charge is in addition to the Construction Engineering Charge.

4.5  LANE OCCUPANCY CHARGE

The contract documents provide allowable lane closure time limits for the contractor's use and occupancy of a lane or lanes to perform work. During the allowable lane closure time limits, the Department does not require the contractor to pay lane occupancy charges.

In the event that the contractor fails to reopen a lane or lanes of traffic on time, the contractor will pay a Lane Occupancy Charge (per direction) for the period of time a lane is unavailable to the traveling public beyond the allowable lane closure time limits. A Lane Occupancy Charge will not be collected when a lane or lanes are closed by extraordinary circumstances as defined in Subsection 108.19 of the Specifications.

If the allowable lane closure time limits permit the contractor to close lanes more than once a day, several occupancy charges are possible. For example, if a contractor must maintain all lanes open for traffic from 6 AM to 9 AM and 4 PM to 7 PM, an occupancy charge may be collected for the overrun of time beyond 6 AM and the overrun of time beyond 4 PM. Each occupancy charge is calculated by multiplying the overrun of time, in minutes, by the chargeable rate per minute. The chargeable rate per minute is based on using the procedures in this manual to calculate the road user costs incurred by the traveling public during the first hour of each period the contractor fails to open a lane or lanes.

For the example above, the road user costs would be calculated for 6 AM to 7 AM and 4 PM to 5 PM and then divided by 60 to obtain the chargeable rate per minute (rounded to the nearest ten dollars). The Lane Occupancy Charge is calculated using 1/2 the chargeable rate for the first 15 minutes of overrun, and shall only be charged if the entire 15 minute period is used. For every subsequent minute after the first 15 minutes, the chargeable rate shall be used.

4.6  INTERIM COMPLETION DATES

Contract documents may require a portion of work, stage of construction, or critical path item to be completed on or before a specified interim date or number of days. In these cases, only the applicable Road User Charge and Lane Occupancy Charge can be included as part of the Liquidated Damages for that interim requirement. These charges will be different than those calculated for the entire project completion, depending on what work is being specified for the interim date or time.

4.7  ALTERNATIVE PROJECT DELIVERY METHODS

A contract that establishes proper completion dates for a construction project is more important today than ever before. Most construction projects now involve the reconstruction of existing highways, which means that traffic is often maintained with lane and shoulder restrictions while the reconstruction takes place. A standard contract completion date should be based on the shortest practical duration of construction to minimize road user costs while allowing the contractor a reasonable amount of time to complete the work. When accelerated construction periods are desired to reduce high road user costs productivity and alternative project delivery methods should be considered.

Table 4.1 provides guidelines for the recommended Project Delivery Method for a particular project or stage of construction based on a comparison between the Calculated Road User Cost (CRUC) and the Maximum Allowable Road User Charge (MARC). The designer shall consider road user costs and any other pertinent factors to determine the most appropriate project delivery method. Each Project Delivery Method is discussed in the sections that follow.

Table 4.1

Project Delivery Method Based on Production Rate and Road User Costs

Comparison Condition Production Rate Recommended Project Delivery Method Road User Charge Value
CRUC < MARC 1.00 Standard CRUC
CRUC > MARC 1.00 Standard MARC
CRUC > 2 x MARC 1.20 Increased Production Rate MARC
CRUC > 3 x MARC 1.25 A + B Bidding MARC
CRUC > 4 x MARC 1.33 Incentive/Disincentive I/D = 0.25 CRUC (*)

(*) Utilize the calculated I/D value, rounded to the nearest hundred dollars, up to a maximum I/D value of 0.1% of the estimated contract amount. The total accumulated I/D payment is generally limited to 5% of the estimated contract amount based on FHWA Technical Advisory T5080.10, dated February 8, 1989.

4.8  INCREASED PRODUCTION RATE

An Increased Production Rate project delivery method speeds up the construction process by utilizing multiple crews, longer workdays, night work, and/or an around-the-clock work schedule. A production rate of 1.20 times the standard production rate would be utilized to establish the contract completion date.

4.9  A+B BIDDING

An A+B Bidding project delivery method is a cost plus time bidding procedure which selects the low bidder based on a monetary combination of the contract bid items (A) and the time (B) needed to complete the project or a critical portion of the project. The award is based on the lowest combined bid using the following formula.

Bid Amount for Evaluation = A + (B x MARC).
Where:

A = Bidder's Estimate of Contract Bid Items ($)
B = Bidder's Estimate of Construction Time (Days)
MARC = Maximum Allowable Road User Charge ($/day)

For example, a project's CRUC value is $18,000/day and MARC value is $5,000/day. Since CRUC = 3.6 MARC, An A+B Bidding project delivery method is recommended with a pre-bid completion date based on a production rate of 1.25 times the standard production rate. The bid information received is as follows:

Bidder ABC Company DEF Company GHI Company
(A) Value $2,500,000 $2,600,000 $2,700,000
MARC VALUE $5,000/day $5,000/day $5,000/day
(B) Value 140 Days 110 Days 95 Days
Time Value $700,000 $550,000 $475,000
Combined Cost $3,200,000 $3,150,000 $3,175,000

Therefore, the DEF Company would be awarded the contract based on it being the lowest combined bid. The contract amount for payment purpose is the (A) value ($2,600,000). The project completion date will be based on the (B) value (110 days).

4.10  INCENTIVE AND DISINCENTIVE (I/D)

An Incentive/Disincentive project delivery method is intended to motivate the contractor to complete the project, or a particular construction stage, on or ahead of an accelerated schedule. I/D projects compensate the contractor a daily amount for completing the work ahead of the I/D completion date or assess a daily amount for finishing later than the I/D completion date.

For example, a $10 million project's CRUC value is $25,000/day and MARC value is $5,000/day. Since CRUC > 4 MARC, as per Table 4.1, an Incentive/Disincentive project delivery method is recommended with an I/D value of $6,300/day [0.25 x CRUC value, rounded to the nearest hundred dollars, up to a maximum of 0.1% of the project cost ($10,000)]. The I/D production rate is 1.33 times the standard production rate. The project would be awarded to the low bidder. The contractor would receive a $6,300/day incentive bonus for each day he finishes prior to the contract completion date up to a maximum of 5% of the project cost ($500,000). Conversely, the contractor would be charged $6,300/day for each day of overrun in the contract completion date.

4.11  BENEFIT / COST RATIO

The Benefit/Cost (B/C) Ratio is a useful tool for the designer to measure the benefits of transportation improvements and increase the value of a project. They are also useful in comparing the value of two or more alternative projects. The B/C Ratios of approved, dormant, and rejected projects should be documented and maintained to aid the Department in prioritizing project needs. The user benefits are defined as the savings in vehicle operating costs and travel time that the facility users will enjoy.

For example, an intersection improvement project is being designed. Exclusive right turn lanes (RTL) are being considered for the northbound and westbound approaches. The calculated B/C ratio without exclusive right turn lanes is 2.5:1 and the overall intersection LOS is 'C'. The specific improvement information is shown below.

Northbound RTL Exclusive Right Turn Lane Westbound RTL
300 Projected Peak Hour Volume 150
E Projected Peak Hour LOS (No Build) C
C Projected Peak Hour LOS (Build) A
$3 Million User Benefits $1 Million
$1 Million ROW and Construction Costs $0.2 Million
3:1 Benefit/Cost Ratio 5:1

The results show that the B/C for each improvement exceeds the 2.5:1 ratio established from the original design. Therefore, adding either of these elements to the project would increase the B/C ratio for the project.

An additional example shows two separate projects having equal support to replace an existing signalized intersection with a grade-separated interchange. The specific information regarding the projects is shown below.

Main Street Project Central Boulevard
D No Build Level of Service E
C Build Level of Service C
50,000 Projected Average Daily Traffic 30,000
$25 Million User Benefits $18 Million
$10 Million ROW and Construction Costs $10 Million
2.5:1 Benefit/Cost Ratio 1.8:1

The results show that the Main Street Project has the highest B/C ratio and therefore should be chosen. Although the Main Street Project under no build conditions has a better Level of Service than the Central Boulevard Project (D Versus E), constructing the Main Street Project provides a better benefit/cost ratio to the public.

4.12  LANE RENTAL

Lane Rental is a form of innovative contracting which charges a contractor daily or hourly fees for occupying lanes or shoulders to perform work. The rental fee is based on road user costs and the daily costs incurred by the Department. Lane rental is applicable to projects where the contractor can adjust the traffic control plans to reduce lane closure duration, or to take lanes out of service during periods when traffic impacts are minimal.


Last Document Correction:
March 9, 2006