Development of risk management strategies for state DOTs to effectively deal with volatile prices of transportation construction materials.

Details

• Creators:
  Ashuri, Baabak ; Ilbeigi, Mohammad ; Shayegh, Soheil ; Hui, Yang
• Corporate Creators:
  Georgia Institute of Technology
• Corporate Contributors:
  United States. Federal Highway Administration
• Subject/TRT Terms:
  Asphalt Cement Bids Building Materials Contracting Cost Estimating Prices Risk Management State Departments Of Transportation
• Publication/ Report Number:
  FHWA-GA-14-1220
• Resource Type:
  Tech Report
• Geographical Coverage:
  Georgia
• Corporate Publisher:
  Georgia. Department of Transportation. Office of Research
• Abstract:
  Volatility in price of critical materials used in transportation projects, such as asphalt cement, leads to
  
  considerable uncertainty about project cost. This uncertainty may lead to price speculation and inflated
  
  bid prices submitted by highway contractors to protect themselves against possible price increases. One
  
  of the most common risk sharing strategies widely used by transportation agencies is price adjustment
  
  clauses (PAC) that divide potential upside and downside risk of material prices between contractors
  
  and owners. However, it is not clear whether offering PAC reduces risk premium of bids submitted by
  
  highway contractors. The research objective of this study is to explore whether offering PAC for asphalt
  
  cement can explain the variation of submitted bids for asphalt line items by highway contractors. Data
  
  on 3,749 highway projects bid out in the State of Georgia from January 1998 to July 2013 were
  
  collected to analyze the impacts of PAC on bid prices. Multivariate regression analysis was conducted
  
  to evaluate the effect of several factors, such as project size, number of bidders, asphalt cement price,
  
  and availability of PAC on unit price bids submitted by highway contractors for major asphalt line
  
  items. The results show that a linear combination of several explanatory variables such as quantity of
  
  the item, total bid price, and asphalt cement price index can explain the variations of the submitted bid
  
  prices appropriately. Eligibility for the PAC program is not a statistically significant explanatory
  
  variable in most of the models. In addition, several time series models were created to forecast the
  
  short-term variation of the asphalt cement price in Georgia.
  
  
• Format:
  PDF
• Funding:
  0010766 (RP12-20 ; UTC Sub-Project)
• Collection(s):
  US Transportation Collection
• Main Document Checksum:
  urn:sha256:33ecc9e3dc5aec6352983b544d774da0ad26c24efba7700256b01ba32ddf6650
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/28709/dot_28709_DS1.pdf
• File Type:
  [PDF - 4.83 MB ]