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:
  • Risk management
  • Building materials
  • Prices
  • State departments of transportation
  • Contracting
  • Asphalt cement
  • Bids
  • Cost estimating
• 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.
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• Format:
  PDF
• Funding:
  0010766 (RP12-20 ; UTC Sub-Project)
• Download URL:
  https://rosap.ntl.bts.gov/view/dot/28709/dot_28709_DS1.pdf
• File Type:
  [PDF - 4.83 MB]
• Collection(s):
  US Transportation Collection
• Main Document Checksum:
  urn:sha256:33ecc9e3dc5aec6352983b544d774da0ad26c24efba7700256b01ba32ddf6650