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Development of a procedure for updating liquidated damage rates used in ALDOT construction contracts.
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2008-10-01
[PDF-3.83 MB]
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Edition:Final report
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Abstract:This research effort sought to develop statistically justifiable means for developing a
schedule of liquidated damage (LD) rates to be adopted by the Alabama Department of
Transportation (ALDOT). The procedure outlined is to be used to review and update the
LD rates found in ALDOTs standard specifications for highway construction contracts,
since their current schedule and review procedure has come under legal scrutiny. After a
review of pertinent literature on the subject, it was determined that there was lack of
documentation concerning State Highway Agencies (SHAs) use of LDs. As a result, an
electronic survey was created and sent out to all SHAs to determine the state-of-the practice
regarding the use of LDs by SHAs in construction contracts. This survey
experienced a 100% response rate. Using the knowledge obtained from the survey, two
statistically justifiable methodologies were developed to calculate LD rates using
historical project cost accounting data including: (1) a traditional LDs provision based on
FHWA guidelines with the LD rates stipulated in a table as a function of contract value,
and (2) a more complex table in which the LDs rates are categorized by contract value as
well as by project type (i.e. bridge, road, building, etc.). These methods were then
compared to the current ALDOT procedure. The first methodology which stipulates LD
rates in a table by contract value was determined to be the most robust method. The
project type method successfully stipulated LDs by both contract value and project type,
but assumptions were made concerning the project type designations due to lack of
information in the historical project data, introducing bias to the procedure weakening its
objectivity. The final product of this research effort is a set of stepwise guidelines for
practitioners to reference when reviewing and updating their schedule of LD rates.
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