Early Contractor Involvement and Target Pricing in U.S. and UK Highways

Abstract

A U.S. panel of federal, state, and private-sector professionals traveled to Canada and Europe in May 2004 to conduct a scan of construction management practices for effective project delivery, contract compliance, and quality assurance. The purpose of this research was to review and document international policies, practices, and technologies for potential application in the United States. The research team observed construction management methods that promote alignment of team goals, integrated use of risk analysis techniques, strategic use of alternative delivery methods, procurement systems that set a framework for success, contract payment methods that support alignment and trust, a delegation of traditional highway agency functions to promote efficiency, a philosophy of network management, and a greater partnership between public and private agencies. One of the significant discoveries dealt with the use of target pricing by the Highways Agency in England on its early contractor involvement projects. As a result of this scan finding, a target pricing proposal was submitted to the South Carolina Department of Transportation (DOT). Additionally, it was discovered after the scan that a form of target pricing has been employed in the state of Washington. Target pricing concepts from the Highways Agency in England, South Carolina DOT, and Washington State DOT are summarized. The aim of the target pricing technique is to align team goals by establishing the contractor's role early in the project development process and then sharing risks rationally and equitably through to project completion.