Thanks to a flexible new contracting method, the cost and time of delivering small highway projects in Minnesota should go down.
The Minnesota Department of Transportation is now able to put road construction contractors on standby for certain types of projects, rather than bid each project individually, due to the adoption of Indefinite Delivery/Indefinite Quantity (IDIQ) contracts.
“IDIQ contracts give MnDOT more flexibility and the ability to get to the field quicker for work that we need repeated routinely, such as culvert repairs, overlays and seal coats,” said Kevin Kosobud, project development engineer with MnDOT’s Office of Construction and Innovative Contracting.
IDIQs also provide flexibility when needs are uncertain. Contracts are often used for multiple small projects that are similar in scope, but difficult to quantify in cost and timing.
For instance, the state of Florida awards IDIQs for hurricane debris removal, activating and paying contractors only when a hurricane necessitates the service.
Although IDIQs showed great promise, MnDOT had to develop a framework to implement them.
The federal government has used IDIQ contracts since the 1980s, but only a small number of state DOTS have used them to procure construction services. No standard procedures existed for their use by state DOTs, and federal procedures are not always applicable at the state level.
MnDOT hired Iowa State University researchers to examine IDIQ usage across the country and develop implementation procedures for Minnesota. (Read a summary of their research here.)
Researchers examined contracting practices at 14 different transportation agencies to recommend guidelines for Minnesota to follow, which allowed MnDOT to begin awarding IDIQ contracts in April 2013.
Case study analyses show clear benefits where IDIQ has been used: acceleration of the project delivery period, reduced construction costs and flexible delivery scheduling.
“IDIQs can help DOTs get better prices for routine services via an economy of scale, for instance, by awarding a contract for a larger number of culvert repairs rather than awarding a single contract for each repair,” explained Doug Gransberg, professor of construction engineering at the Iowa State University Institute of Transportation.
Agencies can award IDIQ contracts individually or collectively.
With a single-award contract, a single contractor is awarded task orders based on the pricing furnished in the initial bid package; multiple-award contracts determine a pool of qualified contractors who may subsequently bid on task orders.
*Editor’s note: This article was adapted from the September-October 2014 issue of our Accelerator newsletter. Read it online or sign up for your free subscription.
Related Resources
- Leveraging the Advantages of Indefinite Delivery/Indefinite Quantity Contracts – Technical Summary (1 MB, 2 pages); Final Report (expected Fall 2014)
Crossroads 
Unfortunately there is likely a cost to the micro-economy as a large contract for multiple culverts is more likely to be bid on by larger construction firms, many of which will not be local at a time when the state -and MnDOT in particular are failing to meet standard set by the state’s Targeted Group (TG), and disadvantaged/women owned (DBE/WBE) programs. Efficiency can come at a price and is not the sole purpose of state government. Our constituents should be clear what the cost of low prices really is.
Should read: “Our agencies should be able to communicate to their constituents what the costs of low prices are.”