Lane rental is used to minimize the impacts of a project on the traveling public, by requiring the contractor to rent a lane in order to close it. This creates a monetary incentive for the contractor to be innovative and minimize the duration of lane closures.
The contractor makes decisions that consider the roadway user costs, both during the bid and as the contract progresses. The contractor's bid consists of a combination of the cost to perform the work (A component) with the cost of the impact to the public (B component) to provide the lowest cost to the public. By providing a more aggressive scheduling package, a contractor may be able to gain a competitive advantage by decreasing the overall impact to the traveling public and thereby reducing the amount for bid consideration.
During the design phase, the public impacts of the project are evaluated. The appropriate lane rental units and charges are determined. Lane rental time credit units will vary in size (minutes, hours, days) depending on the road user impacts, and will be as defined in the special provisions. For example, any section of one lane for any part of a working day is equal to one unit.
During the bidding process, the contractor determines the number of lane closures that will be required to complete the work. This number is included in the bid proposal.
After bids are opened, the contractor's lane rental bid is combined with the price proposal. The project is awarded to the contractor with the lowest adjusted bid. The number of "free" lane rental units in the contract is modified to reflect the awarded contractor's bid.
A lane rental closure is applied anytime a lane is closed, for any reason, to progress contract work. The project office tracks lane rentals.
Should the contractor go over the allotted amount, all additional lane rentals will be charged to "lane rental - additional."
If a contract progresses into liquidated damages, the project office continues to track lane rentals but does not charge them.
Approval for use
The State Construction Engineer has conditionally approved lane rental on a pilot basis. The use of lane rental requires the approval of the State Specifications Engineer for the following reasons:
- To assist in establishing an appropriate unit and value for the closure.
- To concur that the application is appropriate. Commitments regarding application and notification have been made to industry, and we want to give this tool a fair chance to be successful.
- Headquarters Construction needs to be aware of where lane rental is being used in order to monitor the effectiveness of the specification and provide lessons learned throughout the state.
How lane rental works
The contract is awarded based on the lowest responsible bid, using the following formula:
- The bid amount for evaluation = A+ (B x LRC)
- A is the bidder's total estimate for all contract bid items (expressed in dollars).
- B is the total number of days subject to lane closure, as defined previously, required to complete all contract work
- LRC is lane rental cost. These costs can be variable and applied to one or more lanes during a construction project.
Once the contract is awarded, the number of lane rental closures is contractually set. The item "lane rental - additional" is included in the contract to address any overruns in this item. An incentive provision is also included to reward the contractor if the work is completed earlier than the (B) portion bid. This formula is used as a measurement for awarding purposes only, and is not used to determine payment to the contractor. The low bidder may not be the successful bidder. A bidder who proposes to minimize user impacts realizes the value of that benefit as part of their bid. They also run the greatest risk for damages (overrun of lane rental time credits).
When using the flexible start date provision several options may be considered, depending on the desired outcome.
Considerations to determine if the project lends itself to lane rental
The risk in using this type of tool is associated with changes and delays beyond the contractor's control. Changes in lane rental costs will have to be considered with regard to change orders. One way to reduce the chance of problems is to sort out the details of potential third party conflicts prior to construction, to the extent it is possible. These conflicts may involve utilities, railroad agreements, environmental/archaeological issues, hazardous materials, biohazards, public support issues, and other potential problems.
Consideration should also be given to whether a contractor, at the time of bid, can accurately predict the duration of all activities for the project. Larger, more complex projects may not be appropriate for lane rental.
Construction cost with lane rental
Lane rental can increase construction cost. On a standard project, a contractor may see an opportunity to reduce the total impacts. A shorter duration solution may increase the primary item cost but reduce lane rental and overall traffic control costs. The contractor will try to determine the most advantageous bid while balancing the potential overrun in lane rental costs.
Designers should anticipate that there will be a cost for the reduction in days. Whether through acceleration, aggressive management of subcontractors, or specialty equipment, it is likely that the construction price will increase. In no case will the project cost increase greater than the incentive (road user benefit) being offered.
Our construction engineering and inspection costs should be reduced due to the anticipated increase in multiple activities occurring concurrently coupled with the reduced amount of traffic control being used.
Safety shall not be compromised. The contractor is required to comply with the approved work zone traffic control plans along with other related contract requirements.
Number of lane rentals
A special provision allows for a maximum number of lane rentals to be specified. Doing so can provide an upper limit of the public impact allowed on the project. However, the purpose of a lane rental charge is ultimately to produce the best value product. If a contractor can provide a far cheaper bid with more public impacts, this may be the best solution. The challenge is to set the lane rental charge at an appropriate level.
Lane rental charges and liquidated damages
Section 1-08.9 states that liquidated damages are for delays that inconvenience the traveling public, obstruct traffic, interfere with and delay commerce, and increase risks to highway users. For that loss of lane use, we charge liquidated damages. We do not charge the contractor for lane closures during this time frame, it would be a duplication of the liquidated damages.
Change orders (added and deleted work)
Change orders need to adjust lane rental days as they would any other contract item that is impacted by the change. Projects that have a likelihood of a large number of changes may not be good candidates for lane rental.
Pricing lane rental by time of day
The lane rental may be broken out by time of day. We can also break out the number of lanes closed at a location.
The lane rental specification identified time in terms of units. These units, once defined, are established in the contractor's initial bid. The lowest combination of the construction cost combined with the time units required would establish the winning bid.
Once the contract is awarded, time credits will be tracked much like working days. Should a contractor go over the bid amount, the credits will continue to be charged. The unit item "lane rental units - additional" should be included in the contract and entries made based upon an established value. These units are deducted as a standard item.
Overrun of lane rental days
Traffic control items are generally reimbursed as unit items. The intention of lane rental is not to punish, but rather to reward a contractor for sound management and appropriate risk taking.
Additional lane rental considerations
Consider these factors when selecting lane rental for a project:
- Traffic restrictions or lane closures with no (or limited) alternate routes result in a high user cost.
- The project is relatively free of third party conflicts that are outside the control of the contract (right of way, utility, environmental, etc.).
- There is a high degree of confidence that design uncertainties have been addressed in the plans.
- A reasonable contractor can accurately schedule (and bid) the amount of necessary lane closures to complete the work as described.
- "Closures" can be well defined.
- Opportunities exist to reduce closure times.
- User fees are substantial enough to offset the cost of the effort to reduce the closure time.