Warranty clauses provide an assurance to the owner that the product will serve its useful life without failure, and if it does fail, the contractor will repair or replace the product.[43] Warranties have been used for years in a wide variety of consumer products to protect consumers from inferior workmanship. Historically, State DOTs have not used warranties for road construction but have internalized the risk of poor workmanship. Under a warranty approach the maintenance of the product is the responsibility of the contractor. And, as a result, the contractor is more likely to deliver a high quality product in order to reduce future maintenance and repair costs.[44] Thus, the major potential benefit of warranties for owners is a higher quality project with lower costs over the life of the product (life-cycle cost).[45] Warranties may have a higher initial cost, because contractors may increase their initial bids to include contingency funds for correcting problems during the warranty period. However, warranties may result in lower life-cycle costs than those of traditionally contracted projects because there is an improvement in the quality of the initial project. Some industry experts believe that in practice, even the initial cost of a warranted contract is comparable to that of a non-warranted contract, allowing the DOT to obtain a warranty at no additional cost.[46]
New Mexico Corridor 44, a primary trade and tourist route into northwest New Mexico, is an example of a public-private partnership that incorporated a warranty as part of the construction contract. Mesa, LLC, a subsidiary of Koch Industries, was hired by the State to manage the design and the construction and to provide a 20-year warranty for the pavement. The State realized considerable savings from the life-cycle cost approach taken by this approach. The 20-year warranty transferred the risk of poor quality to the private sector. According to the New Mexico government, the State is expected to save $89 million in maintenance costs over the next 20 years. [47]
NMSHTD's use of a warranty is a means for the State to capture the true, long-term cost of highway infrastructure and to ensure the long-term maintenance of the highway. Maintenance is the responsibility of Mesa, LLC and is not dependent on the availability of future State funds. This arrangement avoids the temptation of deferring spending on maintenance so that funds can be used for construction or other higher priority needs. The deferral of maintenance is a significant problem because it allows for the premature deterioration of pavements, leading to significantly more expensive repairs and the waste of taxpayer dollars.[48]
On NM 44, both preventive and corrective maintenance will be scheduled as needed. Measurements will be taken every spring and at the end of the 20-year warranty period. Preventive maintenance will be performed either by contractors obtained through New Mexico's procurement procedures or will be performed by NMSHTD's maintenance crews and reimbursed for the expense by Mesa, LLC. Corrective maintenance will be performed by contractors who win bids through the State's traditional procurement process.[49]
A 20-year research agreement has been executed between U.S. DOT's Research and Special Programs Administration (RSPA) and NMSHTD to validate cost savings to the government by determining the advantages of this innovative approach of providing warranted highway improvements. The agreement is called New Mexico's Road-Lifecycle Innovative Financial Evaluation (LIFE).[50]