iii.  Time Savings from Cost-Plus-Time (A+B Bidding)

Cost-Plus-Time, also known as A+B bidding, is a contracting method that not only considers the initial construction cost in the bidding process, but also takes into account the time needed to complete the project.[79] This shifts the risk of project delays from the public sector to the private contractor. In order to estimate the cost of time, a road user cost ($/day) is determined and multiplied by the required number of days for completion.[80] The contract is then awarded based on the combined cost of time and construction material and services.[81] An incentive/disincentive provision is typically used to encourage the contractor to finish the project earlier than the contract bid time.[82]

A major benefit of cost-plus-time over the traditional low-bid approach is a reduction in project completion time. This is partly due to the incentive available to the contractor for early completion. Contractors rarely pay disincentives due to missing the stated project completion date.

One example of A+B contracting is the $50 million Interstate 10 - Loop 410 project in San Antonio, Texas, where the contractor faces $22,500 a day in potential liquidated damages for each day over the 805 days allotted for the project. The contractor could also win the same amount in bonuses for early completion of up to 45 days. A vice-president for the contracting firm stated that the A+B method would save 25 percent off the estimated project schedule.[83]

The A+B contracting method is regularly used by the FHWA Federal Lands Division. A sample of three Federal Land projects that were constructed under an A+B contract are presented in Figure 3.2. Each project realized significant time-savings, as well as tangible savings in construction engineering costs.

Figure 3.2

Eastern Federal Lands Highway Division

Projects Constructed Pursuant To The A+B Bidding Process[84]
Savings Formula: (Actual time or amount / engineers estimate time or amount)= x, then 1 - x = percent savings