New bidding system designed to reduce costs

LITTLE ROCK — The state Transportation Department has begun a new type of bidding and contracting that is designed to reduce cost overruns while increasing accountability.

The new project management method was authorized by the legislature last year in Act 809 of 2017. It enables the Transportation Department to complete three projects using a “construction manager/general contractor” method. Highway officials and engineers often call it the CMGC method.

For traditional projects, the department publishes a detailed description of a highway or bridge project, including its specifications. Then highway officials open bids from private contractors and usually, but not always, the department then signs a contract with the firm that submitted the lowest bid.

Sometimes the lowest bid is disqualified because the contractor is not able to meet construction standards, or cannot finish the project on schedule, or lacks bonding and insurance coverage.

The CMGC method is different because the department first selects a private firm, with engineering and construction experience, to help design the project. When the private firm participates in pre-construction, there is an incentive for the firm to hold down costs.

Act 809 summarizes the idea: “The cost-effective benefits are achieved by shifting the liability and risk for cost containment and transportation project scheduling to the construction manager, which leads many states to call this method the “construction manager at-risk method.”

For now, the Transportation Department is limited to three projects using the CMGC method, and their total costs may not exceed $200 million.

Act 809 limits the cost of the first project to $70 million. The first project will be a busy intersection in a west Little Rock suburb, where Highway 10 runs east and west and Interstate 430 runs north and south.

Its estimated cost is $58 million. The department has selected engineering firms to work with its staff on the project’s design, and on other pre-construction tasks.

The department has also chosen an engineering firm to be an independent, third party consultant that will develop its own cost estimates.

One goal of the new system is to avoid surprises that could run up the project’s costs.

At its April meeting, the Arkansas Highway Commission opened bids for 69 projects. Their estimated cost will total $153.8 million.

The department collected more than $308 million in revenue in March. The main source was motor fuels taxes, paid at the gas pump by drivers. They were $217.5 million in March. Registration of trucks and heavy vehicles brought in $66.3 million in March, while permit fees and penalties generated another $11.8 million. Revenue from a severance tax on natural gas brought the department $18.3 million.

Motor fuel consumption has gone up slightly over the past 12 months. A total of about 2.1 billion gallons were purchased in Arkansas. That represents three categories, the largest being gasoline at 1.5 billion gallons. About 644 million gallons of diesel were consumed, and a little less than a million gallons of alternative fuels were consumed.

Diesel consumption was up 3 percent, gasoline consumption was down 0.15 percent and alternative fuel consumption went up dramatically, by 160 percent.

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Editor’s note: Arkansas Senator Cecile Bledsoe represents the third district. From Rogers, Sen. Bledsoe is chair of the Public Health, Welfare and Labor Committee.