FUEL AND ASPHALT COST ADJUSTMENT PROVISIONS

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• FUEL AND ASPHALT COST ADJUSTMENT PROVISIONS

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Use of Cost Adjustment Provisions

• FHWA Technical Advisory Dec 10, 1980
• Price volatility of construction materials and
  supplies . Can result in significant problems
  for contractors in preparing realistic bids.
• This leads to price speculation and inflated bid
  prices to protect against possible price
  increases.

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Development of Cost Adjustment Provisions

• Price adjustments should apply for both upward
  and downward movement of prices
• Price adjustments should be based on an index or
  other economic barometer which is not susceptible
  to manipulation
• Price adjustments should be Triggered only by a
  significant change in the index base price

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Development of Cost Adjustment Provisions

• Price adjustment computations should be performed
  at specified intervals rather than as each change
  in price occurs. Monthly is suggested.
• The 1980 Tech advisory recommended against
  optional selection of cost adjustment provisions
  but FHWA later stated Since all bidders have the
  same option, this is consistent with competitive
  bidding principles

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Fuel Cost Adjustment Provisions

• Fuel is typically an incidental cost to the a
  project
• A methodology for basis of payment must therefore
  be determined
• CDOT methodology is Fuel Usage per Unit method
• This estimates the amount of fuel used in various
  units of work under average conditions
• Fuel factors were developed in cooperation with
  Colorado Contractors Association

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2001 CDOT Fuel Cost Adjustment Specification

• First implemented on May 31, 2001 Not optional
• Index was the spot price per barrel of West Texas
  Intermediate crude oil as posted in the Wall
  Street Journal
• Trigger was 10
• Payment was based on the increased pay quantities
  for three items
• Excavation 0.29 Gal/CY
• HBP 1.06 Gal/Ton
• Concrete Pavement 0.03 Gal/SY/Inch Thickness

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Revised November 2005

• Revised November 14, 2005 - Optional
• Index was still the spot price per barrel of West
  Texas Intermediate crude oil as posted in the
  Wall Street Journal
• Trigger was left at 10
• One more item was added
• Aggregate Base Course 0.29 Gal/CY

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Revised Again November 2006

• Revised on November 30, 2006 remained an option
  to the contractor
• Index was revised to Opis Denver 2 Diesel
• Trigger was revised to 5
• Additional items were added
• Fuel factors were revised

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Revised Again November 2006

• Items now include
• Removal of Asphalt 0.006 Gal/SY/Inch depth
• Excavation, Embankment, Borrow 0.29 Gal/CY
• Excavation (Rock) 0.39 Gal/CY
• Structure Excavation 0.29 Gal/CY
• Aggregate Base Course 0.85 Gal/CY (convert Tons
  to CY 0.557 Tons/CY)
• Lime Treated Subgrade 0.12 Gal/SY
• Full Depth Reclamation 0.06 Gal/SY
• HMA SMA 2.47 Gal/Ton
• Heating Scarifying 0.44 Gal/SY
• Cold Bituminous Pavement Recycle 0.01
  Gal/SY/Inch depth
• Concrete Pavement 0.03 Gal/SY/Inch depth

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WYDOT Fuel Adjustment Specification

• Optional for all WYDOT Projects
• Based on Index Prices posted by WYDOT on the Web
  Page. Index is from OPIS.
• Contains a 7.5 Buffer area
• Adjustments are Positive and Negative

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WYDOT Fuel Adjustment Specification

• Contractor submits Affidavit (Form E-12) with
  their signed contract
• Establish of Contract for Fuel items
• Based on affidavit and original contract total
• Computed
• (Affidavit Cost/Original Contract Cost) x 100
• For each product (Unleaded, Diesel, Burner)
• Will remain the same for the life of the contract

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Affidavit of Fuel Cost for Project
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WYDOT Fuel Adjustment Specification

• Unleaded and Diesel Fuels eligible for adjustment
  at every Estimate
• Burner Fuels eligible for adjustment only on
  those Estimates where paving or crack sealing
  happened

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WYDOT Fuel Adjustment Specification

• Adjustments are made only when the index price
  changes by more than 7.5
• Base Fuel Index (BFI) established previously
• Current Fuel Index (CFI) price for month prior
  to the date of the Estimate

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WYDOT Fuel Adjustment Specification

• If an adjustment is warranted, it will be
  computed
• Contract x Estimate Amount x (Change0.075)
• Adjustments are made on each Estimate

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2009 ???

• CDOT and CCA have had discussions regarding
  revising the Fuel Cost Adjustment specification
  again.
• CCA is currently researching fuel factor data for
  the existing items and any additional items they
  may wish to request

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CDOT Asphalt Cement Cost Adjustment

• Joint Task Force with CDOT, FHWA and CAPA worked
  to develop a specification
• First implemented in 2007 as a pilot project as
  an option to the Contractors on 6 projects
• Index was the spot price per barrel of Western
  Canadian Select Crude Oil as published by Encana
• Trigger was 5
• Payment based on the quantities for HMA and SMA

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CDOT Asphalt Cement Cost Adjustment

• In 2007 none of the Contractors optd In and no
  data was gathered
• In 2008 the specification was again offered as a
  pilot until July.
• In July 2008 as a response to the asphalt cement
  price volatility CDOT implemented the Asphalt
  Cement Cost Adjustment specification as a
  Standard Special Provision on all projects with
  HMA or SMA. The cost adjustment specification is
  mandatory, not at the contractors option.
• No change in the index or trigger from the pilot
  specification has been made.

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WYDOT Adjustment for Performance Graded Asphalt
Binder

• Current Specification implemented in 2009
• Reaction to extreme escalation in price
• Also reaction to supply issues within the state
• Includes adjustment for Chip Seal oils

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WYDOT Adjustment for Performance Graded Asphalt
Binder

• Mandatory for all WYDOT Projects with PG Binders
  and Chip Seal oils
• Based on Index Prices posted by WYDOT on the Web
  Page. Index based on wholesale prices.
• Contains a 10 Buffer area
• Adjustments are Positive and Negative

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WYDOT Adjustment for Performance Graded Asphalt
Binder

• The Contractor provides an Affidavit (Form E-14)
  and a confidential bid price at the beginning of
  the project.

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Affidavit of PGAB Price
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WYDOT Adjustment for Performance Graded Asphalt
Binder

• Adjustments are made only when the index price
  changes by more than 10
• If an adjustment is warranted, it will be
  computed
• (PPI-BPI) x 0.90 x Tons of Binder
• Adjustments are made on each Estimate

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WYDOT Adjustment for Performance Graded Asphalt
Binder

• Additional adjustments are allowed for projects
  that go beyond one construction season.
• Adjustment is based on Confidential Bid Price
  received from the Contractor (AAF)
• If an adjustment is warranted, it will be
  computed
• AAF x (PPI-BPI) x 0.90 x Tons of Binder

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Sharing of the Risk

• Cost adjustment specifications not designed for
  the DOT to assume all of the risk
• Contractors still have to bid risk at least up to
  the trigger
• Also have to consider downward movement of the
  price
• CDOT index still based on crude oil price, not
  asphalt cement price, as requested by CAPA
• Cost adjustment only on HMA or SMA, not
  emulsified items

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Sharing of the Risk

• DOTs advertise projects in winter to allow
  contractors and suppliers to plan their work for
  the next construction season
• The longer the period between bid and actual
  construction the greater the risk the index will
  fluctuate the greater the risk to both parties

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WYDOT Specifications and Formswww.dot.state.wy.us

• Specifications

• Forms Index Prices

• Information Central
• Manuals and Publications
• 2003 Standard Specifications
• Supplemental Specifications

• Working With WYDOT
• Contractor Information
• Contractor Forms
• or
• 3. Base Index Prices

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Questions?
Dennis Largent, P.E. Project Development Branch,
Area Engineer dennis.largent_at_dot.state.co.us
Mark W. Ayen P.E. WYDOT Construction Staff
Engineer mark.ayen_at_dot.state.wy.us