Briefing
Warranty Clauses in Federal-Aid Highway Contracts

December 7, 2000

BACKGROUND:

Warranties have been successfully used, in other countries and by some States on non-Federal projects, to protect investments from early failure. Prior to 1991, the FHWA had a longstanding policy that restricts the use of warranties on Federal-aid projects to electrical and mechanical equipment. The rationale for the restriction was that such contract requirements may indirectly result in Federal-aid funds participating in maintenance costs, and the use of Federal-aid funds for routine maintenance is prohibited by law.

TALKING POINTS:

• The 1991 Intermodal Surface Transportation Efficiency Act (ISTEA), permitted States to use local procedures for the design and construction of Federal-aid projects located off the National Highway System. For projects under these conditions, warranty clauses may be used in accordance with State procedures.
• On August 25, 1995, FHWA published an Interim Final Rule (IFR) for warranties for projects on the National Highway System. The IFR states that warranty provisions shall be for a specific construction product or feature. Routine maintenance items are still not eligible. The IFR also prohibits warranties for items not within the control of contractors. The warranty Final Rule was published in the April 19, 1996 Federal Register. The August 25, 1995 interim final rule making drew twenty written responses from various agencies. FHWA did not believe that the responses were significant enough to amend the interim ruling and therefore the interim final rule remains unchanged.
• Sharing Best Practices - FHWA currently has a contract with the Utah State University - Local Technology Assistance Program to conduct a study on the best practices for certain innovative contracting techniques. Utah State University has established a web page to collect information from the states and share best practices. The site will list practical information on innovative contracting such as:
  • What is this contracting technique?
  • Why should you use this?
  • What are criteria for project selection?
  • Who is currently using it?
• NCHRP Study #10-49 - "Improved contracting Methods" provides current information regarding the use of non-traditional contracting in the highway industry. As part of this study, the Texas Transportation Institute developed guide specifications for hot mix asphalt, incentive / disincentives, A+B bidding, lane rental, and night-time construction.
• Prior to the rule makings noted above, eight states participated in the evaluation of warranties under SEP-14. Since the implementation of the warranty regulation in 1995, FHWA no longer requires the evaluation of warranties. It is our understanding that the following states have used warranty provisions for the following products.

  Product	Range of Warranties	States
  Asphaltic Concrete / Rubberized Asphalt	3-8 Years	AL, CA, CO, FL, IN, ME, MI, MO, MS, OH, NM, UT, WI
  Asphaltic Crack Treatment	2 year	MI
  Portland Cement Concrete Pavement	5-10 years	KY, ME, MI, MS, UT, WI
  Bridge Components	5-10 years	WA, ME, NM
  Bridge Painting	2-10 years	IN, MA, MD, ME, MI, NH
  Chip Sealing	1-2 years	CA, MI
  ITS Components / Buildings	2-3 years	VA, NC
  Landscaping, Irrigation	1 year	WY
  Microsurfacing	2 years	CO, MI, NV, OH
  Pavement Marking	2-6 years	FL, MT, OR, PA, UT, WV
  Sign Sheeting	7-12	WV
  Roofing	10 years	HI

• Under SEP-14, Michigan was the leading user of warranties. Since 1995, MDOT has continued to increase its reliance on warranties and today it is the most active user of highway construction warranties.
• Michigan began using warranties on State-funded bridge painting contracts in 1990; and on a select number of Federal-aid projects, under SEP 14, beginning in 1991. Contracts have been let with two-year warranties for a total of 15 Federal-aid bridges. The State reports that they received good competition and that the warranty contract prices have been consistent with regular painting contracts. They are very satisfied with the warranty paint concept. Thus far the warranty period has been reached for 8 bridges. The final inspection of these bridges revealed that 5 required very minor repair and 3 required substantial repair.
• The use of a warranty covering workmanship, materials and/or performance has greatly reduced the inspection and testing requirements on MDOT construction projects. For projects including a 2-5 year warranty on the finished product, the total Construction Engineering Costs are typically less than five percent of the contract total. (This compares to construction engineering costs of 10-15 percent on traditional contracts.)
• Michigan enrolled Senate Bill 303 of 1997 included the following provision for development of warranties on state trunk line construction projects;
• Of the amounts appropriated for state trunk line projects, the department shall, where possible, secure warranties of not less than 5-year full replacement guarantee for Contracted Construction Work.
• In response to this, MDOT has worked in partnership with the road building and surety industries to develop warranty specifications "where possible". The following is a listing of the progress to date as reflected by 1998 contracted construction projects that will include a warranty requirement.
  • Major Pavement Reconstruction (5 Year Warranty) - 3 projects totaling $25.2 million Preventative Maintenance Program (2-3 Year Warranties) - for statewide program including - bituminous overlay, microsurfacing, chip seal, concrete joint repair, joint seals, dowel bar retrofit, crack sealing, (estimated total program cost $50 million)
  • Bridge Painting Program (2 year warranty)
  • Highway Signs (7 year warranty)
  • Pavement Markings (pilot projects underway, 60 day - 5 year trials)
  • Turf Establishment (pilot project underway)
  • Guard Rails and Endings (2 year warranty / certification trial program)
• In 1999, the Ohio Legislature passed House Bill 163 which requires Ohio DOT to utilize construction warranties on at least one-fifth of its capital construction projects. At least one-tenth of all pavement projects must include a warranty. For new pavements, the warranty must be at least seven years. For resurfacing and rehabilitation projects, a minimum five-year warranty is required. For all other products, a warranty of at least a two years is required.
• North Carolina has used a four-year warranty on an epoxy pavement marking project. Pavement failures may effect warranty results.
• Missouri has constructed two rubberized asphalt overlay projects (I-29, let spring 1991 & I-44, let fall 1992), each with a three-year warranty.
• The State of Washington has used a five-year warranty provision for a bridge deck expansion joint system on the transition spans of the I-90 floating bridge across Lake Washington let in late 1991.
• Montana has included a four-year warranty in a $1.6 million pavement marking project let in June and completed in September 1992. By January 1993 significant failures had occurred in certain locations. The contractor has made repairs in conformance with the warranty. The State has indicated satisfaction with the concept and was approved to let a second pavement marking project in the summer of 1995 for approximately $0.6 million. The warranty period was three years.
• California used a warranty on two rubberized asphalt pavement projects, let in 1993, one of three-years duration and the other of five-years.
• Wisconsin is evaluating a five-year warranty for numerous hot mix asphalt projects that were awarded in the 1995 construction season.
• Indiana used a five-year warranty on a pavement rehabilitation project located on I-70 approximately 12.8 km east of Indianapolis. The contract specifications for the warranty provision contain mix design specification requirements (using Superpave mix criteria), bonding requirements, contractor QC/QA provisions and the creation of a "Resolution Team" to manage warranty remedial action.
• Indiana is now into it's fourth year (1999) with HMA warranties on high volume cracked and seated or rubblized Interstate projects and is considering expanding the process to other NHS or Non-NHS routes. Indiana is very pleased with the overall added emphasis by the contractors on construction quality. There have been two projects where warranted indices have been exceeded (ride) which resulted in remedial actions by the contractor. On the first project, the surface course was removed and replaced due to low friction numbers together with other deteriorating pavement distresses. The second project was overlaid with another surface course. The warranty specifications, from an agency perspective, have worked as intended and no changes in thresholds have been made. The contractor absorbed the entire cost to fix both projects. None of the remaining warranty projects have shown any problems to date.

Related Reports

Past reports which served as the basis for FHWA's decision to issue the Warranty Rulemaking include the following:

• Transportation Research Board (TRB) Synthesis Of Highway Practice 195 - "Use of Warranties in Road Construction" in the U.S. and Europe. The final report was released in 1994.
• A General Accounting Office (GAO) study, mandated by the Section 1043 of the 1991 ISTEA, which addresses the effects of inclusion of guaranty/warranty clauses in contracts with designers, contractors and State highway departments. The study titled "Highway Infrastructure - Quality Improvements Would Safeguard Billions of Dollars Already Invested" is dated September 1994.
• A study tour on Contract Administration Techniques for Quality Enhancement was undertaken from September 20 through October 1, 1993, in four European countries (Germany, France, Austria and Spain). All four countries utilize warranty clauses on their projects. While time frames vary, the typical time limit was 2 years on AC pavement, 5 years on PCCP pavement, and 5 years on bridges. The tour was considered a success and a report titled "FHWA Contract Administration Techniques for Quality Enhancement Study Tour (CATQEST)" is available from FHWA.