Chapter 5501:2-7 Incentive/Disincentive Contract
(A) Incentive/disincentive clause - is a contract provision which compensates the contractor a fixed amount of money for each day or fraction thereof identified critical work is completed ahead of schedule and assesses a deduction for each day or fraction thereof the contractor overruns the time allotted for the completion of identified critical work.
(B) Contract time - is the total time established for the completion of all contract work.
(C) Incentive/disincentive time - is the time established for the completion of all identified critical work. The incentive/disincentive time and contract time may be the same when traffic impact exists for the full duration of the project. The incentive/ disincentive time may be for a shorter period of time than the contract time when traffic is impacted only during a certain operation, phase or phases of the work.
(D) Incentive/disincentive amount - is the fixed amount of money paid to the contractor for each day or fraction thereof identified critical work is completed ahead of schedule and the amount of money deducted from the contract price for each day or fraction thereof the contractor overruns the time allotted for the completion of identified critical work.
(E) Liquidated damages - is the daily amount of money established in the contract to be deducted from the contract price for additional costs, other than the disincentive daily amount, incurred by the department due to the contractor's failure to complete all contract work on time. The contract provision shall specify the applicable time unit of measurement for the incentive/disincentive.
Prior to including incentive/disincentive provisions in a contract, the director shall conduct an engineering analysis in order to determine realistic critical and non-critical time frames. The time frames, including critically identified work phase , shall be clearly set out in the construction contract. The analysis should involve a review of industry past performance and a critical path method schedule.
Prior to including incentive/disincentive provisions in a contract the director shall calculate on a per project basis a daily or fraction thereof incentive/disincentive amount considering: construction engineering inspection costs, departmental traffic control costs and maintenance, detour and road user costs. The incentive rate may equal the disincentive rate.
The director shall not pay more than five per cent of the total contract amount in incentive payments unless he/she determines that the work is so critical that a higher percentage is warranted. There shall be no cap placed upon the accruing disincentive amount unless expressly authorized by the director.
When the director elects to include incentive/disincentive provisions in a contract, he/she may hold a prebid conference for prospective bidders and suppliers in order to advise the participants of the incentive/disincentive provisions.
In addition to the standard contract administration practices performed by the department, the director shall ensure the following:
(A) That the contractor provides an acceptable conventional critical path method schedule prior to the commencement of work. The critical path method schedule shall break down the project into the separate operations or processes necessary for its completion. These separate operations will determine, through a network analysis, a completion time for both the critical phase or phases and the project. The schedule will be used for coordination and monitoring of all work under the contract, including all activity of subcontractors, vendors and suppliers, and will be the basic document to gauge and analyze the contractor's progress, determine time adjustments and evaluate claims.
(B) That departmental review times for matters pertaining to the incentive/disincentive phases be included in each incentive/disincentive contract. Further, by specific delegation, he shall provide the contractor with expeditious decisions on all other incentive/disincentive matters.
(C) That no extensions of time be granted, for delays in material deliveries unless such delays are industry wide, for labor strikes unless such strikes are area wide and for inclement weather unless the number of days lost due to weather conditions exceeds that which is normally anticipated for the contract period. Extensions of time for incentive/disincentive phases of work may be granted for increases in bid item quantities which exceed the limits set out in section 5525.14 of the Revised Code and for work not originally contemplated by the contract, provided controlling items of work on the approved schedule are affected and every effort has been made by the department and the contractor to absorb the additional work into the original incentive/disincentive contract schedules. Incentive/disincentive clauses measured in hours will be extended by equal hours of impact time.
(D) That the contractor evaluates forecasted weather prior to beginning weather sensitive work for incentive/disincentive clauses measured in hours and the department concurs with the contractor's proposed starting time for incentive/disincentive clauses measured in hours.
Five Year Review (FYR) Dates: 1/10/2018 and 03/29/2023
Promulgated Under: 119.03
Statutory Authority: 5525.20
Rule Amplifies: 5525.20
Prior Effective Dates: 09/29/2989, 08/08/2006, 08/31/2014,