IntroductionIn a bid to ensure cost-effective highway construction practices, highway agencies constantly seek ways to accelerate project design and delivery through implementation of innovative contracting and procurement practices. The concept of warranties is one of such promising practices and shifts the burden of construction quality control, product performance and product maintenance from the owner to the contractor. As such, warranty projects are expected to enhance product quality and service life, and ultimately, reduced life-cycle cost. The expected benefits of warranty projects, however, could be offset by their general higher agency costs. It is therefore necessary to evaluate the costs and benefits of warranty contracts vis-à-vis traditional contracts so that the more costeffective practice can be identified and implemented for purposes of decision-making.
FindingsThe present study reviewed the practice of warranties in highway construction contracts in Indiana and elsewhere, selected pairs of contracts that generally differ only by their contracting method (warranty versus traditional), and carried out statistical analyses to evaluate the relative costs, effectiveness and cost-effectiveness of these two alternative contracting practices. Effectiveness was measured in terms of average pavement condition and pavement service life, and costs were expressed in annualized costs per lane-mile that were duly corrected for inflation and economy of scale.On the basis of effectiveness only, it was found that warranty pavements exhibit superior pavement condition (in terms of roughness, rutting, and cracking) and greater service life. Using existing performance data and established performance thresholds, it was determined that the projected treatment life of warranty contract pavement was 25 years while similar traditional contract pavements were expected to have a service life of 15 years.On the basis of agency cost, warranty contracts generally have higher cost compared to traditional contracts. However, it was determined that the average construction period and associated workzone user costs are lower for warranty contract pavements.On the basis of cost-effectiveness over a relatively short period of 5 years, the warranty pavement contracts were found to be 27-30% less cost-effective than their traditional counterparts. However, over the long-term (treatment service life), the warranty contracts were found to be 70-90% more cost-effective on the basis of service life, and 58-65% more cost-effective on the basis of both service life and pavement condition. Furthermore, irrespective of analysis period and measure of effectiveness, warranty contracts were found to be more cost-effective when both agency and user costs are used in the analysis.The study results suggest that the longterm superiority of warranty projects is more discernible when both cost and effectiveness are viewed over the entire life of the pavement treatment and when both agency and user costs (rather than agency costs only) are used in t...