Probabilistic cost-based decision-making matrix: IDIQ vs. DBB contracting

Abstract

Public departments of transportation (DOTs) are increasingly adopting alternative contracting methods (ACMs), such as Indefinite Delivery/Indefinite Quantity (IDIQ) agreements, to shorten project delivery and increase scheduling flexibility. However, the challenge remains to decide when an IDIQ contract would offer better value for money in a project compared to the conventional Design-Bid-Build (DBB) method. This paper proposes an IDIQ project selection framework that incorporates expected construction costs to identify suitable candidate projects. Historical bid data, an alternate cost indexing system, nonlinear regression analysis, and the Monte Carlo simulation technique are used to create and compare IDIQ and DBB probabilistic construction cost estimates. The study demonstrates the effectiveness of the framework using a single-award IDIQ granted through the Minnesota Department of Transportation (MnDOT) and past bidding information for projects awarded between January 2008 and April 2015. Additionally, the paper acknowledges the limitations of the study, including its reliance on MnDOT data, the exclusion of non-cost factors, and the assumption of project homogeneity. The study also provides valuable recommendations for future research to address these limitations and enhance the understanding and practical implementation of IDIQ contracting in the construction industry.