Characteristics of Stipends and Their Value-Adding Potential in Design-Build US Highway Construction

Abstract

A best practice tool to enhance design-build best-value procurements is stipends, yet there is very little literature dedicated to this topic. Cited benefits of stipends include incentivizing the level of effort put forth by proposers in preparing their technical proposal, encouraging the number of proposers and thereby increasing competition, and mitigating risk. This paper presents cross-validated findings from the literature, agency policies, a survey of 53 US design-build projects, six agency representative interviews, and 13 design-build industry professional interviews. This paper investigates four aspects of stipends: (1) stipend value and calculation processes; (2) impact on a contractor’s decision to propose; (3) impact of stipend amount on an offeror’s proposal development, and (4) stipends’ ability to aid agencies in achieving best value for highway construction projects. Stipends were found to be a necessary process to achieve best value because they increase competition and often can increase the quality of a proposal based on the stipend amount. Stipends typically cover one-third to one-half of a contractor’s proposal costs. Agencies should use stipends when proposal costs are expected to be high and should estimate the stipend amount on a project-by-project basis. Properly valued stipends demonstrate that an agency is serious about going forward with the project, and understands both the work required and the design-build process. Finally, stipends were found to promote a fair procurement process, building trust with contractors leading to a more collaborative and innovative project execution.