NCDOT has two primary processes for letting large highway projects—hard bid procurement and design-build procurement. Over the last decade or so, NCDOT has relied heavily on the design-build procurement method, whereby NCDOT contracts with one design builder to perform both design and construction services. One key benefit of the design-build procurement method under North Carolina law is that NCDOT may consider both price and quality when selecting a winning design-build team. To evaluate both aspects, design-build teams are invited to submit both technical and price proposals for consideration, each of which are scored based upon the criteria set forth in the request for proposal.

Recently, NCDOT introduced an innovative procedure into a design-build request for proposal for a large interstate highway project. When responsive proposals to the first request for proposal came in over budget, NCDOT issued a revised request for proposal as part of the best and final offer process, which also included an “Optimization and Refinement” period. While this process has been used in other states, we believe this is the first time it has been implemented by NCDOT. While significant, the process is relatively simple. In addition to the traditional technical and price proposals, preapproved design-build teams were also invited to submit an optimization and refinement (“O&R”) proposal. The revised request for proposal provides for a period of time following selection of the design-build team where NCDOT and the selected design-build team work to make alterations to the project to try and reduce the scope and costs of the project. The O&R proposal is supposed to describe at a high level how the design-build team will approach those efforts. The design-build contractor is paid a fee during the O&R period, in this particular project, a fixed fee on a monthly basis. While NCDOT reserved the right to complete the project at the price and scope originally proposed by the contractor and forego the O&R period, assuming the project scope and price is revised through O&R, the design-build team and NCDOT would execute an O&R Supplemental Agreement following the conclusion of the O&R period.

The introduction of the O&R process into design-build projects is an interesting development. It stands to reason that it could result in significant costs savings for NCDOT and, thus, North Carolina taxpayers. Time will tell whether NCDOT will begin to include O&R more regularly in future requests for proposals. And, because O&R is not statutorily defined, NCDOT could alter the procedures in each RFP and even adapt the process to individual projects. To the extent NCDOT continues to use O&R, it will be interesting to see what, if any, adjustments it makes.