APC Fuel Price Adjustment Committee Requests Member Input on Proposed Specification Revision
APC’s Diesel Fuel Price Adjustment Committee met with PennDot on October 16 for two purposes:
- Finalize revised diesel fuel price adjustment specifications that were negotiated in 2008, but suspended by the Department as a result of the fuel price spike that year.
The primary purpose of the revision is to include realistic consumption factors associated with current day equipment and construction practices for Categories A (Earthwork), B (Sub-base and Aggregate Base ) and, D (Rigid Pavement and Shoulders). PAPA has been requested to provide consumption factors for Category C (Flexible Bases, Pavements and Shoulders). It is likely that a new category will be added for Milling. - Rewrite the specification for Category E (Structures) so that the items of work eligible for fuel adjustment are clear and consistent; and, the payment threshold and consumption factors are both realistic and administratively simple.
APC members of the Committee are especially cognizant that any specification adopted must be REALISTIC, not only to protect Contractors’ interests as fuel prices increase, but equally important, to protect Contractors from excessive rebate obligations resulting from unrealistically high specified usage rates and/or application to structure items that entail relatively insignificant consumption rates.
In considering the application of the fuel price adjustment specification to structure work, it is important to consider the fact that, unlike the roadway items in Categories A through D, where adjustments are logically based on fuel consumed per quantity produced, the Category E (Structures) adjustment is currently calculated on a consumption of 8 gallons per $1000 (bid prices) of work performed. While the cost of “work performed”, which is essentially the cost of labor and materials, increases every year. The structure consumption factor has not been changed from the factor used when fuel price adjustment specifications were first introduced in the early 1980’s. Therefore, the unchanged 8 gallons consumption factor attributes several times as much fuel consumption to the same actual quantity of structure work. An additional anomaly is that the cost of “ big ticket items” like fabricated structural steel, pre-stressed beams and “design” costs (on some projects) grossly inflate the dollar value used to calculate fuel consumption, even though those items typically require relatively small quantities of fuel.
APC members should be aware that Contractors who were successful bidders on structure projects during last year’s period of extremely high fuel prices are being assessed very large rebates due to application of the unrealistically high structure consumption rate in the existing specifications to the major decrease in diesel fuel prices that has recently occurred.
The proposed revisions to the fuel price adjustment specification for Structures suggested by the APC Committee are as follows:
- Calculate a fuel price adjustment threshold and calculate the fuel consumption quantity for price adjustment using the total value of unit price bid items and component item prices for all structure work on the project;, excep,t
omit from the calculations the amounts bid for fabricated structural steel, pre-stressed beams and design cost. - Structure work to be included in the threshold and consumption calculations is defined as any structure item tabulated on the structure plans, except fabricated structural steel, pre-stressed beams and design cost.
- Fuel price adjustments will be not made unless the total value of structure work in the entire project (the threshold) is equal to or exceeds ($500,000), or ($750,000), or ($1,000,000) (select one).
- Calculate the fuel adjustment quantity using a fuel consumption factor of
xxx (base on consumption suggested by APC members) gallons per $1,000 of structure work.
The Committee and the Department both recognize that fuel consumption for structure work varies significantly from project to project depending on the type of work in the project. The fuel price adjustment specifications are intended to yield a realistic approximate estimate of fuel consumption so that cost adjustments that are fair and equitable to both parties to the contract, and not a windfall for either, can be made to address large fluctuations in fuel costs during the life of a project.
The Committee requests immediate input from APC members who perform structure work stating their preferences for a reasonable adjustment threshold and a suggested consumption rate to be used in the revised specification. Please e-mail your preferences to lcbellanca@paconstructors.org, together with any other comments you wish the Committee to consider, no later than Friday October 30.
-
Threshold Preference: $750,000 $1,000,000 $1,500,000 Other
(choose one) -
Consumption per $1,000 Structure Work
(Steel, Pre-stressed and Design excluded): 2 gal 4gal 6gal 8gal Other
(choose one)
APC staff will tabulate your input for the Committee. Your identity will be treated as confidential by the APC staff.
Please be reminded that, even with a raised threshold and unchanged or lower consumption rates, Contractors’ fuel cost risks on the size projects eliminated are small.
The Committee expects that negotiations will be complete and a revised specification included in proposals December 31.