Be aware that ITS deployment contracting is complex and may be subject to changes in technologies and market forces.
Virginia DOT's experience with delays in contracting for the Hampton Roads Advanced Traveler Information System deployment
- Recognize that there may not be precedents to consult for ITS contract wording and specifications. Changes in technologies, the part played by market forces, and the impact on finances all need to be considered. Procurement staff needed to figure out how to word the contract, as there was no real precedent. There were also no specifications, which left it to the responders to state what they were to do and at what cost. The options were quite open.
- Clarify Federal funding regulations for projects without tangible products. Numerous internal iterations within and between VDOT and FHWA occurred as the result of the different nature of ITS projects when compared to traditional construction contracts. Federal Aid regulations were not readily available for cases where no tangible product is delivered. To help address this, DOTs and States need to be aware that ATIS projects do not deliver any particular physical product, but rather produce a service to customers. This must be clearly presented in order to justify Federal funding.
- Combine funding from multiple sources (common for ITS deployments). Funding was not available until the contract was signed. In addition, funds from three different sources had to be used by VDOT: an earmark, CMAQ funds, and state funds. This made it necessary to write the contract in phases, with goals tied to expenditures. Deliverables were difficult to identify, making it a service contract.
- Address legal issues related to intellectual property of others. Both the public and private-sector parties involved were concerned with legal problems relating to infringement of patents. A patent holder notified VDOT that they could be in violation of a patent. The investigation into potential patent infringement was very time consuming. Writing an infringement liability section for the contract was also found to be particularly difficult. With the assistance of the Office of the Virginia Attorney General, some existing patent infringement sections from similar earlier VDOT contracts were used instead.
As a result of these factors, it took over a year from when proposals were due to when the contract was signed. Throughout this process, the contractor was taking a risk. None of the private partners wanted to sign contracts until VDOT signed their contract with the prime contractor. Instead, throughout the delay, changing market and finance conditions led to the planned sub-contract scenarios falling through and never being signed.
Since then, changes in business models, potential partners, and other circumstances have all required being adaptable to new options. With changing market conditions, the venture with Cox as an exclusive Internet broadcaster did not happen. The contractor had to change business plans and try to provide non-exclusive information dissemination through multiple channels, getting less revenue from more sources. Because of the significant changes in marketing and partnerships that have occurred since the signing of the contract, it was decided to create a basic HRATIS website to which other ISPs can link. The contractor used a well-known marketing contractor to help secure one or more ISPs to link to the hamptonroads.com website.
In conclusion, changing market conditions – in the fields of Internet, advertising, revenues of companies, technologies within companies, personnel changes, and business focus changes – all had their cumulative effect on the direction that the project took. From this project, VDOT and the contractor realized that the travel information market situation is dynamic. The structure of the public sector controlling process inhibits the private sector's ability to react to changing conditions. Overall, the private party needs a general contract for flexibility and the public sector needs a structured contract to enable description of deliverables. This lesson highlights the need to adapt to changing market forces, which in this case necessitated contract re-negotiation.
Author: Demetsky, Michael J.; Park, B. Brian; Venkatanarayana, Ramkumar (UVA Center for Transportation Studies, Center for ITS Implementation Research)
Published By: Center for Transportation Studies, University of Virginia
Source Date: 10/1/2001
EDL Number: 13634
Other Reference Number: UVA-CE-ITS-03-1URL: http://ntl.bts.gov/lib//jpodocs/repts_te/13634.html
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