Minnesota Department of Transportation

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Innovative contracting

Innovative contracting methods


Warranties have been successfully used in other countries and States to protect investments from early failure.  Prior to 1991, the FHWA restricted the use of warranties under the rationale that such contract requirements may result in the use of Federal-Aid funds for maintenance activities, which is prohibited by law.

By definition a warranty is:  a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time.

Types of warranties

  • Materials and Workmanship: Contractor is responsible for correcting defects in work elements within Contractor control (materials and workmanship), during warranty period.  Since the owner is still responsible for project design, the contractor assumes no responsibility for defects due to design decisions.
  • Performance Warranties: The contractor assumes full responsibility for product performance during the warranty period.  In effect, the contractor guarantees that the product will perform at a desired quality level.  Under a performance warranty the contractor assumes responsibility for some or all design decisions, e.g., design/build projects.  Methods and tests for measuring the performance characteristics of materials in order to predict future performance can be difficult.  Performance warranties can depend on several factors:
    • Design
    • Performance characteristics of materials
    • Quality of construction
    • Environmental distress

When to use warranties

  • The current Standard Specifications and Performance Bond can protect the owner for up to a year if properly written in Special Provisions. 
  • Latent Defects are covered under Specification 1720 of the Standard Specifications and provide for 10 years of protection.


  • Quality and durability of selected work items guaranteed for a specific time
  • Longer timeframe for acceptance means agency can ensure contractor is performing high-quality work
  • Decreased inspection level on warranty projects allows states to allocate resources elsewhere
  • Compatibility with Low Bid System
  • Improvement in Quality of Constructed Project


  • Owner must ensure that warranty guidelines are reasonable and enforceable
  • Warranty may not be collectable if guidelines are too restrictive or place undue burden on contractor
  • Requires additional staffing to monitor the warranty after construction
  • Benefits are difficult to utilize in method specifications
  • Impact on Open Competition
  • Project applicability

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