【正文】 0 million is the ceiling for the pavement warranty and $4 million is the ceiling for the structure , in return for $62 PDC agreed to provide up to $114 million in repairs over a period of 20 years or 4 million ensure the fiscal liability was warranty was also backed by a performance parties established what constitutes warranted pavement defects based on objective criteria such as smoothness, rutting, transverse crack spacing, crack width, potholes, , raveling,and the warranty provider shoulders the risks associated with performance, they have a strong incentive to assure quality in the design, position, and construction of the parties also developed plans to monitor performance and perform both preventative and routine maintenance to ensure the highway’s Cash Flow AnalysisIn a recent interim report of the NM 44 warranty audit, the state of New Mexico challenged the cost effectiveness of the $62 million warranty(Abbey 2004).This interim report and its predecessor(Abbey 1999)provide invaluable cost projections on the NM 44 project and the associated these data we conducted our own cost analysis based on the information available to the NMSHTD when they made the warranty decision in for this analysis,all warrafity benefits and costs incurred during the construction and warranty period were discounted back to the decision time in 1998, and all costs ,and payments were assumed to fall at the end of the , we considered only the pavement warranty which is valued at $60 million and explains % of the total warranty the structures warranty, which is valued at only $2 million, reduces ambiguity without any significant impact on the (2004)estimates that the structures warranty will expire before the end of the 10year warranty period, while the pavement warranty probably will remain in effect for the entire 20year and Policy SuggestionsDue to the ceiling clause, the price of the warranty provisions in the NM 44 projectdoes not reflect the real cost to the ceiling clause, valued at million/year 1998 dollar as calculated, represents additional revenue to Mesa besides the $62 million warranty payment from declaring the ceiling clause, Mesa PDC in fact eliminates unfavorable risk while keeping profitable Mesa gains is what NMSHTD loses since this is a zerosum actual cost for the warranty provision in the NM 44 project goes up to million/year 1998 hurdle rate of a viable warranty provision falls to 4%().Considering that the NMSHTD had to borrow at a higher interest rate to finance the NM 44 warranty provision is not justified because of the high cost of the ceiling is suggested that the state highway agencies carefully evaluate the ceiling clauses when requiring warranty services in selling infrastructure twofold analysis needs to be conducted so a better decision can be , one must realize that the ceiling clause may be model developed in this paper is a handy approach to evaluate the ceiling clause state agencies should better determine a favorable ceiling when including ceiling clauses in the sensitivity analysis indicates that the value of the ceiling clause is elastic to the determined 10% increase of the ceiling in the NM 44 warranty provisions would reduce the option price of the ceiling clause by 30%.Therefore, careful selection for a ceiling can significantly reduce the impact of the ceiling ceiling clause, in essence, is a call option that provides flexibility to switch a decision after more information is available through locking in risks while leaving the favorable uncertainties real option concept provides powerful tools not only for contractors, but also state agencies ceiling clauses or other trigger points in uncertain cash potential application of the real option concept in warranty contracting is to delay the warranty decision until the end of construction when more performance information is available(Cui et ).Then future maintenance savings could be estimated more accurately, and a better decision can be made on whether to purchase a ：The writers gratefully acknowledge the support for this research provided by the University Transportation Center for Alabama(UTCA)and the Alabama Contractors39。s(FHwA)Special Experimental P