Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 31
Advantages/Disadvantages of Each Project Delivery Method 31 approaches to negotiating agreements with third parties than owners do, and these approaches can often be very effective [Medical Center Extension, Greenbush Commuter Rail, T-REX, and I-205 Light Rail Extension Project]. DBOM Since the DBOM contractor will be maintaining the project for a significant period of time after construction, it needs to exert much more control over the third-party agreements. The DBOM contractor may negotiate some of the agreements with little input from the owner. The remainder of the agreements will be similar to the DB process. Sometimes, in cases with fewer schedule constraints, owners may treat third-party agreements similar to the way that they are treated in a DBB project [Hudson-Bergen Light Rail]. Public Policy/Regulatory Issues This section examines the choice of project delivery method in relation to public policy/ regulatory issues such as existing laws, mandated social programs, labor unions, and so forth that establish the legal environment in which the project must be delivered. Issue 13: Competition The choice of delivery method may affect the level of competition. In many cases, agencies are operating under a legal requirement that requires "free and open" competition. The owners ben- efit from a competitive market mainly because of the reduction in bid prices; so, if the choice of a certain delivery method reduces the number of qualified proposers/bidders, it would be con- sidered a disadvantage. Currently, the volatility of bid prices in transportation projects is a major concern for the owners of transit (and other transportation) projects. Additionally, some proj- ect delivery methods may inadvertently lead the agency to package projects in sizes that can effec- tively reduce competition due to bonding limitations and contractors' capacities. The effects of each delivery method on competition are evaluated below. DBB Compared with other delivery methods, the availability of a relatively large pool of potentially qualified bidders in DBB ensures a high level of competition (Walewski, Gibson, and Jasper 2001; AGC 2004). The owner can benefit from this market competition and get a low bid/proposal for its project. This approach also enables the owner to divide the project into smaller packages and bid them out separately to further increase competition. The drawback to the multi-prime approach is that the coordination among various contracts may prove difficult. CMR Using RFP procedures and taking into consideration qualifications-based factors when eval- uating bidders can help owners weed out unqualified proposers. The issue in this method is that the selected CMR constructor becomes the de facto winner of the construction contract, giving the owner less competitive leverage when pricing the construction (Irwin 2003). This can be alleviated to some degree by requiring that the project components be bid competitively among various trade subcontractors. Also, the owner can reserve the right to go to regular bidding if it cannot agree on a GMP with the CMR. DB The RFP process can weed out unqualified DB entities; however, at the same time, the size of the bid package and the bid preparation costs may reduce the number of qualified bidders (AGC 2004).
OCR for page 31
32 A Guidebook for the Evaluation of Project Delivery Methods DBOM Adding operation and maintenance to the scope of work will lengthen the contract duration compared with other delivery methods and requires some extra competencies that typical con- struction contractors usually lack. The prime contractor usually hires operation and mainte- nance subcontractors as parts of the consortium. These factors may decrease the number of potentially qualified bidders when a DBOM project is bid out. In most DBOM projects so far, the number of responsive bidders has not exceeded two! Issue 14: Disadvantaged Business Enterprise (DBE) Impacts A project delivery method can facilitate fair competition for DBEs for DOT-assisted contracts and reduce burdens on small businesses. The effect of each delivery method on promoting par- ticipation by disadvantaged businesses is evaluated in this section. In general, due to the size of most transit programs, it is unlikely that a DBE firm would serve as the lead constructor. What is more common is to set aside a certain percentage of the budget to ensure DBE participation. DBB With DBB, the owner has the chance to include requirements for DBE participation in both design and construction contracts. For example, in the RFP for soliciting design services, the owner may stipulate the nature and extent of DBE participation as part of the design team. In the same way, the owner may require that the general contractor perform a pre-set percentage of construction using DBE subcontractors. Usually, the minimum level (as well as the desired target level) of participation is stipulated in terms of percentage of contract price. On the other hand, the low-bid environment may force DBE subcontractors to submit dangerously low prices, potentially harming the future viability of these fledgling companies. CMR A constructor that submits a proposal for a CMR project is usually more sophisticated than a DBB construction contractor. Lack of experience is a disadvantage for DBEs in a qualifications- based selection. One method to ensure DBE participation is to require a pre-set minimum (and target) percentage of the GMP for DBE firms when the GMP contract is negotiated. DB Lack of experience and financial resources usually make it difficult for a DBE to become the main contractor for a DB project; however, small businesses/DBEs may become subcontrac- tors of the design-builder. As the owner is not directly involved in selecting subcontractors and suppliers, requirements for DBE participation as a percentage of the project budget should be included in the RFP for a DB project and also in the project contract. This percentage should be based on the number of DBEs associated with the various trades that will be required in the project. The design builder should report (usually monthly) actual payments to all the DBE subcontractors and suppliers. Because an owner has less control in this delivery approach, the enforcement of DBE participation may be harder than with DBB or CMR. DBOM DBOM performs very similarly to DB and has the same advantages and disadvantages. The dollar value and the size of the main contract do not work against small businesses if relevant considerations are included in the contract. For example, there were DBE goals in the Hudson- Bergen Light Rail Project that were achieved by putting a clause in the contract for outsourcing some parts of the project to local contractors [Hudson-Bergen Light Rail]. It should be noted, however, that because an agency's control is minimized in this delivery method, there may be some risk that the DBOM contractor does not achieve the desired level of DBE participation.
OCR for page 31
Advantages/Disadvantages of Each Project Delivery Method 33 Issue 15: Labor Unions Each delivery method covers certain phases of a project lifecycle. For example, DBOM covers almost all the phases while DBB only affects the construction phase. The choice of delivery method may have an impact on labor usage and hence labor union issues. The legal protections for transit laborers, such as Section 13(c) of the Federal Transit Act, complicate the application for federal grants, and transit agencies should show that fair and equitable protective arrange- ments are made to protect employees affected by such assistance (for more information on Section 13(c) see TCRP Legal Research Digest 4 [Woodman, Starke, and Schwartz 1995]). Other acts, such as the Davis-Bacon act, should also be taken into consideration when determining laborers' minimum wages in any delivery method. DBB In DBB, the contractor hires the laborers directly or through a subcontractor. Union or non- union labor may be used in this method (unless local conditions and considerations limit a con- structor's options), and there would be no fundamental opposition to DBB unless the contractor fails to comply with the relevant rules and regulations set forth. CMR The constructor in this delivery method plays a similar role to the contractor in DBB, and it is unlikely that there would be fundamental issues between the unions and the constructor. If there are union issues in the project's location, the constructor does not usually guarantee the maximum price of the project and may not absorb the risks posed by the labor union issues. Unions may support alternative delivery methods because these methods give more weight to qualifications than to cost; unions assert that their members are more qualified than non-union labor (Bearup, Kenig, and O'Donnell 2007). DB Design-builders are usually joint ventures and dissolve at the end of a project. This may make the process of dealing with unions a bit complicated because unions expect a reliable and estab- lished party with whom to have an agreement. Awarding the design to a design-builder in cases where state engineers have their own unions (e.g., in California) may cause conflicts and chal- lenges for owners who want to use DB (this practice has more precedence in highway projects than in transit projects). Unions may support alternative delivery methods as these methods give more weight to qualifications than to cost; unions assert their members are more qualified than non-union labor (Bearup, Kenig, and O'Donnell 2007). DBOM Labor unions may affect DBOM more than DB because DBOM includes operation and main- tenance, which are usually done by union laborers employed by public entities. The law requires that the jobs of the laborers already employed by the agency be protected according to the requirements of Section 13(c). Because of this, there must be an agreement between the con- structor and the related unions to guarantee the availability of operation and maintenance per- sonnel at reasonable rates during the operation phase. Also, there may be some opposition from an agency's maintenance employees to the award of such contracts. In any case, there is already considerable experience with operation and maintenance contracting in transit. Issue 16: Federal/State/Local Laws Research done on federal and state laws suggests that transit agencies may not be able to use some project delivery methods. Some states require transit agencies go through several steps before being allowed to use an alternative delivery method. This section looks at how difficult it
OCR for page 31
34 A Guidebook for the Evaluation of Project Delivery Methods is to use a delivery method from a legal standpoint. Constant changes in state and local laws mean that an agency researching possible delivery methods for a project should check the legality of each delivery method by checking all the relevant codes. (See Chapter 2 for more information on this issue.) DBB All the state codes accept DBB as a project delivery method for a transit project. Relevant pro- curement processes are well developed, and details of DBB execution are available nationwide. CMR More than half of the states do not allow the use of CMR transit projects (Ghavamifar and Touran 2008). Some have imposed limits or extra approval requirements, and only about 14 states have fully authorized CMR application in transportation projects. Even in those cases, approval for transportation projects may not mean that CMR can be used in a transit project. Because of these complications, the legality of CMR or any delivery method other than DBB should be care- fully reviewed in a specific state. DB This delivery method has been used more than CMR, but there are still 13 states where this delivery method is not allowed in transportation projects. DBOM Awarding a project with DBOM is similar to awarding a project with DB, and owners are required to comply with the same laws and regulations that in some locations make DBOM application impossible. In addition, if the DBOM arrangement calls for contractor financing, then additional regulations and laws may need to be considered. Issue 17: FTA/EPA Regulations The effect of various environmental regulations on project cost and schedule can be profound. These include obtaining various types of permits and complying with various regulations. Addi- tionally, FTA specifies that a number of requirements be met before a project can receive com- mitment for federal funding (i.e., receive the Full Funding Grant Agreement (FFGA) in the case of New Starts projects). Currently, the FTA accepts all types of project delivery methods; specif- ically, they modified their evaluation process to accommodate DB and DBOM in the 1990s. DBB The traditional approach is the most familiar for the FTA and the environmental agencies. This familiarity can be an advantage in the permitting and funding process. CMR FTA has less experience with CMR than with DBB. This may cause some problems or delays although the agency maintains that it can accommodate all legal delivery methods. Handling environmental issues in CMR would be similar to DBB because the owner remains involved and is in control throughout the design phase. DB FTA started an initiative to experiment with DB early in the 1990s. Five pilot projects were constructed using the DB approach. FTA has since modified its procedures to accommodate the DB delivery method. The owner agencies prefer to receive the FFGA before the project goes to bid, while the project is at the end of preliminary engineering and subject to many uncertainties.