National Academies Press: OpenBook

A Guidebook for the Evaluation of Project Delivery Methods (2009)

Chapter: Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method

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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
×
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Suggested Citation:"Chapter 3 - Advantages/Disadvantages of Each Project Delivery Method." National Academies of Sciences, Engineering, and Medicine. 2009. A Guidebook for the Evaluation of Project Delivery Methods. Washington, DC: The National Academies Press. doi: 10.17226/14238.
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Introduction There are numerous issues that transit agencies need to consider when selecting a project delivery method. In this chapter, the information collected during this research on pertinent issues is synthesized for use in Tiers 1 and 2 of the selection system presented later in the guide- book. These pertinent issues and their interactions with different project delivery methods are presented in the format of a descriptive pro/con analysis. The issues were identified through a literature search, the personal experience of the research team, case studies, and interviews with the project directors of the case study transit projects. Please see the TCRP Project G-8 final report, published as TCRP Web-Only Document 41: Evaluation of Project Delivery Methods, for presentation and discussion of the literature search, case studies, and interviews with the proj- ect directors of the case study transit projects. TCRP Web-Only Document 41 is available on the TRB website at http://trb.org/news/blurb_detail.asp?id=9886. The issues are organized into the following categories: • Project-level issues, • Agency-level issues, • Public policy/regulatory issues, • Lifecycle issues, and • Other issues. In this chapter, each issue is first defined and then the advantages/disadvantages of each deliv- ery method are explained. The analysis is based on the trends found in the interviews (which are cited using brackets) and is supported by quotations from relevant literature. A list of references used is provided in Appendix A. It should be noted that there are overlaps and redundancies in the issues and how they are affected by the choice of delivery method. While there was an effort to separate issues so that redundancy and double counting would be minimized, it was not pos- sible to treat the issues completely independently. Project-Level Issues Project-level issues are those that are specific to the project under consideration and include such items as project size, cost, and schedule, as well as project risk management, risk allocation, and possible certification for sustainable design and construction (e.g., LEED certification). Issue 1: Project Size Project size is determined by transit project dollar value and physical dimensions. Transit projects are usually larger than $100 million in value; however, transit agencies sometimes get 19 C H A P T E R 3 Advantages/Disadvantages of Each Project Delivery Method

involved in smaller projects, such as construction of parking garages. It seems that project size would strongly influence the choice of delivery method. However, current literature and the case studies conducted in this research document successful projects in a range of sizes using DBB, CMR, or DB project delivery methods. A possible exception seems to be DBOM, which has been considered mainly for larger transit projects. Because each of the three main delivery methods (DBB, CMR, and DB) can be applied to projects of all sizes, it seems clear that project size needs to be considered in combination with other issues, such as schedule, agency staffing, and risk management in order to determine an appropriate project delivery method. Issue 2: Cost This issue includes several aspects of project cost, such as ability to handle budget restrictions, early and precise cost estimation, and consistent control of project costs. Below, each project delivery method is evaluated with regard to cost control and cost estimation. DBB This delivery method may provide a cost benefit because it includes marketplace competition, which increases the likelihood of receiving low bids when the project is bid out. Furthermore, having a complete design before awarding the project increases certainty about cost estimates because the owner has the engineer’s estimate as well as several estimates submitted by the bidders. The level of cost certainty increases even more when the payment method is lump sum. Another cost advantage of DBB is that transit agencies can choose unit price bids as the payment method when the project line items and their cost estimates are known but the quantities are not known with certainty. This payment method allows the constructor to bid on unit prices rather than the total price. In this way, the constructor does not have the risk of fluctuating quantities, while the owner does not have to pay for constructor contingencies included in the bid because of quantity uncertainties. CMR This delivery method has two main characteristics relevant to project cost: (1) it is usually com- bined with a GMP payment mechanism and (2) the constructor is involved in the project before bidding the project out. These two characteristics directly affect the performance of this delivery method with regard to project cost. An advantage is that there may be cost savings because of early constructor input to the project (“CM/GC White Paper, Public Contracting Coalition” 2000) and competitive pricing through “open book” accounts (Irwin 2003). Usually, the owner can negoti- ate and set the GMP at about 60% of design completion (AGC 2004). If the project requires the services of major trade or specialty subcontractors, bringing them on board during the design phase is recommended. This way, the project team can benefit from their knowledge and experi- ence and establish a more reliable budget early on. The cost drawback to this project delivery method is losing the opportunity to bid the work out. Potential schedule compression by some overlap between design and construction can be an advantage to CMR if the inflation rate will sig- nificantly escalate project cost. Also, the owner will know the estimated cost earlier in the project lifecycle than a project owner using the traditional DBB method would. At the same time, own- ers using the CMR delivery method need to closely monitor costs on the project because of the cost-reimbursable payment method (Walewski, Gibson, and Jasper 2001). Also, it is somewhat difficult to evaluate the validity of the GMP compared to a traditional bid process. DB DB performs relatively well when there is budget restriction (Gordon & Rees LLP 2005) because it reduces the potential of cost overruns due to claims and delays. TCRP Research Results Digest 53 shows that there are fewer cost overruns in DB (Harrington-Hughes 2002). Another study shows 20 A Guidebook for the Evaluation of Project Delivery Methods

that DB outperforms CMR in operation and maintenance costs, unit cost, and cost growth (Kon- char and Sanvido 1998). The DB method can also provide the owner with a firm, fixed price ear- lier in the design phase. Through the use of a lump sum contract in a DB procurement, the owner can establish a firm cost estimate relatively early in the process (Walewski, Gibson, and Jasper 2001; Gransberg and Barton 2007a). The AASHTO Procurement Guide states that DB gives earlier cost certainty and has less cost growth than traditional DBB (Molenaar et al. 2005). DBOM Early certainty in project costs and mainly operation and maintenance costs is a direct result of awarding operation and maintenance to the constructor of the project. The constructor gen- erally cannot seek additional compensation for excessive operations or maintenance costs result- ing from inadequate design since it is a responsibility of the DB entity. On the other hand, it can be difficult to estimate operation and maintenance costs at the early stages of a DBOM project (when the price proposals are being evaluated) since in most cases the project is only at a 15 to 30% design level. This difficulty can lead to increased contingencies, which result in higher prices if the entities submitting proposals are required to price operation and maintenance in response to the DBOM RFP because the constructor will have to cover all risks and uncertainties. Awarding the project with a DBOM contract extends the scope of the contract. This expan- sion in the contract scope allows the constructor to bring some innovations to the project in order to decrease the project costs (Kessler 2005). Issue 3: Schedule This issue involves two aspects of a project schedule: controlling the schedule (keeping the duration of the project within the expected timeframe) and shortening the schedule. In other words, in this section, each project delivery method is evaluated with regard to schedule control and schedule compression. DBB DBB has a sequential process and usually does not have room for significant schedule compres- sion. This sequential process results in a longer schedule than is required by DB, CMR, and DBOM (Walewski, Gibson, and Jasper 2001; Gordon 1994). A longer schedule is the price that is paid for the owner to have the project designs completed prior to the project award. DBB sched- ule growth also tends to be larger than the schedule growth of the other delivery methods. NCHRP Report 561 showed that DBB projects had the greatest average time growth (Scott et al. 2006). Inability to compress the schedule in DBB has been one of the main reasons that owners choose other delivery methods. One way of compressing DBB projects is to break down the program into several packages and let each package separately [Silver Line Project]. One problem with this approach seems to be the coordination effort required and the issue with abutting primes. CMR Having a constructor on board helps the project team develop a more practical and realistic schedule for the project. A study has shown that CMR has the ability to meet or exceed schedule requirements (Minchin, Thakkar, and Ellis 2007). This delivery method can also help owners with projects that are schedule sensitive (Walewski, Gibson, and Jasper 2001) and can save some time in the project because of concurrent design and construction (“CM/GC White Paper, Pub- lic Contracting Coalition” 2000). DB Flexibility in schedule increases in DB because designer and builder are one entity (“Design- Build White Paper, Public Contracting Coalition” 2002). Many experts believe that DB results Advantages/Disadvantages of Each Project Delivery Method 21

in a faster schedule delivery (Walewski, Gibson, and Jasper 2001; Konchar and Sanvido 1998; Gransberg and Molenaar, 2007b; Molenaar and Scott 2003) and has the least schedule growth (Konchar and Sanvido 1998, Scott et al. 2006). Another effect of DB is earlier schedule certainty (Molenaar et al. 2005) because the design-builder submits the project schedule at the time of con- tracting, which is comparatively early in the project life. Another important characteristic of DB for transit agencies is that it obligates design and construction funds before the end of a given fis- cal year (Gransberg et al. 2007b). This can help agencies award a project and allocate the avail- able funds without waiting for the project design to be complete. DBOM This delivery method can increase schedule certainty and early delivery of the project (Kessler 2005). It has all the characteristics of DB, so it can be used as a means of schedule compression. Issue 4: Risk Management Each new project has some level of uncertainty during various phases of its development. Strategies for coping with these uncertainties are built into each delivery method. The effect of each delivery method on risk identification, quantification, and mitigation is different; therefore, selection of a delivery method is dependent on the owner’s risk management approach. These dif- ferences are considered under this issue. Tier 3 of the selection system presented in this guidebook is based on risk allocation. Also, it should be noted that the effect of risks is prevalent in many of the issues discussed in this chapter and is not limited only to Issues 4 and 5 of the chapter. DBB This delivery method has a long history of application and a rich background in terms of statu- tory laws and standard contracts that entail developed risk management processes. When the project scope is clearly definable, the owner of a transit agency can follow the traditional meth- ods of managing risks in DBB (Gordon 1994). Although risks and rewards are easy to under- stand in this method, disputes often arise over authority, responsibility, and quality (Walewski, Gibson, and Jasper 2001). In other words, having separate contracts for design and construction may or may not help the owner manage the risks of a transit project, and the owner’s success in mitigation of risks depends upon the proficiency and experience of the owner and its consult- ants in risk management. CMR The risk for the CMR comes from the CM holding the trade contracts and taking the perfor- mance risk of the project (AGC 2004). The use of a GMP structure can create a mechanism to share cost risk between the constructor and the owner agency, in the hopes of ultimately reduc- ing costs. Early constructor involvement may result in a better understanding of the project risks, and more efficient risk allocation can be achieved. This delivery method is conducive to team work. The constructor shares information with the owner and designer on trade subcontracts, value engineering, and so forth. This sharing of information is why some experts believe that CMR theoretically reduces the risk of every entity involved in the project (Minchin, Thakkar, and Ellis 2007). DB Risk allocation and risk management are inherently different in DB delivery than they are in DBB and CMR delivery. The risk for errors and omissions in the plans is transferred from the owner to the DB contractor. Having single point accountability for design and construction helps the owner avoid a situation in which the designer and constructor are blaming each other for changes in the cost or the timeframe of the project (Harrington-Hughes 2002; Riley, Diller, 22 A Guidebook for the Evaluation of Project Delivery Methods

and Kerr 2005; Irwin 2003). From the owner’s perspective, the DB approach reduces the size and frequency of change orders (Molenaar and Scott 2003; Riley, Diller, and Kerr 2005) as long as the owner understands the loss of its control over design and also does not change the scope. Agencies should realize that although the risks are contractually transferred to the design- builder, a poorly defined initial scope in the RFP may result in significant cost increases. Accord- ing to the design-builder’s scope of work, which includes the project design, the DB contractor may be required to have errors and omissions insurance (which is usually required from design firms) in this transfer of risks (AGC 2004, Irwin 2003). In essence, the risk for errors and omis- sions does not go away, but is transferred to the DB contractor, who has more of an economic incentive to manage the risk than the owner in the DBB system. DBOM The DBOM entity assumes the risks assumed by the constructor in DB delivery, as well as assuming the risks involved with operations and maintenance, system integration, and project start-up. Agencies expect that the DBOM entity will be more inclined to ensure quality of design and workmanship since it will be responsible for operations and maintenance. Also, the DBOM delivery method does not allow the DBOM entity to claim compensation from the agency for inadequate operation and maintenance considerations because the designer and the con- structor are on the same team. As the contract includes the operation and maintenance phase, uncertainty during the operation and maintenance period is reduced by awarding the whole package to the constructor (Garvin 2003). One problem that may surface with DBOM delivery is the commercial/financial approach to risk management by the constructor (Kessler 2005). The DBOM constructor makes money out of the project and may accept higher levels of risk in safety or lower levels of commuter satisfaction to increase its income. This difference between the view- points of an agency and a contractor may increase the risk of having safety issues or commuter satisfaction problems. Issue 5: Risk Allocation Research in the area of risk management has indicated that the most effective approach for risk management is risk allocation—assigning project risks to the parties in the best position to manage them. This means that the party assuming a certain risk should be the party who has the most control over that risk and is also most likely to survive the negative impact of such risk. The main vehicle for risk allocation is the contract. The type of project delivery method selected by an owner will have a profound impact on risk allocation. Some methods allow the owner greater flexibility in allocating risks to the parties involved. Tier 3 of the project delivery method selec- tion system presented in this guidebook is based on an effective method of risk allocation. For example, schedule risk is sometimes addressed by choosing a DB approach (as discussed above). It is important to note that risk allocation affects many of the issues discussed in this chapter and is not limited to Issues 4 and 5. DBB This delivery method can help the owner divide risks between the designer and the contrac- tor, but the risk of additional construction costs resulting from erroneous design remains with the owner, which the owner usually transfers to the design team (AGC 2004). Scope definitions of design and construction contracts in DBB play an important role in risk allocation. The owner will face challenges if the duties are not defined clearly and ambiguity remains in the contracts. CMR Although CMR facilitates risk management, it is not necessarily the best method for risk allocation. Having an experienced constructor on board improves the whole process of risk Advantages/Disadvantages of Each Project Delivery Method 23

management, including risk allocation, but the increase in the number of parties directly involved in the project and some overlaps between their duties may make the risk allocation more difficult [Portland Mall Project, Weber County Commuter Rail]. Although GMP as a means of risk allo- cation should decrease the owner’s risks, there is always the possibility that the owner and the onboard contractor will not come to an agreement on GMP in a timely fashion. The owner in this case may have to bid out the project and will suffer from the resulting delay imposed on the project as well as taking the chance of getting bids that are higher than expected. DB Because the design-builder is the single point of responsibility in this delivery method, risk allocation is simpler. The owner must carefully decide which risks it can best manage and assign the design-builder the risks that the design-builder can best bear. It is unwise to allocate total risk to the DB contractor because that would drastically increase the contingency and the construc- tor’s insurance costs, which will be transferred to the owner through the bid (AGC 2004). Exam- ples of other risks include the risk of obtaining various environmental permits or purchasing real estate. Experience shows that the owner is in the best position to assume these risks [Greenbush Commuter Rail]. DBOM Risk allocation in this method is similar to risk allocation in DB, but an allocation of risks is added for the operation and maintenance phase. If the owner can identify the risks of the project early enough to allocate them at the time the project is awarded, DBOM can have some advan- tages with regard to risk allocation. In other words, DBOM facilitates risk allocation if the owner is able to identify the project risks up front. DBOM has an advantage over other delivery methods in cases in which the system provider does not guarantee the system if operated by another entity (Kessler 2005). One of the major risks in this approach is the owner’s ability to provide clear scope and objectives; if the owner cannot provide these, the consequences of disputes in the later stages may be significant. Issue 6: LEED Certification Sustainable design and construction features are becoming more common and may become mandatory in the future for public infrastructure projects. Thus, it is important to gauge a proj- ect delivery method’s ability to include these features in accordance with the owner’s needs. The U.S. Green Building Association’s Leadership in Energy and Environmental Design (LEED) cer- tification is often used by public agencies as a means of articulating their desire to design and build both energy-efficient and environmentally responsible projects. Although LEED certification has not become a requirement in transit projects, how each delivery method functions with regard to this issue can be a benefit or a drawback. For example, one benefit of establishing LEED as a cri- terion is that it can be used as a metric to evaluate sustainable design and construction options whether or not LEED certification is sought for the project. LEED prerequisites (including selec- tion of site and construction activity pollution prevention) can yield environmental benefits while reducing regulatory risk. On the other hand, LEED requirements may increase project costs because of extra tasks and documentation. One important fact to remember is that LEED stan- dards are evolving in an effort to accommodate a range of project types. The adoption of LEED criteria as a selection requirement may need to be phrased to indicate that the most current iter- ation of LEED criteria should be consulted rather than a particular, existing LEED standard. DBB In DBB, the owner has a clear opportunity to define sustainable design with LEED criteria. The builder’s lack of input in DBB means that there will be little opportunity to take advantage 24 A Guidebook for the Evaluation of Project Delivery Methods

of builder knowledge of sustainable design, and the owner, in certain cases, can thereby risk los- ing LEED certification. CMR In CMR, the owner has a clear opportunity to define sustainable design with LEED criteria. Sustainable construction features are more likely to be implemented because of the cooperative nature of the owner/builder contract. DB With DB, the owner can clearly articulate its expectations regarding the use of LEED criteria by assigning weight to the LEED criteria in relation to other factors in the DB evaluation plan and by using sustainable design and construction as performance criteria during design and con- struction. There is some evidence that the use of DB may hamper the objective of achieving LEED certification. This is due to the perception of risk by the DB contractor when considering whether to bid on a DB project with LEED goals. The owner needs to define the project scope and goals clearly to ensure reasonable competition, especially if LEED certification is desired. DBOM While the project owner and operation and maintenance personnel may be acquainted with the LEED criteria and requirements, there may be limited ability to incorporate evolv- ing criteria as well as restricted opportunities to “push the envelope.” The addition of post- construction operation and maintenance allows the owner to hold the DBOM contractor responsible for delivering the lifecycle cost savings incorporated as a result of the design process. The DBOM contractor would thus be at risk for failing to achieve the savings associated with the approved design. Reduced lifecycle cost (both economic and environmental) is an advan- tage of sustainable design strategies and a fundamental LEED component. Sustainable design strategies that may produce increased initial costs are balanced and ultimately offset through reduced lifecycle costs. Agency-Level Issues Agency-level issues relate to the owner agency. These will include items such as experience with various delivery methods, workforce requirements, staff capability, agency goals and objectives, agency control of the project, and third-party agreements. Issue 7: Agency Experience This issue relates mainly to the level of experience of an owner’s staff in application of various delivery methods—in other words the staff’s comfort and confidence using a specific delivery method. Owners who have used a project delivery method in the past would have a higher level of experience with that method. DBB Transit agencies have historically employed DBB as their project delivery method. This expe- rience with DBB makes it a good candidate as a project delivery method (Harrington-Hughes 2002). This experience can motivate an agency to use an alternative delivery method or deter the agency from doing so. The most experienced owners may find that some of their negative expe- riences with DBB (e.g., contractor’s claims, erroneous designs, delays in the schedule, and cost overruns) will push them to try alternative methods. Other owners will be comfortable with DBB delivery and therefore be hesitant to try new delivery methods. Advantages/Disadvantages of Each Project Delivery Method 25

CMR Most transit agencies have not used CMR for their projects because this is a relatively new project delivery method in transit. Agencies’ experience with CM is limited mainly to hiring a construction manager as a consultant or agency CM (see Chapter 2 for a detailed discussion of the CM definition). Nonetheless, agency staff with DBB management experience should have most of the skills necessary to manage CMR because of the similarities between CMR and DBB [Portland Mall Project and Weber County Commuter Rail]. One missing skill may be negotiat- ing the construction manager’s preconstruction services fees and the GMP in CMR. DB Several transit projects have been executed with the DB approach. Many transit agencies, as well as other public agencies, have the managerial experience required for a DB project. Although agency staff with DBB management experience should have most of the skills necessary to man- age DB, the differences between DB and DBB are significant enough that some sort of training seems to be inevitable for agencies with no background in DB. The primary difference between the two approaches is in managing a contract that contains the designer and constructor as one entity. This difference affects the manner in which the design-builder is procured (e.g., using the best value method instead of biding based solely on cost), the manner in which the design is reviewed, and some aspects of how construction is overseen by the owner. Additionally, agency staff will need to learn how to conduct project oversight without the presence of a completed design for early features of work. This may require training in new skills for owner employees, which may make DB more difficult to administer [Medical Center Extension, Greenbush Com- muter Rail, T-REX, and I-205 Light Rail Extension Project]. DBOM DBOM represents a significant departure from DBB, and few agencies have experience with this method. The advantage to using DBOM is that the agency can transfer most of the tradi- tional responsibilities of the agency staff to the DBOM contractor. Some experts believe that this delivery method is best suited for small agencies without substantial in-house expertise (Kessler 2005). However, the loss of control that goes with this transference of responsibility can be a dis- advantage if the agency does not have experience in managing responsibilities for design, con- struction, and maintenance that have been outsourced to a contractor. Issue 8: Staffing Required This issue reflects how each delivery method affects the owner’s direct involvement in the project. Each delivery method assigns specific duties to each party, including the owner. The scope of these duties and the dependence of project progress on the owner’s involvement in deci- sions reflect the extent of the owner’s involvement. The total number of owner employees required for each delivery method is one measure of the extent of owner involvement. A second measure is the variation in the number of staff required throughout the project development process. It is assumed that, in general, a smaller staff is more desirable; nonetheless, this assump- tion has to be weighed against potential reluctance within the agency to buy into a method that can reduce the need for agency staff. DBB An owner in a DBB project should administer two separate contracts for design and con- struction. Because of this and the high level of involvement in decision-making and quality management, a relatively large number of owner employees are needed in this approach [Silver Line Project] (AGC 2004, Gordon 1994). The owner’s responsibilities in DBB are spread through- out the project (mainly focused on dealing with the designer at the beginning of the process and 26 A Guidebook for the Evaluation of Project Delivery Methods

shifting to focus on the contractor after project award); fluctuation in the number of employees required during the project is minimal. CMR The owner hires a new party in CMR and delegates some parts of its managing duties to this party. This approach can arguably require the least number of owner employees because the CMR can expand to meet the owner’s staffing needs (Gordon 1994). The owner may, however, need to add some professionals to its staff (either as employees or consultants) if special expertise (e.g., GMP or construction manager’s fee negotiation) in managing a CMR contract is desired. DB The owner should develop a comprehensive set of project specifications before advertising a DB project because the design-builder takes responsibility for the project in both design and construction phases only after the project is awarded and will base the project design on the specifications. The owners may hire consultants for developing the RFQ/RFP documents or use their own staff. One study shows that most agencies have not changed the size of their staff after implementing DB mainly because the owner must be involved in a substantial amount of pre- advertising design and engineering (Gransberg and Molenaar 2007b). Another study shows that some public agencies have put considerable effort into developing the design documents as a means of performance risk reduction in large DB projects (Molenaar 2005). The number of staff required for project administration decreases after the award because the number of check- points and controls is reduced in this delivery method and the oversight procedures are usually streamlined (Harrington-Hughes 2002). Another driver with respect to the size of staff is the way quality assurance/quality control (QA/QC) is handled in DB projects. In most DB projects, the constructor is put in charge of day-to-day QC functions. The owner’s role is to design and implement a QA program. DBOM Early decisions in this delivery method cover a wide range—from the feasibility of the project in conceptual design to safety in the operation phase. This broad range of expertise requires an owner to have a good-sized staff to handle the project at least in pre-design and preliminary phases of design [Hudson-Bergen Light Rail]. On the other hand, some experts believe that a transit agency with a small staff would prefer to choose DBOM and outsource many of its duties (Kessler 2005). In most DB projects, the constructor is put in charge of day-to-day QC functions. The owner’s role is limited to spot checks and QA functions. Issue 9: Staff Capability This issue is mainly focused on the quality and competence of the owner’s employees and their ability to complete the duties that must be undertaken in each delivery method. There is a con- cern about the retirement of experienced employees negatively affecting the capability of an owner’s staff during the project. So the availability of the experienced staff until the end of the project should be considered while evaluating staff capability. DBB Transit agencies have more experience with DBB than other project delivery methods. This experience helps them to gradually build up capability in their staff at all levels of the organiza- tion. An important issue to consider is the different staff expertise required to handle a design contract with the designer of the project and a construction contract with the general contrac- tor. If an owner chooses a project delivery method other than DBB, it may end up with a longer list of required competencies [Silver Line Project]. Advantages/Disadvantages of Each Project Delivery Method 27

CMR Some professionals believe that administering CMR requires special capabilities while others think that the owner agency delegates most of its duties to the CMR. While the work can be del- egated, agency staff must be capable of overseeing CMR work and notice errors or omissions [Portland Mall Project and Weber County Commuter Rail]. CMR also requires management of the relations between the onboard constructor and the designer. The owner should carefully man- age the process by which the constructor gives input (constructability, value engineering, etc.) to the designer and the way these inputs are received, analyzed, and implemented. Also, the expe- rience of the agency staff in GMP negotiations is a key factor in this delivery method. It seems that while the agency would need a smaller staff with this method, the staff would need to be especially competent and versatile in dealing with these additional requirements. DB DB contracts require owner competency in managing the process, keeping up with the typi- cally faster pace of the design-builder, and understanding the procedures. Recent research shows that the traditional design and construction engineering tasks performed by public agency pro- fessional engineers (e.g., design deliverable approvals and construction inspection) were per- formed by the same staff in design-build projects (Gransberg and Molenaar 2007b). While the required skills for DBB are similar to DB, owners tend to put their most experienced staff on DB projects because these staff members need to understand conceptual designs, conceptual esti- mates, and performance criteria. These skills typically reside only in the most experienced staff [Medical Center Extension, Greenbush Commuter Rail, T-REX, and I-205 Light Rail Extension Project] (Gransberg and Molenaar 2007b). DBOM The variety of decisions that must be made early in the main portion of the project scope demands capable employees with a high level of expertise [Hudson-Bergen Light Rail]. The owner will also need to have financial analysis capabilities in its staff because this delivery method may include project financing, which in turn will require more extensive financial analysis of project viability, contract incentives, and the owner’s financial security (FTA 2006). Issue 10: Agency Goals and Objectives Agency goals can be described in broad terms as providing service to the community or achieving its growth goals. Agency goals can align with project delivery attributes or can be in conflict with them. Agency goals are different from project goals. Agency goals entail statutory requirements for safety, equal opportunity, and other legal/regulatory requirements. Project goals, on the other hand, are specified in procurement documents and are usually described in terms of time and cost expectations. DBB An agency can incorporate its goals and objectives in prescriptive specifications and detailed designs. Having control over the design, on the one hand, and requirement of design approval for construction commencement, on the other hand, helps the owner ensure the achievement of its goals and objectives. Examples of achieving goals and objectives include specifying targets for disadvantaged business enterprise (DBE) participation and stakeholders concerns with regard to agency and project objectives. CMR The agency can work with CMR during the design phase and when negotiating the GMP to develop project goals and objectives in alignment with agency goals and ensure that they 28 A Guidebook for the Evaluation of Project Delivery Methods

are achieved by the project. Since this is typically a qualifications-based selection, the RFP can help ensure that agency goals and objectives are clearly incorporated into CMR proposals. This delivery method may encourage a better owner-constructor relationship than DBB, one that can facilitate the achievement of agency goals [Portland Mall Project and Weber County Commuter Rail]. DB In DB, an agency has less control over the details of the design than in DBB. To the extent that these details affect agency goals, DB may have a negative impact on achieving agency goals. Exam- ples of agency goals that could be compromised include aesthetic considerations, safety, and com- muter satisfaction. If an owner is not absolutely clear on its goals prior to procurement, DB can yield unsatisfying results [Medical Center Extension, Greenbush Commuter Rail, T-REX, and I-205 Light Rail Extension Project] (Molenaar et al. 2005). DBOM A DBOM contract covers a large number of project issues. This comprehensive agreement may push the project through different decision steps and help the owner achieve its goals. Nonetheless, there is a concern that DBOM may hinder the owner in achieving its social goals. Although, according to Kessler (2005, p. 36), a “TRB study” states that decreases in quality and safety of services provided by private entities have not been proven, some experts believe that using this delivery method may limit agencies’ power to serve the public (e.g., a change required in operation phase will be extremely costly in DBOM). Advocates of this method believe that a comprehensive agreement with an appropriate level of detail can address this issue; however, it should be noted that there is insufficient precedence to ensure success. Issue 11: Agency Control of Project Different delivery methods have different checkpoints and decision-making steps. This sec- tion is focused on an owner’s control over the details of design and quality of construction; cost control and time control are examined in other sections. DBB The owner using this delivery method may benefit from the checks and balances provided by having separate contracts with the designer and the constructor. Having periodic decision points in DBB, primarily during the design phase, helps the owner control the project’s design (Harrington-Hughes 2002, Garvin 2003, Irwin 2003). Having a specific contract based on bid plans helps the owner to control construction and material quality. The owner has objective control over the quality of the design through the design team. Also, if flexibility is required dur- ing construction, DBB can perform better than some other methods because there are established procedures for implementing changes. Nonetheless, change orders are usually accompanied by corresponding cost increases. CMR The owner agency benefits from the involvement of the CM in most of the decisions during the design phase. The CM can assist in controlling the details of design. The owner therefore has a similar level of control in CMR as in DBB if the working relationship with the CMR is good. This delivery method gives more control and flexibility to the owner in implementing changes in the details of design during design development than DB does. Furthermore, imple- menting changes in CMR may be more effective than implementing changes in DBB because the CM is on the team in CMR (Walewski, Gibson, and Jasper 2001; Minchin, Thakkar, and Ellis 2007). Advantages/Disadvantages of Each Project Delivery Method 29

DB Although, according to some, DB provides the owner with the same quality of design and con- struction as DBB does, in DB the owner loses control over the details of the design that are not defined in the RFP (Konchar and Sanvido 1998; SAIC, AECOM Consult, and University of Col- orado at Boulder 2006). Loss of control over the design (and possibly lack of checkpoints) has the potential to expose the owner to shortcomings in the quality of design and construction [Medical Center Extension, T-REX, and I-205 Light Rail Extension Project] (Gordon & Rees LLP 2005; Irwin 2003; Gransberg and Molenaar 2004). DBOM The owner in this delivery method loses control over the details of design and details of oper- ation and maintenance. DBOM is not a good option for owners who want to extend their exist- ing systems, mainly because of the integration needed in the operation phase (Kessler 2005). Loss of checks and controls after awarding the contract is a disadvantage of this delivery method espe- cially if the owner is expecting a high level of control over the project. Issue 12: Third-Party Agreements This issue concerns each delivery method’s impact on facilitating agreements with third parties— political entities, utilities, railroads, and so forth—involved in the progress of the project. DBB Using DBB can be advantageous during lengthy negotiations with some project stakeholders [Silver Line Project]. It gives some flexibility and time to the owner to get required agreements before the commencement of the construction phase. Third parties, on the other hand, have the ability to examine 100%-complete designs before a contractor is hired. The possible disadvan- tages of completing designs before hiring a contractor include a lengthy design schedule (includ- ing numerous instances of stakeholder inputs that can disrupt the most generous schedules) and a lack of construction contractor input into the third-party agreements. CMR The main advantage of having a CM is having constructability advice and the responsibility for that advice (e.g., construction knowledge and an understanding of construction methods) during the development of third-party agreements. This delivery method may also have a signif- icant impact on getting into an agreement with third parties involved in a project when com- pared to DBB if the owner includes the responsibility to make agreements with third parties as part of the CMR contract. As an example, among the agencies interviewed in this research, one strongly emphasized the benefit of having a contractor on board while negotiating with third parties [Weber County Commuter Rail]. In general, the CMR’s knowledge of construction processes and sequencing can help clarify various aspects of project impact on communities and institutions; this will hopefully facilitate achieving understanding and approvals. DB The DB process can move third-party agreements to an earlier point in the delivery process, often before the design is complete. Agencies have experienced both the benefits and drawbacks of having the design-build contractor on the team before all third-party agreements are in place. As the design and construction are awarded in one contract, the time required to develop agree- ments with other parties can be shorter than desired. Additionally, these agreements must often be written in performance terms because the design is not completed at the time of award. How- ever, some experiences with DB show that DB contractors have been successful in obtaining responses from project stakeholders by exerting pressure on them. Constructors have different 30 A Guidebook for the Evaluation of Project Delivery Methods

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). Advantages/Disadvantages of Each Project Delivery Method 31

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. 32 A Guidebook for the Evaluation of Project Delivery Methods

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 Advantages/Disadvantages of Each Project Delivery Method 33

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. 34 A Guidebook for the Evaluation of Project Delivery Methods

Current regulations require that the agencies work closely with FTA, which may cause some delay. The FTA had some problems with the first generation of DB projects. Currently, most of these problems have been resolved, and the agency has matured in dealing with DB projects. The environmental permitting process, however, can be problematic. For example, in a commuter rail project [Greenbush Commuter Rail], a major cause of delay was that the owner had left the obtaining of environmental permits to the constructor, a task for which the DB contractor was ill equipped. This caused a delay of more than a year. DBOM Concerns with DBOM are similar to concerns with DB in relation to FTA/EPA regulations. Issue 18: Stakeholder/Community Input The opportunities afforded by a particular delivery method to an owner for coping with com- munity inputs are discussed below. A delivery method should leverage stakeholder and commu- nity input as much as possible to achieve project goals in a meaningful and transparent fashion. DBB The separation of design and construction phases in DBB gives an owner more time and opportunity to get stakeholders’ and communities’ inputs to project design and incorporate their expectations into the project scope before the commencement of the construction phase. This characteristic of DBB can lengthen the project preconstruction phase and cause delays in the project. CMR The CM is on board during design in CMR and can help the owner negotiate with stake- holders and understand their expectations while pushing the project forward. Additionally, community outreach and public information can be made part of the CMR’s preconstruction service package. Depending on the CMR’s experience and qualifications, this may enhance project chances for obtaining community consent and stakeholder agreements. DB The owner of a transit project needs to get all the important input from stakeholders before issuing an RFP because changes in the project after that are difficult and costly. On the other hand, after the contract award, DB contractors have sometimes been able to handle community pressure more effectively than state agencies [T-REX]. Additionally, the agency can require the DB contractor to include a public information and outreach program in the project to facilitate stakeholder input during design and construction. DBOM This delivery method decreases the decision points and covers a longer period of time in the project lifecycle. This characteristic makes preconstruction negotiations between owners and stakeholders more complex. The DBOM contractor may be able to push through the construc- tion phase and handle community pressures more effectively. At this point, there is little evidence to show how this issue will be coped with in DBOM projects. Lifecycle Issues This section looks at the project delivery methods in a long-term, post-construction context. Lifecycle issues are those issues that impact not only the maintainability of a project and the cost Advantages/Disadvantages of Each Project Delivery Method 35

of operation and maintenance, but also the sustainable design and construction goals that are starting to emerge as measures of an agency’s commitment to the environment. Issue 19: Lifecycle Costs The opportunities or barriers that each delivery method provides with regard to lifecycle costs are discussed below. DBB The owner is in control of design and quality and can tailor these to a project’s long-term life- cycle goals. CMR The owner keeps almost the same level of control over the design of the project as in DBB and also benefits from constructor’s advice regarding future costs of the project. DB The owner needs to watch out for increasing project lifecycle costs mainly because the design- builder has a motive to decrease the initial costs of the project to bring it down to the agreed upon amount regardless of possible increases in the future operation and maintenance costs of the facility. DBOM In this delivery method, the constructor is in charge of operating and maintaining the built facility. Transferring the responsibility of long-term operation and maintenance to a private con- structor creates opportunities to leverage private-sector expertise and to realize lifecycle cost reduction by integrating delivery activities and private-sector efficiencies (Garvin 2003, FTA 2006). There are usually provisions in a DBOM contract that motivate the constructor to keep the operation and maintenance cost at the lowest possible amount. The DBOM delivery method is primarily used for financial purposes in countries other than the United States and has been the most suitable delivery method for public owners when the project initial costs are beyond the available funding resources (Harrington-Hughes 2002) Issue 20: Maintainability Maintainability is affected by the choice of delivery method in two different areas: level of quality and ease of maintenance. DBB In DBB, the owner can check the maintainability of the finished design before awarding the project. Having checkpoints in the design phase can help the owner ensure the design quality of the end product. CMR The owner of a CMR project can benefit from all the advantages of DBB and also the con- structor’s advice on maintenance of the end product if the constructor has previously operated similar facilities. DB As quality control is transferred to the design-builder in DB and the details of the design are not known at the time that the project is awarded, many owners have some concerns about the 36 A Guidebook for the Evaluation of Project Delivery Methods

maintainability and quality of the end product. This has led some owners to require multiyear warranties from DB contractors. DBOM This delivery method works much like DB; however, as operation and maintenance are included in the contract and the constructor is in charge of operating the facility after it is built, the owner is less concerned about ensuring the quality and maintainability of the end product. Issue 21: Sustainable Design Goals Sustainable design is becoming ever more important in achieving sustainability goals for projects. The effect of delivery method on the sustainability of project designs is the focus of this discussion. DBB In DBB, the owner has a clear opportunity to define sustainable design intent and shape social and environmental impact. This method provides opportunities to promote and enhance sus- tainable design criteria by allowing for materials research and the development of strategic stake- holder input. One drawback may be that the ultimate operation and maintenance personnel for the project could be unfamiliar with the operational requirements for sustainable systems, but this is an issue that can be resolved with careful planning. CMR In CMR, the owner has a unique opportunity to realize the economic returns of sustainable systems performance as well as using sustainability as an evaluation factor for the selection of a builder. The design schedule could, however, outlive systems performance criteria and impact public participation, limiting social equity issues. DB This project delivery method can result in an inherent coordination of design and performance with potential for accelerated economic returns for sustainable systems performance by shorten- ing the project schedule. The owner has an opportunity to use multiple design-builders to pres- ent innovative designs that are consistent with clearly defined sustainability criteria. The owner can clearly articulate expectations regarding sustainability by assigning weight to sustainability in relation to other factors in the DB evaluation plan. The design schedule could, however, impact public participation, thereby raising social equity issues. Due to the normally time-consuming processes associated with fulfilling municipal and state requirements for announcement and convening of public hearings, certain sustainability measures—such as wetlands mitigation and avoidance of undeveloped areas—raise concerns for eminent domain and brown fields redevel- opment, which can impact time performance. DBOM DBOM can realize accelerated economic returns for sustainable systems performance since the owner/operator has an inherent bias toward minimizing operations and maintenance life- cycle costs. The compressed timeframes could, however, impact public participation, raising social equity issues. Furthermore, operation and maintenance personnel may be unfamiliar with sustainable systems requirements. For example, materials may require alternate maintenance procedures or systems controls may incorporate technologies requiring specialized training that may be beyond the scope of the initial proposal. Advantages/Disadvantages of Each Project Delivery Method 37

Issue 22: Sustainable Construction Goals Sustainable construction is an important vehicle for achieving sustainability goals for new projects. The disconnect between designer and builder in some delivery methods can restrict the means and methods available for a project. The effect of various delivery methods on facilitat- ing sustainable construction is the focus of this discussion. DBB With DBB, an experienced constructor does not have the opportunity to give sustainable design features as inputs during the design phase. Sustainable materials and practices relevant to regional procurement and construction methodology may be unavailable to designers unfamil- iar with the project location. CMR With CMR, the owner has a unique opportunity to realize the economic returns for sustain- able systems performance as well as using sustainability as an evaluation factor for the selection of a builder. Sustainable construction features are more likely to be implemented considering the cooperative nature of the owner/constructor contracts in this delivery method. DB This project delivery method can result in an inherent coordination of design and perfor- mance with potential for accelerated economic returns for sustainable systems performance. The owner has an opportunity to use sustainability to evaluate potential design-builders although innovation with sustainable criteria related to more advanced technology could be limited due to a lack of previous installations. DBOM In DBOM, because designer, builder, and operator are contractually united, there is an inher- ent coordination of design and performance with the requisite guaranteed ability to implement sustainable construction and operational features. DBOM can realize accelerated economic returns for sustainable systems performance since DBOM contractors have an inherent bias toward minimizing operations and maintenance lifecycle costs. Added benefits can include par- ticipation in the development of evaluation criteria for new technologies as part of an ongoing review of installed systems and lifecycle costs. Other Issues This category includes issues that are important to project success that have not been previ- ously categorized in this chapter. Issue 23: Construction Claims The focus of this discussion is how each delivery method exposes the agency to potential con- flicts and claims. If a delivery method can reduce exposure to construction claims, that delivery method is a favorable choice, and if it increases the possibility of construction claims, it is an unfavorable choice. DBB This method typically has the highest occurrence of claims and disputes. Disputes often arise over authority, responsibility, and quality (Walewski, Gibson, and Jasper 2001). Furthermore, 38 A Guidebook for the Evaluation of Project Delivery Methods

as the owner is responsible for design completeness, errors and omissions claims are common in DBB projects. Some contractors may bid low to win a job and try to enhance their final profit margin through claims and change orders, especially if design errors or ambiguities are present in the construction documents. Studies have shown that this delivery method results in the high- est rate of cost growth, which could be an indication of a large number of claims (Konchar and Sanvido 1998). CMR Assuming a well-structured contract, there is less possibility of claims and disputes in CMR projects once a GMP is agreed upon and the contract is signed. Because the CMR is present dur- ing the design process, there is less need for information and clarification of the design docu- ments. Some professionals think that this approach will result in very few construction claims, which is a major advantage of the CMR approach [Weber County Commuter Rail]. The qualifications-based selection methodology creates an effective deterrent to initiating claims by requiring the CMR to be “successful” on the current contract in order to be competitive for future projects. The qualifications-based selection process may reduce the possibility of hiring litigious contractors. DB Some research shows that the size and frequency of change orders are less in DB than in other project delivery methods (Riley, Diller, and Kerr 2005). This delivery method is less prone to claims and disputes, assuming a well-structured contract. For example, claims for design errors, a major source of DBB contractors’ complaints, are reduced considerably in DB. At the same time, early pricing leaves the owner vulnerable to claims for scope that was missing in the RFP. The qualifications-based selection methodology creates an effective deterrent to initiating claims by requiring the design-builder to be “successful” on the current contract in order to be com- petitive for future projects. DBOM An advantage of DBOM is that at the time of the agreement among all the parties, the maxi- mum level of contractual obligation is signed. In other words, all parties have obligated themselves not only for the construction phase but also for several years of operation and maintenance. This will minimize the challenges of start-up claims and system integration in complex projects (Kessler 2005). On the other hand, if the DBOM contractor does not have the competencies and characteristics expected by the owner, or, if the owner has not defined the scope of work ade- quately, the project will face difficulties during the design, construction, and operation phases. Issue 24: Adversarial Relationship Transit projects can be hampered by conflicts between parties to the design and construction contracts. The higher the level of adversarial relationships in a project, the more likely the proj- ect will suffer from cost, schedule, and quality problems. Delivery methods define the relation- ships among all project parties. If the project delivery method encourages project parties to work together as a team to achieve the project goals and characteristics, it is considered a benefit. Con- versely, if the project delivery method increases the possibility of adversarial relationships, it is considered a detriment. DBB This delivery method can create an adversarial relationship among the parties to the contract— mainly between the owner and the construction contractor (Walewski, Gibson, and Jasper 2001; Irwin 2003; Mahdi and Al-Reshaid 2005). Furthermore, the engineer and the contractor may Advantages/Disadvantages of Each Project Delivery Method 39

assume adversarial roles as one is in charge of approving the other’s work. The division of responsibilities may also result in these two parties blaming each other in the case of project fail- ures or during major disputes (Halpin 2006). CMR The inclusion of the construction contractor during the design phase in the CMR method builds constructive team work and facilitates project team formation (Irwin 2003; Minchin, Thakkar, and Ellis 2007) although it requires extensive coordination of consultants and/or subcontractors. DB Having a single point of responsibility for design and construction, as in the DB method, decreases the potential for conflict between the engineer and constructor (Walewski, Gibson, and Jasper 2001; Harrington-Hughes 2002; Halpin 2006). Although in DB there should be less incentive for the designer and the constructor to blame each other for problems (since they are both on the same team and they are jointly responsible to the agency for the success of the project), instances of disputes between designer and constructor (on the same DB team) were observed during the interviews for this research [Greenbush Commuter Rail and Hudson- Bergen Light Rail]. It is worth mentioning that design-builders may be deterred from submit- ting frivolous claims to owners who have future DB projects because with a qualifications-based selection system the design-builder will want to avoid making the owner angry with a claim. DBOM With the DBOM method, the owner is less vulnerable to disputes between DB and operation and maintenance personnel. This delivery method also decreases start-up challenges and system integration during the initial years of operation (Kessler 2005). Despite this, disputes between team members such as systems and civil contractors can adversely affect the project. Conclusion This chapter discusses the advantages and disadvantages of various project delivery methods in relation to each of the pertinent issues discussed. It should be noted that in many cases, the advantages and disadvantages listed are not absolute and should be considered in comparison with competing delivery methods. The information provided in this chapter can be used to help identify the strengths or weaknesses of each delivery method in relation to important factors that can affect a project’s goals. This discussion provides a broad picture of the issues affecting proj- ect delivery methods and thereby provides a basis for the decision system that is introduced in the chapters that follow. 40 A Guidebook for the Evaluation of Project Delivery Methods

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TRB’s Transit Cooperative Research Program (TCRP) Report 131: A Guidebook for the Evaluation of Project Delivery Methods examines various project delivery methods for major transit capital projects. The report also explores the impacts, advantages, and disadvantages of including operations and maintenance as a component of a contract for a project delivery method.

A companion publication to TCRP Report 131 isTCRP Web-Only Document 41: Evaluation of Project Delivery Methods, which explores pertinent literature and research findings related to various project delivery methods for transit projects. TCRP Web-Only Document 41 also includes definitions of project delivery methods and highlights the existing selection approaches commonly used by transit agencies.

Appendix A: References and Appendix B: Definitions were published as part of TCRP Report 131. Appendices C through H of the report are available online.

Appendix C: Forms for Project Description and Goals

Appendix D: Forms for the Analytical Delivery Decision Approach (Tier 1)

Appendix E: Forms for the Weighted-Matrix Delivery Decision Approach (Tier 2)

Appendix F: Procedures for Determining the Weights of Selection Factors in the Weighted-Matrix Delivery Decision Approach (Tier 2)

Appendix G: Form for the Optimal Risk-Based Approach (Tier 3)

Appendix H: Application of the Tier 1 and Tier 2 Approaches to a Hypothetical Project

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