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CHAPTER 2 Literature Review and Definitions Before embarking on describing various delivery methods, it is important to note the features of airport projects that distinguish them from other transportation projects because these features may have an effect on the selection process. Several types of project delivery method are currently available to the owners and managers of airport projects in the United States. It is important, espe- cially in the case of large and complicated airport projects, to select the most appropriate project delivery method for a specific project. Contractual relations, contemporary laws and regulations, the project owner's perception of risks, procurement award mechanisms, and the method of pay- ment are all factors in project delivery method selection. It is important to note that this research in no way advocates one type of project delivery method over another. The expressed purpose of this effort is to assist airports in making the proj- ect delivery selection decision in a defensible and consistent manner. The report authors firmly believe that all project delivery methods can be used to successfully complete airport projects. Nonetheless, each project has unique characteristics that will make a given project delivery method the optimal one for project delivery. In the paragraphs that follow, alternative project delivery methods will be compared with traditional DBB project delivery, which functions as the benchmark against which all other methods are compared. A review of the literature suggests that the use of an alternative project delivery method can accrue benefits for project owners. How- ever, the benefits of alternative project delivery methods presented in the literature occur most often across a population of projects rather than on an individual project. Thus, the reporting of benefits found in the literature should not be misconstrued as advocating one project delivery method over another. All project delivery methods have yielded both success and failure. Often failure is the result of selecting an inappropriate project delivery method. Distinguishing Characteristics of Airport Projects Wide Range in Size, Scope, and Cost One distinguishing characteristic of airport projects is the wide range in their costs. There is a wide variety in airport projects; they consist of both horizontal and vertical projects ranging in cost from a few thousand dollars to megaprojects worth hundreds of millions of dollars. For instance, Logan International Airport projects have ranged in cost from $10,000 to $165 million over the past 5 years. Security Security consideration is another important attribute of airport projects. An airport's area is usually thought of as including two parts: "airside," which comprises runways and other facilities 6
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Literature Review and Definitions 7 beyond the terminals, and "landside," which includes an airport's interface with ground trans- portation (Reid and Brown 2007). Sometimes an airport's area is thought of as including three parts: airside, landside, and terminals (Transportation Security Administration 2006). The airside is a secured, non-public portion of an airport where movement of construction personnel and equip- ment is controlled. Further, access to the area adjacent to runways, taxiways, and gates is limited and under strict control. The terminal buildings, designed to accommodate the enplaning and deplaning activities of aircraft passengers, are the part of the airport with the highest level of secu- rity, safety, and operational requirements. The landside, excluding terminals, is a non-restricted area that includes area and buildings to which both traveling passengers and the non-traveling public have unlimited access. Construction in the secured zones of airports involves difficulties in providing security, which is time consuming and costly. Research has found that the cost of construction in areas beyond security checkpoints is 15 to 25% more than the cost of similar con- struction outside the secured area (Adrem et al. 2006). The reasons for this cost difference are numerous. Workers must be issued special security badges to enter the secure airside/terminal regions. This requires specific training and completion of a security clearance process, both of which take time. All vehicles and drivers have to get special licenses. Each morning, the workers are required to enter the secure zone via static security stations that may be remote from the work site. All materials trucks are not only security checked, but also escorted to the work site. Also, because of the presence of expensive aircraft and flammable material on the airside, the contrac- tor must take into account various safety regulations that are not necessary in landside projects. All of these issues reduce the daily production rate of construction, adding time and money to the airport project. Construction During Airport Operation Airport projects are usually executed while airport operations are ongoing. Because of this, it is important to manage design and construction in a way that minimizes impact on airport oper- ations. For example, construction work is often scheduled during periods of low airport activity. This usually means that much of the construction occurs at night (Adrem et al. 2006, Corey 2005). In some airports, like Los Angeles International Airport, a multiphased scheduling approach is tried that divides the project into phases and protracts the construction time to minimize delays to flight and passenger processing (Florkowski 2007a). The appropriate project delivery method should optimize available resources in achieving project goals in an active airport environment. Choosing the proper project delivery method can play a major role in minimizing the impact on airport operation and flight delays. Complexity of Airport Projects Airport projects are often complex: "Airport projects have a whole series of special systems which are seen nowhere else, on an enormous scale" (Merkel and Cho 2003). Some of these systems include sophisticated security devices (e.g., closed-circuit television, explosion detection systems, and X-ray scanners); electrical and data systems; special fire alarm and fire-fighting systems; and sophisticated baggage-handling systems. The spatial and circulation requirements of aircraft and related equipment and the crowds that ebb and flow throughout the day add complexity to airport design and construction. Some experts compare an airport to a body with multiple systems of inter- dependent organs; a failure in one system can shut down the entire terminal. Also, airports usually add or remove existing facilities instead of building a new one. This process causes problems such as establishing the terms of contract (allocation of responsibilities to project participants, especially the contractors) and ensuring that new additions are designed in a way that is compatible with existing facilities in terms of style and material. The challenge is to integrate the new and old facil- ities in an effective manner (Adrem et al. 2006).
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8 A Guidebook for Selecting Airport Capital Project Delivery Methods Different Stakeholders Due to the various activities conducted in an airport and the far-reaching effect of some airport projects on adjacent communities (such as construction of new runways or expansion of existing ones), there are many different stakeholders in an airport construction project. All stakeholders want to optimize the design based on their concerns, and these concerns are sometimes in conflict. Even in the airport proper, stakeholders' concerns can be in conflict. For instance, entities inter- ested in the commercial aspects of airport operation may prefer a design that exposes passengers to as many stores as possible, while entities concerned with terminal operations may prefer that passengers take the shortest possible route through the airport. Different agents, with specific duties, who may not be responsible for a project's cost, make requisitions that may increase the cost of the project. The conflicting demands of project stakeholders can make it challenging for those in charge of a project to reach the needed agreements, and this may increase the design and devel- opment phase of the project (Adrem et al. 2006). Type of Funding Major airport financing comes from (1) federal assistance (FAA and TSA), (2) state assistance, (3) bond sales, and (4) airport cash and revenue funding (Airports Council International--North America et al. 2006). The Airport and Airway Trust Fund established by the Airport and Airway Revenue Act of 1970 provides the revenues used to fund the Airport Improvement Program (AIP), which assists sponsors, owners, or operators of public-use airports in the development of a nationwide system of airports adequate to meet the needs of civil aeronautics. In 1997, Congress enacted new taxes and funded the trust fund that guarantees a stable funding source whereby users pay for the service they receive. When aircraft operators are exempt from paying aviation taxes, their airport activity is not included in the justification or design for an AIP project (FAA 2005). Only those AIP projects considered by the FAA Administrator to be necessary to provide for a safe and efficient airport system and to meet the current and projected growth of civil aeronautics are considered for selection. Although AIP can fund multiyear projects, the funds are released on a yearly basis and based on an agreed-upon payment schedule. Because of this, cash flow and compliance with an AIP- approved fund schedule have important roles. Using this fund causes restrictions like competitive pricing of construction services, compliance with the Davis-Bacon Act, and good faith efforts to include Disadvantaged Business Enterprise (DBE) firms (Airports Council International--North America et al. 2006). In fiscal year 2005, the total amount made available for the AIP program was $3,590,506,982. This budget provided 2,099 grants, ranging from $10,925 to $38,826,223, with an average value of $1,710,580 (General Services Administration 2008). For a typical AIP-funded con- struction project, the grantee and the FAA follow a designated process. However, based on the work involved, type of sponsor, project size, and so forth, some steps can be eliminated from this process. AIP funds do not require that accounting procedures be in accordance with the Federal Acquisition Regulation (FAR); for all federal aid that comes from TSA, grantees must follow FAR accounting procedures (Airports Council International-North America et al. 2006). Another source of funds is passenger facility charges (PFCs). These are taxes charged on each airline ticket, collected by the airlines, and given to the airport. The airport has to follow FAA guidelines in order to use these funds (such as using the funds for airfield-related or terminal-related projects). State funding is another source of financing for airport projects. Many states assist capital improvement projects with grants through various programs. As with federal assistance, accep- tance of this funding imposes restrictions and compliances. These can include restrictions on the type of contract and disbursement of the state's funds; competitive pricing of construction ser- vices; auditing and monitoring rules; required project record retention; involvement by the state