Guide for Design Management on Design-Build and Construction Manager/General Contractor Projects (2014)

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47 If the design phase of a CM/GC construction project could be perfectly executed, the con- struction phase would be completely free of the problems, challenges and difficult decisions so common in a traditional highway construction project, save force majeure and unforeseen conditions and human error. This statement cannot be made about any other system, and points to the importance of DM under CM/GC. The goal of this chapter is to help the decision mak- ers in public transportation agencies establish and apply this unique and effective system in the most ideal way to their specific, individual circumstances, and to make CM/GC a powerful tool in their project delivery toolbox. If some of the methodologies discussed in this chapter seem unrealistic or unattainable, the agency should strive to follow them as close as possible. If they do this and have high quality, competent people that believe in the system and are willing to work diligently to see the system work and the project or program succeed, things are very likely to go well. When reading this section, the reader may note what appears to be a very important contra- diction regarding the design effort required with CM/GC in comparison to DBB. The two case studies that focused on the Utah DOT (Mountain View Corridor [MVC] and UDOT—CM/GC Case Studies) both make the point that UDOT requires “105% plans”—a very intensive design effort, greater than found on DBB projects so that problems may be avoided in the construction phase, cost estimates can be more accurate and so that risk may be more accurately allocated. The case study that focused on Osceola County said the opposite. The outcome of that case study was that an advantage of CM/GC was the reduced design effort necessary, and thus reduced design cost, when using CM/GC, compared to DBB. Could they both be right? Absolutely. And that points again to one of the biggest strengths of CM/GC—its flexibility. These are two very different programs, with very different needs that both found what they needed with CM/GC. UDOT is an established program. It is a world leader in the use of CM/GC. Contractors, subcontractors, suppliers, local government agencies, permitting agencies and util- ity companies all understand, accept and mostly embrace CM/GC there, especially people within UDOT. UDOT’s major consideration is cost. Even their striving for proper risk allocation has at its base, cost. They have found that the “105% plans” helps them lower cost by identifying and assigning risk, which helps the process of innovation. Meanwhile, the Osceola County program was brand new. A recently elected County Commission had hired a new County Manager and handed him a broken highway construction program that had been collecting money for years from a tax increase for the expressed purpose of building roads. They had several years’ worth of highway tax money, but a record of starting virtually no highway construction. The previous two County Managers had been fired because of this. The new County Manager was told to get seven highway projects under construction within 12 months, or he would lose his job, as would his staff. Therefore, the need that this program had was speed. Speed in design and speed in starting construction. Every decision was made to meet the goal of getting as many projects started as C H a P T E r 4 Design Management under Construction Manager/ General Contractor

48 Guide for Design management on Design-Build and Construction manager/General Contractor Projects possible, as quickly as possible. This was accomplished by co-locating all key parties to a con- tract, doing away with traditional sets of plans and designing the project through a seemingly constant series of meetings of the decision makers from all the parties around a large conference table. Their design goal was to get the CM just enough design to get started and then keep the design process just enough ahead of the construction so as to not slow down the prosecution of the work. And CM/GC, as a delivery method, was just as successful at meeting Osceola County’s goal as it was in meeting UDOT’s goal. A: Background The traditional procurement system for highway construction involving the separation of design and construction services, the qualifications-based procurement of DPs, and the com- petitive low-bid system for construction have served the public well during the past century. The foundation of this system, often called DBB, is the principle of selecting DPs based on qualifications (Brooks Act—Public Law 92-582) and selecting construction contractors based on competitive sealed bids with award to the lowest responsive and responsible bidder, often based on 100% PS&E. The combination of these two procurement practices helped solidify the usage of DBB in the public sector. Over the decades, DBB has provided taxpayers with adequate, safe, and efficient transporta- tion at the lowest price that responsible, competitive bidders can offer. For the most part, it has effectively prevented favoritism in spending public funds and has provided checks and balances through separate contracts with the DP and contractor while stimulating private sector competi- tion. However, this process can foster adversarial relationships among the project parties, limit innovation, result in high cost and time growth, and may not necessarily provide the best value to the owner for all project circumstances or types. Also, DBB typically results in the longest duration between conception and construction, as well as between design and construction. In recent years, this issue has become a more pressing concern for highway agencies, as dete- riorating infrastructure and increasing population have created tremendous pressure to move critical projects quickly from planning through design and into construction without a com- mensurate increase in funding. Underlying these external budget and time pressures is the basic requirement to maintain quality in all phases of the highway program. Thus, there is a continu- ing need for highway agencies to review and evaluate alternative procurement and contracting procedures that promote improved efficiency and quality. The wide range of options for project delivery methods available today is a relatively recent development for publicly funded highway projects in the United States. Things changed drastically with the introduction of D-B to highway construction through the Intermodal Surface Transportation Efficiency Act of 1991. Another step was taken in 1996 when the Federal Acquisition Reform Act explicitly authorized the use of D-B for federal proj- ects. After that, TEA-21, Public Law 105-178, allowed the state DOTs to award D-B contracts if the enabling state-level legislation was in force (TEA-21 1998). Subsequent to the successful experience of using D-B in several projects, many states passed new legislation and codes to allow alternative project delivery methods such as D-B, CMR, and CM/GC. Many public agencies have implemented D-B, and while D-B has advantages, including single-point responsibility (combining the DP and builder under a single contract), accelerated delivery, collaboration, and innovation, it also has certain disadvantages, including less agency control over design and the angst felt by most DPs in the event of a dispute where they find them- selves aligned with a contractor against the public highway agency through which they procure much, if not most, of their business.

Design management under Construction manager/General Contractor 49 Such concerns have caused some transportation agencies to seek alterna- tives to DBB and D-B for project delivery. A promising alternative that gen- erated initial interest around the turn of the century was CMR. This option offers some of the same advantages as D-B, such as expediting delivery of proj- ects, while allowing the agency to retain control of design (through a separate contract with the DP). However, the nations’ contractors, except in certain limited locations, never accepted CMR because of one characteristic of the sys- tem. CMR contracts generally either forbid the CM to self-perform any work, or only allow the CM to perform work for which they underbid all subcontrac- tors that bid on the work. This aspect of the system led to the unfounded fear that all CMR work would go to large, out of state CM firms and local companies would get none of the work. The logic of this was patently faulty from the beginning (even if a non-local company got the “prime” contract, they would have to contract someone to actually do the work, and this was almost always local contractors). Research studies that showed CMR to be a valuable tool for the toolbox of any public transportation agency (Minchin 2011) (NCHRP 2009, Gransberg and Shane 2010) debunked this notion. Nonetheless it was widespread. This resulted in an impasse that deterred transportation construction contract innovation for most of the first decade of the 21st century. With this in mind, the FHWA launched Every Day Counts 1 (EDC-1 2010) and Every Day Counts 2 (EDC-2 2012), two priority initiatives focusing on shortening the time needed to com- plete highway projects through the use of new technologies and innovative processes. To deliver projects more quickly, FHWA now recommends implementing D-B and CM/GC, proposing that state DOTs make innovative contracting practices their “standard way of doing business.” CM/GC occupies the middle ground between DBB and D-B, and affords owners more oppor- tunities for meeting the goals of the EDC initiatives than any other available delivery method. Successful use of CM/GC expedites project delivery, while allowing the agency to retain full control of the design; and positioning the DPs where they are most comfortable, directly respon- sible to the owner. An integrated team approach that applies professional management during the planning, design, and construction of a project, CM/GC incentivizes innovation to a greater extent than any other delivery system. In fact the system allows for, encourages and even requires innovation during the design process. The CM/GC team consists of the owner, the architect/engineer or DP, the CM, the sub-DPs and subcontractors. The CM is best retained about the same time as the DP, typically through a qualifications-based or best-value selection process. Any agency considering using this system must understand that they are trading off control over the construction process in favor of speed, innovation, and flexibility. Typically, preconstruction continues until the last work package is approved and released for construction. Of course, by this time the construction phase is well underway. During precon- struction, the CM acts as an advisor, providing professional services to the owner. A CM per- forms constructability reviews, cost estimates, construction phasing and schedules, and budget recommendations to assist in determining the best options for the owner based on the project budget. The CM also may perform duties not typically performed by contractors, such as assist- ing in securing financing or selecting or helping in the selection of DPs. The CM’s greatest con- tributions during the design phase (and construction phase, for that matter) are to generate and create innovations to better perform work tasks, either from a methods standpoint or through a scheduling or financing standpoint. Once construction begins, the CM becomes the GC. This phase typically begins when the project team releases its first work package for construction. The CM awards subcontracts in a fixed price, cost-reimbursable, or GMP contract. When a CM is bound to a GMP, the most fun- damental character of the relationship is changed. In addition to acting in the owner’s interest, Most advantages of CM/GC are derived from the fact that a CM should be involved in the design and decision-making process early in the project.

50 Guide for Design management on Design-Build and Construction manager/General Contractor Projects the CM must manage and control construction costs to not exceed the GMP (AIA-MBA Joint Committee 2014). Most advantages of CM/GC are derived from the fact that a CM should be involved in the design and decision making process early in the project. These include the three most important general advantages of (1) freedom to innovate design and construction practices; (2) flexibility to allocate risk, and then to re-allocate risk and continue to re-allocate risk throughout the life of the project; and (3) potential for great cost savings through innovation and optimum risk allocation. Noted advantages of CM/GC specifically involving design are as follows: • Innovation and constructability recommendations early in the design phase • Flexibility in the assignment of risk, reduction of risk and improved project decisions as a result • Agency retention of substantial control over design • The DP works to coordinate contract documents to the contractors’ needs • Cost savings by identifying real-time project costs throughout the design process • Potential for time savings by fast-tracking early components of construction prior to com- plete design in phased packages • Rapid adaptability to changing conditions and additional project requirements during design • Ability for the DP to develop a more accurate cost estimate earlier • Allowance for the design to be accomplished in the priority order that the phases are needed for construction and budget constraints • Close coordination of third party issues (utilities, ROW, permits, etc.). Note that the legal status of CM/GC for public construction projects varies from state to state. In some states, it is not legal for public construction projects at all. In other states, it is legal for public construction of vertical facilities, but not for horizontal construction like highways and bridges. In still others, it can be used for all public construction. Any state transportation agency that cannot legally use CM/GC should work within their legislative process to achieve legislation necessary to legalize its use. B: Framework and Template for Organizing DM under CM/GC The framework, illustrated in Figure 7, is based on the following seven fundamental principles: • the need to understand the CM/GC concept and processes; • the need to staff the project with as many people as possible with experience in fast-tracked construction (preferably CM/GC), and that those people be leaders as opposed to managers; • the need to develop a strategic plan; • the need to capitalize on early contractor involvement; • the need to balance project risk; • the need to tailor the project to the schedule and budget (not the other way around); • and the need to define clear procedures for QA and QC. It is nearly impossible to completely separate the design process from the construction process in CM/GC, since the two are more closely intertwined and dependent on one another than in any other major delivery system. The framework presented in Figure 7 is presented as a DM framework, but includes a distinct flavor of CM. Understand CM/GC Under CM/GC, it is possible for projects to be designed around a table during regular project meetings (with the entire team present) rather than in a design office, with little or no active involvement from the team; and the system works best if this is the process. The emphasis of

Design management under Construction manager/General Contractor 51 the design process changes in this scenario from traditional bid sets of plans to construction sets. The intensity of the design effort shifts from traditional plans production to team project planning—that is, critical design decisions are made during regular meetings with all deci- sion makers present. CM/GC projects do not need a fully developed design package, as with DBB projects, or a complex performance specification as with D-B projects. CM/GC creates an environment where the owner, or owner’s agent, must be more involved; for instance, CM/GC gives the owner the ability to get what they want from the contractor and price items accord- ingly. Also, since the parties are co-housed, it is simple to gather the parties together and have an impromptu meeting if something happens on the project that warrants such a step. If executed properly, CM/GC offers the fastest way for a construction project to progress from conception to completion. It also offers the fastest way to get multiple projects designed and into construction. The Osceola County program was able to get 11 projects under construction in 1 year, whereas in the previous 5 years, only one project had been constructed (see Osceola County Case Study). Figure 8 shows comparative durations of the design and construction phases for similar proj- ects, when using the three most-used transportation delivery systems. The probability of estab- lishing a successful program or project is greatly increased by following the recommendations in this Guidebook, all of which were taken from successful CM/GC projects and programs. One of the recurring themes in the research that led to this Guidebook was that to understand the workings and execution of CM/GC, one must understand the culture of CM/GC. Understand CM/GC Cr ea te A tm os ph er e of In no va ti on Recruit Team of Experienced Leaders Develop Strategic Plan Balance Project Risk En ga ge F ul ly a s O w ne r Tailor Design Contracts to CM/GC Evaluate/ Modify Agency Processes Establish Clear Roles, Responsibilities, & Lines of Communication Define Clear QA/QC Procedures Fo st er C ul tu re o f C ol la bo ra ti on & T ru st O bt ai n & S us ta in S ta ke ho ld er In pu t & “ Bu y- in ” Overarching Fundamental Auxiliary Framework Component Key Capitalize on Early Contractor Involvement Tailor Project to Schedule & Budget Figure 7. CM/GC design management process framework.

52 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Culture In many cases CM/GC requires a significant and aggressive change in the culture and phi- losophies of the owners, CMs, and DPs from traditional DBB design projects. For instance, the standard design methods, schedules, and plan review stages that are frequently used in designing DBB projects may prove to be inadequate to realize the advantages of CM/GC. DPs are required to take a more active role in working with the owner and CM during the design process. DPs may therefore need to be educated in receiving real-time input from the CM, as well as in flex- ibility in modifying standard items such as traffic control plans, to best fit the chosen approach to construction. Overall, the fast-track nature of this method leads to a short-term need for increased plan production rates. This places additional requirements on the DPs, such as extended work hours, to keep pace with the acceleration and innovation changes proposed by the CM. Successful implementation often requires that a project be broken into additional “mini” phases, enabling the CM to start work early in areas where ROW and permits have been obtained and/or utilities relocations have been completed. UDOT sometimes uses as many as five “mini-GMPs” for the expressed purpose of accommodating early work items and/or early procurement items (see UDOT CM/GC Case Study). As with just about anything, however, use of multiple small early phases can be overdone. Oregon DOT feels that they may have used too many in one contract (see ODOT Case Study). Early work packages can be broken into such items as retention ponds, partial clearing and grubbing, constructing on friendly parcel takes, etc., which requires more design effort than traditional “station-to-station” designs. Small contracts can also be written that will allow the CM to order items with long lead times. Figure 8. Comparison of durations for design and construction phases for DBB, D-B, CM/GC.

Design management under Construction manager/General Contractor 53 Standard items under the DP’s oversight, such as utility coordination and permitting during design, partially transfer to the CM due to the need to accelerate utility relocations, advance- order long lead items, have one “point” of responsibility with the utility companies, permitting agencies, etc. These shifts in responsibilities often are needed for the CM to take responsibility for the overall project schedule and budget. Well thought out and finely crafted specialized and hybrid contracts—i.e., with the CM, DPs, consultants, etc.—must match perfectly the goals and objectives of the program/project. For best results, the contracts should require aggressive delivery, streamlined plans, innovation- mandatory goal percentages, advanced coordination, sufficient time for production meetings, principal involvement, strict adherence to the schedules and budgets, coordination, etc. Failure to put this language in the contracts will require asking for volunteer participation, which is much more challenging. When one compares the means and methods of CM/GC to those of other delivery systems, it is easy to understand the importance of understanding and embracing the culture of CM/GC. For instance, the duties of the design team—such as permitting, project management, utility coordination, overall project schedules, and owner’s representative duties—should be handled from the beginning by the whole team. Traditional duties are redistributed among the team, not handed off after the phases are complete. The CM should take over project administration as soon as possible and through construction while many of the duties that would be led and handled by the DP (such as utility coordination) are redistributed to the team. Some risk and effort traditionally borne by the DP in the design phase can be lessened or even eliminated through not requiring quantity take-offs, com- putation books, and bid summary sheets. Some or all of these items can now be assigned to the CM as part of the GMP. Making quantities the responsibility of the CM enables the DP to strictly design instead of being concerned with plan matrices, quantity take-offs, etc. This practice also reduces the DP’s scope and the cost of design; and converts the design plans to construction plans rather than bid plans. Streamlining the plans and scopes is a key principle in keeping the costs of CM/GC under control, and one of the best ways to do this is to eliminate some activities that are not as necessary as in the past, let the CM handle more of the activities for which they are better positioned to handle, and then not replicate or duplicate effort by having the DP or Construction Engineering Inspection (CEI) perform some of the same functions. Please note that some of the details of the process currently outlined are geared toward the program just getting started, or whose over-riding consideration is speed—speed from concep- tion to construction or merely from design to construction. If an agency is more concerned with, say, risk identification, risk balancing, risk allocation, more complete sets of plans may be necessary. UDOT has long used CM/GC to shift risk among CM/GC team members for cost advantage (see UDOT Case Study). Key CM contributions to the design of a CM/GC project include innovation, motivation, and a sense of urgency, thus getting utility companies and permitting agencies moving toward project goals. These functions are just as, or even more, valuable than more apparent and acknowledged contributions, such as plans reviews and constructability/biddability reviews. Of course a CM must perform constructability reviews, cost estimates, construction phasing and schedules, and budget recommendations to assist in determining the best options for the owner based on the project budget, but the sense of urgency that the contractor brings is to be valued by the agency. The City of Phoenix believes that permitting agencies and utility companies do not see a project as a “real project” until the contractor is part of the team (see City of Phoenix Case Study). The foundation of a successful CM/ GC project is trust and the best way to build trust initially is through total transparency in assembling the team.

54 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Recruit Team of Experienced Leaders CM/GC, unlike any other delivery method, enables an agency to build its own partnering team. It is essential that the agency capitalize on this opportunity and effectively “custom-build” its team to properly fit the specific needs and objectives of the project. This is a reason why the CM is best retained at the same time as the DP. Proven and experienced leaders and innovators should be the first people considered for the team. In Osceola County, leadership was as highly valued as technical competency (see Osceola County Case Study). In addition, a fundamental question to ask when evaluating potential team members is: Will this individual advance the CM/GC process or impede its application? If there is any doubt that the individual will advance the process, that person should be eliminated from consideration. However, nothing should be done in secret. The most important characteristic of team assembly is transparency. This means transparency in the placing of in-house personnel on the team, in hiring new personnel, in procuring the CM, the DP, the specialty DPs, the CEI consultant, and all other team members. The role of the CEI in a CM/GC project is decreased from that in a DBB contract. The CEI in a CM/GC project is mostly limited to quality manage- ment, but is important nonetheless. When a CM/GC project team includes a CEI, the CEI arrives early in the design process and immediately assumes a key role. Additionally, the CEI often serves on various selection panels. UDOT actually uses the CEI to help select the CM (see UDOT Case Study). CM/GC offers an unprecedented way to create a strong synergy between partners; the foundation of a successful CM/GC project is trust and the best way to build trust initially is through total transparency in assembling the team. In some cases an agency may be innovative and open to new ideas, but have some employees who are not of the same mindset. These organizations can still adopt and be successful with CM/GC, but will have to select project personnel who are willing and able to participate in such a program and who truly believe in its application. Examples exist where an agency adopts an innovative deliv- ery method and then assigns one or more traditional staff members to its implementation only to find these individuals resisting the very program they are assigned to administer. This intentional and focused effort to identify and place the best people is equally important when recruiting external team members. The same screening criteria should apply in the selection of all DPs, PMs, QA/QC personnel, CM/GC personnel, and any other external team members. CM/GC provides the team flexibility to react, change and adapt to difficulties with minimum delay. It also allows capacity for owners to deliver critical projects within a tight timeframe, in resource-constrained markets, enhancing capabilities and productivity. Good results come from co-housing the entire team of professionals starting at the inception of the project. This includes the construction phase as well. Retaining the “best in the industry” for all professional services should be the goal, i.e., the CM, DP, geotechnical engineer, etc., who have proven and successful experience leading major CM/GC projects, or at least D-B projects. The learning curve is often too sharp for someone with the years of experience necessary to function as a Project Leader (PL) or senior PM to go straight from DBB to CM/GC. This is especially true where the owner has limited experience with which to guide someone smoothly into the CM/GC culture. Each team member should be respected by the other team members; trust is a foundational element of CM/GC. A lack of trust is the fastest way to lose the benefits of the CM/GC process. For instance, The Utah Transit Authority UTA values trust in the contractor ahead of the contractor’s capacity or technical competency (see UTA Case Study). Importance of Qualification-Based Selection One of the most significant advantages of CM/GC is the owner’s opportunity to select the entire project team based on qualifications and past performance. The owner is therefore strongly encouraged to exercise due diligence in evaluating and selecting design, PM and other

Design management under Construction manager/General Contractor 55 consultants, CMs and subcontractors. Low-bid does not afford this opportunity and therefore should not be the primary criteria for choosing contractors and subcontractors. Advantages of choosing the very best people and firms are numerous. For instance, UTA can manage a project with substantially fewer staff if the right contractors and subcontractors are selected (see UTA Case Study); Osceola County found that the plans set can be substantially thinned (see Osceola County Case Study); Phoenix found that the quality of the contractors and subcontractors supersedes everything—to the point that cost is not considered at all in the CM selection pro- cess (see City of Phoenix Case Study). Every owner uses different methods once the process arrives at price negotiation. In many scenarios, owners tend to fall back to the old familiar “competitive bid” paradigm. Many owners claim to hire based solely on qualifications, but once hiring is completed, they want the contrac- tor to solicit subcontractor quotes, which the contractor must then beat in order to self-perform the work. Other programs like the City of Phoenix reject this. In those programs, contractors see this process as “going from this great best-value contracting back to the low-bid mentality of DBB” (see City of Phoenix Case Study). The result of a properly executed Qualifications-Based Selection (QBS) is that every team member is regarded as a respected leader in their specific area of practice and is known for inno- vation and excellence. Of course, the most important personnel selections are for the PL and PMs, or whatever nomenclature the agency chooses for those positions. PL is the designation used in this Guidebook to represent the person who facilitates the entire CM/GC project and process, and has ultimate authority to make the final decision on the biggest questions. This person is an official with the agency, or the agency’s assigns, or an agent of the agency. Procurement of the CM Regardless of which method is used to procure the CM, it is understood that as long as the CM’s performance is satisfactory in the preconstruction phase of the project, the CM will evolve into the GC (contractor) for the construction phase of the project. There are three popular methods used for CM procurement: One-step QBS, One-step Best-Value and Two-step Best Value. In some cases, the differences between the methods are slight and subtle. The simplest and fastest is the One-step QBS method. In this method, the agency requires an SOQ in which prospective CMs are asked for any information that the agency thinks it needs to determine the best qualified CM. The agency is advised in this case to restrict itself to requesting information pertinent to this effort. While undeniably the fastest and least complicated method, the QBS method has the disadvantage of not providing the owner with the quantitative information that it could use to generate the pricing structure for the project. In the One-step Best Value selection method, the candidate CMs are required by an RFP to submit their proposed fees, qualifications and a short narrative showing their understanding of and ability to successfully execute the technical aspects of the project. The award will go to the CM that achieves the highest score generated by an algorithm that was part of the RFP. The algorithm can include anything that the agency wants to be part of the selection process, but almost always includes cost/pricing and technical data as presented by the candidate and judged by the selection panel. A downside of this process is that there must be some preliminary design in place for the candidates to use in preparing prices/costs. The more transparent this process can be, the better it will be for owner-CM relationships on this project, as well as future projects. Lists of popular algorithms are available in the literature. One such list can be found in NCHRP Report 10-85, A Guidebook for CM/GC Contracting for Highway Projects. The Two-step Best Value selection method is based on the method typically used by state transportation agencies in the D-B process. From the responses of a Request for Qualifications (RFQ), a selection panel narrows the number of candidates to a short list of, usually, three or four candidates. The shortlisted candidates are issued an RFP, which will require a detailed

56 Guide for Design management on Design-Build and Construction manager/General Contractor Projects response including fees, organization charts, qualifications of key individuals, past construction experience, both CM/GC and otherwise, and of the company and of the key individuals, prelimi- nary schedule, subcontracting plan, etc. A downside of this process is that there must be some preliminary design in place for the candidates to use in preparing prices/costs. Many agencies also take an opportunity here to request ATCs. If the agency issues a stipend to the unsuccessful candidates (a common practice), the agency then owns any ideas put forth through any unsuc- cessful proposal and can incorporate any of them into the project even though the successful CM candidate did not propose the idea. This includes ideas put forth as ATCs. Project Leadership and Project Management Project management is different when the PMs work with all professional firms (DP, CM, CEI firm, surveyor, geotechnical engineer, etc.) rather than with (or even for, in the case of D-B) a low-bid contractor. However, CM/GC can work well either way. It is critical to the success of this system that the person designated as the PL be a senior facilitator and decision maker. This system also requires greater experience on the part of the PMs. Everything takes teamwork. For instance, permitting becomes a collaborative effort, with greater involvement by all team mem- bers to meet the fast-track schedules. In addition, the CM and the rest of the team—not just the DP—are responsible for developing the project schedule, with the owner having active input to the overall schedule and budget. These shifts in responsibilities are often required for the CM to take responsibility for the overall project schedule and budget. Ideally, the head of the CM/GC team (the PL) functions as the owner of the entire project and/or the CM/GC program, and is responsible for the guidance and leadership of the entire team. PMs (as assigned by the PL) review the plans and ensure that they meet the intent of the owner. Consultants and full-time staff work as design and construction PMs to review design and construction submittals for compliance with standards/criteria and to oversee the project for the owner. Co-housing the PMs helps to avoid distinction between internal staff and consul- tants. The whole team is involved in the RFI process, including the CM and DP, and if necessary, subcontractors and sub-DPs. UDOT and Osceola County both found that this process reduces formal submittals significantly (see UDOT and Osceola County Case Studies). The goal of CM/GC is to have the plans reviewed during the regular design/production meet- ings and produce construction-ready drawings rather than bid sets. This process substantially increases production rates for design and all but eliminates lengthy owner review phases. This process also avoids touching plans twice, as the plans review is done in real time and, by the time they are a physical set of plans, the plans have already been approved by the team. Reviews are conducted only to ensure that all decisions made by the team are reflected in the construction sets. Discuss with all stakeholders, prior to kicking off the program, the purpose of CM/GC and the goals and objectives to be met for the project to be considered successful. As appropriate, utility companies, ROW agents, permitting agencies, subcontractors, CEI firms, municipalities, counties and other local governments, owners, internal departments, procurement personnel, contractors, subcontractors, DPs, sub-DPs, law enforcement, citizens’ groups, press, surveyors, attorneys, polit- ical figures, upper administration, CMs, and (most importantly) internal owner staff, leadership, and subordinates should be included in this process. It is recommended that the principals of the DPs and all other professional services be required to be present and represent their teams in regular design production meetings; and it works best if the owner’s senior leadership—i.e., people with binding, decision making authority—are actively involved in all design production meetings. All PMs and subordinate staff also should be required to attend these meetings, which should be a regular part of the schedule for partici- pants from the beginning of the scoping of the projects to the completion of construction. This requires a tremendous effort and investment for all parties concerned. The costs for these efforts

Design management under Construction manager/General Contractor 57 must be made up through innovation produced as a result of the meetings. No one member dominates the team, although the PL facilitates the meetings. Also, it is wise to have a partner- ing retreat early in the process to introduce each member and build positive relationships. The partnering meetings also can be used to train team members in the nuances unique to CM/GC, such as responsibilities and lines of communication. Owners must be willing to make a significant investment—more than with any other delivery method—in leading these projects to ensure success. This is not a passive delivery method for the owner. Ceding control of certain aspects of project management (mostly in the construction phase) to other parties does not equal less involvement. Poor engagement by the owner almost always leads to poor results. The owner must be the hardest-working member of the team— either actual owner personnel or the owner’s assigns, or agent of the owner. Research and experience has shown that an agency can hire a consulting firm as a program manager—the owner’s agent to operate its program or project. A senior officer of this firm could act as PL. This can be effective if the firm hired to perform this function is competent and both experienced with and enthusiastic about CM/GC. Programs have been analyzed, however, where the firm procured to act as the agency’s agent was all that it needed to be—competent, experienced and enthusiastic—and the PL was the most respected individual on the project, a leader in every respect, competent, experienced and enthusiastic; but the program or project was a major disappointment because the agency undermined its own PL. This occurred because some agency personnel, usually local, never supported CM/GC and resented having to use a system that they were not familiar with. This led to overruling the PL on decisions giving more flexibility and authority to the CM because the agency was reluctant to relinquish the control that it was accustomed to on DBB projects (Minchin and Li 2011). Any team member not fully supporting the process and the success of the project or pro- gram should be removed from the team quickly and permanently, as that person’s presence will damage team morale and undermine the CM/GC process faster than just about anything. It is recommended that the owner require this commitment during the RFP process and select only professionals who completely meet these requirements. Develop Strategic Plan One of the major benefits of CM/GC is an agency’s ability to incorporate stakeholders’ needs, wants, and desires successfully within the project’s schedule and budget. Consequently, it is criti- cal for an agency to spend a tremendous amount of time, resources, and effort in advance, pains- takingly planning the entire CM/GC operation/project for its lifecycle. One of the agency’s first and most important action items, even before selecting outside team members, is to reach out to all stakeholders and begin educating them. At the time of the writing of this Guidebook, gov- ernment and industry leaders in very few areas of the country know enough about the CM/GC culture or process for the agency to skip this vital step. Therefore, an aggressive public relations and education effort must be undertaken, and it must contain a message that is consistent, no matter who is sharing or receiving the message. This process does not end when the CM/GC team is put together. It would be wise for the team, once assembled, to exert time and energy early in the process toward educating key personnel from affected county, city, state and federal agencies about the project, the CM/GC process and the desperate need for quick permit application turnaround. Others needing early visits are utility companies and owners of land parcels that might not be an easy acqui- sition. The education begins inside the agency, however. All agency personnel and work groups from whom the CM/GC team will need or expect anything CM/GC by far affords an owner the greatest opportunity for input and influence. Therefore, it is the owner’s primary responsibility to lead and guide the project successfully.

58 Guide for Design management on Design-Build and Construction manager/General Contractor Projects during the course of the project must be educated about the CM/GC culture and process. The only CM/GC project that could be classified as a bad project during the investigation leading to this Guidebook struggled for two main reasons that could have been avoided: (1) Reluctance on the part of the agency to relinquish the control it was accustomed to on a construction project, and (2) Failure to educate the stakeholders, both inside and outside the agency. Research shows that it is much harder for someone at a permitting agency or a utility company to refuse to cooperate with someone with whom they have a relationship. To this end the City of Phoenix assigns a person the responsibility, on every CM/GC project, of developing a personal relation- ship with at least one person at each applicable permitting agency and utility company (see City of Phoenix Case Study). Of the three primary delivery methods (D-B, DBB, and CM/GC), CM/GC by far affords an owner the greatest opportunity for input and influence. Therefore, it is the owner’s primary responsibility to lead and guide the project successfully, starting at a time in the preconstruction phase well in advance of design. This objective is best accomplished through strategic planning. During this process, care must be taken to include all stakeholders whose input is essential to the project. Failure to include a key stakeholder can result in an unsuccessful project. CM/GC can accomplish efficiently all project requirements and meet the needs of the stakeholders if these are properly identified and accounted for in advance. To that end, the owner should conduct strategic planning and partnering workshops that include all stakeholders concerning the CM/GC process and overall project DM planning, to discuss agency experience with CM/GC, the project’s vision, mission, goals and objectives, appli- cable statutes and laws, stakeholder and community input, Disadvantaged Business Employee (DBE) and small businesses, life cycle costs and sustainability, potential construction claims and adversarial relationships, project size, complexities, obstacles, opportunities and threats, budget and funding, staffing required and current staffing capabilities, design requirements, status and requirement for permits, survey, utilities and ROW, potential for accelerating project delivery, etc. Among other things, a good strategic plan will accentuate a documented benefit of CM/GC; UDOT credits the projects’ strategic plans for a substantial reduction of RFIs on their applicable projects (see UDOT Case Study). Capitalize on Early Contractor Involvement Among the advantages of CM/GC, the emphasis on teamwork and the contractor’s involve- ment in the design and decision making process early in the project brings important benefits. The CM (contractor) can be brought on to the project at any time during the design phase; however, there is a strong consensus that the earlier the better. The earlier the CM is retained, the more time there is to develop synergy with the DP and the rest of the team; and the more time and opportunity to enjoy the most important benefit of CM/GC—innovation. Innovation in project design, traffic control design, permit application, utility relocation, schedule of activities, ROW acquisition, construction methods and many other items is essential for the most success- ful execution of a CM/GC project. The CM is the single most important team member as far as innovation is concerned, and every day that the CM is part of the team is a day in which the full team can work toward time and cost saving innovations. On one project in Utah, the CM saved substantial money and time by eliminating the need to relocate a large set of gas lines traversing the project. For details, see the MVC and UDOT Case Studies. The budget can be affected significantly by the CM’s arrival if ROW, survey, permits, etc., are just beginning. Bringing in a CM, regardless of the timing, significantly reduces changes, delays, constructability issues, and schedule challenges, while increasing ease of contracting and

Design management under Construction manager/General Contractor 59 procurement. Permitting agencies and utility companies almost always respond more favorably and more quickly to a project team’s requests and applications after the contractor is on board. These organizations will see the CM as a contractor even though the contractor is still officially serving in a CM capacity during preconstruction; and experience and research show that permit- ting agencies and utility companies change their attitude about a project when there is a contractor present. Suddenly the project that was a “paper project” becomes a real project. The administra- tors of the Osceola County program inherited projects at every possible stage of development, and observed that changing from DBB to CM/GC and immediately procuring the CM (contractor) improved every project, regardless of its stage of development (see Osceola County Case Study). Agencies are constantly discovering new ways to take advantage of the experience and knowledge of the contractor early in the life of a fast-tracked contract. One of the tasks emerg- ing for early-involved CMs is the acquisition of ROW. Who would better know exactly what land to procure than the people helping with the design of the project, creating innovations by which to best construct the project and ultimately constructing the project? Osceola County (see Case Study) lists in its Lessons Learned that they should have allowed the CM to handle the entire ROW procurement process, and would do so in the future. NCDOT (see Case Study) does not have a CM/GC program, but in their D-B program, they started a few years ago letting the D-B purchase any ROW that resulted from changes to the contract. They recently expanded this to having the D-B firm handle all the ROW procurement procedures right up until money changes hands. Currently, on many D-B projects in North Carolina, the D-B identifies and negotiates the purchase of the land, and purchases the land. NCDOT, however, writes the check for the purchase. Oregon DOT has both a D-B and CM/GC pro- gram. Their D-B program handles ROW acquisition the same as NCDOT (see ODOT D-B (Bundle 401) Case Study). The D-B does everything but write the check. In their CM/GC program, their Program Manager (private firm acting as owner’s agent) handles the ROW acquisition (see ODOT CM/GC Case Study). Innovation is Essential CM/GC incentivizes innovation to a greater extent than any other delivery system. Based on this, successful CM/GC projects require the owner to explore this question: Is the agency pre- pared to adopt and implement a new and innovative project delivery approach? Another critical question is this: Is the agency prepared to accept innovative ideas even if the proposed concepts have never been used on its projects in the past? The greatest benefit of CM/ GC is the innovation that the whole team, working together, brings to the project. Innovation should actually be on the agenda of every CM/GC design progress meeting. However, sometimes agency culture, tradition, or attitudes prevent these fresh ideas from being implemented because they were not “invented here” or “we’ve never done it like this before.” Avoiding this bias is an important step in achieving full CM/GC success. The project team must innovate in order to make up all CM fees as well as those required by the design team, consultants, subcontractors, etc. Otherwise, costs will escalate. Contractual requirements should be in place for the team to target a certain amount in cost savings. The scope of work and associated fees, for both the DP and the CM, should obligate the CM and the DP to coordinate throughout the design and construction phases and attend all design meetings. This is essential to developing the innovative options and designs that reduce over- all project costs as well as make up for coordination costs and the CM’s overall fees. Without CM attendance at regular design meetings, the advantage of bringing the CM on board early is reduced significantly.

60 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Substantial Cost Savings are Available Lost in the amazing story of the project that just kept growing in size is the fact that to grow like that, the project had to experience substantial cost savings. In fact, Mountain View Project data shows a 27% reduction in expected cost over the design period of the project (see Mountain View Case Study). This is unheard of on a major highway construction project. In fact, costs gen- erally go up during design. UDOT, in their public release of information has noted this savings in several of their documents. Similarly lost in the amazing story of how the CM/GC program in Osceola County got nine projects designed and under construction in 1 year was the amount of money that was saved in the process (see Osceola County Case Study). To save substantial money, the owner must understand the risk and know how to manage that risk. The owner can- not be totally risk-averse and save money. Risk management and cost savings go hand in hand. Risk management also affects quality and schedule. Hence, CM/GC is more work for the owner. It takes more owner knowledge and skill, but it pays big dividends. The owner that has the ability and desire to manage risk gets the reward. Balance/Assign Project Risk All major capital projects involve inherent risks (i.e., political or economic change, climate, technology, ground conditions, engineering uncertainties, errors, industrial disputes, land issues, environmental issues and many more). In order to achieve optimal outcomes the project owner must select the most appropriate strategy for managing these risks. “The traditional risk- transfer contracting models have increasingly been shown to be inadequate to deal with these circumstances” (Ross 2003). The most successful CM/GC projects are those that take advantage of the most important opportunities offered by the CM/GC delivery system. Only the opportunity for innovation is a bigger advantage than the flexibility to assign and re-assign risk during a project. For instance, if a CM’s submitted cost for a certain work item in a certain phase or GMP of the project is high, the owner can simply ask the CM what is making that item so costly. Often, the answer is tied to risk. The owner may then offer to cover the risk that causes the cost of that item to be so high. With no risk to worry about, the CM can then lower the item’s cost. If the item is a major item, the change in cost could be significant. Please see the Case Study on the MVC for an example of how this has worked on an actual project. The process of risk assessment and allocation is a well-established one, containing Risk Regis- ters, matrices, and the execution of a new risk assessment at every new cost estimate. Utah DOT has been a leader in risk assessment and allocation, and has become quite adept at exploiting the flexibility that CM/GC offers for assigning and reassigning risk as the project progresses. Please see the UDOT CM/GC Case Study (as well as the MVC Case Study) for more details on this unique opportunity to possibly lower contract cost, shorten project duration and even eliminate work items from the project through allocation and re-allocation of risk. Contingency, Trust, and Allowance Innovation is essential to reduce or eliminate change orders and finish the project. The entire project team is encouraged to agree to a zero change order policy, starting with the owner and proceeding to the DPs, other consultants, CMs, subcontractors, CEI firm, etc. Once change orders begin, the GMP process loses all effectiveness. One organization researched had an arrangement with all team members that when the budget and contingencies were exhausted, the team’s work would continue on a pro bono basis. This was great motivation for all team members to effectively monitor and control spending throughout the life of their projects (see Osceola County Case Study).

Design management under Construction manager/General Contractor 61 Contingencies and allowances are required to successfully cover the design and construc- tion aspect of the project and to accelerate the entire process. Contingencies are the difference between success and failure on a CM/GC project as they enable real-time decisions to be made and paid for and the project to move forward rapidly. The contingency is the part of the cost estimate that covers all the uncertain costs of the project (Gransberg 2013). It is unwise to set a contingency amount based on some arbitrary percentage of the contract costs. Characteristics of the project must be taken into consideration. Though not common practice at this time, it is wise to set the contingency amount(s) based on the findings of a thor- ough risk analysis whenever possible. Contingency funds are best managed by the owner, and there may be as many as three dif- ferent types: the CM (contractor) contingency, covering material and labor cost escalation, subcontractor availability and competition level, and market uncertainties; owner contingency, covering problems with the project documents (including scope definition and unforeseen con- ditions), as well as regulatory changes and force majeure issues; and management reserve, a fund established for changes and operational requirements not emanating from completion of the project requirements, but effect the project nonetheless. For a detailed description of these three types of contingency, see NCHRP Synthesis 402—Chapter 6 (Gransberg 2013; Gransberg and Shane 2010). As stated elsewhere in this Guidebook, trust is an element that glues the whole CM/GC pro- cess together (see UTA Case Study). One thing that builds trust among contract parties like few other things is the concept of “open books.” This involves sharing project information among parties to the contract that, in other settings, might be considered proprietary and carefully guarded. This project information, such as actual project costs, overhead, processes and con- struction methods, is often shared by parties to a CM/GC contract. For example, on the MVC project, the team discovered a way to avoid relocating utilities (see MVC Case Study). The better that everyone understands the most intricate details of the budget, the better they can visual- ize the impact that their decisions can have on budget compliance or profit margin during the construction phase. Tailor Project to Schedule and Budget “Schedule and Budget Drive the Project, Not Vice Versa”—this principle is critical to con- trolling costs, as the administrative overhead is most expensive among the three primary deliv- ery methods and if not controlled will cause the project to fail. Due to the high overhead, the program must be resource-loaded up front, determining how many staff to bring on, how many hours they need to work during the project, and when they need to cut back on their hours to meet budgets and staffing requirements. This needs to be understood clearly by all team mem- bers to avoid causing any friction due to unmet or colliding expectations. Costs of all cumula- tive GMPs should be calculated as accurately as possible prior to starting early work packages or mini-GMPs. The scopes of the design contracts should be streamlined to produce construction plans rather than bid sets, and the bulk of the design team and all other professionals should be required to be present during the regular design production meetings. DPs must budget additional funding and management personnel for frequent team meetings and binding decisions while working with both the owner and contractor (CM). DPs that have not worked within CM/GC before probably will need to be educated in the process of receiving real-time input from the constructor as well as being flexible in modifying standard items such as traffic control plans to best fit the chosen approach to construction. Once the project budgets have been determined, require the professionals to agree to them— i.e., design fees, CM fees, CEI fees, geotechnical fees, survey fees, overhead, and construction

62 Guide for Design management on Design-Build and Construction manager/General Contractor Projects costs as well, as the overall project budget and schedules should be specifically broken into design, construction, survey, permitting, and ROW. Identify clearly all targets. For the project to succeed, costs cannot exceed the agreed-upon budget for all GMPs combined, regardless of the circumstances and problems encountered. If total project costs ever exceed the agreed-upon budget for all GMPs combined, it sets a very dangerous precedent for the program. Guaranteed Maximum Price (GMP) CM/GC affords the opportunity for an agency to establish a GMP for a project early in the design process, thereby allowing the agency to modify/adjust designs according to the required/ targeted budget. It is not essential for project or program success that the GMP concept be uti- lized. Some successful programs do not adhere to its use. Most do, however, so the concept will be explained here. First, the CM performs constructability reviews, cost estimates, construction phasing and schedules, and budget recommendations to assist in determining the best options for the owner based on the project budget. A GMP is a contracting arrangement in which an owner con- tracts with a firm to perform a fixed scope of work in exchange for a price that is guaranteed not to exceed the stated maximum price (CMAA 2012). A GMP contract includes a base cost along with several allowances and contingencies that can result in a final cost below the stated GMP. Savings are then provided to the owner or shared between the owner and contracted firm (CMAA 2012; Gransberg and Shane 2010). In the Osceola County program, the owner kept all the savings initially, then shared savings with the contractor but eventually saw this as unfair and damaging to the morale of other parties to the contract who might be involved in the process of saving money on the project. They intended to move to a system that allows any party that contributed to the savings to share in the savings (see Osceola County Case Study). It is critical for the contractors and subcontractors to formulate the rough and final GMPs based on real bids, not estimates by the DPs and/or CM firms. Getting real costs at the earliest possible rough concept phases of scoping and rough plans is essential to coming in under budget and generating constructible projects within schedule and budget. The agency and the CM must agree on each GMP. If there is ever a GMP on which the two cannot agree, most contracts contain language that allows the agency to cancel the CM/GC pro- cess for the body of work assigned to the GMP under negotiation, and let that work as a separate low-bid DBB contract. This can be an effective tool for hastening the parties to an agreement, but should be used as only a last resort. Experience and research have shown that when this clause is exercised, both the agency and the CM tend to lose (Minchin and Li 2011). As stated earlier, once a CM is bound to a GMP, the most fundamental character of the relationship is changed. In addition to acting in the owner’s interest, the CM must manage and control construction costs to not exceed the GMP (AIA-MBA Joint Committee 2014). Independent Cost Estimates (ICE) An ICE is a cost estimate developed by a consultant to compare with the contractor’s cost estimate to ensure that the construction costs are reasonable and fair (Gransberg 2013). Only a firm that includes experienced transportation construction estimators should be considered for work as an ICE (see UTA Case Study). A properly executed ICE should never use histori- cal figures (data). The independent cost estimator should be contacting the same people that the CM is contacting. This introduces another potential problem, however. The subcontrac- tors and suppliers, if not contacted by the CM and/or owner and “encouraged” to support the ICE, will almost assuredly not do so–rendering erroneous prices, or none at all. Subcontractors and suppliers should be told in advance that they will be contacted by the ICE, and should be

Design management under Construction manager/General Contractor 63 strongly encouraged to work with them. Preferably, the ICE should engage the CM’s estimators throughout this process. By allowing the parties to talk through their disagreements, the process becomes much more efficient. Conceivably, this does not present any potential conflict through these discussions. Since any differences have to be reconciled eventually, it is a good idea to let the individuals that produce these estimates sort things out directly, and as early as possible. Throughout the ICE process, the entire project team should be aware of the targeted, versus the actual, ongoing costs of the project, as it is being designed and innovations are implemented to assure that the overall project costs are kept under budget. ICEs should be performed using contractors/entities with direct local construction bidding experience. In addition, the entire project team (including the ICE) discusses the actual bid estimates/prices, received directly from the subs, during the regular project meetings and deter- mines if and why costs may be out of range, i.e., is the project overdesigned? Are the specifica- tions more stringent than needed? Is the CM carrying too many risks? Is the owner asking for more than they can afford? Are contingencies and allowances needed? With this process, each pay item is treated as an individual GMP and the entire team agrees to a reasonable cost to pay for each item, prior to moving forward with the design detail. This enables real-time adjustments to each pay item, as well as each design detail, prior to proceeding to an overall GMP very early in the design process. Costs should thereby remain in control because they are controlled and adjusted during each regular production meeting. Define Clear QA/QC Procedures QA/QC for a CM/GC project should not be confused with QA/QC for a DBB (low-bid) project. This is due in part to the owner having direct contracts with the CM, QA team, and designer, with all three, in theory, acting as owner’s representatives. A significant benefit of CM/GC is that it enables the owner to facilitate the entire QA/QC process. Based on this innovative arrangement, the owner has the advantage/ability to engage its QA/QC team early in the DM process while also working directly with the entire project team, specifically the CM. This is a huge advantage for the owner, who can receive real-time QA/QC feedback during the DM process, a benefit traditionally available only at or around the time of bidding and/or construction. Capitalizing on this innovative QA/QC arrangement, when combined with early contractor involvement, is critical to capturing the full benefits of CM/GC. It is important to modify QA/QC practices to reflect the CM/GC process. The DP usually has the lead responsibility for QC, with the CM/GC and QA/QC team providing additional QC. This is one of the many reasons that it is important that the Engineer of Record (EOR) has direct experience managing a CM/GC design phase and that the DP (firm) has a solid history working on CM/GC projects. Management of the QA/QC process means that the DP is required to fre- quently modify plans, implementing the CM/GC input, while working and coordinating directly with the QC/QA and CM/GC team related to plans production, specifications, pay items, engi- neering cost estimates, and plan details. This requires regular/frequent QA/QC meetings with the owner, CM/GC and QA/QC team. If, while managing the QA/QC process, the DP’s plan production rates cannot keep pace with the approved project schedule/accelerated pace required for CM/GC, it can mean trouble for the project. This goes back to the importance of hiring a DP with a history of delivering accelerated and innovative designs, on schedule and within budget. Lessons Learned The recommendations listed herein under the title “Lessons Learned” originate in a variety of places. Some are described as “best practices” by their sources. Others are simply solutions

64 Guide for Design management on Design-Build and Construction manager/General Contractor Projects to various challenges, gathered by the research team from previous experience and previous research. Please note that no distinction is made in this list between programs that have different idiosyncrasies or utilize different minor procedures or use different terminology. For instance, some CM/GC programs use a GMP and some do not. Therefore, not all of these lessons learned would apply to every CM/GC program. Project Planning and Procurement • The procurement process should include well-defined selection criteria and scoring methods. The selection criteria should include project-specific features, list the minimum qualifications and focus on the differentiators. • The selection committee should be blinded for the technical evaluation: “Proposer A,” “Pro- poser B,” etc. • Public involvement is huge. • Establish, as early as possible, a partnering relationship with all other stakeholders and work very hard at keeping things friendly between the parties. Continued coordination with appro- priate people and stakeholders is very important during the project. • Always include a consultant and a contractor on the evaluation team/selection committee. • Training of Selection Panels is necessary especially with a new scoring method and new approach. • Spend whatever time and resources are necessary in the beginning to educate the permitting and other key agencies (city, county, etc.) about the project. • Think long-term and do not start the project until the team is ready. • The CM Preconstruction contract MUST be coordinated with design contract. • Design contract must require engineer to cooperate with CM/GC. • GMP components must be clearly defined in RFQ/RFP. • Bring in necessary people early. • One can never do too much research before starting with CM/GC. • Research the project delivery programs and software your organization uses and how it will apply to CM/GC. • Do not assume that an existing RFP or Contract template will work for your organization or project. • Do not assume you will get buy-in from everyone to start using this new method. • Sometimes the Civil Rights Office of a DOT may not be familiar enough with the specifics when establishing the DBE goal. It is helpful to notify Civil Rights about specialty work that cannot be provided by a DBE. • Long Lead Time Procurement—Needs environmental and FHWA clearance if federally funded. • Collaboration and constant communication with AGC state chapter and FHWA early and often is essential for success. • Phasing the project gets the contractor out on the project earlier and saves a lot of time. Pro- gressive GMPs reduce the need for contingencies and allow early lock in of volatile material costs. • Address Industry concerns and feedback. There will be challenges to the program from indus- try. State laws will be scrutinized. • Considering region and statewide training of CM/GC including a manual, classes, and webinars. • Co-locating the contractor and the designer for a few days helped tremendously. It would be beneficial if they were co-located on or near the project site for the whole project. • The easiest way to pay the contractor and please FHWA auditors is to use either straight Unit Price, or a combination of Unit Price and Lump Sum or Unit Price and Cost-reimbursable.

Design management under Construction manager/General Contractor 65 • The manner in which the owner procures services can have a major impact on the team mem- bers’ ability to work together and, consequently, on the project’s potential success. • The most important aspect of a successful CM/GC program is transparency. Transparency in the selection process and open books for the parties to the contract. • Managers must be educated to the very top. Executive decisions should be made long before the project executives are brought in only for big decisions. • Most CM/GC highway projects require at least middle management support for CM/GC. • Identify challenges early. • You must not only educate local politicians (city, county, etc.) on how CM/GC works, but get their buy-in. • Whoever has the purse strings and whoever makes the final decisions have to be on board with CM/GC. Design Phase • If a project will have multiple contracts, do everything possible to not have most of the work (money) in one contract, especially if the work in that contract comes relatively late in the project. • In the Design Phase, it is good to keep the team focused through setting goals. One must remain constantly aware of schedule limitations and have candid budget discussions. • BBOs should be conducted at the 30%, 60%, 90% and 100% plans stages. BBOs are used by UDOT, for example, to have a snapshot of the status of the project budget prior to official bidding. The structure package had multiple BBOs as UDOT neared its budget limit. Though the Blind Bid Openings (BBO) process greatly aided the team in tracking its budget, it was unsuccessful at reducing unit prices. • Do not start construction before a lead DP is procured. • Be very reluctant to change delivery systems mid-project, even if contractually allowed. • When a CM is chosen, allow the CM to act as a CM, not as a low-bid contractor. If the CM approaches the owner with a complaint about changed conditions, delays in reviewing shop drawings, other common delays, etc., the owner should not treat this like it would if a prime contractor on a DBB project made the same advances. Most CM/GC contracts make it clear that unless an incident caused the CM or a subcontractor to do something that was outside the boundaries of the contract (a material change), the CM just has to handle the situation. That is part of their CM fee. Paying the CM for handling such items is a dangerous precedent and amounts to double-paying the contractor. • Do a project closeout session at the end of each CM/GC project. • Have the ROW acquisition directly under the team and preferably handled by someone hired by the CM firm. • If design activity is put on hold, stop construction also. If construction activity is put on hold, stop design also, unless the CM is an active member of the design team. • It would have been helpful on some projects to have more design-oriented meetings. The meet- ings were geared more toward discussions of the process, which were not useful in providing clear direction to the design team. • Normally, CM/GC projects involve discreet breakout sessions for the different design disci- plines. This should happen on all CM/GC projects, no matter how small. • The roadway designers should always strive for more discussions with the contractor, and they need to become skilled at pulling the contractor into the design process. • Schedule-driven design does not allow enough time for coordination between the true cost and the cost model, which means that the ICE has difficulty defending its numbers. • The first CM/GC project that an agency executes is difficult. A local CM should be chosen for the first job.

66 Guide for Design management on Design-Build and Construction manager/General Contractor Projects • Everyone has to buy in. • Owner PMs will work longer hours, put in more work, and put in more effort than with other delivery methods. • There usually is a crunch at bid time because CM/GC projects end up being schedule-driven during design. In many cases, final plans are barely complete in time to produce an adequate estimate and a sound bid. It is wise to allow the time for a sound bid. • CM/GC can be an excellent risk-reduction process if the owner so desires. It is actually more of a risk-reduction process than an accelerated design process. • The additional design time tends to help expedite construction by overcoming likely con- struction obstacles during design. • The proper time for a design team to consider the DBE goal is after PS&E. However, once the DBE goal is established, the scope cannot change. • Require actual construction personnel on the agency and contractor side to be involved all the way through the preconstruction phase. • Adding major features to the project during the final stages of design goes much more smoothly with CM/GC. The process allows for flexibility in design and construction implementation. • A rigorous analysis of risk is always beneficial to the team. • Scoping a CM/GC project is critical with respect to scoping estimates and scope creep prevention. • Discussions with the contractor are very beneficial to the owner when determining the costs of risk events and gauging the values of incentives. • Do not assume equal knowledge of the process and expectations among team members. • Contractor feedback during the RFP process (submittals and interviews) is valuable. • Tailoring the design to meet the contractor’s means and methods may not save money directly unless procedures are put in place to ensure that the savings are passed on to the bid prices. • Contractor input is vital to tie down budgets efficiently. • It is paramount that the contractor understands its role during design and participates in the process. • Find a champion who has the drive, passion, and energy to put into the program. • The contractor can help obtain site data more efficiently than with DBB or D-B (soil investiga- tions, borings, etc.). • Questioning the “standard” design methods is permitted and can result in tremendous savings. • Innovations implemented may result in change orders during construction. The team recog- nized the tradeoffs made to meet the schedule and budget. • A lot more communication is necessary (than with DBB). Fortunately, CM/GC helps facilitate communication. • ICE support during the selection process was very helpful. • Subcontractors and suppliers should be told in advance to expect to be contacted by the ICE, and should be strongly encouraged to work with them. • People should be encouraged to give feedback, even when it is uncomfortable. • Have a contractual coordination requirement between CM and DP. • To make a CM/GC program or project work at its highest level of efficiency and quality, all parties must be willing to risk failure and derision. • It is important to educate DPs and contractors that have never worked on CM/GC projects that the entire culture of CM/GC is different than DBB or D-B, and to teach them about the culture. • Constructability Reviews and VE are considered part of the fee the CM gets for preconstruc- tion services. • Require contractors to submit their prices at each predetermined milestone. • Use actual subcontractor quotes to generate the GMP. • It is critical to educate the DP early in the process so they can aid in the education of the contractor.

Design management under Construction manager/General Contractor 67 • Everyone must understand the meaning of partnership and Partnering. • Experience with CM/GC can be a deciding factor when hiring DPs. • With CM/GC, there is more of a team atmosphere than with D-B or DBB. • There has to be an understanding that price does not equal cost. • Middle management must be consulted daily, and must be allowed to make decisions. • Executives must support middle management and be available. • Move the utilities early in the design phase, before construction starts. • Locate GMPs in the most advantageous position and order to mitigate mobilization costs. • People need to realize that it’s all about long-term relationships. Everyone needs to let their guard down and recognize the value that each party brings. Also, more cooperation (is needed) between the DP and the CM. • An owner contingency should be included to cover scope changes, design errors and omis- sions, and unforeseen conditions. • The CM should have control over the solicitation, selection and administration of sub- contractors in much the same way as subcontractors are selected through traditional DBB procurements based on experience, qualifications, track record and price. • Generally, the CM/GC procedure will lead to minimal VE change orders as cost saving ideas should be developed in the preconstruction services and incorporated into the GMP. • If the CM can offer a satisfactory explanation as to why an idea could not have been identi- fied in the preconstruction services phase, then an equal sharing of the savings should be considered. C: Short Case Studies Program Case Studies CM/GC Program Case Study No. 1: Utah Department of Transportation The UDOT has a long history of innovation in highway and bridge construction contract- ing. Among its many such accomplishments is the execution of the largest (up to that time) D-B project in U.S. history. The I-15 reconstruction project, built for Salt Lake City’s 2002 Winter Olympics, was also the largest project ever undertaken by the state of Utah. The success of this high-visibility project gave UDOT the reputation as one of the nation’s most innovative public transportation agencies and showed other agencies that highway and bridge construction projects can be successfully completed using a delivery system other than DBB. Having proven the viability of D-B, UDOT turned its sights on developing a new system providing contracted parties the benefits of D-B along with the benefits of DBB. The system they turned to was the CM/GC delivery system. UDOT now has built more than 25 projects with CM/GC since 2005, and is, therefore, the state agency most experienced in using this method on a large variety of projects. The function of the PM is different from that of a typical DBB project in that PMs have a more prominent role in decision making and leading the projects. UDOT designs projects utilizing multiple “mini” GMPs. Although these vary per project, there are typically three to five GMPs based on early procurement items as well as early work items. The typical design milestones in a GMP contract are traditional percentage complete phase submittals (i.e., 30%, 60%, 90%, etc.) followed by a final PS&E. An ICE is then generated and compared to the Engineer’s Estimate and the PS&E. There is a 10% red light/green light process wherein the PM has the power to authorize a project if costs are within 10% of the ICE. The DP is required to take less risk on a CM/GC project, although UDOT’s internal design PM manages design changes as they affect the schedule, budget, and overall GMP. Although [they] vary per project, there are typically three to five GMPs based on early procurement items as well as early work items.

68 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Designs are taken to “105%” in that there is more up-front work to ensure that the prices and plan are correct. Over time, UDOT has learned that the design effort must be intensified on CM/GC projects to reduce cost. Plans are very detailed, and projects are not as schedule-driven as they are design-driven. A full risk assessment is completed in detail for every project, and 100% of the savings goes to the owner. Flexibility of risk assignment is one of the two biggest advantages of CM/GC. In actuality, CM/GC projects are driven by the owner’s PM, who manages both design and construction phases. However, both the DP and CM are the owner’s representatives. As such, the CM is primarily responsible for generating some documents traditionally the responsibility of the DP, such as traffic control plans. The DP’s role during construction is minimal due to the intensive up-front effort invested dur- ing the design phase, but the QC process for design used during the design phase does not differ from the QC process for design used in the construction phase. The role of the CEI consultant differs from that in a DBB contract. The CEI enters into the design process early and is often on the selection panel. The CEI is involved during the design phase, is actively engaged in reviewing the plan sets during plan review, and attends all design meetings. UDOT’s process allows DPs to adjust their plans to “real-time” information provided by the CM, no matter when the informa- tion comes to light. It is recommended that the owner procure the CM as early as possible, ideally at the same time as procuring the DP, though sometimes this is not possible. The earlier the CM is part of the team, the more innovations may be generated during the design phase. In fact, UDOT believes that innovations generated by having the CM as part of the design team is the single biggest advantage offered by CM/GC. When choosing a CM and DP, the selection committee consists of a representative from the state contractor and DP advocacy associations. Once construction begins, managing post-award design activities (i.e., design activities during construction) are no different from DBB activities, though the number of RFIs is reduced significantly versus DBB projects. The CM manages RFIs with owner oversight and approval. During the design and construction phases, the owner takes primary lead in coordinating design changes with DPs, and project contingency funds are used for design errors and omissions. All communications go through UDOT’s design PM during the design phase; and after NTP, all go through the construction PM. Designs typically come in at or over budget. Since more design work goes into CM/GC proj- ects, additional overall design hours are needed to complete CM/GC projects, and fees are based on the individual UDOT PM’s experience. Approximately 6–8% of the construction cost is typical for the design fee, and this percentage is higher than with DBB projects. CM/GC projects require a more detailed design; however, the construction starts earlier in the design process and responsibility for creating and monitoring the design, construction, and overall project sched- ules is a collaborative effort. Nonetheless, the owner is responsible in the end and establishes all schedules up front in the planning phase. CM/GC Program Case Study No. 2: City of Phoenix, Arizona The City of Phoenix has built more than 200 projects using what they call a CMR construction project delivery system since initiating the system in 2000. Only recently has the city commenced using CMR for horizontal construction, totaling 12 horizontal CMR projects since their first project, let in 2008. Note: Definitions of CMR and CM/GC and a discussion on the differences between these methods are provided in Chapter 1 of this guidebook. According to these definitions, the

Design management under Construction manager/General Contractor 69 approach used by the City of Phoenix would better fit under the CM/GC label even if the city titles it CMR. It has all the classic characteristics of CM/GC: (1) Calls the CM a “contractor”; (2) Contract requires the contractor to self-perform work; (3) Utilizes a straight unit price sys- tem to pay the contractor. To avoid confusion, this system will be referred to as CM/GC. When using this delivery system, the City typically procures the DP before the CM. The CM/GC process differs from a typical DBB project once the CM has been selected and is part of the team. For instance, the CM actively participates during the design phase in producing the traffic control and con- struction phasing plans. The DP customizes the construction documents to the contractor’s needs and works on more finite cost proposals to assist with a final GMP. In CM (contractor) procurement, the focus is on “most qualified” (there is no price component), and for the most part, CMs are hired based on past performance with the understanding that they will move forward and help the DP and the owner design the best project constructible, work through risks, and agree on a fair price. It has been described by some in Phoenix as “a shotgun wedding of sorts.” It is more of a shot- gun wedding than a typical CM/GC project with a price component because there is an owner who, “99.9% of the time,” has already selected a DP and now is trying to pick a contractor that will marry well with that DP due to the high level of contact between the two. This con- tractual relationship allows for free flow. The owner is not required to be present or privy to most conversations between the CM and DP: the flow of information is as free as the owner wants it to be. In the design process, DPs have no incentive to control costs other than their reputation. This makes contractor input even more essential. Innovation is encouraged through VE and construction phasing and methods. Especially sought is contractor input on major structural items/elements, scheduling, and cost estimating, specifically, cost reviews and preliminary cost estimating, constructability reviews, and biddability reviews. The utility coordination and moving utility lines starts about the same time as with DBB projects. Phoenix’s CMR process enables permitting and design in small “mini” phases, and the design process is tailored to begin construction earlier than at the traditional final plan stage. Best design practices for controlling construction costs include requiring contractors to sub- mit their prices at predetermined milestones, requiring that all work be done using the unit price contracting method, using actual subcontractor quotes to generate the GMP, when pos- sible, bringing the contractor and DP onboard at the same time and negotiating contracts at the same time, and finally, once the contractor is brought in, having them join in the validation and negotiate the GMP. Five tangible things were identified as high priorities in the design phase: (1) ROW; (2) Per- mitting; (3) Identifying challenges; (4) Bringing in the necessary people; (5) Relocating utilities. The City has found that two things aid in moving utility lines earlier: (1) get the contractor on board early and (2) assign someone to initiate and develop a personal relationship with at least one person at each utility company (and each permitting agency). Phoenix has found that it is harder for the utility company (or permitting agency) to refuse to assist someone they know than a nameless, faceless entity. During the design phase, the CM is contractually obligated to coordinate with the DP on estimating, construction phasing, schedule, and GMP preparations. The first GMP generally is developed and submitted at 90%, although simple phases or plan packages could be completed earlier. ROW acquisition begins about the same time, although it can begin as early as 30% with Phoenix has found that it is harder for the utility company (or permit- ting agency) to refuse to assist someone they know than a name- less, faceless entity.

70 Guide for Design management on Design-Build and Construction manager/General Contractor Projects environmental clearance. This is earlier than with the DBB delivery system. Utility relocation coordination is completed in-house, either prior to bid or during the design and construction phases. CM/GC Program Case Study No. 3: Osceola County, Florida The CMR program in Osceola County was initiated under great controversy due to the long- term instability of the county road building program, and political pressures to complete and execute a major infrastructure plan. As a result, the program was under an ultimatum from the County Commission to have nine projects under contract within one year, when only one was under contract at the time. The new administration boldly decided to implement an untried delivery system to meet the target, adding to the controversy. This program was a true CMR program, but to avoid confusion, will be referred to as CM/GC since the two are almost identical in the ways important to this study. To begin this program, a tremendous training effort was initiated, focusing first on the design community. The program internally encountered a high degree of resistance from a group of county com- missioners and the county legal department who were against the implementation of CM/GC. Similarly, the design and construction consulting communities and the local road builders were skeptical. Because the administration inherited a program in disarray, the immediate implementation of CM/GC brought in CMs at all phases of plan completion. It was found that completing the project under CM/GC and bringing in the CM as early as possible improved the project, no matter at what stage the project was in. However, after experiencing various scenarios where CMs were brought in at every possible juncture in the life of a project, the admin- istration concluded that the best time to bring in the CM was simultaneously with the DP. In many cases, the program required establishing a GMP prior to preliminary plans for early work items, materials ordering, and additional geotechnical work based on only a description of the scope required. In addition, GMPs were priced at the 0%, 30%, 60%, and 90% plan stages. ROW acquisition began as early as possible in an effort to efficiently and wisely design projects and minimize the ROW required. This also assisted in wise ROW choices based on market condi- tions and friendly takes rather than eminent domain. When early acquisition was not possible— as when the administration inherited plans sets already complete or nearing completion—the CM/GC process allowed for adjustments in construction and work-arounds rather than waiting until all issues were resolved. To further expedite the process, the administration decided to assign ROW acquisition duties to the CM as part of the preconstruction package for future projects. Who better to choose and buy the ROW than the people who assist the DP most with design, work with utility companies, procure the construction permits and who will ultimately execute the construction? Quantity take-offs, computation books, and bid summary sheets (as a requirement of the DP) were eliminated, which significantly reduced the DPs’ risks. These items were the responsibility of the CM as part of the GMP. Quantities were the responsibility of the CM, enabling the DP to design instead of being concerned with plan matrices, quantity take-offs, etc. Streamlining the plans and scopes is a key principle in cost control, as administratively it can be much more expensive if not controlled with de-scoping items. Fees were inserted requiring the CM to coordinate (throughout the design) and attend all regular design meetings. This is essential in order to develop options for reducing overall design Tremendous money, time, and changes are saved when the CM firms and the DPs work together to produce the plans and phasings for the projects.

Design management under Construction manager/General Contractor 71 costs and making up for coordination costs and the CM’s overall fees. CM meeting attendance also is crucial to obtaining the benefits of CM/GC pertaining to reduced costs; without this, the advantage of bringing CMs on board is reduced or eliminated altogether. Innovation was required to complete all projects under budget. During initial partnering meetings, the team agreed to the cost reductions required to meet the aggressive budgets. This is critical to success; the team, upfront and prior to the beginning of the project, must buy in to the fact that significant cost reductions are essential. In Osceola County, the owner and the CMs achieved this; but in reality, the money should have been split proportionately among all team members, to be fair and to incentivize the whole team to work toward cost savings. The design process consists of projects basically designed around a table during regular proj- ect meetings with the entire team rather than in a design office with little or no active team involvement. The design’s purpose is to provide the lightest, most innovative and cost efficient set of plans possible—versus a heavy design effort—to give the CM just the right information to bid the project. The intensity of the design effort is in the planning—not in plans production. Though there was no specific program to train proposal evaluators, the administration was extremely selective about who was put on panels to select the CMs. Panels were set up for each selection, similar to panels for the other contract parties. The PL, in this case the Public Works Administrator, was a driving force in facilitating each panel. These panels selected the DPs, CMs, Geotechnical Engineers, CEIs, etc. Panels also included previously selected CMs, DPs, etc. as advisors who would attend the meetings whenever possible. Design PMs (internal to the department) would review plans and ensure they met the owner’s intent. Consultants and full-time staff who worked as design and construction PMs were hired to review design submittals for compliance with standards/criteria and for project oversight. These were co-housed to avoid distinction between internal staff and consultants. Also, the whole team was involved in the RFP development process, including the CMs and DPs. Initially, typical design review submittal phases were required; but as the program evolved, formal submittals were substantially reduced. This increased production rates for design and all but eliminated lengthy owner review phases. This process also avoided touching the plans twice, as the plans review is done in real time and, by the time the plans are put in ink, they have been approved by the team. Reviews are conducted only to ensure that all decisions made it into the construction plans. The DP, CM, subcontractor, and owner are each best at what they do; as such, each should be considered a specialist on the team. The following steps can help make this possible: Require the PL to be in all production meetings to maintain cohesion and teamwork. There is no substitute in CM/GC for top-down leadership. All parties should meet early in the scoping and budgeting process, including subs. Have a partnering retreat early in the process to introduce members and build positive rela- tionships. The partnering meetings can also train team members in the nuances unique to CM/ GC, such as communication. The surveyor and geotechnical engineer should be at both the preliminary scoping and bud- geting meetings. This is essential to having effective overall plans for the project as well as for avoiding constructability and design problems. They should have an equal seat at the table. In Osceola County, the entire team was responsible for public involvement during design. The CM and the entire team are intimately involved and aware of all issues, goals, and objectives relating to public involvement, so utilizing them for that purpose only makes sense.

72 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Tremendous money and time are saved, and changes are avoided when the CM firms and DPs work together to produce the plans and phasings for the projects. Utility relocation prefer- ably was handled with the entire team during the production meetings, with the relevant utility companies present during early project scoping. This is essential to keeping a CM/GC project within budget and schedule. Failure to do this effectively can lead to a GMP that is neither valid nor accurate and a project that cannot be constructed within the schedule and GMP. Summary The CM/GC system was installed despite overwhelming, wide-ranging protest from local contracting, design, and CEI communities. The results were that within a year, 11 major road- way segments were ready to begin construction, thus achieving 55 times the production rate of the previous five years, and this at over 20% under budget for all projects, including design, permitting, mitigation and construction. All CM/GC fees and preconstruction fees in savings were returned to the owner. Local participation rate, the strongest of the myriad objections voiced, stood at 75% and helped keep numerous local contractors from going out of business. Approximately $350 million were spent on construction in the first year; however, $105 mil- lion were saved due to innovations and bid packages broken into specialty items of work, a 23% savings. The total returned to the county in the first year was $36 million. Another $80 million were returned to the community through local contractors in the first four months of construc- tion, with nine out of every 10 construction dollars going to local contractors. This was impor- tant because in the first four months, $80 million were invested in the community at a time when the local economy was depressed and had one of the highest home foreclosure rates in the nation. This does not include what was paid to the local design community. CM/GC Program Case Study No. 4: Utah Transit Authority UTA has used the CM/GC construction project delivery system on five major projects since 2002. At the time of the case study, the $2.5 billion cost of these projects may be more than any other agency has spent on CM/GC projects. UTA believes that selection of personnel is one of the most important functions of an agency. A project cannot succeed if the wrong people are involved. In the past, they had the personnel for each project; those who did not believe in CM/GC or who seemed to be stuck in old ideas were not allowed on the project. UTA felt that it actually could manage the project with fewer staff if it had the right people on the job. UTA has conducted some experimental work in alliancing. After using alliancing on the North Temple Viaduct Project, it now has applied it to the Sugar House Line, even though it’s unknown if any other U.S. agency uses this system. UTA seems to have gotten most of its inspira- tion and practices from Australia. UTA performs CM/GC because it allows more speed and a greater level of control vs. DBB. The method also was reported to be a “good agency fit,” developing a high level of trust among all parties. Trust is the key to success at UTA, which prefers not to do business with people it does not know and trust. The level of coordination required for a CM/GC project is more than that required on a typical DBB contract and requires a cultural change for some parties. These changes in culture and philosophy of contractors and designers (vs. traditional DBB) include trust, the belief that all will be treated fairly, and that contractors understand how the design process works. The level of coordination required for a CM/GC project is more than that on a typical DBB contract and means a cultural change for some parties.

Design management under Construction manager/General Contractor 73 Shared savings and leveraged relationships help build this, especially trusting that the contrac- tor is not going to overcharge the owner. Reverse incentives have also proven helpful. Deferring 6% of billings over time to reduce cash flow requirements became contractor insurance. Finally, UTA wants 40–70% of the work self performed (versus other owners in the area wanting 30%). Contractors like that. The process is also different from that of a typical DBB contract. First, coordination starts earlier. Also, permitting, project management, utility coordination, overall project schedules, and owner’s representative duties are different. The process employed by UTA enables the team to permit and design the project in small “mini” phases and ensures that the design process is tailored to begin construction early instead of at the traditional final plans stage. Developing the necessary trust for a program like UTA’s takes time working together. The more CM/GC projects that owners work on with contractors, the more trust can be built. In the beginning, however, any party coming from a DBB culture into a CM/GC contract must be educated in the culture. After the first time, educating the designers and contractors becomes much easier. CM/GC creates an environment where the owner can be more involved. UTA’s best cost containment practices include an early start due to the availability of equipment; iterative esti- mating; the owner’s scope and budget adjustment toward the goal; certainty about the price; the contractor having a better handle on the real cost of the work (as opposed to the designer); and avoiding scope conflicts. The estimating process for a CM/GC project can be either very efficient or very time consum- ing. UTA sometimes uses a local firm, which is composed of former contractor estimators, as its ICE. The use of consulting engineers who lack experience in the field or in generating estimates by crew and activity is not sophisticated enough for CM/GC. Using unit prices from previous projects also will not work. Using someone like this local firm as ICE allows the team to get to a number sooner. Several tools have emerged for paying the contractor. The more traditional methods included unit price, lump sum, and cost-reimbursable. Other nuances regarding contractor payment included: (1) Progress payments were done proportionally; (2) Subjective review of percentage complete; (3) Some contractors agreed to be paid based on a cost-loaded schedule; (4) Prear- ranged increments helped decide the percentages; (5) Schedule of value based on the GMP is not as complicated as a cost-loaded Critical Path Method (CPM); (6) Agreed-upon progress percentages (with the owner) are relatively easy to administer; (7) The federal project was paid off a cost-loaded schedule (vs. state projects, which were done by percentage complete); and (8) The contractor would publish a revised payment forecast every quarter. UTA’s program has the flexibility required to change designs, construction phasing, and materials selected if the design team (the CM, agency personnel, and DP) discovers a better method than what is currently in the contract, even late in the design phase. There is a high degree of openness and willingness to engage new or innovative ideas. UTA’s culture is very open to new ideas, but they believe that they, as the owner, must resist exercising too much control over the design. Finally, the delivery method must be matched with the goals of the agency. The first decision is what the goals are and then the second is the best delivery method to achieve those goals. For the Commuter Rail North project, UTA had the following goals: (1) Early knowledge of the price (this facilitated their negotiations with the Federal Transit Administration regarding the amount of their full funding grant agreement [FFGA]); (2) Flexibility in the design, even during the FFGA process; (3) More UTA involvement in the design process than in past D-B projects;

74 Guide for Design management on Design-Build and Construction manager/General Contractor Projects (4) Issues addressed quickly with the railroad. After reviewing the delivery methods available (D-B, DBB, CM/GC), it was clear that CM/GC was the only delivery method that would achieve these goals. It is a big mistake for owners to choose the delivery method before determining their goals. This can easily lead to selecting the wrong delivery method. CM/GC Program Case Study No. 5: Oregon Department of Transportation ODOT has used the CM/GC construction project delivery system on three projects since 2011. When using this system, ODOT employs several methods of managing post-award design activities. Their process allows DPs to adjust their plans with “real-time” information provided by the CM/GC firm. There are written SOPs for the design of CM/GC projects, and the agency now utilizes these contracts, because while the agency had only worked on one CM/GC project under such a contract at the time of publication, it worked well. The function of CM/GC project management is fundamentally different from a typical DBB project in that industry personnel are not entirely familiar with VE as a matter of course and in allowing the contractor to take the lead. It requires a completely different mindset and release of control and letting the contractor lead has been the department’s biggest problem in building the CM/GC program. The ODOT design process calls for multiple “mini” GMPs—and in ret- rospect, perhaps too many on some projects. The typical design milestones utilized in a CM/GC contract are traditional percent complete phase submit- tals (i.e., 30%, 60%, 90%, etc.) followed by a final PS&E. The DP is required to take less risk, and steps are taken to manage this during design, and to share risk between the owner, DP, and CM/GC. Dur- ing the design phase, the DP is designated as the owner’s representative and ODOT has an agency PM overseeing design. The DP also assists in choosing the CM/GC firm. RFIs and shop drawings on CM/GC projects are managed by the lead PM for the DP. The CM/GC and the agency’s representative are primary leads in coordinating design changes during the design and construction phases, while the DP is responsible for covering design errors and omissions during design and construction. With respect to project goals and objectives, ODOT ranked political impact as the top prior- ity, time as second, and cost as third. As this project entailed a major interstate, a dense political climate and community involvement had to be considered at all times. These priorities can change from project to project. During the design and construction phases various communication channels were used to keep the CM/GC, DP and agency representatives in constant touch. On projects, or portions of projects, where communication is especially important, ODOT requires co-location between the CM/GC, DP and owner’s representative. During construction, the DP’s role is to handle design changes, contract modifications, and other responsibilities. In fact, due to numerous site condition changes, the DP is often as active with construction concerns as with design concerns. Regarding how the agency’s post-award design management affects project performance, the design standards and specifications are no different under CM/GC than those used on a typi- cal DBB project. Similarly, CEI is the same, though the coordination between the DP and the CEI is different. The CEI is not involved during the design phase, but gets involved once actual construction has commenced. CM/GC designs typically come in under budget, and factors that most significantly contribute to this include constructability reviews provided by the CM.

Design management under Construction manager/General Contractor 75 CM/GC designs typically come in under budget, and factors that most significantly contrib- ute to this include constructability reviews provided by the CM/GC, which have saved ODOT substantial funds on CM/GC projects. Additional fees are not included for the DPs’ coordination with the CM/GC (and vice versa), but approximately 11–15% of the construction cost is typical for the design fee, and this percent- age is higher than on typical DBB projects. When multiple GMPs are used, the total cumulative project costs are calculated during the design process. Design schedules typically have similar durations to those of DBB projects and the responsibility for creating and monitoring the design, construction and overall project schedules is a collaborative effort between the DP and CM/GC. Using CM/GC provided a 25% time reduction in project delivery on the one project for which this comparison was made. For ODOT, the owner’s representative manages design changes as they relate to potential impacts to the schedule, budget and overall GMP. This is primarily because it affects both the DP and CM/GC. The ICE process entails the use of a third party firm (located out of state) along with both the DP’s and CM/GC’s estimates. Having three estimates to compare against each other worked extremely well in identifying several cost savings options–and the agency plans to use this process in the future. QC for design during the design phase differs slightly from that process used for design in the construction phase. Notably, QC responsibility shifted during construction from the DP to the CEI oversight firm. As a means to communicate the owner’s expectations for how design QA and QC are to be ensured throughout design development, ODOT employs design QC templates and plan templates, and all who propose to work as a CM/GC are required to use these templates. Project Case Studies CM/GC Project Case Study No. 1: Mountain View Corridor/UDOT The MVC is a 15-mile “planned” freeway in western Salt Lake County and northwestern Utah County servicing 13 municipalities. There actually were three contracts on this project. A small one upfront included early order items such as girders and some canal crossings that had to be done at certain times of the year, a flexibility made possible because of the CM/GC process. Even- tually, the information available was enough for the development of a complete set of final plans, but that was deemed unnecessary since the project operated on a system of continuing pricing. An integrated construction and ROW schedule was prepared during the design phase and was updated continually based on properties cleared and utility permits acquired. Float was considered a shared resource and was able to be used by the contractor or owner depending on the situation and the need. This required a high level of trust and coordination but resulted in delivery of the project with no delays to the schedule. The process for this project had four pricing milestones—the first with an approximately 30% set of plans, the second with approximately 50%, the third at 75%, and then at 90%. At each milestone, the team also conducted a risk workshop. The contractor reviewed the plans and the team agreed on quantities from the set of plans. This risk workshop was based on these quanti- ties, and the team discussed every possible good or bad scenario that could change the pricing. A percentage was derived, based on the probability that each incident might actually occur and what cost and schedule impact each would have. A Risk Register (in the form of a matrix) was then developed that listed each of these possible occurrences. Some of them decreased the cost of the job; most increased the cost of the job. Finally, through Monte Carlo simulations, curves were developed to identify the probability of finishing the job at certain costs. At each stage, the budget needed a 90% probability of covering the project cost.

76 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Figure 9 shows an example of the curves where the project had a 50% probability of finishing with a cost of $307 million and a 90% probability of finishing at $350 million. Therefore, the budget was set at $350 million, with a 90% confidence level of finishing the project within budget. The curve flattened as the contractor identified risks that had not theretofore been con- sidered. The cost estimate climbed accordingly as the contractor brought in all constructability issues. As the team eliminated those risks, the price fell, allowing the team to con- centrate on the biggest risks and how to remove them, mitigate them, or assign them to the contractor or owner, whoever could best manage them. At this point, the team carried $50 mil- lion in contingency, based on what the contractor thought it could deliver. As the contractor got more confident, the contingency fund went from $50 million to $30 million. That money was reinvested in more ROW, and then ultimately in extending the project. As the process of identifying, assigning, and eventually retiring risk continued, the curves were updated. Figure 9 shows the curves for the same project as shown in Figure 10 after subsequent quarterly reviews allowed the team to first identify and then retire more risks. This whole process happened four times within about a year until the design was completed, but the Risk Register was updated quarterly throughout the project. As risk was retired, contin- gency was retired in kind. A 90% confidence level of delivery was always carried. Also within the CM/GC contract were provisional sums. The team discussed every item and who should take the risk on it. A number of times the team agreed that if something were deemed 75% likely to happen, then a provisional sum would be assigned for it. Very few of the items assigned provisional sums were realized, and the money that came back to UDOT ended up allowing the purchase of the additional ROW and construction. The DART process documented $25 million in savings from things that team members brought into the process which were not part of the original plans for the project. Figure 9. Curve after original risk register.

Design management under Construction manager/General Contractor 77 The DP’s responsibility for cost containment focused on monitoring its own budget and making sure the design budget was not overrun, and delivering a responsible design that could be built within the budget. Coming up with the innovations to help make this happen was the role of the whole team. The DP, as well as the contractor and owner, participated in a process called a decision analysis by ranking techniques (DART) decision. This software will determine what any change costs in terms of design, construction schedule, and construction. Ultimately, DART tells the decision makers whether the possible change saves money or whether the cost for designing and constructing the change, plus construction delays caused by the change, will be less than or greater than its benefit. Once DART renders a positive recommendation, the innovation makes its way through a pro- cess. Ultimately, a management team has to recommend that the innovation be implemented. In all, the DART process documented $25 million in savings from things that team members brought into the process which were not part of the original plans for the project (innovations). The contractor was retained for preconstruction services when the design was roughly 30% complete. Approximately one year was spent producing the design plans, adding innovations, doing constructability reviews, and pricing the job. Once the team was satisfied that they had constructible plans and appropriate pricing, they entered into a construction contract. The willingness of the owner and the contractor to sit down with third parties to work on a solution allowed the team to overcome many challenges. One particular challenge was related to a 300-foot-wide utility transmission corridor. The ability to have the contractor at the table with the utility company allowed a discussion of construction methods and specific equipment. This led to the development of a protect-in-place scenario, which allowed the team to delay an $8 million relocation until future phases of the project, possibly 10–15 years in the future. The $8 million was able to be used to expand and progress current phases of the project. Figure 10. Risk curves on the same contract as Figure 9 after four risk registers.

78 Guide for Design management on Design-Build and Construction manager/General Contractor Projects Review risks every quarter that included Risk Registers, DART, risk assignment, and risk retirement allowed UDOT to save and set aside about $117 million. All of this money was used to extend the contract and ultimately, the 15-mile project became a 17.5-mile project. Table 7 identifies specific reinvestment of MVC funds beyond their originally scoped construction limits. These items were added gradually over time as risks were reduced and contingency could be reinvested. Reinvestment Reinvestment Amount Golf Course Reconstruction $18m Kern River Gas Relocation $18m Residential Relocation (150) $40m Kennecott Rail Line Relocation $11m Rocky Mtn. Power Relocate $20m Water Tank Relocation $4m Additional Earthwork $6m Table 7. Reinvestment of MVC funds beyond original construction limits.