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Guidelines for Airport Sound Insulation Programs (2013)

Chapter: Chapter 10 - Construction Contracting

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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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Suggested Citation:"Chapter 10 - Construction Contracting." National Academies of Sciences, Engineering, and Medicine. 2013. Guidelines for Airport Sound Insulation Programs. Washington, DC: The National Academies Press. doi: 10.17226/22519.
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187 Construction Contracting The perceived success and reputation of an SIP depend heavily on the construction phase of the program since this is when the sponsor either fulfills or disappoints the expectations of the program’s participants. This is also when the sponsor contractually transfers significant control of the program to the construction contractor. For this reason, it is imperative that sponsors select a construction delivery approach responsive to the program’s needs while addressing the unique nature of sound insulation. Sound insulation programs are unique in the sense that: 1. Public funds are expended for capital improvement of private property by a contractor with no direct contractual relationship to the property owner. The construction contractor acts as a third party, responsible for executing and delivering on agreements, understandings, and expectations established contractually between the sponsor and property owner. 2. Due to the magnitude of the work and limitations on available funds and delivery resources, sound insulation programs typically require many years to complete. Use of public funds often mandates using a competitive bidding process to select a construction contractor, with contracts awarded to the lowest responsible bidder(s). SIPs tasked with providing consistent and responsive improvements to private property by means of multiyear projects completed by a variety of contractors have a considerable challenge. This challenge is met by provid- ing contractor orientation regarding the unique third-party relationship to the homeowner, establishing consistent interpretation of contract provisions, and integrating the contractor into the sponsor’s program delivery approach. 3. Fast-paced residential SIPs demand skill sets and capabilities beyond those of the industry- standard construction contractor. For example, many residential contractors will have the construction trade skills to complete the residential renovation work but lack the significant administrative skills necessary to succeed on a government-funded project. Conversely, in many instances, contractors experienced in delivery of government-funded projects are not experienced with residential renovation work. 4. Rather than providing construction on a single property for a single client, SIP contracts typi- cally include 25 to 100 properties, each with a different owner. As a result, a sound insulation project essentially consists of multiple mini-projects, each with its own completion schedule. The magnitude of properties and involved parties significantly increases the quantity of issues to be addressed to keep stakeholders satisfied. 5. Construction contracts are required to meet the requirements of PGL 12-09, which stresses that AIP-funded projects, including SIPs, “meet all federal procurement and contract require- ments including the Buy American Preference requirements of Title 49 United States Code 50101.”1 These requirements are addressed further in PGL 10-02, Guidance for Buy American C H A P T E R 1 0 1 U.S. DOT, FAA, PGL 12-09, August 17, 2012, Attachment A, §812 (c)(2), p. 1-5.

188 Guidelines for Airport Sound Insulation Programs on Airport Improvement (AIP) or American Recovery and Reinvestment Act (ARRA) Proj- ects, issued by the FAA on February 24, 2010. Contractors will need to work with the pro- gram sponsor to determine if waivers are in place or need to be filed for the project to move forward. Since the FAA has specific rules not included in the federal acquisition regulations, it is important to be familiar with the FAA documents governing Buy American regulations. 10.1 Construction Delivery Approaches This section provides a brief description of standard delivery approaches used in the general construction industry, as well as those developed for publicly funded projects such as SIPs. These general approaches are widely recognized and supported by government agencies that contract for construction services as well as by professional organizations such as the American Institute of Architects, the National Society of Professional Engineers, the Design Build Institute, and the Construction Management Association of America. The material outlined here is not intended to be a complete presentation of all available options, but rather a summary of the most common delivery methods for sound insulation. This will help stakeholders have a meaningful dialogue regarding the best construction delivery approach for their program. For each of these delivery approaches, there is an entire body of books, reference materials, and standards that have been developed for their implementation. These references are made avail- able by public agencies and professional organizations. With the assistance of a design or construc- tion professional, construction delivery approaches can be modified to create the system that best meets an SIP’s unique needs in concert with the sponsor’s contracting regulations. 10.1.1 Design–Bid–Build: Single Prime This is the most common and traditional approach for delivery of publicly funded projects. With this approach, the sponsor employs design professionals to prepare contract bid documents and conducts a public bid to general contractors; general contractors then execute the construction phase of the project. Under this approach there is considerable reliance on contract documents to effectively establish performance requirements for the general contractor. The general contractor has significant control of means and methods for meeting the established performance requirements. This approach is most commonly used since it places the burden of construction on a single entity, the general contractor, and minimizes the sponsor’s involvement in project management. Since project performance is heavily dependent on the general contractor under this approach, some contractually required qualifications or a prequalification process is recommended. 10.1.2 Design–Bid–Build: Multiple Prime This approach is very similar to design–bid–build single prime, with the exception that the spon- sor divides the project into separate sections, as appropriate for the specific project, and issues a prime contract for each section. For sound insulation projects, this usually includes a general con- struction contract, mechanical contract, and electrical contract; however, there are no limitations as to how a project can be divided under this approach. The sponsor will either act as coordinator of the multiple primes or delegate this responsibility to someone else, typically the general construc- tion contractor. This approach lends itself well to task order or indefinite-delivery–type contracts. 10.1.3 Design–Build Design–build (DB) relies on a single entity, procured by the sponsor on a competitive basis, to provide both the design and construction services necessary for completion of a project. The DB

Construction Contracting 189 entity can be a single firm or a team of firms, with the DB entity selection accomplished by a qualifications-based selection or competitive proposal selection process with a guaranteed max- imum price or cost-plus fixed fee. Cost-plus percentage contracts are not allowed as DB con- tracts.2 FAA AC 150/5100-14D, Section 4-8.xxxvii, Alternative Delivery Methods, and FAA Order 5100.38C, Section 3, Alternative Delivery Methods, detail the FAA’s requirements for implement- ing DB. The FAA requires that a DB approach be approved by the FAA prior to use and that proj- ect conditions must be evaluated to determine if the more traditional design–bid–build approach is more appropriate before undertaking an alternative delivery method. Proponents of DB believe the benefits of this approach include single-source accountabil- ity, reduced project delivery times, lower cost, higher quality, and less litigation. The use of DB is relatively new to the FAA and residential sound insulation programs, and as such, little independent quantitative analysis and study have been accomplished or published regarding proven benefits. 10.1.4 Design–Bid–Build with Some Elements of Design–Build This approach is the same as design–bid–build single prime or multi prime, with responsibil- ity for select portions of the project’s design delegated for the construction contractor(s). For SIPs, the DB elements typically involve the mechanical systems, electrical systems, and ventila- tion. This approach is often used on renovation projects in order to avoid the initial cost of detailed design, which in many cases must be altered during construction to address unforeseen conditions. Such alterations create a significant administrative task for the design team. Shifting the responsibility of final design to the construction contractor minimizes the need for design alterations and corresponding change orders. Effective use of this approach requires DB bid documents and specifications to provide infor- mation regarding existing physical conditions, detailed installation and performance require- ments, and instructions addressing the various types of structures to be encountered on the project. This allows contractors to properly estimate the DB element of the project and under certain conditions can minimize change orders. Pre-bid physical inspection of representative structures is encouraged. 10.1.5 Construction Management Not at Risk This approach is similar to the design–bid–build single prime or multi prime approach, with the added feature of employing a construction manager. In most cases, the construction manager will integrate into the design team and be responsible for construction-related aspects of the proj- ect, including cost estimates, constructability reviews, phasing, construction controls, construc- tion administration and oversight, and contractor procurement. The construction managers will either solicit construction bids on the sponsor’s behalf or hold construction contracts themselves. Under this approach, the construction manager is not providing an established price for the proj- ect but rather managing the construction aspect of the project on the sponsor’s behalf. The construction management not at risk approach integrates a construction professional into the process, which is helpful to a program using more complex approaches such as selective DB, multiple prime, or task order contracts. Construction management not at risk can establish continuity and consistency on multiyear sound insulation programs, which use a multitude of construction contractors. 2 U.S. DOT, FAA, AC 150/5100-14D, Architectural, Engineering, and Planning Consultant Services for Airport Grant Projects, September 30, 2005, §4.8 c.2.

190 Guidelines for Airport Sound Insulation Programs 10.1.6 Construction Management at Risk This approach provides a fixed cost for the construction phase of a project by competitive procurement of a construction manager. This approach guarantees the sponsor a fixed cost for a project, while allowing the construction manager to competitively procure construction con- tractors and manage the construction phase of the project. This contracting method is better suited to new construction. Due to the level of difficulty and level of sophistication necessary to use this approach on publicly funded renovation projects, it has not been used in SIPs at the time of publication and will not be discussed in detail. 10.1.7 Task Order Contract This approach has not been used in residential SIPs in a pure sense but bears mentioning because a variety of federal agencies use this approach when procuring contractors for renovation and main- tenance contracts. Under this approach, contractors must qualify to participate on a task order con- tract for an established period of time or for a capped dollar amount. Once placed under contract, qualified contractors competitively bid on task orders as they are issued. This approach typically uses a process that grades contractors on performance as they complete work. Contractors must main- tain a minimum performance grade or forfeit eligibility to participate. This process has been used by some agencies as a means of prequalifying contractors to use as a short list of bidders. 10.1.8 Single Parcel Approach Rather than grouping homes into a single construction contract for public bid, the single parcel approach allows for individual homeowners to be involved in the selection of the contractors who will do the work on their homes. The single parcel approach prequalifies local installation contrac- tors and then invites individual property owners to select a minimum of three contractors to submit a competitive bid for the work on their property. This allows contact between the contractor and homeowner prior to the construction contract being awarded and still meets the public funding requirement for competitive bidding. Formally arranged gatherings introduce property owners to prequalified installation contractors while giving property owners the opportunity to inspect prod- uct offerings and make product selections for their project. This approach facilitates homeowner participation, thus furthering a degree of ownership in the process. The lowest responsive bidder of the homeowner-selected contractors is awarded the work. Some projects allow the property owner to select from responsive bidders after bids are procured; the property owner may select any installation contractor from the responsive bidders; however, if the selected contractor is not the low bidder, the property owner pays the difference between the low bidder and their desired contractor. An integrated single parcel approach is currently being used in one SIP. Under this approach, the sponsor procures a single professional entity to administer, design, and contract for con- struction of the SIP. This approach blends elements of DB and the integrated project manage- ment approach as briefly presented herein. The responsible professional service provider under this arrangement facilitates homeowner communication, prepares design documents, manages a competitive bid process, administers contract award, procures product, inventories product, and manages construction. This approach allows a single entity to act as both program manager and general contractor and could be applicable to a multiple parcel approach as well. 10.1.9 Integrated Project Management (IPM) Approach IPM is an approach specifically developed for SIPs by a variety of nationally recognized sound insulation professional service providers. This approach places all elements necessary for deliv- ery of an SIP, except the construction contractor, under a single entity typically referred to as

Construction Contracting 191 the program manager. Elements of this integration typically include public relations, acoustical consulting, participant administration, design, construction administration, and construction inspection. Under this approach, a sponsor has a single entity with accountability, namely the pro- gram manager, rather than procuring a host of professionals and being responsible for integrating their services. IPM uses many of the construction delivery approaches outlined in Section 10.1. The IPM approach is an effective tool for integrating the many facets of sound insulation under a single umbrella, providing a level of continuity for all elements of delivery, including construction, across a multiyear program. As it relates to construction, this approach is intended to break down communication barriers, facilitate timely resolution of issues, and create feedback for continuous process improvement. 10.1.10 Unit Price Considerations Unit price payment items for construction contracts have been used in whole or in part for delivery of SIPs under the various approaches indicated previously. Several large SIPs have relied entirely on unit price payment items for administration of their construction contracts. Under the unit price approach, sound insulation improvements, including architectural, mechanical, and electrical, are broken down into logical discrete unit price work and payment items. Con- tractors are paid according to the quantity of unit price items necessary to complete the work. Some SIPs use unit price forms of contracting for dealing with unforeseen construction condi- tions and work that may be difficult to define. The use of a unit pricing approach for these situ- ations helps reduce administrative burdens associated with change order processing. 10.2 Delivery Approach Considerations Several considerations should be evaluated and discussed before selecting a construction delivery approach for any given sound insulation program. Following are some of the major considerations. 10.2.1 Level of Expertise Generally speaking, the more sophisticated the construction delivery system, the higher the level of construction expertise required to succeed. Most sponsors and design professionals are well versed in the use of the design–bid–build single prime approach and likely have in-house staff that can support this system. If more sophisticated approaches are used, the addition of sponsor or consultant staff with specialized expertise administering the contracts and processes of nontraditional construction models is highly recommended. In general, more complex construction delivery systems, if properly implemented, can result in higher stakeholder satisfaction rates. However, due to the increased skill level necessary to implement sophisticated delivery approaches, they are also ripe for failure if the appropriate skill sets are not present on the sponsor’s implementation team. This should not be taken as an impediment to exploring more sophisticated delivery approaches; simply acknowledge up front that striving to obtain higher stakeholder satisfaction rates involves developing a professional services team with the requisite experience to deliver on these approaches. 10.2.2 Internal Considerations In many situations, a sponsor’s existing internal procedures, standard forms, and agreements do not support a sophisticated construction delivery system or even a modest modification to

192 Guidelines for Airport Sound Insulation Programs the traditional design–bid–build single prime approach. When considering a delivery approach for sound insulation, it is prudent to review the sponsor’s existing procedures to determine what level of complexity the sponsor can currently support. Evaluate what changes the sponsor would be willing to consider in support of a more tailored construction delivery approach. 10.2.3 Public Relations and Accountability The high number of individual properties contained in a residential SIP means a high number of stakeholders. Additionally, since public funds are involved, there is significant political influ- ence and interest and thus a high level of accountability. Accordingly, the construction delivery approach needs to recognize this reality and provide well-defined, well-coordinated lines of com- munication to accommodate the many stakeholders, accomplish day-to-day project coordination, and resolve issues in a timely manner. As previously presented, sound insulation programs garner significant public attention. Dur- ing the construction phase of a program, when contractors must deliver on stakeholder’s expec- tations of the process and finished product, public relations issues are heightened. Accordingly, construction delivery approaches must support timely resolution of issues that affect the par- ticipants’ and public’s perception of the program. 10.2.4 Risk Management Construction projects are fraught with risk. The SIP sponsor should develop a construction delivery approach that provides for the management and control of these risks. Risks unique to sound insulation are discussed in the following. 1. Residential SIPs involve renovation on a fast-paced commercial scale, with the additional bur- den of administrative requirements associated with public funds. Very few contractors have the mix of skill sets required to meet all these needs. This issue can be effectively managed by using experienced sound insulation construction managers as a buffer between the sponsor and the contracting community. Other risk management tools include specifying minimum qualifications or conducting prequalifications for general contractors. Some airports use sub- mission of a construction plan as a weighted portion of the bid to verify that the contractor has grasped the scope of work and has a sound plan for delivering it. Offering smaller projects that contractors must successfully complete prior to bidding on larger projects is an effective means of mitigating the risk of under-qualified contractors. 2. A single contractor’s poor performance can significantly harm the reputation of a sound program. The construction delivery approach should minimize this potential by providing timely options for handling poor performance or by reducing poor performance through a series of qualifying activities. 3. SIPs are conducted in occupied homes or schools and require property owner presence dur- ing construction. Homeowners who have arranged for vacation time or secured someone to be on-site during construction (or users of schools needing to start classes) may be upset if the schedule does not proceed as they have been informed. The construction delivery approach chosen by the sponsor needs to address contractor performance in regard to stay- ing on schedule. Methods to address this issue should be discussed with the sponsor’s legal advisors as part of designing the program. A few examples are: a. Designing time into the specified contract schedule where no new houses are started and any delays can be rectified before continuing. b. Not allowing work to start on a property before all of the product has arrived and been verified. c. Quantified performance reviews conducted on each awarded contract that affect the abil- ity to bid again.

Construction Contracting 193 d. Restrictions on the amount of work one contractor can undertake and successful comple- tion of the first contract before being awarded any additional work. e. Daily construction observation so that delays can be noted and resolved before they become an issue. 10.2.5 Scale and Cost The selected construction delivery approach should match the anticipated scale and pace of the SIP. Most publicly funded programs are judged for reasonableness based on percentages— for example, the ratio of soft costs (administration, design, engineering, outreach) to hard costs (construction). The larger the program, the more room there is in the budget to spread the costs of sophisticated delivery systems that are costly. More complex delivery systems that may meet more community goals need a minimum economy of scale to make them sustainable from a cost standpoint, whereas the most commonly used design–bid–build approach can be used success- fully on small or large programs. 10.2.6 Continuity SIPs typically have durations from a just a few years to over 15 years. An array of construc- tion general contractors, subcontractors, suppliers, and service providers will develop in the community to support completion of the projects. It may take from several months to several years to fully develop the construction-related resources required to successfully support a significant SIP. Based on this reality, program continuity from inception to completion is crucial to maintaining a responsive construction community. Continuity facilitates warranty service work from the contractors and manufacturers since they are present for the continu- ing work. That continuity comes in two main forms. First is the presence of a reliable stream of biddable contracts for contractors. This maintains interest and facilitates a contractor investing in build- ing the labor and other resources needed to complete the work. Secondly, a program’s policies and procedures for design and construction delivery should provide a framework for ensuring some level of consistency from contract to contract and year to year. This allows contractors to achieve proficiency along with efficiency. Many programs use a pilot phase as a means of testing and adjusting their delivery approach and ramping up a project from inception to an established program. This preliminary effort to thoughtfully establish an approach serves the program well in contractor interest and straightforward management. 10.3 Approach Evaluation and Selection Process A brief summary of typical construction delivery approaches and the considerations that should go into formulating a delivery approach are presented in Sections 10.1 and 10.2. Steps in the process for selecting a delivery approach and customizing that approach to suit the individual program’s needs are: 1. Evaluate the sponsor’s existing procurement capability and flexibility for alternative approaches. 2. Assess the capability of in-house or SIP staff (including consultants) in regard to construction delivery expertise. 3. Determine anticipated pace and duration of the program. 4. Determine what kind of management control the sponsor wants to maintain during construction. 5. Determine what management control the sponsor feels comfortable delegating, and to whom.

194 Guidelines for Airport Sound Insulation Programs 6. Determine what type of procedures and controls the sound insulation management team intends to use for management of the unique risks associated with SIPs, as described in Section 10.2. 7. Determine if there are elements of the design that are appropriate and beneficial to delegate to contractors. 8. Establish expectations and parameters for program communications and issue resolution during construction. Finally, select a delivery approach that accommodates the evaluation of items 1 through 8. It is strongly encouraged that the evaluation of a program’s needs and establishment of a con- struction delivery approach involve the expertise of a construction professional. As previously stated, the construction delivery approaches briefly outlined in Section 10.1, although well established, are just a starting point. Typically these standard approaches are significantly tailored, fine-tuned, and blended with elements of other approaches to meet the specific needs of a program. 10.4 Management of Physical Construction Although the selected construction delivery approach should define how projects will be man- aged during physical construction, a brief summary of common approaches and critical compo- nents to consider are presented in the following. 10.4.1 Common Approaches SIPs have used a variety of approaches for the direct management of projects during physical construction, including: 1. In-house/sponsor’s staff, 2. Integrated team under the direction of a program manager, 3. Construction manager as part of a design team, 4. Construction manager independent of a design team, 5. Engineering or architectural firm as part of a design team, 6. Engineering or architectural firm independent of a design team, and 7. Some combination of approaches 1 through 6. Choosing one or more of the management approaches can help address sponsor priorities, including when: • The sponsor desires some level of control during construction due to the public relations nature of these programs. • The sponsor desires to establish checks and balances by employing an independent third party to manage the construction phase. • The sponsor desires to have an integrated approach or a single entity responsible for delivery of the entire project to facilitate streamlined communications and create a single point of account- ability. 10.4.2 Critical Components Regardless of the approach taken to managing actual physical construction, several criti- cal components must be incorporated into the approach to foster success. These components include: • Definition of entities and individuals with direct authority to act on the sponsor’s behalf to conduct administrative and management duties, including scheduling, field directives, prop-

Construction Contracting 195 erty owner interaction, work acceptance, RFI processing, change order processing, and pay- ment application processing; • A streamlined approach to issue resolution, unforeseen conditions, and necessary design modifications; • A team approach to issue resolution; • Consistent staffing or supervisory functions to ensure uniform oversight; • A timely feedback process to allow corrective measures to be implemented; and • Project documentation systems for the efficient management of federally required project records. 10.4.3 Best Practice Recommendations: Construction Contracting 1. Sponsor understanding of the unique nature of the construction phase of an SIP is critical to making selection of a construction delivery approach a priority during program development. 2. Involve a construction-oriented professional during program development to assist in developing a responsive and sponsor-specific construction delivery approach. 3. When evaluating construction delivery approaches, sponsors need to consider inter- nal capabilities, expertise, and processes, and their willingness to bolster their capa- bilities as necessary to meet the specific demands of their SIP construction delivery approach. 4. Public relations considerations are paramount in development of a responsive con- struction delivery system. 5. Take into consideration the intended scale and pace of the individual SIP when selecting a construction delivery approach. 6. It is critical that the selected delivery approach include provisions to manage the unique risks associated with construction in SIPs.

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TRB’s Airport Cooperative Research Program (ACRP) Report 89: Guidelines for Airport Sound Insulation Programs provides updated guidelines for sound insulation of residential and other noise-sensitive buildings. The report is designed to help airports and others develop and effectively manage aircraft noise insulation projects.

In February 2014 TRB released ACRP Report 105: Guidelines for Ensuring Longevity of Airport Sound Insulation Programs, which complements ACRP Report 89.

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