Procuring and Managing Professional Services for Airports (2013)

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1 This Handbook is intended to be useful for all airports—regardless of size, location or governing structure—in refining their practices for procuring and managing professional services. This Handbook will demonstrate the importance of establishing effective, clearly written procedures; well-defined roles and responsibilities; a flexible approach to developing and managing the scope-schedule-cost of services; a transparent and accountable process for soliciting, selecting, and contracting services; and a communication plan and policy for maintaining a trusting relation- ship and predictable performance in the delivery of those services. The intent of this Handbook is not to provide a how-to-guide for scope development, pro- curement, cost estimating, scheduling, contract negotiations, project close-out, or management of professional services—many sophisticated, thorough, and detailed manuals already exist on these subjects. Rather, the intent is to identify critical organizational principles, policies, procedures, strategies, and standards for procuring and managing professional services. The Handbook profiles best practices, lessons learned, and innovative ideas throughout the Handbook to demonstrate how agencies have implemented a recommended practice. The Task Force on Values and Guiding Principles for Public Procurement of the National Institute of Governmental Purchasing (NIGP) sets forth three pillars that should guide any successful government procurement. Public Trust is the first—government employees are held to a far higher standard of conduct than their private sector and non-profit counterparts. Second, Public Service requires that procurement officers make the best use of available financial and human resources; good governance requires government employees to use their authority without bias and to use honesty, expertise, and fortitude to pursue the public interest. Third, Justice demands public procurement professionals exercise judgment to balance competing interests among all stakeholders so that decisions and actions are proper, impartial, fair, and appropriate. How to Use This Handbook This Handbook will introduce airport leaders to the fundamentals and guide airports of all sizes in developing a framework for successfully procuring and managing professional service contracts. Today, agencies are faced with increasing demands to do better with less. There are many challenges to meeting the new goals and rising expectations for performance and delivery of services. This Handbook will outline the key elements that guide the use of professional services and the value of adopting a flexible, accountable, communicative, transparent, and strategic direction (FACTS) process for procuring and managing professional services that saves time and money, improves performance, and increases public trust. C H A P T E R 1 Introduction

2 Procuring and Managing Professional Services for Airports The Handbook addresses four major elements of procuring and managing professional services: (1) Organization and Approach, (2) the Procurement Process, (3) Negotiating and Contracting, and (4) Managing Professional Services. Each chapter presents recommended practices, tools, and technology, along with a list of resources for further reference. Key points and common misconceptions discovered through the research are highlighted in text boxes throughout the Handbook. The appendixes consist of a bibliography, glossary, sample forms and model documents. This Handbook is based on research that included a substantial literature review coupled with comprehensive interviews. The literature search examined hundreds of documents and websites from many industries, including aviation, transportation, and trade organizations. The research focused on • Project and program management • Procurement processes and procedures • Solicitation and selection • Contracting and negotiating • Strategic planning • Project controls • Quality Assurance/Quality Control (QA/QC) • Communication and collaboration practices • Risk management • Information technology for procurement The in-depth interviews were conducted by teleconference and in-person with 11 airport agencies and 4 non-airport agencies selected from the literature search. The purpose of these interviews was to gather more detailed information on best practices and lessons learned regard- ing procurement and management of professional services. The 11 airport agencies interviewed represented 31 airports (10 large-hub, 5 small/medium-hub, and 16 general aviation [GA] airports), along with three state DOTs and one county transportation agency. Diversity of Professional Services In these challenging times, an agency’s response to increasing demands to be more cost- effective, efficient, flexible, transparent, and accountable rests solidly in the approach to procuring and managing professional services so as to achieve agency goals and outcomes. Procuring and managing professional service providers (PSP) is integral to the delivery of services and should reflect an agencies’ mission and goals. Prior to procurement, an agency should identify needs, goals, and project delivery methods as they relate to “core” responsibilities and then determine the need to retain a PSP. The agency then sets forward the strategic approach to procuring a PSP. The relationship between the agency and the PSP is established at this point, is formalized during procurement, and is realized during management of PSP contracts. The appropriate processes and methods used in the procurement phase are defined based on agency policies and governing laws. PSP services are diverse and involve a wide variety of tasks and profession- als, so the methods also need to be diverse and flexible and carefully selected to allow for effective delivery of services. An understanding of prevailing laws and regulations, as well as agency policies and pro- cedures, will assist in selecting the right fit for the right task. The pro- curement process needs to be clearly crafted and communicated to all internal and external stakeholders. The use of the agency’s legal, audit, and contract professionals throughout the procurement Demystifying the procurement process and opening the channels of communication are keys to successful PSP contracts and results. Transparency and clarity of process can save time and money for both the agency and the PSP.

Introduction 3 process can enable a clear, accountable, and transparent process that allows PSP a full understanding of the agency mission, goals, and objectives while also creating the clarity of purpose necessary to deliver needed services. Providing information and access prior to solicitation saves everyone time and money in responding to agency needs and opens the door to more creativity. Thoughtful decisions about the development and management of scope-schedule-cost, contract type, and selection process can ultimately determine a sound selection and clear a path to achieve goals. Current Trends and Practices in Procurement and Management Strong forces are affecting how airports are organized to do business. On the one hand, signi- ficant federal and state political and economic changes are resulting in funding constraints and pressure to do business more efficiently and to deliver services with fewer resources. Airport agencies are responding to those changes while facing their own workforce, operational, and orga- nizational challenges because of declining resources, stricter rules and regulations, and changing demographics. PSPs are facing similar challenges while also responding to agency constraints and striving to meet new demands for acceleration and innovation with fewer resources available. Traditional rules and funding availability at the federal and state levels are also changing. Rules and regulations that govern available funding have become more stringent. The reduction in funding at the federal level adds more pressure at the state and local level for airports to be more selective on spending and more creative in developing partnerships to fund necessary services. Public perceptions are influencing regulation and have increased the complexity of procuring and managing PSPs with requirements to demonstrate accountability, transparency, and cost savings. These shifts are changing the way business is conducted for both airports and PSPs. The economic constraints to do better with less and to respond to growing demands for services are resulting in airports re-evaluating missions, re-assessing their organizations’ core functions, and transferring more and more functions to PSPs. Staff responsibilities are shifting and services are shifting to meet new demands. Many agencies are losing staff because of retirement and/or downsizing, thus requiring a re-evaluation of what the agency can perform internally and where the agency needs support from PSPs to deliver services. Reductions in staffing levels at airports are posing operational impedi- ments, such as knowledge transfer, succession planning, and effective management of assets and resources (human, financial, and technological). Current resource limitations have an obvious effect on the staffing and training necessary to procure and manage PSPs. It is increasingly difficult to identify the right people with the right skills to serve on selection panels and to manage the procurement, contracting, and management of professional services. The consequence of these shifting demands plays out differently, depending on the airport’s organization, processes, people, and relationships. For many, these changing times have resulted in re-organizations, changes in use of PSPs, and the implementation of different policies and regulations. Without a clearly identified direction and communication of purpose and process, the results can lead to increased confusion and misunderstanding, erosion of process, and a breakdown in the communications necessary to achieve the new demands and requirements. Common Denominators and Divergent Practices Many common denominators (e.g., concerns, innovations, and best practices) and divergent practices (e.g., key issues with contrasting or contradictory practices) were revealed through the research and outreach that relate to procuring and managing professional service contracts.

4 Procuring and Managing Professional Services for Airports Generally, there are two governing structures for airports. The first governing structure is an authority. Authorities operate in a closed system under one management structure (typically a board of directors) and contain multiple departments (e.g., Procurement, Legal, and Human Resources [HR]) within the organization. All of the departments in an authority report to the board of directors. The second structure is organized under a government agency, such as a city or county (referred to in this Handbook as Airport Government Agencies or AGA). In an AGA structure, the airport is one of many departments, typically not located within the same physical area, and each department reports to a Mayor or Board of Supervisors. In this Handbook, the term “agency” will refer to both Authorities and AGAs. Some of the typical divergent practices as well as common denominators for Authorities and AGAs are summarized in the following subsections. Procurement Practices Common Denominators The research identified three main areas of common denominators: (1) Organization and Approach, (2) People/Partnerships/Relationships, and (3) Process and Procedures. Organization and Approach • Authorities were typically more transparent about the selection, contracting, and debriefing processes. • Authorities often have more procurement tools available and greater control over resources than their AGA counterparts. • AGAs typically do not directly contract PSPs for Legal, Information Technology (IT), or HR services, which are usually administered by a central governmental department. People/Partnerships/Relationships • Qualified, well-trained staff was recognized by most agencies as a critical component of the procurement process, especially in the context of cutbacks in training funds. • Agencies noted that, as the volume of work increases and staff resources decline, project managers are assuming more responsibility for procuring and managing contracts without formal training. • Respondents almost unanimously agreed on the importance of effective communication between internal stakeholders and with PSPs to develop a better understanding of the project needs and to help control scope-schedule-cost. Process and Procedures • The interview participants recognized the need to be more flexible in the procurement process, but there was also uncertainty regarding how to translate that into practice, and many agencies harbored concerns that flexibility could lead to litigation. • Scope and budget were cited as the main drivers for determining agencies’ needs, and the avail- ability of funding is the central driver in determining the start of projects. Almost unanimously, the agencies interviewed stated that a good, solid scope will reduce future changes, costs, and disputes as the contract progresses. • Selection criteria were generally consistent among all agencies interviewed, with a focus on qualifications (key staff, project managers, and firms), relevant projects, and past performance. • Incentives and penalties were almost uniformly not used for PSP contracts. Respondents typically stated that the cost and time required to administer incentives and penalties out- weighed any benefits.

Introduction 5 Divergent Practices • Methods used to enhance transparency and provide information to PSPs were often clouded by concerns that the information might not be uniformly provided to all PSPs and result in potential litigation. • The approach to including local businesses and Disadvantaged, Minority, or Women-Owned Business Enterprises varied considerably, especially across different markets. • The inclusion of contract restrictions, such as salary caps or overhead limitations, were diverse, especially across different regions. • Conflicting attitudes emerged regarding fee types. For example, the same rationale (ease of audits and administrative oversight) was applied to both fee types by various interview respondents for selecting either Lump Sum or Cost-Plus Fee. Management Practices Common Denominators • Several interview respondents stated that project controls were performed by third parties, giving responsibility to one designated, and independent entity to perform critical oversight, monitoring, and evaluation. • A well-defined, high-quality scope of work reduced the number of change orders that occurred during projects. • Communication among the agency, PSP, and stakeholders was recognized as key to successful project management and delivery. Engaging the various stakeholders in periodic design reviews reduces potential requests for changes to scope-schedule-cost as the projects move forward. • Many project managers had to rely on their own experiences without receiving any formal training for managing professional service contracts. • Contract changes most often resulted from previously unknown site conditions or were generated by tenants and other internal stakeholders. Divergent Practices • Although recognizing that communication is a key to successful project management and delivery, most agencies did not have a formal plan to provide the strategic vision and performance expectations to internal departments and external stakeholders. • The role of the legal and audit departments varied among agencies. Some agencies partnered with the legal and audit departments throughout the contracting process, while other agencies only engaged the legal and audit departments to assist with specific issues as they arose. • Most agencies recognized that the scheduling of work can be affected both by the internal budgeting process and by the FAA grant schedule, but many agencies did not have a well- developed formal process for scheduling. • The approach to estimating costs varied considerably by agency and was not a clearly prescribed or well-communicated process at most agencies. • Quality control was acknowledged as an important factor in managing a project, but most agencies interviewed had not implemented a formal quality process with defined roles or procedures. • The practice of carrying out PSP performance evaluations was generally regarded as important by most agencies, but the subsequent distribution and sharing of the evaluation results with PSPs was generally not formalized and varied from full disclosure to not providing any access because of litigation concerns. • Agencies recognized the importance of closing-out projects at completion, but few implemented a formal close-out process and several purposely did not close out contracts in case other related tasks were eventually needed.

6 Procuring and Managing Professional Services for Airports The best practices and lessons learned regarding these common denominators and divergent practices form the basis of this Handbook. In addition, some agencies noted the same rationale to justify opposing practices based on a lack of information, misunderstanding of processes, or as a response to political concerns or potential litigation, thereby creating a set of intriguing series of misconceptions. These misconceptions are highlighted throughout the Handbook. Model documents and sample forms are included to demonstrate how other agencies have incorporated successful processes into their organizations. Figure 1-1 illustrates the standard procurement and management process for professional services at any agency. This process can be adapted to meet the requirements of any airport, regardless of size and organizational structure. Figure 1-1. Standard critical path.