Evaluation of Project Delivery Methods (2009)

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TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs CHAPTER 5 – ADVANTAGES/DISADVANTAGES OF EACH DELIVERY METHOD Introduction There are numerous factors that transit agencies need to consider when deciding to select a project delivery method. These influencing factors and their interactions with different project delivery methods are studied in this chapter in the format of a descriptive pro-con analysis. These factors were identified through literature search, personal experience, case studies and interviews with project directors of the case study transit projects during this effort. These factors are categorized as follows: 1. project-level issues, 2. agency-level issues, 3. public policy/regulatory issues, 4. life cycle issues, and 5. other issues. Each pertinent issue is defined first and then if a delivery method is a favorable choice for that issue, it is considered as “pro”, and if it is an unfavorable choice, it is considered as “con”. The analysis is based on the trends found in the interviews [which are cited using right brackets] and is supported by quotations from relevant literature. A listing of references directly used is provided in Appendix A. It should be noted that there will be overlaps and redundancies in the characteristics of some of these pertinent issues and how they are affected by the choice of delivery methods. While there was an effort to separate these issues such that redundancy and double-counting will be minimized, it was not possible to choose completely independent issues. Purpose The purpose of this chapter is to synthesize the information collected during this research on important factors and to use this information in the selection process. The research team used this information in Tier 1 and Tier 2 of the selection system presented in the Guide. Project-Level Issues Project-level issues are defined as those that are specific to the project under consideration and include such items as project size, cost, and schedule, as well as project-specific risk management/allocation and possible certification for sustainable design and construction (e.g., LEED Certification, etc). Northeastern University The Research Report 85

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs 1) Project size: It reflects the dollar value and physical dimensions of the transit project. Transit projects are usually larger than $100 million in value; however, transit agencies sometimes get involved in smaller projects such as construction of parking garages. By studying this issue one seeks to determine which delivery method is suitable for a project with a given size, and how changing the size may impact the choice of delivery method. Intuitively, project size would influence the choice of delivery method. However, current literature and the case studies conducted in this research, document successful projects in a range of sizes using DBB, CMR, or DB project delivery methods. Because each of the three main delivery methods can be applied to projects of all sizes, this issue needs to be considered in combination with other issues such as schedule, agency staffing, risk management, and others. A possible exception seems to be the DBOM that has been considered mainly for larger transit projects. 2) Cost: This issue represents several aspects of project cost like ability to handle budget restrictions, early and precise cost estimation, and consistent control of project costs. In other words this issue checks the abilities of each delivery method in terms of cost control and cost estimate. DBB: This delivery method may benefit from competition in the market and get low bids when bidding out a project. Having a complete design before awarding the project increases the certainty about cost estimates because the owner has the engineer’s estimate as well as several estimates submitted by the bidders. The level of cost certainty increases even more when the payment method is lump-sum. As an advantage for DBB, transit agencies can choose unit price bids as the payment method when the project line items and their cost estimates are known but the quantities are not known with certainty. This payment method allows the constructor to bid on unit prices rather than the total price. In this way, the constructor does not have the risk of fluctuating quantities, while the owner will not have to pay for constructor’s contingencies included in the bid because of quantity uncertainties. CMR: This delivery method has two main characteristics relevant to project cost: 1) it is usually combined with a GMP payment mechanism and 2) the constructor is involved in the project before bidding the project out. These two characteristics directly affect the performance of this delivery method in regards with project cost. As an advantage, there may be cost savings because of early constructor's inputs to the project (Oregon Public Contracting Coalition, 2000) and also competitive pricing through "open book" accounts (Irwin, 2003). Usually, the owner can negotiate and set the GMP at about 60% design complete (AGC 2004). It is advisable that in case the project requires the services of major trade or specialty subcontractors, to bring them on board during the design phase. This way, the project team can benefit from their knowledge and experience and establish a more reliable budget early on. The drawback is losing the opportunity of putting this work to bid. Potential schedule compression by some overlap between design and construction will be an advantage to CMR if the inflation rate has a significant effect on the project cost escalation. Also, compared to the traditional DBB method, the owner will know the estimated cost earlier in the project life-cycle. But at the same time the owner needs to have a close cost monitoring on the project because of the cost reimbursable payment method (Walewski et al, 2001). Also, it is somewhat difficult to evaluate the validity of the GMP compared to a traditional bid process. Northeastern University The Research Report 86

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs DB: DB has a relatively good performance when there is budget restriction (Gordon & REES LLP., 2005) because it reduces the potential of cost overruns due to claims and delays. A TCRP study shows that there are fewer cost overruns in DB (TCRP, 2002). Another study shows that DB outperforms CMR in O&M costs, unit cost, and cost growth (Konchar et al, 1998). The DB method can also provide the owner with a firm fixed price earlier in design.. Through the use of a lump sum contract in a DB procurement, the owner can establish a firm cost estimate relatively early in the process (Walewski et al, 2001; Gransberg et al, 2007). The AASHTO Procurement Guide states that DB gives earlier cost certainty and has less cost growth compared to traditional DBB (Molenaar et al, 2005). DBOM: Early certainty in project costs and mainly O&M costs is a direct result of awarding operation and maintenance to the constructor of the project. The constructor generally cannot seek additional compensation for excessive operations or maintenance costs resulting from inadequate design since it is a responsibility of the DB entity. On the other hand, it can be difficult to estimate O&M costs at the early stages of a DBOM project (when the price proposals are being evaluated) since in most cases the project is only at a 15%-30% design level. This can lead to increased contingencies which result in higher prices if the entities submitting proposals are required to price O&M in response to the DBOM RFP, since the constructor will have to cover all risks and uncertainties. Awarding the project with a DBOM contract extends the scope of the contract. This expansion in the contract scope gives opportunity to the constructor to bring some innovations to the project in order to decrease the project costs (Kessler et al, 2005). 3) Schedule: This factor shows two aspects of project schedule and includes both the ability to shorten the schedule and the opportunity to control and prevent time growth. In other words this issue checks the abilities of each delivery method in terms of schedule control and schedule compression. DBB: Design-bid-build has a sequential process and usually does not have room for significant schedule compression. This sequential process results in a longer schedule compared to the three alternative delivery methods (Walewski et al, 2001; Gordon, 1994). A lengthy schedule is the price that is paid for the owner to have the project designs completed prior to the project award. DBB schedule growth tends to be higher compared to other delivery methods. The NCHRP Best-Value contracting study found that DBB projects had the greatest average time growth (Scott et al 2006). Lack of ability to compress the schedule in DBB has been one of the main reasons for owners to choose other delivery methods. One way of compressing DBB projects is to break down the program into several packages and let each package separately [Silver Line]. One problem in this approach seems to be the coordination effort required and the issue with abutting primes. CMR: Having a constructor on board helps the project team develop a more practical and doable schedule for the project. A study has shown that CMR has the ability to meet or exceed schedule requirements (Minchin, 2007). This delivery method can also help the owners with projects that are schedule sensitive (Walewski et al, 2001) and can save some time in the project because of concurrent design and construction (Oregon Public Contracting Coalition, 2000). Northeastern University The Research Report 87

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs DB: Flexibility in schedule increases in this delivery method because designer and builder are one entity (Oregon Public Contracting Coalition, 2002). Many experts believe that DB results in a faster schedule delivery (Walewski et al, 2001; Konchar et al, 1998; Gransberg et al, 2007; Molenaar et al, 2003) and has the least schedule growth (Konchar et al, 1998, Scott et al 2006). Another effect of DB is earlier schedule certainty (Molenaar et al, 2005) because the design-builder submits the project schedule at the time of contracting which is comparatively early in the project life. Another important characteristic of DB for transit agencies is that it obligates design and construction funds before the end of a given fiscal year (Gransberg et al, 2007). This can help the agencies award the project and allocate the available funds to a project without waiting for its design to be complete. DBOM: This delivery method can increase schedule certainty and early delivery of project (Kessler et al, 2005). It has all the characteristics of DB, so one can use this delivery method as a means of schedule compression. 4) Risk management: Each new project has some level of uncertainty during various phases of its project development. Methods to cope with these uncertainties are inherent to each delivery method. The effect of delivery methods on risk identification, quantification, and mitigation is different; therefore, selection of a delivery method is dependent upon the owner’s risk management approach. These differences are considered under this issue. Tier 3 of the selection system developed in this Guide is based on risk allocation. Also, it should be noted that the effect of risks is prevalent in many of the issues discussed in this chapter and is not limited to the items 4 and 5 of this chapter. DBB: This delivery method has a long history of application and a rich background in terms of statutory laws and standard contracts which entail developed risk management processes. When the project scope is clearly definable, the owner of a transit agency can follow the traditional methods of managing risks in DBB (Gordon, 1994). Although risks and rewards are easy to understand in this method, disputes arise often over authority, responsibility and quality (Walewski et al, 2001). In other words having separate contracts for design and construction may or may not help the owner manage the risks of a transit project and the owner’s success in mitigation of risks depends upon the proficiency and experience of the owner and its consultants in risk management. CMR: The risk for the construction manager at risk comes from the CM holding the trade contracts and taking the performance risk of the project (AGC, 2004). The use of a guaranteed maximum pricing structure can create a mechanism to share cost risk between the constructor and the owner agency in the hopes of ultimately reducing costs. Early constructor involvement may result in a better understanding of the project risks and more efficient risk allocation can be achieved. This delivery method is conducive to team work. The constructor shares information with the owner and designer on trade subcontracts, value engineering, etc. That is why some experts believe that CMR theoretically reduces the risks of every entity involved in the project (Minchin, 2007). DB: Risk allocation and risk management are inherently different in DB delivery compared to DBB and CMR. The risk for errors and omissions in the plans is transferred from the owner to the DB contractor. Having single point accountability for design and construction helps the owner avoid designer-constructor blaming each other on changes in cost or time Northeastern University The Research Report 88

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs of project execution (TCRP, 2002; Riley et al, 2005; Irwin, 2003). From the owner’s perspective, the DB approach reduces the size and frequency of change orders (Molenaar et al, 2003; Riley et al, 2005) as long as the owner understands the loss of its control over design and also does not change the scope. Agencies should realize that though the risks are contractually transferred to the design-builder, a poorly defined initial scope in the RFP may result in significant cost increases. According to the design-builder’s scope of work which includes the project design, the DB contractor may be required to have errors and omissions insurance (which is usually required from design firms) in this transfer of risks (AGC, 2004; Irwin, 2003). In essence, the risk for errors and omissions does not go away, but it is transferred to the DB contractor, who has an economic incentive to manage the risk better than the owner in the DBB system. DBOM: In addition to the risks assumed by the constructor in DB delivery, the DBOM entity also assumes the risks involved with operations and maintenance and mainly the system integration and project start-up. Agencies expect that the DBOM entity will therefore be more inclined to ensure quality of design and workmanship since it will be responsible for operation and maintenance. Also the delivery method does not allow the DBOM entity to claim compensation from the agency for inadequate O&M considerations since the designer and the constructor are on the same team. As the contract includes the O&M phase, uncertainty during O&M period is reduced by awarding the whole package to the constructor (Garvin, 2003). One problem that may surface with DBOM delivery is the commercial/financial approach to risk management by constructor (Kessler et al, 2005). The DBOM constructor makes money out of the project and may accept higher levels of risk in safety or commuter satisfaction to increase its income. This difference between the viewpoints of an agency and a contractor may increase the risk of having safety issues or commuters’ satisfaction problems. 5) Risk allocation: Research in the area of risk management has indicated that the most effective approach in risk allocation is to assign project risks to the parties in the best position to manage them. This means that the party assuming a certain risk should be the party who has the most control over that risk and is also most likely to survive the negative impact of such risk. The main vehicle for risk allocation is the contract. The type of project delivery method will have a profound impact on risk allocation. Some methods allow the owner greater flexibility in allocating risks to the parties involved. Tier 3 of the project delivery method selection system developed under this Guide is based on an effective method of risk allocation. As an example, schedule risk is sometimes addressed by choosing a DB approach. This was also covered earlier under Item 3. It is emphasized that risk allocation affects many of the pertinent issues discussed in this chapter and is not limited to Items 4 and 5. DBB: This delivery method can help the owner divide risks between the designer and the contractor, but the risk of additional construction costs resulting from erroneous design remains with the owner (AGC, 2004) which the owner usually transfers to the design team. Scope definitions of design and construction contracts in DBB play an important role in risk allocation. The owner will face challenges if the duties are not defined clearly and ambiguity remains in the contracts. CMR: Although CMR facilitates risk management, it is not necessarily the best method for risk allocation. Having an experienced constructor on board improves the whole process of Northeastern University The Research Report 89

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs risk management including risk allocation but the increase in the number of parties directly involved in the project and some overlaps between their duties may make the risk allocation more difficult [Portland Mall; Weber County SLC]. Although GMP as a means of risk allocation should decrease the owner’s risks, there is always a possibility that the owner and the on-board contractor do not come to an agreement on GMP in a timely fashion. The owner in this case may have to bid out the project and will suffer from the resulting delay imposed on the project and will be subject to the uncertainty of getting higher than expected bids. DB: Because design-builder is the single point of responsibility in this delivery method, risk allocation is simpler. The owner must carefully decide which risks it can best manage and assign the design-builder those where it is the best party to bear them. It is not wise to allocate total risks to the DB contractor because that would drastically increase the contingency and constructor’s insurance costs which will be transferred to the owner through the bid (AGC, 2004). Examples of other risks include the risk of obtaining various environmental permits, or purchasing the real estate. Experience shows that the owner is in the best position to assume these risks [Greenbush]. DBOM: Risk allocation in this method is similar to DB, but adds an allocation of risks for the O&M phase. If the owner can identify the risks of the project early enough to allocate them at the time of project awarding, DBOM would be a “pro” for this issue. In other words, DBOM facilitates risk allocation if the owner is able to identify the project risks up front. DBOM has an advantage over other delivery methods in case the system provider does not guarantee the system if operated by another entity (Kessler et al, 2005). One of the major risks in this approach is the owner’s ability to provide clear scope and objectives; otherwise the consequences of disputes in the later stages may be significant. 6) LEED certification: Sustainable design and construction features are becoming more common and may become mandatory in the future for public infrastructure projects. Thus, it is important to gauge a project delivery method’s ability to include these features in accordance with the owner’s needs. The US Green Building Association’s Leadership in Energy and Environmental Design (LEED) certification is often used by public agencies as a means to articulate its desire to design and build both energy efficient and environmentally responsible projects. Although LEED certification has not become a requirement in transit projects, how each delivery method facilitates this issue can be a benefit or a drawback. For example, one benefit of establishing LEED as a criterion is that it can be used as a metric to evaluate sustainable design and construction options regardless if LEED certification is sought for the project. LEED prerequisites (including selection of site, and construction activity pollution prevention) can yield greater environmental benefits while reducing regulatory risk. On the other hand, LEED requirements may increase project costs because of extra tasks and documentation. One important fact to remember is that the LEED standards are evolving and trying to accommodate a range of project types. The adoption of LEED criteria as a selection requirement may need to be phrased to include the most current iteration rather than a particular standard. DBB: The owner has a clear opportunity to define sustainable design with LEED criteria. The lack of builder input can limit the opportunity for input into sustainable design and the owner, in certain cases, can thereby risk losing LEED certification. Northeastern University The Research Report 90

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs CMR: The owner has a clear opportunity to define sustainable design with LEED criteria. Sustainable construction features are more likely to be implemented considering the cooperative nature of the owner/builder contract. DB: The owner can clearly articulate its expectations regarding the use of LEED criteria by assigning weight in relation to other factors in the DB evaluation plan as well as using sustainable design and construction as performance criteria during design and construction. There is some evidence that the use of DB may hamper the objective of achieving LEED certification. This is due to the perception of risk by the DB contractor when considering whether to bid on a DB project with LEED goals. The owner needs to be cautious in defining the project scope and goals clearly to ensure reasonable competition, especially if LEED certification is desired. DBOM: While owner and O&M personnel may be acquainted with the LEED standard and requirements there may be limited ability to incorporating evolving standards as well as restricted opportunities to “push the envelope”. The addition of post-construction operations and maintenance, allows the owner to hold the DBOM contractor responsible for delivering the life cycle costs savings that were incorporated as a result of the design process with the DBOM contractor being at risk for failing to achieve the savings associated with the approved design. Life-cycle cost (both economic and environmental) of sustainable design strategies is a means of selection of those strategies and is a fundamental LEED component. The selection of design strategies that may produce increased first-costs are balanced and ultimately chosen by utilizing the offsets achieved through reduced life-cycle costs. Agency-Level Issues Agency-level issues relate to the owner agency. These will include items such as experience with various delivery methods, workforce requirements, goals and objectives for the capital improvement program, control of the project, and third party agreements. 7) Agency experience: This issue focuses mainly on the level of experience of an owner’s staff in terms of alternative delivery methods application. It shows the interaction between the level of experience and comfort and confidence using a specific delivery method. Owners who have used a project delivery method in the past would have a higher level of experience with that method. DBB: Transit agencies have historically employed DBB project delivery. This historic experience with DBB makes the delivery method a good candidate (TCRP, 2002). This experience can be a motivator or a detractor for using alternative delivery methods. The most experienced owners may find that some of their negative experiences with DBB (e.g. contractor’s claims, erroneous designs, delay in schedule, and cost overruns) will push them to try alternative methods. Other owners will be comfortable with DBB delivery and therefore be hesitant in trying new delivery methods. CMR: Most of the agencies have not applied CMR in their projects, as this is a relatively new method in transit. The agencies’ experience with CM is mainly about hiring a construction manager as a consultant (or Agency CM) (Please refer to chapter 2 for detailed Northeastern University The Research Report 91

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs discussion on the CM definition). Nonetheless, agency staff with DBB management experience should have most skills necessary to manage CMR because of the similarities between CMR and DBB, [Portland Mall and Weber County SLC]. One missing skill may be negotiating the construction manager’s preconstruction services fees and the guaranteed maximum price (GMP) in CMR. DB: There have been several examples of transit projects executed with the DB approach. Many transit agencies as well as other public agencies have managerial experience required for a DB project. Although agency staff with DBB management experience should have most skills necessary to manage DB, the differences between DB and DBB are significant enough that some sort of training seems to be inevitable for agencies with no background in DB. The primary difference is managing a contract that contains the designer and constructor as one entity. This difference affects the manner in which the design-builder is procured (e.g. using best value method instead of biding based solely on cost), the manner in which design is reviewed, and some aspects of how construction is overseen by the owner. Additionally, agency staff will need to learn how to conduct project oversight without the presence of a completed design for early features of work. This may require training and change of skills of owner employees which may make DB more difficult to administer [Utah Med. Center, Utah University, Green Bush, TREX, I-205 Light Rail]. DBOM: DBOM represents a significant departure from DBB and few agencies have experience with this method. The advantage to using DBOM is that the agency can transfer most of the traditional responsibilities of the agency staff to the DBOM contractor. Some experts believe that this delivery method is best suited for small agencies without substantial in-house expertise (Kessler et al, 2005). However, the loss of control that goes with this transferring of responsibility can be a disadvantage if the agency does not have experience in managing outsourced responsibilities for design, construction and maintenance to constructor. 8) Staffing Required: This issue reflects how each delivery method drives the owner’s direct involvement in the project. Each delivery method assigns specific duties to each party including the owner. The scope of these duties and the dependency of the project progress on the owner’s involvement in decisions show the extent of owner’s involvement. The total number of required owner’s employees for each delivery method is one measure of the extent of owner involvement. A second measure is the variation in the number of staff required throughout the project development process. It is assumed that in general, a smaller staff is more desirable, although this has to be measured against potential reluctance within the agency to buy into a method that can reduce the need for agency staff. DBB: An owner in a DBB project should administer two separate contracts for design and construction. Because of this and the high level of involvement in decision making and quality management, a relatively large number of owner employees are needed in this system (AGC, 2004; Gordon, 1994), [Silver Line]. The owner’s responsibilities in DBB are spread throughout the project (mainly dealing with the designer at the beginning and shifting to the contractor after project award); fluctuation in the number of employees required during the project is minimal. Northeastern University The Research Report 92

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs CMR: The owner hires a new party in CMR and delegates some parts of its managing duties to this party. This system can arguably require the least number of owner’s employees because the CMR can expand to meet the owner’s staffing needs (Gordon, 1994). The owner may however need to add some professionals to its staff (either as an employee or consultant) if special expertise (GMP or construction manager’s fee negotiation as an example) in managing a CMR contract is desired. DB: The owner should develop a comprehensive set of project specifications before advertising the project because the design-builder takes responsibility for the project in both design and construction phases only after the project is awarded and will base the project design on the specifications. The owners may hire consultants for developing the RFQ/RFP documents or use their own staff. A study shows that most of the agencies have not changed the size of their staff after implementing DB mainly because the owner must be involved with substantial amount of pre-advertising design and engineering effort (Gransberg and Molenaar, 2007). Another study shows that some public agencies had spent considerable effort in developing the design documents as a means of performance risk reduction in large DB projects (Molenaar, 2005). The number of staff required for project administration decreases after the award as the number of check points and controls is reduced in this delivery method and the oversight procedures are usually streamlined (TCRP, 2002). Another driver with respect to the size of staff is the way QA/QC is handled in DB projects. In most DB projects, the constructor is put in charge of day-to-day quality control functions. The owner’s role is to design and implement a quality assurance program. DBOM: Early decisions in this delivery method cover a wide range from feasibility of project in conceptual design to safety in operation phase. This broad range of expertise requires a good size owner’s staff to handle the project at least in pre-design and preliminary phases of design [Hudson-Bergen]. On the other hand some experts believe that a transit agency with a small staff would prefer to choose DBOM and outsource many of its duties (Kessler et al, 2005). In most DB projects, the constructor is put in charge of day-to-day quality control functions. The owner’s role is limited to spot checks and quality assurance functions. 9) Staff Capability: This issue mainly focuses on the quality and competence of the owner’s employees. This factor seeks to measure the owner’s requirement to furnish a highly capable staff to complete the duties it must undertake in each delivery method. There is a concern about retirement of experienced employees which can negatively affect the capability of owner’s staff during the project. So the availability of the experienced staff until the end of the project should be considered while evaluating the staff capability. DBB: Transit agencies have more experience with DBB. This experience helps them gradually build up the capability in their staff at all levels of the organizational chart. An important issue here is the different expertise required in owner’s agency to handle a design contract with the designer of project and a construction contract with the general contractor. So the owner may end up with a longer list of required competencies [Silver Line]. CMR: Some professionals believe that CMR requires special capabilities to administer this type of delivery method while others think that the owner agency is delegating most of its duties to the CMR. While the work can be delegated, agency staff must have the capability to Northeastern University The Research Report 93

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs oversee CMR work and notice errors or omissions in their work [Portland Mall and Weber County SLC]. Another managerial skill required in CMR is related to the relations between the onboard constructor and the designer. The owner should carefully manage the process by which the constructor gives inputs (constructability, value engineering, etc) to the designer, and the way these inputs are received, analyzed and implemented. Designers are not used to taking on-going criticism by a contractor and there is potential for this process to cause conflicts. Also, the experience of the agency staff in GMP negotiations is a key factor in this delivery method. It seems that while the agency would need a smaller staff in this method, the staff needs to be especially competent and versatile in dealing with these additional requirements. DB: As an alternative delivery method, DB contracts require owner’s competency in terms of managing the process, keeping up with the speed and understanding the procedures. A recent research shows that the traditional design and construction engineering tasks performed by public agency professional engineers (e.g. design deliverable approvals, construction inspection) were performed by the same staff in the design-build projects (Gransberg and Molenaar, 2007). While the required skills for DBB are similar to DB, owners tend to put their most experienced staff on DB projects because they need to be better prepared to understand conceptual designs, conceptual estimates, and performance criteria. These skills typically only reside in the most experienced staff (Gransberg and Molenaar, 2007) [Utah Med. Center; Utah University; Green Bush; TREX: I-205 Light Rail]. DBOM: The variety of early decisions that freeze the main portion of project scope demands capable employees with high level of expertise [Hudson-Bergen]. The owner will also need to have financial analysis capabilities in its staff because this delivery method may include project financing which in turn will require more extensive financial analysis on project viability, contract incentives, and owner’s financial security (FTA, 2006). 10) Agency Goals and Objectives: Agency goals can be described in broad terms such as providing service to the community or achieving its growth goals. Agency goals can align with project delivery attributes (pro) or can be in conflict (con) with them. Agency goals are different from project goals. Agency goals also entail statutory requirements for safety, equal opportunity, and other legal/regulatory requirements. Project goals on the other hand are specified in procurement documents and are usually described in terms of time and cost expectations. DBB: An agency can incorporate its goals and objectives in prescriptive specifications and detailed designs. Having control over the design on one hand and requirement of design approval for construction commencement on the other hand helps the owner assure the achievement of its goals and objectives. Examples include specifying targets for DBE participation and stakeholders concerns with regard to agency and project objectives. CMR: The agency can work with CMR during the design phase, and when negotiating the GMP to develop project goals and objectives in alignment with agency goals and ensure that they are achieved by the project. Since this is typically a qualifications-based selection, the request for proposal can help assure that agency goals and objectives are clearly incorporated in CMR proposals. Compared to DBB this delivery method may contribute to a better owner-constructor relationship that can facilitate the achievement of agency goals. [Portland Mall; Weber County SLC] Northeastern University The Research Report 94

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs DB: Compared to DBB, the DB approach reduces the agency’s control over the details of the design. To the extent that these details affect the agency’s goals, the DB may have a negative impact on achieving its goals. Examples of the agency goals that could be compromised include aesthetic considerations, safety, and commuter satisfaction. If an owner is not absolutely clear on its goals prior to procurement, DB can yield unsatisfying results (Molenaar et al, 2005), [Utah Med. Center; Utah University; Green Bush; TREX; I- 205 Light Rail]. DBOM: A DBOM contract covers a wide area of project issues. This comprehensive agreement may push the project through different steps of decision, and help the owner achieve its goals. There is a concern that DBOM may hinder the owner in achieving its social goals. Although a TRB study states that decrease in quality and safety of services provided by private entities has not been proven (Kessler et al, 2005), some experts believe that using this delivery method may limit the agencies’ power to serve the public, e.g. a change required in operation phase will be extremely costly in DBOM (Kessler et al, 2005). Advocates of this method believe that a comprehensive agreement with appropriate level of detail can address this issue, however, it should be noted that there is insufficient precedence to ensure success. 11) Agency Control of Project: Different delivery methods have different check points and decision making steps. Owner’s control over the details of design and quality of construction is studied in this issue while cost control and time control are studied in other issues. DBB: The owner in this delivery method may benefit from checks and balances by having the designer and constructor under two separate contracts. Having periodic decision points in DBB and mainly during the design phase helps the owner control the project’s design (TCRP, 2002; Garvin, 2003; Irwin, 2003). Having a specific contract based on bid plans helps the owner control construction and material quality. The owner will have objective control over the quality of design through the design team. Also, if flexibility is required during the construction, DBB can comparatively have a better performance because there are established procedures for implementing changes. However, change orders are usually accompanied by corresponding cost increases. CMR: The owner agency benefits from the involvement of the construction manager in most of the decisions during the design phase. The construction manager can assist in controlling the details of design. The owner therefore has a similar level of control in CMR as compared with DBB if the working relationship with the CMR is good. This delivery method gives more control and flexibility to the owner in implementing changes in the details of design during design development compared to DB. Furthermore, having the construction manager on the team may make implementing changes more effective than in DBB. (Walewski et al, 2001; Minchin et al, 2007). DB: Although DB arguably provides the owner with the same quality of design and construction as DBB does (Konchar et al, 1998; FHWA 2006), the owner will lose control over the details of the design that are not defined in the request for proposal. Loss of control over the design (and possibly lack of check points) has the potential to expose the owner to shortcomings in the quality of design and construction (Gordon & REES LLP, 2005; Irwin, 2003; Gransberg et al, 2004) [Utah Med. Center; Utah University; TREX, I-205 Light Rail]. Northeastern University The Research Report 95

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs DBOM: The owner in this delivery method loses its control over the details of design and even details of operation and maintenance. DBOM is not a good option for the owners who want to extend their existing systems mainly because of the integration needed in operation phase (Kessler et al, 2005). Loss of checks and controls after awarding the contract is a disadvantage of this delivery method especially if the owner is expecting a high level of control over the project. 12)Third Party Agreement: This issue concerns each delivery method’s impact on facilitating agreements with third parties, such as political entities, utilities, railroads, etc. involved in the progress of project. DBB: DBB can help during lengthy negotiations with some project stakeholders [Silver Line]. It gives some flexibility and time to the owner to get required agreements before the commencement of construction phase. Third parties on the other hand, will have the ability to examine 100 percent complete designs before a contractor is hired. The disadvantages of completing designs before hiring a contractor may include a lengthy design schedule (including numerous instances of stakeholder inputs that can disrupt the most generous schedules) and also a lack of construction contractor input into the third party agreements. CMR: The main advantage of having a construction manager is the constructability advice and responsibility for that advice (for example, construction knowledge and an understanding of construction methods) during the development of third party agreements. This delivery method may also have a significant impact on getting into an agreement with third parties involved in a project when compared to DBB if the owner includes the responsibility to make agreements with third parties as part of the CMR contract. As an example, among the projects interviewed for this work, one agency clearly mentioned the benefit of having a contractor on board while negotiating with third parties [Weber County SLC]. In general, the CMR’s knowledge of construction processes and sequencing can help clarify various aspects of project impact on communities and institutions; this will hopefully facilitate achieving understanding and approvals. DB: The DB process can move third party agreements earlier in the delivery process, often before the design is complete. Agencies have experienced both benefits and drawbacks of having the design-build contractor on the team before all third party agreements are in place. As the design and construction is awarded in one contract, the time required to develop agreements with other parties can be shorter than desired. Additionally, these agreements must often be written in performance terms because the design is not completed at the time of award. However, some other experiences with DB show that the DB contractors have been successful in obtaining responses from project stakeholders by exerting pressure on them. The constructors have different approaches to negotiating agreements with third parties compared to owners and these can often be very effective [Utah Med. Center; Utah University; Green Bush; TREX; I-205 Light Rail]. DBOM: Since the DBOM contractor will be maintaining the project for a significant period of time after construction, they need to exert much more control over the third party agreements. The DBOM contractor may negotiate some of the agreements with little input from the owner. The remainder of the agreements will be similar to the DB process. In Northeastern University The Research Report 96

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs some cases with less schedule constraints, the owners may treat third party agreements similar to a DBB project [Hudson-Bergen]. Public Policy/Regulatory Issues Public policy/regulatory issues analyze the choice of project delivery method decision in the face of existing laws, mandated social programs, labor unions, and other factors that establish the legal environment in which the project must be delivered. 13) Competition: Each delivery method may affect the level of competition. In many cases, agencies are operating under a legal requirement which requires “free and open” competition. The owners benefit from a competitive market mainly because of the reduction in bid prices; so if the choice of a certain delivery method reduces the number of qualified proposers/bidders, it would be considered a disadvantage. Currently, the volatility of bid prices in transportation projects is a major concern for the owners of transit (and other modes of transportation) projects. Additionally, alternative project delivery methods may inadvertently lead the agency to package projects in sizes that can effectively reduce competition due to bonding limitations and contractors’ capacities. This factor is about the evaluation of facilitating effects of each delivery method on competition. DBB: Compared to other delivery methods, availability of a relatively large pool of potentially qualified bidders ensures a high level of competition (Walewski et al, 2001; AGC, 2004). The owner can benefit from this market competition and get a low bid/proposal for its project. This approach also enables the owner to divide the project into smaller packages and bid them separately to further increase competition. The drawback to the multi-prime approach is that the coordination between various contracts may prove difficult. CMR: Using RFP procedures and taking into consideration qualifications-based factors when evaluating the bidders can help the owners weed out unqualified proposers. The issue in this system is that the selected CMR constructor becomes the de facto winner of the construction contract, giving the owner less competitive leverage when pricing the construction (Irwin, 2003). This can be alleviated to some degree by requiring that the project components be bid competitively among various trade subcontractors. Also, the owner can reserve the right to go to regular bidding if it cannot agree on a GMP with the CMR. DB: The RFP process can weed out unqualified DB entities but at the same time, the size of the bid package and the bid preparation costs may reduce the number of qualified bidders (AGC, 2004). DBOM: Adding operation and maintenance to the scope of work will lengthen the contract duration compared to other delivery methods on one hand and requires some extra competencies that typical construction contractors usually lack. The prime contractor usually hires operation and maintenance subs as parts of the consortium. These factors may decrease the number of potentially qualified bidders when a DBOM project is bid out. In most DBOM projects so far, the number of responsive bidders has not exceeded two! Northeastern University The Research Report 97

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs 14) Disadvantaged Business Enterprise (DBE) Impacts: Delivery methods may facilitate the fair competition for DBEs for DOT-assisted contracts and reduce burdens on small businesses. The effect of each delivery method on promoting participation by disadvantaged businesses is evaluated under this issue. In general due to the size of most transit programs, it would be unlikely that a DBE firm serve as the lead constructor. What is more common is to set aside a certain percent of budget to assure DBE participation. DBB: The owner has the chance to include requirements for participation in both design and construction contracts. For example, in the RFP for soliciting design services, the owner may stipulate the nature and extent of DBE participation as part of the design team. In the same way, the owner may require that the general contractor perform a pre-set percentage of construction using DBE subcontractors. Usually, the minimum level (as well as the desired target level) of participation is stipulated in terms of percent of contract price. On the other hand, the low bid environment may force DBE subs to submit dangerously low prices, potentially harming the future viability of these fledgling companies. CMR: A constructor that submits a proposal for a CMR project is usually more sophisticated than a DBB construction contractor. Lack of enough experience is a negative point for DBEs in a qualifications-based selection. One method to ensure DBE participation is to require a pre-set minimum (and target) percentage of the GMP for DBE firms when the GMP contract is negotiated. DB: Lack of enough experience and finance does not allow a DBE to become the main contractor but small businesses/DBEs may become subcontractors of the design-builder. As the owner is not directly involved in selecting subcontractors and suppliers, requirements for DBE participation as a percentage of the project budget should be included in DB RFP and then in the contract. This should be based on the number of DBEs associated with the various trades that will be required in the project. The design builder should report (usually monthly) actual payments to all the DBE subcontractors and suppliers. As owner has less control in this delivery approach, the enforcement of DBE participation may be harder than DBB or CMR. DBOM: This delivery method performs very similar to DB and it has the same advantages and disadvantages. The dollar value and the size of main contract do not work against small businesses if relevant considerations are included in the contract. For example there were DBE goals in Hudson-Bergen light rail which were achieved by putting a clause in the contract for outsourcing some parts of the project to local contractors [Hudson-Bergen]. It should be noted however that because agency’s control is minimized in this delivery method, there may be some risk that the DBOM contractor does not achieve the desired level of DBE participation. 15) Labor Unions: Each delivery method covers certain phases of a project life cycle. For example DBOM delivery covers almost all the phases while DBB delivery only affects the construction phase. The choice of delivery method may have an impact on labor usage and hence labor union issues. The legal protections for transit laborers such as Section 13 (c) of Federal Transit Act complicates the application for federal grants and transit agencies should show that fair and equitable protective arrangements are made to protect employees affected by such assistance (for more information on Section 13 (c) please refer to a legal research done by TCRP in 1995). Other Northeastern University The Research Report 98

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs acts like Davis-Bacon act should also be taken into consideration while determining the labors’ minimum wages in any delivery method. DBB: This is the traditional way of doing the project in which the contractor hires the laborers directly or through a subcontractor. Union or non-union labor may be used in this approach (unless local conditions and considerations limit constructor’s options) and there would be no fundamental opposition to DBB unless the contractor fails to comply with the relevant rules and regulations set forth. CMR: The constructor in this delivery method plays a similar role to the contractor in DBB and there would not be fundamental issues between the unions and the constructor. If there are union issues in the project’s location, the constructor does not usually guarantee the maximum price of the project and may not absorb the risks of the labor union issues. Unions may support alternative delivery methods as these methods give more weight to qualifications rather than cost; unions assert they are more qualified than non-union labor (Bearup, et al 2007). DB: Design-builders are usually joint ventures and dissolve after the end of the project. This may make the process of dealing with unions a bit complicated as they expect a reliable and established party to have an agreement with. Awarding the design to a design-builder in some cases (California for example) where state engineers have their own unions may cause conflicts and challenges for the owners who seek to use DB (although this has more precedence in highway rather than transit). Unions may support alternative delivery methods as these methods give more weight to qualifications rather than cost; unions assert they are more qualified than non-union labor (Bearup, et al 2007). DBOM: Labor unions may affect this delivery method more than DB because the scope of this method entails operation and maintenance which are usually done by union laborers employed by public entities. The law requires that the jobs of the laborers already employed by the agency be protected according to the requirements of Section 13 (c). Because of this, there must be an agreement between the constructor and the related unions to guarantee the availability of O&M personnel with reasonable rates during the operation phase. Also, there may be some opposition from agency’s maintenance employees to award of such contracts. In any case, there is already considerable experience with O & M contracting in transit. 16) Fed/State/Local Laws: Based on the research done on the federal and state laws, use of some delivery methods may not be allowed for transit agencies. Some of the states mandate that transit agencies go through several steps before being allowed to use an alternative delivery method. This issue studies the level of difficulty of using a delivery method from a legal standpoint. Due to constant changes in state and local laws, each agency should check all the relevant codes in order to find out the legality of each delivery method at the time when possible delivery methods are studied for each project. (Please refer to Chapter 2 for more information on this issue). DBB: All the state codes accept DBB as a project delivery method for a transit project. Relevant procurement processes are well-developed and details of DBB execution are available nationwide. Northeastern University The Research Report 99

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs CMR: More than half of the states do not allow CMR to be used in transit projects (Ghavamifar and Touran, 2008). Some have imposed limits or extra approval requirements and only about 14 states have fully authorized CMR application in transportation projects. Even in those cases, approval for transportation projects may not mean that CMR can be used in a transit project. Because of these complications, the legality of the CMR or any other alternative delivery method should be carefully reviewed in a specific state. DB: This delivery method has been used more than CMR, but there are still 13 states where this delivery method is not allowed in transportation projects. DBOM: Awarding a project with DBOM delivery method is similar to DB and owners are required to go through the same laws and regulations that in some locations make DBOM application impossible. In addition, if the DBOM arrangement calls for contractor’s financing, then additional regulations and laws may need to be considered. 17) FTA/EPA Regulations: The effect of various environmental regulations on project cost and schedule can be profound. These include obtaining various types of permits and complying with various regulations. Additionally, FTA specifies that a number of requirements be met before a project can receive commitment for federal funding (i.e., receive the Full Funding Grant Agreement (FFGA) in case of New Starts projects). Currently the FTA accepts all types of project delivery methods; specifically, they modified their evaluation process to accommodate DB and DBOM in the 1990’s. DBB: The traditional approach is the most familiar for the FTA and the environmental agencies. This familiarity can be an advantage in the permitting and funding process. CMR: FTA has less experience with CMR. This may cause some problems or delays although the agency maintains that it can accommodate all legal delivery methods. Environmental issues would be similar to DBB as the owner remains involved and is in control throughout the design phase. DB: FTA started an initiative to experiment with DB early in the 1990’s. Five pilot projects were constructed using the DB approach. FTA has since modified its procedures to accommodate the DB delivery method. The owner agencies prefer to receive the FFGA before the project goes to bid, while the project is at the end of Preliminary Engineering (PE) and subject to many uncertainties. Current regulations require that the agencies work closely with FTA which may cause some delay. The FTA had some problems with the first generation of DB projects. Currently, most of these problems have been resolved and the agency has matured in dealing with DB projects. The environmental permitting process can be problematic though. As an example, in a commuter rail project [Green Bush], a major cause of delay was that the owner had left the obtaining of environmental permits to the constructor, a task for which the DB contractor was ill-equipped. This caused a delay of longer than one year. DBOM: Concerns here are similar to DB. 18) Stakeholder/Community Input: This issue discusses the opportunities afforded by the delivery method to the owner for coping with community inputs. The delivery method should strive Northeastern University The Research Report 100

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs to leverage stakeholder and community input to achieve project goals in a meaningful and transparent fashion. DBB: Separate design and construction phases give more time and opportunity to the owner to get stakeholders and communities’ inputs to the project design and incorporate their expectations in the project scope before the commencement of the construction phase. This characteristic of DBB can lengthen the project pre-construction phase and cause delays in the project. CMR: The construction manager is on board during design in this method and can help the owner negotiate with stakeholders and understand their expectations while pushing the project forward. Additionally, community outreach and public information can be made part of the CMR’s preconstruction service package. Depending on the CMR’s experience and qualifications, this may enhance project chances for obtaining community consent and stakeholder agreements. DB: The owner of a transit project needs to get all the important inputs from stakeholders before issuing a RFP because changes in the project after that would be difficult and costly. On the other hand, after the contract award, the DB contractors have sometimes been able to proceed through community pressure more effectively compared to state agencies [TREX]. Additionally, the agency can require the DB contractor to include a public information and outreach program in the project to facilitate stakeholder input during design and construction. DBOM: This delivery method decreases the decision points and covers a longer period of time in project life cycle. This characteristic makes pre-construction negotiations between owners and stakeholders more complex. The DBOM contractor may be able to push through construction phase and deal with community pressures more effectively. At this point, there is little evidence to support how the DBOM will cope with this issue. Life-Cycle Issues The life-cycle issues category attempts to place the project delivery methods in a long-term, post- construction context in the minds of the respondents. These issues deal with project aspects that impact not only maintainability and the cost of operations and maintenance, but also the sustainable design and construction goals that are starting to emerge as measures of an agency’s commitment to the environment. 19) Life-Cycle Costs: Effects of delivery methods are extended to the operation and maintenance phase. This issue focuses on the opportunities or barriers that each delivery method provides in regards to life-cycle costs. DBB: The owner is in control of design and quality and can tailor these to project’s long- term life-cycle goals. CMR: The owner keeps almost the same level of control over the design of the project and also benefits from constructor’s advice regarding future costs of the project. Northeastern University The Research Report 101

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs DB: The owner needs to have a close eye on the issue of increasing life cycle costs of the project mainly because the design-builder has a motive to decrease the initial costs of the project and bring it down to the agreed upon amount regardless of possible increases in the future operation and maintenance costs of the facility. DBOM: In this delivery method the constructor is in charge of operating and maintaining the built facility. Transferring the responsibility of long-term O&M to a private constructor creates opportunities to leverage private sector expertise and to realize life cycle costs reduction by integrating delivery activities and private sector efficiencies (Garvin, 2003; FTA, 2006). There are usually provisions in DBOM contract that motivate the constructor to keep the O&M cost to the lowest possible amount. DBOM delivery method is primarily used for financial purposes in other countries and has been the most suitable delivery method for the public owners if the project initial costs are beyond the available funding resources (TCRP, 2002) 20) Maintainability: Maintainability is affected by the choice of delivery method in two different aspects: level of quality and ease of maintenance. This issue describes positive or negative effects of each delivery method on these two aspects. DBB: The owner can check the maintainability of the finished design before awarding the project. Having check points in the design phase can help the owner assure the quality of the design of the end product. CMR: The owner of a CMR project can benefit from all the advantages of DBB and also the constructor’s advice on maintenance of the end product if the constructor has previously operated similar facilities. DB: As the quality control is transferred to the design-builder and details of the design are not known at the time of awarding, many owners have some concerns about maintainability and quality of the end product. This has led some owners to require multi-year warranties from DB contractors. DBOM: This delivery method works similar to DB but as O&M is included in the contract and the constructor is in charge of operating the facility after it is built, the owners have less concern about the quality and maintainability of the end product. 21) Sustainable Design Goals: Sustainable design is becoming ever more important in helping to achieve sustainability goals for the projects. The effect of delivery method in facilitating the process of implementing sustainability issues in the design is the focus of this discussion. DBB: The Owner has a clear opportunity to define sustainable design intent and shape social and environmental impact. This method presents opportunities to promote and enhance sustainable design criteria by allowing for materials research and the development of strategic stakeholder input. One drawback may be that the O&M personnel could ultimately be unfamiliar with sustainable systems operational requirements, but this is an issue that can be resolved with careful planning. Northeastern University The Research Report 102

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs CMR: The owner has a unique opportunity to realize the economic returns for sustainable systems performance as well as using sustainability as an evaluation factor for the selection of a builder. The design schedule could, however, outlive systems performance criteria and impact public participation limiting social equity issues. DB: This project delivery method can result in an inherent coordination of design and performance with potential for accelerated economic returns for sustainable systems performance by shortening the project schedule. The owner has an opportunity to use multiple design-builders to present innovative designs that are consistent with clearly defined sustainable criteria. The owner can clearly articulate expectations regarding sustainability by assigning weight in relation to other factors in the DB evaluation plan. The design schedule could, however, impact public participation thereby limiting social equity issues. Due to the normally time consuming processes associated with municipal and state requirements for mandatory announcement and the convening of public hearings, certain sustainability measures such as wetlands mitigation and avoidance of undeveloped areas raises concerns for eminent domain and brown fields redevelopment which can impact time performance. DBOM: While O&M personnel are intimately aware of sustainable requirements there may be limited access to incorporating evolving standards or expectations as well as restricted opportunities to “stretch the limits”. The DBOM can realize accelerated economic returns for sustainable systems performance since the owner/operator has an inherent bias toward minimizing operations and maintenance life cycle costs. The compressed timeframes could, however, impact public participation limiting social equity issues. Furthermore, O&M personnel may be unfamiliar with sustainable systems requirements. For example, materials may require alternate maintenance procedures, or systems controls may incorporate technologies requiring specialized training that may be beyond the scope of the initial proposal. 22) Sustainable Construction Goals: Sustainable construction is an important vehicle for achieving sustainability goals for new projects. The disconnect between designer and builder with some delivery methods can create limitations on the means and methods available to the project. The effect of a delivery method on facilitating the process of sustainable construction is the focus of this discussion. DBB: An experienced constructor does not have opportunity to give sustainable design features as inputs during the design phase. The availability of sustainable materials and practices relevant to regional procurement and construction methodology may be unavailable to designers unfamiliar with the project location. CMR: The owner has a unique opportunity to realize the economic returns for sustainable systems performance as well as using sustainability as an evaluation factor for the selection of a builder. Sustainable construction features are more likely to be implemented considering the cooperative nature of the owner/constructor contracts when using this delivery method. DB: This project delivery method can result in an inherent coordination of design and performance with potential for accelerated economic returns for sustainable systems performance. The owner has an opportunity to use sustainability to evaluate potential Northeastern University The Research Report 103

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs design-builders although innovation with sustainable criteria related to more advanced technology could be limited due to the lack of previous installations. DBOM: There is an inherent coordination of design and performance with the requisite guaranteed ability to implement sustainable construction and operational features as designer, builder, and operator are contractually united. The DBOM can realize accelerated economic returns for sustainable systems performance since they have an inherent bias toward minimizing operations and maintenance life cycle costs. Added benefits can include participation in the development of evaluation criteria for new technologies as part of an ongoing review of installed systems and life-cycle costs. Other Issues The Other Issues category consists of issues that are important to project success but not categorized previously in this chapter. 23) Construction Claims: The effect of each delivery method in exposing the agency to potential conflicts and claims is studied under this issue. If a delivery method can reduce the exposure to construction claims, that delivery method is a favorable choice (“pro”), and if it increases the possibility of construction claims, it is an unfavorable choice (“con”). DBB: This method typically has the highest occurrence of claims & disputes. Disputes arise often over authority, responsibility and quality (Walewski et al, 2001). Furthermore, as the owner is responsible for design completeness, errors and omissions claims is a common occurrence in DBB projects. Some contractors may bid low to win a job and try to enhance their final profit margin through claims and change orders, especially if design errors or ambiguities are present in the construction documents. Studies have shown that this delivery method resulted in the highest rate of cost growth which could be an indication of large number of claims (Konchar, 1998). CMR: Assuming a well-structured contract, there is less probability for claims and disputes once a GMP is agreed upon and the contract is signed. As the CMR has been present during the design process there will be less need for information and clarification of the design documents. Some professionals consider that this approach will result in very few construction claims. This is then a major advantage of the CMR approach [Weber County SLC]. The qualifications-based selection methodology creates an effective deterrent to initiating claims by requiring the CMR to be “successful” on the current contract in order to be competitive for future projects. The qualifications-based selection process may reduce the possibility of hiring litigious contractors. DB: A study shows that the size and frequency of change orders are less in DB (Riley et al, 2005). This delivery method is less prone to claims and disputes, assuming a well-structured contract. As an example, claims for design errors, a major source of DBB contractors’ complaints, is reduced considerably in DB. At the same time, early pricing leaves the owner vulnerable to claims for scope that was missing in the RFP. The qualifications-based selection methodology creates an effective deterrent to initiating claims by requiring the Northeastern University The Research Report 104

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs design-builder to be “successful” on the current contract in order to be competitive for future projects. DBOM: An advantage of DBOM is that at the time of the agreement between all the parties, the maximum level of contractual obligation is signed. In other words, all parties have obligated themselves not only for the construction phase but also for several years of O&M. This will minimize the challenges of start-up claims and system integration in complex projects (Kessler et al, 2005). On the other hand, if the DBOM contractor does not have the competencies and characteristics expected by the owner, or if the owner has not defined the scope of work adequately, the whole project will face difficulties during design, construction, and operation phases. 24) Adversarial Relationship: Transit projects can be hampered by conflicts between parties to the design and construction contracts. The higher the level of adversarial relationships in a project, the more likely the project will suffer from cost, schedule, and quality problems. Delivery methods define the relationships among all project parties. If the project delivery method encourages project parties to work together as a team to achieve the project goals and characteristics, it is considered a benefit (pro). Conversely, if the project delivery method increases the possibility of adversarial relationships, it is considered a detriment (“con”). DBB: This delivery method can create an adversarial relationship between the parties and mainly between the owner and the construction contractor (Walewski et al, 2001; Irwin, 2003; Mahdi et al, 2005). Furthermore, the engineer and the contractor may assume adversarial roles as one is in charge of approving the other’s work. The division of responsibilities may also result in these two parties blaming each other in case of project failures or during major disputes (Halpin 2006). CMR: Including construction contractor collaboration during design phase builds constructive team work and facilitates project team formation (Irwin, 2003; Minchin et al, 2007) although it requires extensive coordination of consultants and/or subcontractors. DB: Single point of responsibility for design and construction decreases the potential for conflict between the engineer and constructor (Walewski et al, 2001; TCRP, 2002; Halpin 2006). Although there should be less blaming between the designer and the constructor (since they are both on the same team and they are jointly responsible to the agency for the success of the project.), instances of disputes between them (on the same DB team) were observed during our interviews [Greenbush, NJ Transit]. It is worth mentioning that design- builders may be deterred from submitting frivolous claims to owners who have future DB projects to avoid poisoning the well on a qualifications based selection system (QBS) by making the owner angry with a claim. DBOM: The owner is more immune from disputes between DB and O&M personnel. This delivery method also decreases the start-up challenges and system integration during initial years of operation (Kessler et al, 2005). Despite this, disputes between team members such as systems and civil contractors can adversely affect the project. Northeastern University The Research Report 105

TCRP G-08 – Project Delivery Methods Chapter 5 - Advantages/Disadvantages of PDMs Northeastern University The Research Report 106 Conclusion The analysis done in this chapter is not deterministic or judgmental. It only describes the advantages and disadvantages of delivery methods in dealing with each of the pertinent issues discussed. This in turn helps identify strengths or weaknesses of each delivery method in coping with important factors that can affect project goals. This analysis provides a broad picture of the issues affecting project delivery methods and develops a basis for a decision system which is introduced in the following chapters. Also, it should be noted that in many cases, advantages and disadvantages listed are not absolute and should be considered in comparison with competing delivery methods.