Strategic Program Delivery Methods (2017)

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CONTENTS 1 SUMMARY 5 CHAPTER ONE INTRODUCTION Background, 5 Synthesis Goals and Objectives, 5 Key Definitions, 6 Synthesis Methodology, 7 Synthesis Organization, 7 8 CHAPTER TWO OVERVIEW OF STRATEGIC PROGRAM DELIVERY Introduction, 8 Transportation Project and Program Development Phases, 8 Strategic Planning and Programmatic Delivery, 9 Organizational Structure, 11 Summary, 14 15 CHAPTER THREE CURRENT PRACTICES IN STRATEGIC PROGRAM DELIVERY Introduction, 15 Program Structure and Policies, 15 Project and Program Delivery Methods, 17 Summary, 24 25 CHAPTER FOUR PROGRAM DELIVERY PERFORMANCE: BENEFITS AND CHALLENGES Introduction, 25 Project and Program Delivery Performance, 25 Benefits of Program Delivery, 29 Challenges and Lessons Learned in Program Delivery, 31 Summary, 32 33 CHAPTER FIVE CASE EXAMPLES OF STRATEGIC PROGRAM DELIVERY Introduction, 33 Selection of Case Examples, 33 California Department of Transportation, 34 Florida Department of Transportation, 38 Missouri Department of Transportation, 40 New York State Department of Transportation, 44 Oregon Department of Transportation, 47 Utah Department of Transportation, 52 Washington State Department of Transportation, 54 Summary, 58 59 CHAPTER SIX CASE EXAMPLE FINDINGS Introduction, 59 Strategic Program Delivery Benefits, 59 Strategic Program Delivery Challenges, 60 Underlying Factors to Consider in Program Delivery, 61 Summary, 63

64 CHAPTER SEVEN CONCLUSIONS AND SUGGESTIONS FOR FUTURE RESEARCH Introduction, 64 Conclusions, 64 Future Research, 65 66 ACRONYMS AND ABBREVIATIONS 68 REFERENCES 72 APPENDIX A SURVEY QUESTIONNAIRE 81 APPENDIX B SUMMARY OF SURVEY RESULTS 100 APPENDIX C CASE EXAMPLE QUESTIONNAIRE Note: Many of the photographs, figures, and tables in this report have been converted from color to grayscale for printing. The electronic version of the report (posted on the web at www.trb.org) retains the color versions.

SUMMARY STRATEGIC PROGRAM DELIVERY METHODS Individual transportation projects are developed under programs that aim to implement an agency’s strategic delivery plan, legislative initiatives, and other public policies. State departments of transportation (DOTs) constantly seek solutions to improve managerial, operational, and organizational effectiveness in delivering their transportation programs. The structure, organization, and management of a program have a substantial influence on the efficiency and effectiveness of program development and delivery. State DOTs and other transportation agencies face several challenges in delivering their transportation programs and sub-programs. Delivering projects on time and within budget, distributing funding effectively, and managing resources are typical driving forces for program delivery. Effec- tive program delivery depends on policies and procedures that address the administration and management of individual projects throughout the program delivery process. In this synthesis, the word program is used to mean a collection of projects; bundled projects; a state’s, region’s, or district’s budgeted transportation construction program; or a state’s transportation program (which includes highways, bridges, mass transit, and so on). A number of project delivery options are available for state DOTs to deliver their transportation programs. These delivery options include the traditional design-bid-build (D-B-B) method; alternative contracting methods (ACMs) such as design-build (D-B), construction manager/general contractor (CM/GC), and public-private partnership (P3); and other innovative techniques such as A+B contracting (cost-plus-time, a best-value approach to D-B-B projects) or alternative technical concepts (ATCs) with D-B-B and other delivery methods. State DOTs have increasingly employed ACMs and innovative techniques to improve their program delivery. Each delivery method has certain perfor- mance opportunities in terms of cost, schedule, quality, risk management, and other met- rics. Developing an effective strategic plan by incorporating these diverse delivery options is critical for successful program delivery. However, research is lacking that documents how implementing various delivery methods strategically for a program of projects can improve the delivery of the entire program. The goal of this synthesis is to document the state of practice in strategic program delivery. The report identifies transportation program structures and approaches to selecting delivery methods for a program. It also identifies and documents the benefits of each method that has been applied to programmatic decisions. The study methodology consisted of four main steps: 1. literature review, 2. survey of DOTs, 3. content analyses of state guidelines and manuals, and 4. case examples.

2 After a rigorous literature review, a web-based survey was developed and distributed to the members of the AASHTO Standing Committee on Highways, which includes repre- sentatives of all 50 state DOTs. Forty-one DOTs responded to the survey (an 82% response rate). Among the 41 responses, 18 state DOTs reported that they choose project delivery methods in the context of program delivery, and 13 state DOTs noted that they have guide- lines or tools to determine the delivery methods for a program. The content analysis involved documenting and analyzing the state DOT documents, guidelines, and manuals relevant to program delivery from the 13 state DOTs. Finally, structured interviews with seven of the experienced DOTs provide case examples of strategic program delivery implementation and lessons learned. These seven state DOTs were selected on the basis of their experience with the use of ACMs and their availability to participate in the study. This four-step study meth- odology provides for a comprehensive state-of-practice summary. The synthesis summarizes the current state of practice through a technical assessment of the facts. The results indicate that the success of program delivery depends on the establish- ment of sound policies and procedures that address organizational approaches, staff require- ments and outsourcing, ACMs, and program management throughout the delivery process. The study documents practices in the following areas: 1. A case-by-case approach to program delivery: State DOTs have recently gained trac- tion to improve project delivery methods by using innovative techniques and tech- nology, expediting critical phases of a project, improving communication among stakeholders, and enhancing outreach efforts. A holistic approach to program delivery is still relatively new to most state DOTs. Ninety percent of the agencies studied in this synthesis select project delivery methods on a project-by-project basis. 2. A corridor approach to program delivery: Some state DOTs have used a corridor or bundling approach, in which agencies combine several capital or maintenance proj- ects into a single project to maximize the benefits of delivering a program of projects. Twenty-seven percent of the transportation agencies studied in this synthesis choose project delivery methods for a program based on a group of projects. Case examples for the Missouri, New York State, and Oregon DOTs show the benefits to program delivery of bundling multiple bridges, whereas the Florida and Washington State examples illustrate the benefits of bundling multiple transportation projects within a corridor. 3. Use of alternative contracting methods for program delivery: Many state DOTs are increasingly using ACMs in an attempt to improve cost and time performance and enhance the innovation and effectiveness of program delivery. Accelerated schedul- ing, streamlined processes, and innovation are the top motivational factors for imple- menting strategic program delivery methods. 4. Risk management and program delivery selection: There is an increasing trend in state DOTs to conduct a project risk assessment and analysis before choosing project delivery methods. Twenty-three state DOTs reported that project and program risk management significantly influences the selection of a delivery method. The Florida and Utah DOT case examples show how the use of program and enterprise risk man- agement is an effective way to select program delivery methods. 5. Performance-based program delivery: State DOTs are becoming more focused on incorporating performance measures into program delivery. A performance-based program delivery approach increases transparency and accountability, encourages innovation, and helps stakeholders make decisions based on real information and performance. More than half of the agencies in this study track the performance of their program delivery.

3 6. Public and political support and trust: At the highest level, when conducted prop- erly, programmatic delivery creates trust-based relationships among state DOTs, political officials, and the public. When a program is delivered as promised, state DOTs realize substantial value in terms of improving relations with the traveling public and building the political support and capital needed to fund future transpor- tation programs. The most significant benefits and challenges of a strategic approach to transportation program delivery are summarized below, not in order of importance. The major benefits of using a strategic approach to transportation program delivery include the following: • Accelerated delivery • Flexibility in innovation • Flexibility in reassessing and reassigning risk • Greater and/or earlier cost certainty • Improved relationships with contractors and industry • More choices in funding and delivery methods • Effective management and leverage of resources • Increased cost savings • Increased control of scope, schedule, and cost • Effective management of changes. The major challenges of using a strategic approach to transportation program delivery include the following: • Lack of experienced personnel • Required culture changes from traditional points of view • Need to establish trust between regions and the department headquarters • Need for greater levels of coordination and collaboration among various parts of the organization • Workforce issues/use of local contractors • Required training and education of staff, industry, permitting agencies, county and municipal government agencies, and legislature • Strategizing funding for a program • Required effective community outreach. The synthesis discovered a number of gaps in knowledge and practices in implementing strategic program delivery that provide opportunities for future research. The major gaps are summarized below. The conclusions in chapter seven provide more details on these gaps and potential future research. 1. Staff capabilities: State DOT personnel, in some cases, lack expertise, experience, and training on program delivery. Agencies need assistance to better understand new project and program management and alternative delivery approaches. 2. Cultural barriers: Successfully implementing program delivery requires that state DOTs promote and sustain a culture of innovation and improvement across all levels of the department. 3. Organizational changes: Program delivery requires changes to a DOT’s organiza- tional structure. Agencies need assistance to understand and address the necessary organizational changes to effectively deliver their programs. 4. Improved tools to measure performance: Although state DOTs are becoming more focused on developing performance measures, they still lack adequate tools and

4 mechanisms to assess program delivery performance. State DOTs need better tools, policies, and processes to track and monitor project and program budgets, schedules, and other delivery performance metrics. 5. Project and program management strategies and systems: State DOTs face inconsis- tencies in project and program management practices, and a lack of tools, techniques, and processes to assess and evaluate the potential benefits, costs, and risks of program delivery. State DOTs need a formal process and guidelines to effectively deliver and manage their programs.

5 CHAPTER ONE INTRODUCTION BACKGROUND One of the common goals of all state departments of transportation (DOTs) and transportation agencies across the United States is to continually seek solutions to improve managerial, operational, and organizational effectiveness in delivering much-needed transportation projects. Recently, several state DOTs have taken a more holistic approach—maximizing the benefits of time and cost savings by delivering transportation programs rather than individual projects. State DOTs and other transportation agencies, such as local planning agencies, have a wide range of approaches to deliver transportation programs, ranging from the traditional design-bid-build (D-B-B) delivery method to alternative contracting methods (ACMs), including design-build (D-B), construction manager/general contractor (CM/GC), and public-private partnership (P3). Each method has certain advantages and disadvantages related to cost, schedule, quality, risk management, and other performance metrics. No single delivery method is right for all projects; however, an optimal delivery method does exist for any given project. In general, a delivery method is selected on the basis of a rigorous analysis of the goals, attributes, constraints, and risks of an individual project or a group of projects (which will be referred to in this study as a program or a program of projects). Several state DOTs have employed a broader approach to delivering transportation programs. These approaches include combining winning strategies, taking an all-inclusive approach to project delivery, implementing a project management culture, improving delivery processes, and enhancing communication across the organization. A considerable amount of published research has focused on the process of selecting an optimal delivery method for a given project. However, there is a lack of research that documents how implementing a variety of delivery methods strategically for a program of projects can improve the delivery of the entire program. This synthesis provides information on a holistic approach to program delivery. The word program is used to mean a collection of projects; a group of projects that have been bundled; a state’s, region’s, or district’s budgeted transportation construction program; or a state’s transportation program (which includes highways, bridges, mass transit, and so on). Discus- sions in this synthesis will focus on the delivery of programs rather than projects. Research has shown that the key challenges for program delivery are (1) selecting a delivery method that provides the best outcomes and cost savings for the program and agencies; (2) maximizing the efficiency and effectiveness of agency resources; (3) meeting customer expectations; (4) minimizing the negative impacts to customers and stakeholders; (5) adhering to project scope, schedule, and budget; and (6) managing needed changes in projects and programs (AASHTO 2002; AASHTO 2013). To overcome such challenges, state DOTs are increasingly using a variety of ACMs and strategic programming approaches to deliver their transportation programs. These methods require greater cooperation, partnering, and risk sharing among agency owners, designers, contractors, and other parties. This study defines strategic programming as a process of clarification of mission and values, development of a vision of success, environmental scanning and assessment of the driving forces behind external threats and opportunities, analysis of the department’s capabilities and performance, assessment of internal strengths and weaknesses, development of strategic goals and objectives to identify the issues facing the department, development of overall strategies and strategic initiatives, and definition of associated performance measures. SYNTHESIS GOALS AND OBJECTIVES The overarching goal of this synthesis was to summarize and document the state of practice for choosing project delivery methods that enhance program delivery. The goal was achieved by accomplishing the following objectives: • Reviewing the state of practice related to processes for choosing project delivery methods as a strategic programmatic delivery decision;

6 • Identifying transportation program structures and policies; • Identifying the approaches to select project delivery methods at the programmatic level; and • Identifying and documenting the benefits of each method that has been applied to programmatic decisions. In recent years, federal agencies and state DOTs have improved project delivery by using ACMs (e.g., D-B or CM/GC) and other innovative techniques to accelerate critical phases of a project, enrich outreach efforts, and improve communication among stakeholders. However, little research has explored the benefits of employing a variety of project delivery methods to a holistic approach to programming. The use of a variety of delivery methods to deliver a program of projects is still relatively new to state DOTs. This synthesis report will help state DOTs and transportation agencies develop an effective decision- making process that considers the critical factors in selecting delivery methods for an agency’s program. In addition to a rigorous literature review, the synthesis is based on new data from a survey of state DOTs, a set of struc- tured interviews, case examples, and a content analysis. A general survey on strategic program delivery methods elicited responses from 41 state DOTs. The content analysis included relevant program delivery documents from 13 state DOTs. Finally, case examples from seven states provide specific information on strategic program delivery methods. KEY DEFINITIONS Program delivery is still a relatively new concept for state DOTs, and the use of strategic program delivery methods requires additional procurement terms to support the process. The following terms support strategic program delivery methods; how- ever, individual state definitions may vary, even among the case examples presented in this synthesis. • Alternative contracting methods (ACMs): ACMs are mainstreamed as viable delivery options for highway construction projects to accelerate project delivery, encourage the deployment of innovation, and minimize unforeseen delays and cost overruns. These options include design-build (D-B), construction manager/general contractor (CM/GC), alterna- tive technical concepts (ATCs), and other innovative techniques (FHWA n.d.). • Project delivery method: The comprehensive process of assigning the contractual responsibilities for designing and constructing a project. A delivery method identifies the primary parties taking contractual responsibility for the perfor- mance of the work (AGC 2004). • Program: A collection of similar projects grouped together or an endeavor to deliver a range of improvements (Keck et al. 2010). • Strategic programming: The process of clarification of mission and values, development of a vision of success, environ- mental scanning and assessment of the driving forces behind external threats and opportunities, analysis of the depart- ment’s capabilities and performance, assessment of internal strengths and weaknesses, development of strategic goals and objectives to identify the issues facing the department, development of overall strategies and strategic initiatives, and definition of associated performance measures (Poister 2004). • Programming phase: The phase of a transportation project development process that involves determining which proj- ects will receive funding within the next 3–6 years through the programming process (FHWA 2012). Typical activities in the programming phase include environmental analysis, schematic development, public hearings, determination of right-of-way impacts, and project economic feasibility and funding authorization. • Program delivery: A holistic approach to the entire delivery process in the agency and program context. Program deliv- ery focuses on a collection of projects that are aligned with an organization’s strategic goals (Keck et al. 2010). • Bundling: The consolidation of two or more procurement requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation of offers for a single contract that is likely to be unsuitable for award to a small business concern (Government Contracting Terms & Definitions n.d.). • Bundled contract: A contract in which the requirements have been consolidated by bundling (Government Contracting Terms & Definitions n.d.). • Design-bid-build (D-B-B): The traditional project delivery method in which the agency designs the project, solicits bids, and awards the construction contract to the lowest responsive bidder (AASHTO 2008). • Design-build (D-B): A project delivery method that combines the design and construction phases under a single contract (AASHTO 2008). • Construction manager/general contractor (CM/GC): A project delivery method in which a construction manager is selected to provide input during project design and is then at risk for the final cost and duration of construction (Gransberg and Shane 2010).

7 • Public-private partnership (P3): A contractual agreement formed between public and private sector organizations that allow more private sector participation in heretofore public endeavors. The agreement usually involves a government agency contracting with a private company to finance, renovate, construct, operate, maintain, or manage a facility or system (U.S.DOT 2004). • Best-value: An award method that uses cost and other management or technical factors (e.g., cost-plus-time bidding, qualifications, design approach) to select the winning bid to minimize negative impacts and enhance the long-term performance and value of construction (Scott et al. 2006). • Qualification-based selection: An award method that focuses on qualitative criteria such as expertise, experience, and past performance as the basis for selection. Price is not considered as a part of the selection process (AASHTO 2006). SYNTHESIS METHODOLOGY This report is the result of an intersection of the following four independent sources of information: • Literature review; • Survey of state DOTs using a web-based questionnaire; • Content analysis of relevant DOT program delivery documents; and • Case examples of strategic program delivery. The research team conducted a comprehensive literature review of related strategic program delivery documents. The goal of this effort was twofold. The team searched current academic literature, industry publications, state DOT websites, and government reports to identify trends and best practices in strategic program delivery methods. Additionally, the team searched archival information to ascertain the origins of best-value procurement and how it has evolved into the current state of practice. From the literature review and NCHRP panel input, the research team developed a questionnaire and conducted a survey of state DOTs. The survey questionnaire was distributed in both web-based and paper form to the members of the AASHTO Standing Committee on Highways, which includes representatives of all 50 state DOTs. After three follow-up requests, the research team received responses from 41 state DOTs (82% response rate). To better understand how states are implementing best-value procedures, the research team conducted a content analysis of the relevant program delivery documents, guidelines, and manuals from 13 state DOTs. A content analysis is a technique for making valid inferences by objectively and systematically identifying specified characteristics of a message, written or visual, using a set of procedures (Holsti 1969; Neuendorf 2002). Finally, the case examples were selected on the basis of the literature review and according to survey responses that indi- cated an agency’s willingness to participate. Case examples from seven states provide specific information related to strategic program delivery methods. The research team used the case study method described by Yin (2009) to collect data from the case example projects. SYNTHESIS ORGANIZATION This report has seven chapters. The first chapter introduces the subject area and covers the scope, objectives, and study meth- odology. Chapter two provides an overview of the most relevant issues related to transportation project and program delivery methods and briefly discusses project and program development phases, strategic planning and program delivery, and organi- zational structures. Chapter three presents current practices of program delivery methods and processes in the transportation industry. The chapter integrates information collected from a national survey of state DOTs, a review of their guidelines and process documents, and other relevant literature searches. Chapter four discusses program delivery performance and benefits, as well as the challenges of program delivery. Chapter five describes the strategic program delivery methods used in seven case example states. The chapter discusses in detail issues related to transportation program structures, ACMs, program deliv- ery performance, benefits and challenges, and lessons learned. Chapter six summarizes the key findings on strategic program delivery based on the information obtained from the case examples, and discusses the benefits and challenges of using a stra- tegic approach to program delivery. Finally, chapter seven briefly summarizes the information presented in the previous chap- ters and offers conclusions and suggestions for future research regarding the implementation of program delivery approaches.