Strategic Program Delivery Methods (2017)

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15 INTRODUCTION This chapter presents current practices in program delivery methods and processes for transportation. It integrates informa- tion collected from a national survey of state DOTs, a review of their guidelines and process documents, and other relevant literature. The chapter provides an overview of program structure and policies, describes the current practice of program delivery methods, and discusses the selection of project delivery methods that can apply to program delivery. PROGRAM STRUCTURE AND POLICIES Many factors influence the establishment of transportation programs and systematic approaches to program delivery. These factors center around four functional areas: (1) identifying priorities, (2) obtaining resources, (3) delivering the program, and (4) managing finances (Henkin 2009). Identifying project priorities involves the program management disciplines of strategic planning, programming, asset management, performance measures, and economic analysis. Obtaining resources involves functions related to securing federal funding, raising state revenue, and attracting private and local financing. Delivering a program involves activities related to program delivery approaches and tools, the choice between in-house delivery and out- sourcing, and roles and responsibilities of in-house staff and private sector partners. Managing finances involves administra- tive functions associated with financial resources, cost estimation, and control mechanisms. Figure 2 shows the relationship of program development and project prioritization (i.e., planning and programming) with program delivery and policy goals and objectives. Planning, prioritizing projects and programming, program delivery, and system monitoring must be aligned with policy objectives (AASHTO 2002). The following are sources of policy guidance: • State and federal statutes and regulations; • Policy statements and guidelines from the governor, legislature, and transportation commission or board; • Directives issued by agency executives; and • Agreements with other parties (AASHTO 2002). FIGURE 2 Program structure and policies (Source: AASHTO 2002). CHAPTER THREE CURRENT PRACTICES IN STRATEGIC PROGRAM DELIVERY

16 Programming is a critical phase in the process. When projects are programmed, information may be limited for decision makers to make judgments on project cost, scope, and schedule estimates. Henkin (2009) concluded that a balance between science and art is required to place enough projects into the program (the delivery pipeline) to ensure that resources are effec- tively used, but not so many that available resources are exceeded. State DOTs typically face two problems in the program- ming phase: (1) too many projects are sitting on the shelf, and (2) too few projects are ready to go. One common pitfall in the programming process is that inconsistent methods of defining programs can obscure the link between resource allocation decisions and support of policy objectives (AASHTO 2002). To understand how DOTs establish programs, a survey was distributed to all 50 state DOTs. A portion of the survey collected data on the current state of practice in the establishment of transportation programs. The survey asked the state DOTs to rank the appropriateness of grouping projects into a program using the following Likert scale: 0 = Not Applicable, 1 = Inappropriate, 2 = Slightly Appropriate, 3 = Appropriate, 4 = Very Appropriate, and 5 = Extremely Appropriate. Table 2 summarizes the responses to this question. TABLE 2 THE APPROACH TO THE ESTABLISHMENT OF TRANSPORTATION PROGRAMS Factors Influencing Program Establishment N/A 1 2 3 4 5 Weighted Average Project functionalities (bridges, maintenance, or pavement) 1 0 1 7 15 17 4.2 Project construction type (rehab, preservation, or new) 1 0 2 9 16 13 4.0 Funding issues 2 2 3 14 13 7 3.4 Demand and urgency 4 2 1 14 12 8 3.4 Stakeholders’ priorities and expectations 4 2 5 13 11 6 3.1 Critical completion dates (scheduling issues) 6 2 3 13 14 3 2.9 Project location 4 2 10 14 8 3 2.7 State or federal mandates/political influences 5 3 10 11 9 3 2.7 Financing issues/revenue generator (tolls, special taxes) 7 9 6 7 7 5 2.4 Agency personnel’s experience on similar projects 6 10 7 9 2 7 2.4 Project complexity 5 6 10 12 6 2 2.3 Note: N/A = not applicable; 1 = inappropriate; 2 = slightly appropriate; 3 = appropriate; 4 = very appropriate; 5 = extremely appropriate. Table 2 indicates that the top five factors that most influence the establishment of transportation programs are project func- tionalities, project construction types, funding issues, demand and urgency, and stakeholders’ priorities and expectations. All five of these factors have a weighted average score greater than 3.0 (the “appropriate” level). For example, the establishment of a transportation program based on project functionalities has a weighted average of 4.2. Of the 41 state DOT responses, 17 agencies (41%) indicated that establishing a transportation program based on project functionalities is extremely appropriate; 15 agencies (37%) indicated that it is very appropriate; seven agencies (17%) indicated that it is appropriate; one agency (2%) indicated that it is slightly appropriate; and one agency (2%) indicated that it is not applicable. In addition to the 11 factors in Table 2, the respondents were asked to list other factors that affect the establishment of transportation programs in their states. One respondent said that asset condition and asset management are extremely appro- priate factors to consider for programming projects. Another respondent noted that existing conditions and the need for repairs are extremely appropriate. A third respondent mentioned that the DOT establishes its transportation programs on the basis of infrastructure system needs. The Georgia DOT has established an Office of Program Delivery and an Office of Program Control to manage its transportation programs (GDOT n.d.). Georgia DOT Office of Program Delivery – This office coordinates project development and delivery with department offices, metropolitan planning organization (MPO) staff, local government, business and community stakeholders, and other state and federal agencies. Project managers focus on critical project delivery tasks that include scope, schedule, and budget development, resource management, and risk analysis (GDOT 2016). http://www.dot.ga.gov/AboutGDOT/Offices, accessed April 2016

17 Georgia DOT Office of Program Control – This office monitors, controls, and reports on project status; serves as owner of the project scheduling software and project status reports; leads the Plan Development Process training course and the Local Administered Project training; raises awareness of the value of collaborative practices from project selection through project closing; provides monthly letting list recommendations to executive management; works with individual project managers/leaders to ensure that the department’s project scheduling tool is understood and followed. The Office of Program Control is also responsible for maintaining a balanced construction work program and for reviewing project concept reports (GDOT 2016). http://www.dot.ga.gov/AboutGDOT/Offices, accessed April 2016 PROJECT AND PROGRAM DELIVERY METHODS State DOTs have a range of delivery methods from which to choose for their projects and programs. In addition to the tradi- tional D-B-B method, agencies may use D-B, CM/GC, and P3 to effectively and efficiently deliver their transportation pro- grams. Of the 41 DOT responses to the national survey, 38 agencies (88%) reported that they have authority to use alternative contracting methods (ACMs) (e.g., D-B, CM/GC, or P3). Three state DOTs (North Dakota, Oklahoma, and Wisconsin) do not have authority to use ACMs. Figure 3 summarizes the responses and the current legal authorizations for using ACMs. FIGURE 3 Current legal authorization for using ACMs from survey results. Of the 38 state DOTs that have authority to use ACMs, 33 may use D-B; 19 may use CM/GC; and 19 may use P3. Five state DOTs reported that they use other ACMs, including prequalification D-B-B, best-value, fixed price/variable scope, an A+B approach, and alternative technical concepts with D-B-B projects. The survey attempted to determine the percentage of projects associated with each delivery method used in state DOTs. Figure 4 summarizes the 41 responses to this question. It shows that D-B-B is still the dominant delivery method for transpor- tation projects. On average, 93.2% of projects are delivered using D-B-B; 7.1% are delivered using D-B; 3.4% are delivered using CM/GC; and 1.3% are delivered using P3. These values were calculated based on the number of projects; the distribu- tion of project delivery method use based on total dollars would probably be different. For example, UDOT uses ACMs for approximately 20% of its projects, but ACM projects represent approximately 80% of annual funding used. Program Delivery Methods This section presents the result from the national survey with regard to the current use of program delivery methods in state DOTs and other transportation-related public agencies. It concludes with the organizational barriers for implement- ing program delivery. Of the 41 state DOTs that responded to the survey, 26 DOTs (63%) indicated that they are currently

18 implementing or considering the use of program delivery—a holistic approach to delivering groups of projects. Fifteen state DOTs (37%) reported that they have not used program delivery. Figure 5 shows the reasons for not using program delivery approaches. FIGURE 4 Project delivery methods used in state DOTs in terms of number of projects. FIGURE 5 Reasons for not using program delivery approaches (n = 15). The survey also attempted to determine the number of times state DOTs have used program delivery over the past 10 years. Of the 26 state DOTs that are currently implementing or considering the use of program delivery methods, 11 have used such methods more than 10 times; five have used them between five and 10 times; and 10 have used them fewer than five times. Twenty-four state DOTs also reported that the consulting industry supports the use of program delivery. In addition, the respondents were asked to provide information on the use of program delivery approaches in other trans- portation-related public agencies. Figure 6 shows the responses to this question. Of the 41 state DOTs, 25 (61%) do not know whether program delivery methods are used in transportation-related public agencies; six (15%) stated that these methods are not used in transportation-related public agencies; and 10 (24%) reported that program delivery approaches are used in transportation-related public agencies. Of these 10 state DOTs, seven (70%) mentioned that program delivery methods are used in transit agencies; six (60%) reported that program delivery methods are used in local government agencies; and two (20%) stated that program delivery methods are used by airport authorities. The respondents were asked to identify organizational barriers for implementing program delivery. Figure 7 shows the responses to this question; they indicate that the cultural change required to use ACMs and a lack of expertise are two common organizational barriers that prevent the implementation of program delivery. Twelve state DOTs also mentioned other organi- zational barriers, such as lack of contractor ability to handle large volumes of work, legislative authority, and funding issues.

19 FIGURE 6 Program delivery approaches in transportation-related public agencies (n = 10). New Hampshire Rural Transit Assistance Program (RTAP) The State RTAP is outlined in a Program of Projects submitted to the Federal Transit Administration (FTA) annually. Program Delivery—States have broad discretion in deciding how best to provide assistance and implement projects under RTAP. Delivery of these projects may include: • Assistance by in-house staff • Contracts with private consultants, universities, nonprofit organizations, state transit associations, or other organizations or operators • Support of peer-to-peer networks of individuals to provide assistance to each other. http://www.nh.gov/dot/programs/nhrtap/details.htm, accessed April 2016 FIGURE 7 Organizational barriers for implementing program delivery (n = 41). The following quote is from NCHRP Report 662: Accelerating Transportation Project and Program Delivery: Conception to Completion: The transportation industry has undergone a dramatic transformation. In comparing the DOT cultures of today with the prevailing thought of the 1980s, the new paradigm shifts imply new skills, enhanced relationships, new pathways of accountability, new standards of performance, and new criteria for decision making. These imply a very, very different kind of culture than in traditional . . . approaches. In some instances, paradigm shifts might have been perceived as radical, revolutionary attempts to overhaul the DOTs. In fact, it is safer to say that they were evolutionary changes that brought about new ideas, identities, innovations, and ideologies. (Keck et al. 2010, italics added)

20 Program Delivery Approaches Figure 8 shows the responses to the survey with regard to the use of project delivery methods for programs. Specifically, 41 state DOTs (100%) allow the use of D-B-B for their program delivery; 30 DOTs (73%) allow the use of D-B; 18 (44%) allow the use of CM/GC; 16 (39%) allow the use of P3; six (15%) allow the use of a single combined contract; and five (12%) use other delivery methods, such as D-B-B best-value, alternate bid, fixed price/variable scope, alternative technical concepts on D-B-B, and specific methods required by legislation. FIGURE 8 Application of project delivery methods in program delivery (n = 41). Figure 9 shows the survey responses with regard to the use of procurement procedures for program delivery. Specifically, 41 state DOTs (100%) allow the use of low-bid for their program delivery; 29 DOTs (71%) allow the use of best-value or cost- plus-time procurement; 18 (44%) allow the use of CM/GC; 17 (42%) allow the use of qualification-based procurement; 10 (24%) allow the use of a single combined contract; and two (5%) use other procurement procedures, such as alternate bid and specific methods required by legislation. FIGURE 9 Application of procurement procedures in program delivery (n = 41). Figure 10 shows the survey responses with regard to the use of payment provisions for program delivery. Specifically, 33 state DOTs (80%) allow the use of unit prices for their program delivery; 27 DOTs (66%) allow the use of lump sum methods; 15 (37%) allow the use of cost reimbursable methods; nine (22%) allow the use of a single combined contract; and four (10%) use other payment methods—such as milestone completion, guaranteed maximum price, and others—on a case-by-case basis. Program Delivery Selection The selection of an appropriate delivery method is complex because the choice is best made early in the project development process. Each delivery method has certain performance advantages and disadvantages in terms of cost, schedule, quality, risk management, and other metrics. No single delivery method is right for all projects; however, an optimal delivery method exists for any given proj-

21 ect. In general, the delivery method is selected after rigorously analyzing the goals, attributes, and risks of an individual project or a group of projects. In analyzing the delivery options for programs and projects, decision makers should focus on the following issues: • Delivery methods are best evaluated on a case-by-case basis (AASHTO 2002; Tran and Molenaar 2012). • Although some constraints may exist regarding the use of ACMs, state DOTs can customize procurement strategies to meet their specific needs (AASHTO 2002). • State DOTs may benefit from restructuring the traditional procurement process to maximize the benefits and mitigate the risks of using ACMs (AASHTO 2002; Tran and Molenaar 2015). • Because ACMs provide agencies with more flexibility and certainty in terms of project cost, schedule, and the use of in- house resources, delivery decisions can be made early in the planning and programming phases (Miller 2000; AASHTO 2002; Tran and Molenaar 2015). FIGURE 10 Application of payment provisions in program delivery (n = 41). Figure 11 shows the responses to the national survey with regard to program delivery selection processes. Of the 41 state DOTs that responded, 18 (44%) reported that they choose project delivery methods in the context of program delivery; 13 (32%) stated that they have guidelines or tools to determine the delivery methods for a program; and 21 (51%) said they have a strategic approach to selecting delivery methods. FIGURE 11 Overall project delivery selection practices (n = 41). California DOT’s Toolbox The Project Delivery Acceleration Toolbox (Toolbox) is a comprehensive report listing the California Department of Transportation’s (Caltrans) efforts (past and present) to accelerate the delivery of transportation projects. This document also identifies proposed tools for Caltrans to implement over the next few years. This document will be modified often to reflect the most current and continuing improvement efforts of Caltrans. The purpose of this document is to provide Caltrans employees, as well as our external partners, with valuable tools to accelerate project delivery (Caltrans 2014). http://www.dot.ca.gov/hq/oppd/projaccel/2014-Toolbox-Final.pdf, accessed April 2016

22 In the survey, state DOTs were asked to provide information on the project delivery method selection process for a program. Figure 12 summarizes the responses to this question. Of the 41 state DOTs that responded to the survey, 37 DOTs (90%) reported that they select delivery methods on a case-by-case basis; 11 (27%) said they select delivery methods based on a group of projects; five (12%) said they select delivery methods for a program based on funding availability or restriction on the use of the D-B-B option; and two (5%) (Florida and Indiana) said they select delivery methods using a holistic approach to programming. FIGURE 12 Project delivery selection processes for a program (n = 41). The 26 state DOTs that are currently implementing or considering the use of program delivery methods were asked to list the factors they consider in the program delivery decision. Figure 13 summarizes their responses. The most influen- tial factors were project size in dollars, technical complexity of groups of projects, third-party issues involved (utilities, right-of-way, railroad), program construction type, program scheduling issues, project and program risk management, and environmental issues. FIGURE 13 Factors influencing program delivery method decisions (n = 26). Figure 14 shows the motivational factors that agencies use to select program delivery methods. The critical factors are scheduling issues, streamlined processes/innovations, project and program risk management, project size in dollars, and reduced public impact.

23 FIGURE 14 Motivational factors for program delivery methods (n = 26). NCHRP Report 662: Accelerating Transportation Project and Program Delivery: Conception to Completion classifies the motivational factors for accelerating transportation project and program delivery into three main areas: internal factors, external factors, and political/administrative factors (Keck et al. 2010). The internal factors involve scheduling, cost savings to program delivery, limited funding, and innovation. The external factors involve reduced public impact, meeting stakeholders’ expectations, quickly delivering the facility, and gaining trust from the public. The political/administrative factors involve improved agency image, accolades for activity (allowance to apply more options for other projects), better risk management, and best return on tax dollars. Figure 15 graphically illustrates the motivational factors for accelerating transportation project and program delivery. FIGURE 15 Motivational factors for accelerating program delivery (Source: Keck et al. 2010). The Washington State DOT (WSDOT) identified nine drivers of successful program delivery (WSDOT 2008) (Figure 16). The following are brief definitions of these nine drivers: • Long-term core competencies: Ensure the availability and retention of skilled engineers and construction specialists. • Workforce capabilities: Ensure that an adequate and skilled workforce will be available to deliver the capital program, and ensure the development and implementation of effective project management processes. If those hired will have little experience, ensure the allocation of resources for training.

24 • Vintage legacy systems: Any solution should be applicable to all phases of project development and should not involve abandoning useful processes or tools of viable legacy systems. • Rapid program growth: Ability of regions of different sizes to deliver projects with varying degrees of complexity, and the need for hands-on control. • New accountability expectations: Move toward accountability for aggregate project delivery at the budgeted total pro- gram value with a commitment to delivering each planned project. • Railroad and utilities cooperation: Seek methods to expedite real estate acquisitions through the formation of a low- interest or interest-free loan program that give utilities access to the capital to implement timely utility relocations, and employ techniques for facilitating coordination with utilities and railroads. • Market trends: Revise upward the dollar thresholds established for cost and scope changes to recognize the dynamics of the marketplace in terms of escalation of construction and delivery costs. • Need for mobility improvements: Ensure that the WSDOT Strategic Delivery Plan directly supports the priorities of improving the mobility of people, goods, and services. • Management of scope, schedule, and budget trade-off: Ensure that WSDOT management has the authority to make modest adjustments to scope, schedules, and budgets to lessen the potential for needless major project delays. FIGURE 16 Drivers of successful program delivery (Source: WSDOT 2008). SUMMARY This chapter determines the current use of strategic program delivery methods through the responses to a national survey of highway agencies and a review of their guidelines and process documents. The survey found that more than a half of the responding DOTs are currently implementing or considering the use of program delivery methods. Over the past 10 years, a quarter of the responding DOTs have used program delivery fewer than five times. A quarter of the responding DOTs also reported that program delivery approaches are used in transportation-related public agencies such as transit agencies, local government agencies, and airport authorities. The main organizational barriers to program delivery are the necessity for culture changes and a lack of expertise and train- ing. Typically, program delivery uses low-bid and best-value as the main procurement procedures and unit price and lump sum as the main payment provisions. More than half of the responding DOTs have a strategic approach to selecting program delivery methods, and most agencies select them on a case-by-case basis. The main factors considered are scheduling issues, project size, innovation, project and program risk management, reduced public impact, funding issues, and third-party issues. These findings provided the research team with a basis for selecting seven states to use as case examples (see Chapters 5 and 6).