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3 Chapter 1: Background 1.1 The Research Problem According to NCHRP Synthesis 429: Geotechnical Information Practices in Design-Build Projects (Gransberg and Loulakis 2011) and the most recent American Society of Civil Engineers (ASCE) Report Card on Americaâs Infrastructure (ASCE 2014) the nationâs highways and bridges are rated as D and C+, respectively. This is just one of many reports that have documented the âurgent need to replace aging infrastructureâ (Dowall and Whittington 2003). Design-build (DB) project delivery has proven itself to be one method to accelerate the construction, reconstruction, and rehabilitation of aging, structurally deficient infrastructure because it allows construction to begin before the design is 100 percent complete (FHWA 2006). DB also allows the DOT to shift some of the responsibility for completing the geotechnical investigations necessary to support the geotechnical design to the design-builder after the award of the DB contract. This creates a different risk profile than when the project owner has full responsibility for design (and hence geotechnical investigations) in a traditional design-bid-build (DBB) project. The Federal Highway Administration (FHWA) mandates the use of a differing site conditions (DSC) clause for DBB projects on federal aid highway projects, unless the use of such a clause is contrary to state law (23 CFR 635.109). The typical DSC clause provides broad relief to a contractor for physical conditions that materially differ from what is anticipated by the contract. FHWA does not, however, have the same mandate for DB projects. Instead, FHWA encourages state DOTs to use these clauses when appropriate for the risk and responsibilities that are shared with the design-builder. On DBB projects, the risk of differing site conditions is almost always the responsibility of the owner (Tufenkjian 2007). While this is largely due to the presence of a DSC clause, it is also caused by the fact that prevailing case law and sound contract
4 management principles require the owner to disclose to bidders virtually all geotechnical information in the control of the owner. On DB projects, the risk of differing site conditions is not as clear (Clark and Borst 2002). The DB contract can be awarded before a full geotechnical site investigation is made by either the owner or the design-builder (Smith 2001). This leads to a question of how to identify an appropriate baseline for the DSC clause (if one is included in the contract) (Hatem 2011). There is also a policy question for the DOT as to how much information it should furnish about the geotechnical site conditions (Blanchard 2007; Dwyre et al. 2010). The more information that is provided, the more likely it is that the design-builder can submit a competitive price proposal since the design-builder will be able to reduce the contingencies contained in the price proposal (Christiansen and Meeker 2002). Additionally, this will enable the DOT to have a better sense of its program and expected costs. However, because the DB delivery process has proven to be an effective means of compressing project delivery periods to their shortest states (FHWA 2006), there is frequently an incentive for the DOT to start the procurement process before a thorough geotechnical investigation and analysis have been performed (Higbee 2004; Kim et al. 2009). In all, potential risks are created for both parties on a DB project that are not present in a DBB delivery process (WSDOT 2004). According to the NCHRP 24-44 Request for Proposals (RFP): âThe objective of this research is to develop guidelines for the implementation of geotechnical risk management measures for DB project delivery related to geotechnical investigation, design, and construction.â In light of the above discussion, the proposed research will be both valuable and timely. As such, the following are the objectives of the proposed research plan.
5 â¢ To quantify and compare the costs and benefits of the owner completing the geotechnical investigation before advertising a DB project versus assigning that responsibility to the design-builder on a post-award basis. â¢ To prepare a recommended guideline for managing geotechnical risk in DB projects. The guidelines will address the following topics as a minimum: o Geotechnical risk identification, allocation, and mitigation in practice o Legal and commercial issues o Geotechnical baseline report (GBR) usage o Emerging technology and practices for appropriate risk transfer o Geotechnical considerations for both best value and low bid procurements o Development and maintenance of a geotechnical risk register o Development & scoring of geotechnical evaluation criteria o Geotechnical characteristics that preclude the project from DB delivery o Geotechnical considerations in the alternative technical concepts (ATC) process o Geotechnical contract provisions and specifications o Domestic and international best practices o Geotechnical data collection, timing, and risk allocation The following four issues are of primary concern to all public transportation agencies during project development and delivery: â¢ Selecting the appropriate project delivery method â¢ Maximizing project cost/time certainty while minimizing disruptions due to disputes â¢ Ensuring proactive project quality management
6 â¢ Creating a safe environment for workers and the traveling public. The increased use of alternative project delivery methods has caused the above issues to become increasingly interrelated and created a project management challenge for DOTs. These projects allow concurrent design and construction, thereby moving at a faster pace, which demands a much higher degree of both integration and active collaboration to meet the demands of the aggressive schedule. Synthesis 429 found that âhigh-level federal encouragement via the FHWA Every Days Counts program for state departments of transportation (DOT) to accelerate project delivery by using DB elevates the need to manage geotechnical risk while expediting geotechnical design to a critical project success factorâ (Gransberg and Loulakis 2011), which makes the results of this research both timely and valuable. In light of this discussion, the research team proposed: â¢ To identify, analyze, and understand existing models for successful delivery of DB projects with significant geotechnical considerations and â¢ Secondly, to develop guidelines to implement industry best practices on DB projects that rationally manage the risk of pre-award geotechnical uncertainty. Finally, since the typical DOT has the ability to complete the preliminary design required to produce DB RFPs using in-house resources, this project will extend the work performed by the team on NCHRP Synthesis 429: Geotechnical Information Practices by developing guidelines for managing geotechnical risk projects delivered using both in-house and outsourced design services for RFP development.
7 1.2 Background One of the most important issues confronting owners, designers and contractors on any transportation project is the nature and predictability of geotechnical conditions. Geotechnical conditions not only have an enormous impact on project design, but they directly impact project cost and schedule. This is particularly true for âdiffering site conditions,â also sometimes called âchanged conditions.â In essence, these are conditions that materially differ from what the contractor should have reasonably expected when it priced its contract. Differing site conditions create project challenges, all of which lead to a fundamental question: Who should bear the financial risk of these conditions? The major issue during the procurement stage of a project relates to how much geotechnical data will be provided to the proposers to allow them to submit competitive pricing without excessive contingencies to cover the risks of uncertainties. This particular issue is exacerbated by the fact that most public owners select DB project delivery to accelerate the delivery of a particular project (Songer and Molenaar 1996). As a result, including extensive geotechnical investigations in the preliminary engineering completed as part of the RFP development process is often impossible. (Beard et al. 2001). For this and other reasons, the problem basically boils down to answering the following questions: â¢ Will the geotechnical aspects of the given site be a major factor in the project design process? â¢ How much time is available for geotechnical investigations and preliminary geotechnical engineering? â¢ How uncertain are the subsurface conditions on the project site?
8 â¢ What are the critical geotechnical variables that must be known for the DOT to develop a preliminary design for funding and bidding purposes? â¢ What critical geotechnical variables must be known for the design-builder to complete a workable design? â¢ Can the geotechnical risk be shared with the design-builder to reduce the projectâs cost? â¢ Is there flexibility in the procurement and contracting process to enable the design- builder to advance the geotechnical investigation before finalizing a price? 1.3 Choosing Alternative Project Delivery The predominant way that DB is procured in the public sector requires that the design- builder commit to a firm fixed price before the projectâs design is complete (Mahdi and Alreshaid 2005). Thus, the risk of cost overruns for unforeseen geotechnical site conditions is increased, since the full geotechnical investigations necessary for each project will likely be completed after contract award, as part of the design process. Given this, the first question a DOT will address is whether or not a given project is a good candidate for DB project delivery given the influence of geotechnical conditions on the preliminary design, price, and schedule. Table 1.1 is a synopsis of the risk profiles for DBB and DB found in Koch et al. (2010) and adapted for geotechnical risks. One can see that the major change in the risk profile is due to the shift in design responsibility to the design-builder (Black et al. 2000). The ownerâs new DB risks result in many cases from the failure to relinquish the design responsibility to the design-builder. The ownerâs DB scope risk for geotechnical design review comments and directives is an example of this. The direct and tacit approval of constructive changes to the geotechnical design during construction is another example.
9 Table 1.1 Project Characteristics that Indicate a Given Project Is a Poor Candidate for DB Project Delivery Found in the Literature (Gransberg and Loulakis 2011) Project Characteristic Source â¢ High risk of differing site conditions â¢ Low probability to be able to expedite design and construction schedule â¢ High possibility of change to phases of work Blanchard 2007 â¢ The design must be complete for accurate pricing â¢ The design must be complete for permitting or third party issues Gransberg et al. 2006 â¢ Project scope is difficult to define or quantify â¢ Project scope has high probability of change in permitting process â¢ Missing âsound geotechnical and environmental data prior to the bid phaseâ Christensen and Meeker 2002 â¢ âinability of design-stage investigation to eliminate risks from unknown geological conditions for construction of underground worksâ Hoek and Palmieri 1998 â¢ Risk shedding is ownerâs primary motivation for using alternative project delivery methods Scheepbouwer and Humphries 2011 If accelerating the projectâs schedule is not an objective, then the ownerâs ability to portray the geotechnical scope of work accurately without completing the typical geotechnical investigation will determine whether DB is an appropriate delivery method. Ideally, the DOTâs RFP packages should provide proposing design-builders with sufficient subsurface information to permit them to generate conceptual designs for the foundation, embankment, and other features of work that are dependent on the geotechnical conditions of the site. The amount of geotechnical information may vary drastically depending on the projectâs location and characteristics. If the subsurface and geologic project information is inadequate, then the proposing design- builder has two options (Christensen and Meeker 2002). First, it can include a contingency in the price to cover what its geotechnical designers would believe to be the worst possible case. The second option is to declare the project as too risky and choose not to bid (Dwyer et al. 2010). Either way the owner is negatively impacted. In the first case, the contingency could drive the price outside the available budget and make it impossible to award. In the second case, the pool of qualified competitors becomes shallower, possibly leaving only competitors that do not recognize (or have chosen not to price) the actual geotechnical scope risk. This may result in an award to a design-builder that does not realize it is in trouble until the geotechnical risks are quantified during
10 the design process. The issue also exposes the DOT to either a major differing site conditions claim or a design-builder that has underpriced the job and is in financial trouble â possibly to the point of default. For the above reasons, it is critical that the project delivery method selection decision be made after careful consideration of the risk associated with the siteâs subsurface and geological conditions. The Synthesis 429 DOT survey asked the respondents their reason for not selecting DB project delivery. Two respondents indicated that they did not use DB because the liability for geotechnical aspects was unfavorable for the agency. Another two cited the lack of time to complete geotechnical investigations to a point where they could reasonably quantify the geotechnical scope. Table 1.1, previously listed contains a list of project characteristics found in the literature that indicate that a given project is NOT a good candidate for DB project delivery. The above discussion illustrates that the literature is rich with information to support the assertion that projects with unknown or uncertain geotechnical conditions that must be defined and resolved during the design process should not be delivered using DB. However, the exigencies of the typical DOTs annual construction program often override the technical considerations creating unwanted geotechnical risk for the owner. A typical example is the Hastings Bridge project in Minnesota. The bridge in question had known foundation problems, and as the subsurface investigation was going to be extensive, the DOT had decided to use DBB. However, a newly appointed highway commissioner accelerated the project into the current yearâs program, and MnDOT had no choice but to turn to DB delivery to meet the new construction start date. They also included ATCs in the procurement and were able to transfer the geotechnical risk to the winning design-builder when it proposed to replace the problem foundation with a column- supported fill. The result was a cost savings and a 3-year warranty against settlement with the
11 contractor installing instrumentation in the fill to permit MnDOT to monitor settlement after construction. Not all projects delivered by DB have the happy ending described above. Synthesis 429 also reported an interview of 11 design-build contractors to get their perspective on geotechnical risks on DB projects. The results were synopsized as follows: âDuring the interview each design-builder was asked to comment on the impact of the DSC [differing site conditions] clause with respect to geotechnical uncertainty. There was a nearly unanimous agreement (10 of 11) that interpreting the agencyâs DSC was a challenge on all DB projects. The issue was not in understanding the clauseâs legal verbiage, but rather on how the agency would actually apply the clause to identify what constitutes a DSC.â (Gransberg and Loulakis 2011). Thus, the research problem in the NCHRP 24-44 project is not purely technical, but a multi- dimensional one that must be approached by a multidisciplinary team of experienced practitioners as well as academics and legal experts. The research plan detailed in subsequent sections will include a review of case law, a sophisticated geotechnical risk analysis, a detailed content analysis of DOT DB documentation and in-depth case studies of successful DB projects, like the Hastings Bridge project cited above. 1.4 Research Problem Statement The term geotechnical risk evokes different meanings to different stakeholders of the transportation engineering and construction industry. To be successful, this research must reach beyond the constraints that are assumed in traditional project delivery in the US and tackle questions that have not been addressed like the following:
12 â¢ How should the format of the traditional geotechnical risk register/analysis change when the owner is no longer the consulting engineerâs client on DB contracts? â¢ At what point is the geotechnical uncertainty so great that it precludes DB project delivery? â¢ Can variations of DB delivery in use by other sectors like airport and transit, such as progressive DB, be adapted to the highway sector and used to mitigate geotechnical risk? â¢ Are insurance products like a single-premium, named peril policy for geotechnical performance adequate to mitigate the risk to the owner and what do those specialty products cost? The above questions are just a sampling of the many that will be addressed in the proposed research. The ultimate objective of the proposed research is to identify and evaluate opportunities to measurably reduce the levels of geotechnical uncertainty for both the owner and the competing design-builders where possible before project advertisement and award, as well as to equitably distribute the remaining geotechnical risk between the parties. Given the above discussion, the specific research objectives and the plan to achieve them are described in the remainder of this report. 1.5 Research Objectives To ensure the research satisfies the need for geotechnical risk management guidance in projects delivered by the DB project delivery method and that it can be implemented expeditiously, the following research objectives have been established:
13 1. Identify, analyze, and understand the current models for successful geotechnical risk management on projects delivered by the DB delivery method. 2. Quantify the costs and benefits of successful approaches to managing geotechnical risk in DB. 3. Prepare a set of Guidelines for Managing Geotechnical Risk on Design-Build Projects for agency implementation on highway construction projects. Accomplishing these objectives will yield a geotechnical risk model that is specifically adapted for DOT projects delivered using DB project delivery. The specific model will be flexible enough to be tailored for implementation within the statutory constraints of a given jurisdiction, as well as responsive to the concerns for equity and transparency of that stateâs design and construction industry partners. The proposed research will produce these deliverables: 1. Draft Guidelines for Managing Geotechnical Risk on Design-Build Projects for initiating and implementing both formal and informal geotechnical risk assessments on traditional projects and those delivered using alternative methods. 2. Interim and final research reports addressing the implications of adopting the proposed draft guidelines and recommendations for surmounting barriers to implementation, as well as documenting the details of the research methods used to arrive at the studyâs findings. 3. Interim emerging practice memorandums, as applicable and approved by the NCHRP panel, that document findings that can be implemented before the final guidelines is produced. These objectives will be further explored by focusing on the following questions and associated sub-objectives:
14 1. What project characteristics indicate that a substantial return on investment on the cost of formal geotechnical risk investigation can be achieved? Document and discuss the project characteristics previously used to select projects for formal geotechnical risk assessment through exploration of the literature and analysis of agency solicitation documents. Determine the underlying motivation for describing geotechnical risks, advantages and disadvantages, via detailed case study interviews. 2. What, if any, changes to the traditional geotechnical risk process should be made to maximize the benefits of geotechnical risk on projects delivered using alternative methods? Document and synthesize the experiences of DOTs and other transportation agencies regarding the path to implementing geotechnical risk assessments on DB projects as found in the literature and case studies. Identify the culture shift necessary to execute geotechnical risk management process and realize its benefits on projects delivered using alternative methods. Explore the roles of both in-house and outsourced design services in the geotechnical risk process. 3. What are the quantified costs and benefits of formal geotechnical risk? Identify methods to quantify the benefits and costs of geotechnical risk management from the literature. Document and synthesize the tangible and intangible costs and benefits of geotechnical risk documentation found in agency solicitation/policy documents and case study interviews. Analyze documented costs and benefits using the methods found in the literature and develop a model to calculate the return on investment that can be adapted by a given agency and tailored to its specific constraints and/or preferences.
15 4. Does a geotechnical risk management program actually increase collaboration and integration and if so, how can a valuation be assigned to the increase? Analyze the behavioral changes associated with the various approaches in use during geotechnical risk management workshops found in the case study interviews and develop a generic geotechnical risk collaboration performance measure that can be adapted by a given agency and tailored to its specific constraints and/or preferences to measure the performance of geotechnical risk assessment efforts at the project level.