Guidelines for Managing Geotechnical Risks in Design–Build Projects (2018)

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3 The purpose of these guidelines is to assist public agencies in manag­ ing geotechnical risk on highway construction projects that are deliv­ ered using design–build (DB). They may also provide insight for users managing projects with traditional delivery. The goal associated with using these guidelines is to aid agencies in identifying and evaluating opportunities that measurably reduce the levels of geotechnical uncer­ tainty for both the owner and the competing design–builders, where possible, before project advertisement and award, as well as equitably distribute the remaining risk between the parties during contract exe­ cution so that there is a positive impact on project cost and schedule. The intended audience of the guidelines is public agencies that must manage geotechnical risk on DB highway construction projects. This report furnishes insight about the potential impact of geotechnical risk in the DB context. The guidelines can be used to facilitate the DB proj­ ect delivery selection process. Once the decision to use DB is made, it also provides information for allocating the geotechnical risk between the agency and the design–builder, as well as specific practices found during the supporting research to be effective in managing, mitigating, and retiring geotechnical risk. The supporting research conducted an extensive review of state departments of transportation (DOTs) legal, contracting, design, and construction practices to manage DB geotechnical risk. The outcome was to frame the problem as a conflict between two characteristics of DB project delivery. First, DOTs use DB to accelerate project delivery and, second, one of the reasons for selecting DB is to develop a single point of responsibility for both design and construction. The conflict comes when the time available during the preliminary engineering conducted to develop a DB request for proposal (RFP) is insufficient to permit the agency to characterize the project’s subsurface conditions to a reasonable degree of certainty. The ability to transfer the geotechnical risk to the design–builder is limited because often the design–builder is charged with completing the necessary subsurface investigations and interpreting those to develop the project’s design. Once the DB contract is awarded, the first design elements that must be completed are those dealing with subsurface features of work, utilities, and drainage. This further reduces the time available for geotechnical engineering effort and often creates a situation in which early con­ struction packages are started before the subsurface uncertainty can be brought to a reasonable level. The result can be summarized as the following chain of logic: • The bulk of U.S. construction case law demonstrates that owners find it challenging to win differing site conditions (DSC) claims. C H A P T E R 1 Introduction to Design–Build Geotechnical Risk Management The primary finding of the guidelines supporting research is that there is a need to achieve an aligned approach toward managing geotechnical risks in DB projects. The disconnect between owners and contractors as to who owns the geotechnical risk in DB projects creates an overestimation of the risks that lead to unnecessary contingencies as a mea- sure of protection from overexposure. Therefore, the focus moving forward is to mitigate the geotechnical risks by encour- aging collaboration between the parties in a DB contract to achieve a mutually agreed geotechnical risk allocation plan.

4 Guidelines for Managing Geotechnical Risks in Design–Build Projects • Nevertheless, DOTs continue to rely on exculpatory language to attempt to shed geotechnical risk in DB projects. • The industry recognizes the risk shedding bias and perceives geotechnical risk to be much higher than do authors of DOT DB RFPs. • The result is the inclusion of contingencies for geotechnical risks that may not be realized, which must logically increase the overall cost of the project. • The solution is to align the perceptions of geotechnical risk of the DOT and the DB team early in the process. • The study has identified progressive DB, DB with multiple notices to proceed, and DB with some fixed scope validation period as potential mechanisms to permit the early alignment of geotechnical risk perceptions. Put another way, there simply is not enough time in a typical DB project’s development cycle to complete the geotechnical investigations necessary to reduce geotechnical uncertainty to an acceptable level prior to awarding the DB contract. Thus, the most pragmatic way to mitigate DB subsurface risk is to start the digging and uncover the actual site conditions on which the project must be built as soon as practical. This can be accomplished through early contractor involvement and joint development of the geotechnical risk profile for the DB project. The overall objective of the guidelines is to assist agencies by furnishing potential methodologies that permit the DOT and its industry partners to align perceptions of risks as well as their business objectives as early as practical during the delivery of a DB transportation project. 1.1 Design–Build Project Risk Management While the focus of the report is on geotechnical risk, it is important to be able to put that in context of the overall risk profile for a DB project. The major change in the DB risk profile versus design–bid–build (DBB) risk is due to the shift in design responsibility to the design– builder. The owner’s new DB risks can result from not relinquishing the design responsibility to the design–builder. Compounding the issue is the owner’s desire to accelerate the construc­ tion schedule, which may result in construction beginning before the project’s design is 100% complete. Since public sector DB projects often require that the design–builder commit to a firm fixed price before the project’s design is complete, the risk that the agency’s RFP does not adequately articulate the total scope of work is higher than DBB. Additionally, unfamiliarity with DB contracts often leads to a proliferation of exculpatory risk shedding clauses that will ultimately drive the competing design–builders to raise their proposed prices regardless if those clauses are actually enforceable. The bottom line is that the winning design–builder must design to the budget defined by its contract amount. If the agency’s oversight staff is new to DB, this is often perceived to be cutting corners on design and construction quality on the basis of a preva­ lent school of thought that believes any changes made after contract award are done to increase the contractor’s profit margin. This issue can cause an adversarial environment to develop, in which the risk of claims because the actual scope of work does not match the one portrayed in the solicitation and award documents is higher. Given the preceding discussion, the first question a DOT will want to address is whether a given project is a good candidate for DB project delivery given the influence of geotechnical uncertainty on the design, price, and schedule. Table 1.1 is a synopsis of project characteristics found in the literature that would indicate that DB delivery may not be the most appropriate approach. However, the DOT survey from supporting research also found that the decision to use DB was rarely, if ever, influenced by the level of geotechnical risk. This brings the discus­ sion back to its starting point. DOTs use DB when an aggressive delivery schedule is required; therefore, it becomes imperative that geotechnical risk be thoughtfully managed. Given that the

Introduction to Design–Build Geotechnical Risk Management 5 subsurface risks will be the first to be realized in construction, it makes sense to give the sub­ surface risks specific attention both before and after DB contract award. Additionally, the need for the agency and the design–builder to align their perceptions of geotechnical uncertainty as early as possible gains importance as a remedy to avoid potential disputes over DSC after construction has commenced. 1.1.1 Geotechnical Risk in DB projects When trying to understand risk in projects delivered by alternative methods, one must remember that risk is a function of both individual and organizational perceptions borne by the collective experiences of those conducting the risk analysis. Risk is measured by comparing it with a benchmark with which the analyst is familiar. In this case, a comparison of typical geo­ technical risks in DBB projects versus the change in the risk profile that occurs when the contract is awarded for both design and construction is a logical starting point. In doing the comparison, it is important to remember that geotechnical uncertainty is always high until the necessary sub­ surface investigations and studies are complete, and the uncertainty will remain until construc­ tion activities expose the actual subsurface characteristics found on the project site. Table 1.2 provides a side­by­side comparison of geotechnical scope, schedule, and cost risks in DBB and DB from the perspective of the owner and its construction contractor or design– builder. Looking at the table, in most cases the decision to use DB delivery results in a shift of many of the risks associated with design activities to the design–builder. One of the major risks in DB is that the owner’s staff will not relinquish control over the design details that they are used to exercising in DBB to the design–builder’s design staff. The case law review for this guide found that when the agency becomes prescriptive in its design reviews, it usually assumes the performance liability for the aspect that it directed to be changed. This is shown in the Table 1.2 scope risk section, in which “direct and tacit approval of constructive changes to geotechnical design” remains in the owner’s court in both DB and DBB. The DOTs with the most DB experience tend to employ the use of “over­the­shoulder” design reviews to remedy this potential issue. In DBB delivery, the design is complete before the construction contract is awarded. The owner assumes responsibility for accuracy of design. Most geotechnical claims fall under changes due to differing site conditions or DSC. The FHWA mandates the use of a DSC clause for DBB projects on federal­aid highway projects unless its use is contrary to the state law. The typical DSC clause provides broad relief to a contractor for site conditions that differ materially from Project Characteristic Source • High risk of differing site conditions. • Low probability to be able to expedite design and construction schedule. • High possibility of change to phases of work. Blanchard 2007 • The design must be complete to develop accurate pricing. • The design must be complete to obtain permits and/or satisfy other third party issues. Gransberg et al. 2006 • Project scope is difficult to define or quantify. • Project scope has high probability of change in permitting process. • Missing “sound geotechnical and environmental data prior to the bid phase.” Christensen and Meeker 2002 • “Inability of design-stage investigation to eliminate risks from unknown geological conditions for construction of underground works.” Hoek and Palmieri 1998 • Risk shedding is owner’s primary motivation for using alternative project delivery methods. Scheepbouwer and Humphries 2011 Table 1.1. Project characteristics that indicate a poor candidate for DB project delivery.

6 Guidelines for Managing Geotechnical Risks in Design–Build Projects what is expected according to the contract documents. Thus, the risk of DSC is usually borne by the owner in DBB projects. However, in DB, the design–builder is responsible for completing the design and construction under a single contract. FHWA does not have a similar DSC mandate for DB projects. Without a DSC clause, the liability for DSC becomes murky and the potential for costly and time­consuming disputes rises. Most RFPs require that the design–builder conduct a comprehensive geotechnical study of the site and base the final design on the results of its own geotechnical investigation. A dilemma arises since the geotechnical study is not conducted until the contract is awarded, and it is both unreasonable and unrealistic to expect competing teams to gather that data at their own expense during procurement. Thus, the agency must provide enough information about project site conditions to permit competing teams to develop a price, forcing the DOT to furnish what is currently available in the agency’s files and from any preliminary engineering studies. Often, the same RFPs also include disclaimers of liability for the accuracy of geotechnical information furnished by the owner in the RFP. As a result, when the winning design–builder encounters a site condition that significantly differs from the owner­furnished RFP geotechnical data during its own comprehensive investigations, a dispute may occur if the agency denies the claim, relying on its exculpatory disclaimers. The legal review that was conducted found two important facts that can be used to pro­ vide guidance on the above­cited dilemma. First, regardless of project delivery method, the courts rarely find for the project owner, holding that most exculpatory verbiage does not in fact transfer the liability for unknown/undiscovered conditions. Second, when the agency fails to disclose everything it knows about a given project’s site conditions in the DB RFP, the agency stands in danger of having been found to have knowingly withheld information that would have DBB Contractor/Design–Builder Owner Geotechnical Scope Risk DBB Warranties and guarantees Latent defects—workmanship Competent geotechnical specialty subcontractors available Design error and omissions Latent defects—design Direct and tacit approval of constructive changes to geotechnical design DB Design errors and omissions Warranties and guarantees Latent defects—design and/or workmanship Competent geotechnical design personnel available Clear geotechnical scope definition Direct and tacit approval of constructive changes to geotechnical design Geotechnical design review comments and directives Technical review capability Geotechnical Cost Risk DBB Rework Subcontractor default Market fluctuation after award Redesign and resultant rework Construction contract amount Market fluctuation during design—material and labor DB Rework Redesign Subcontractor default Market fluctuation during design—material and labor Design–build contract amount Prompt payment Design–builder default Geotechnical Schedule Risk DBB Contract completion date Liquidated damages Timely design completion Owner furnished property delivery DB Delivery on approved schedule Fast-track geotechnical rework • • • • • • • • • • • • • • • • • • • Liquidated damages Unrealistic schedule Timely geotechnical design approvals on fast- track project • • • • • • • • • • • • • • • • • • Owner furnished property delivery Table 1.2. DBB versus DB geotechnical risk profiles.

Introduction to Design–Build Geotechnical Risk Management 7 materially affected bid pricing. The conclusion is clear. The owner cannot reliably shed DSC risk and, therefore, must mitigate that risk in other ways, like including a DSC clause in their DB contracts. The subsequent chapters in this report will furnish a number of other alternatives that have proved to be successful. 1.1.2 Alternative Contracting Methods This report features AASHTO best practices guidance for managing geotechnical risk in vari­ ous types of DB contracts, including specific task assignments of responsibility based on the type of contracting method and means of project execution. There are three major variations of the DB delivery method. Those variations are based on the manner in which the award will be determined. The general definition for DB and its variations are as follows: • Design–Build. The system of contracting under which one entity performs both architecture/ engineering and construction under a single contract with the owner. – Design–Build–Low Bid. The award is based on the lowest priced responsive proposal. – Design–Build–Best Value. The award is based on the factors other than lowest proposed price alone. The factors may include qualifications, past experience, proposed design approach, proposed schedule, and so on. – Design–Build–Stipulated Sum. This variant is sometimes termed “Fixed Price­Best Proposal.” Its distinguishing feature is the absence of price competition. The owner stipulates the maximum allowable price and essentially awards the project to the proposal that provides the “most bang for the buck.” DB is intended to create a single point of responsibility for design and construction, inte­ grating the DB team through its internal contractual arrangements. DB also permits the owner to evaluate the merits of multiple design solutions to the same design problem. If the agency indicates a specific desire to optimize the geotechnical risk management strategy in the proposed design, it will potentially receive proposals from the competing DB teams that provide more than one approach for satisfying the project’s RFP performance criteria. Table 1.3 shows the major advantages and disadvantages of using DB in the geotechnical risk management context. Alternate technical concepts (ATCs) can be included in all three DB variants. ATCs are often referred to incorrectly as pre­award value engineering. While the result is the same (i.e., money or timesaving changes to the baseline design are proposed, evaluated, and approved), there is no shared savings. The agency receives the entire savings as part of the contract award price. The definition for ATCs is as follows: • Alternative Technical Concepts. An ATC is a specific modification of the baseline scope of work and its attendant contract requirements in a manner that is equal to or better than the baseline scope of work articulated in the solicitation of the project. NCHRP Synthesis 455: Alternative Technical Concepts (2014) found that the confidential one­on­one meetings used in “ATC submittal pro­ cess was found to be an effective practice for DB projects to furnish an opportunity to identify errors, omissions, ambiguities and to provide clari- fications that might not be raised when all RFIs are published.” It also found that “implementing ATCs with confidential one­on­one meet­ ings effectively provides a new level of design quality control through the involvement of the contractor in reviewing the solicitation and design documents and identifying errors, omissions, and ambiguities.” Hence, the ATC one­on­one meetings create an opportunity to clarify the geotechnical risk as well as for the agency to consider changes to the “In comparing the ATC cost benefits to the stipends paid, Caltrans achieved a return on investment of 156:1, mean- ing $156 of ATCs incorporated or made available to Caltrans for every dollar spent on stipends.” Ray Tritt, PE 2013

8 Guidelines for Managing Geotechnical Risks in Design–Build Projects baseline design that it may not have found alone. As will be seen in subsequent chapters, ATCs provide a powerful geotechnical risk management and mitigation tool for DB projects. 1.1.3 The Motivation of the Guidelines The overarching motivation for using DB project delivery is driven by the agency’s need to accelerate the project’s schedule. Geotechnical characterization of the site’s subsurface proper­ ties is not an activity that can easily be crashed. Thus, most DB projects delay the comprehensive geotechnical studies and reports to the post­award timeframe. This means that the contract price is fixed and if the actual conditions significantly differ from those that can be reasonably expected by the information provided in the RFP, a dispute may arise as to whether the changes/delays related to differing subsurface conditions are compensable. Therefore, the primary purpose of these guidelines is to furnish a menu of options for avoiding controversy over geotechnical risk, based on DB practices of geotechnical risk management that have proved to be effective in the field. These guidelines do not advocate any specific practice contained herein but rather leave it up to the practitioner to identify those effective practices that will best apply to their specific DB project. 1.2 Project Geotechnical Risk Management Process This section provides a brief overview of the classic project risk management process as applied in the geotechnical context. Geotechnical risk is not just another one of the full suite of risks that must be managed in a typical DB project. Geotechnical risk is typically the first one Advantage Geotechnical Context Single point of responsibility for both design and construction • Integrating subsurface risk management strategy into the project strategy facilitated by DB internal structure. • Reduced potential for differing site conditions delays. • DB team can conduct subsurface utility engineering (SUE), plus utility coordination.* Contractor design input • Creates opportunities for optimizing means and methods with geotechnical risk strategy. • Allows DB team to evaluate alternatives to utility relocation after award, before final design. Fast tracking supported • Sequence of work can be optimized with project geotechnical risk strategy. • Work packaging and work phases can be developed for geotechnical risk requirements. • Early start possible for utility relocations. Compete different design solutions • Creates opportunities for optimizing DB teams’ preferred means and methods with geotechnical risk strategy. • Allows competing DB teams to propose alternatives to avoid geotechnical risks. • Competing proposals can be evaluated for innovative geotechnical engineering design and risk management strategies. Disadvantage Large contingencies for risk • An incomplete geotechnical risk strategy forces the DB team to include contingencies for subsurface risks and utility conflicts that might not be realized. • Contingencies can be reduced if ATCs are used to create a pre-award dialogue to better clarify geotechnical risk. Loss of checks and balances • Frequently creates a subcontractor relationship for the designer, which may make cost considerations after award more important than the coverage of the post-award subsurface investigations and the quality of the geotechnical engineering. • Often puts the general contractor between the owner and the designer, reducing the designer’s ability to act as the owner’s advocate on geotechnical engineering matters. *See Standard Guidelines for the Collection and Depiction of Existing Subsurface Utility Data. (2002). Standard CI/ASCE 38-02. American Society of Civil Engineers, Reston, Va. Table 1.3. DB advantages and disadvantages.

Introduction to Design–Build Geotechnical Risk Management 9 encountered, the first one to be realized, and if well managed, it can be the first one retired so that the project delivery team can focus on completing the remainder of the project. It can be argued that geotechnical risk may also be the risk that has the highest level of uncertainty during the pre­award phase and, as previously mentioned, cannot be transferred in its entirety, regardless of contract language. Therefore, geotechnical risk occupies a unique position in the project risk register because of its early occurrence and deserves to be treated with the necessary respect and attention because of its potential impact on project cost and schedule performance. 1.2.1 Risk Term Definitions The definitions of following terms that relate to the risk management process are important to understand to comprehend properly the information in this guide. These definitions come from ISO 31000 (Lark 2015). • Risk: Effect of uncertainty on objectives • Risk Management: Coordinated activities to direct and control an organization with regard to risk • Risk Identification: Process of finding, recognizing, and describing risks • Risk Assessment: Overall process of risk identification, risk quantification, risk analysis, and risk evaluation • Risk Analysis: Process to comprehend the nature of risk and determine the level of risk • Risk Evaluation: Process of comparing the results of risk analysis with risk criteria to determine whether the risk and/or its magnitude is acceptable or tolerable. 1.2.2 Geotechnical Term Definitions Most DOTs have evolved their own technical jargon and the proliferation of new tech­ nical terms in transportation creates confusion, making it difficult to properly interpret agency documents. This issue is prevalent in the geotechnical arena. The guideline will use certain geotechnical terms in a precise sense. It is important for the reader to understand the specific definition of each of the terms to understand fully the contents of this document. The definitions for the primary geotechnical reports that will be referenced in the synthesis are drawn from the FHWA Technical Manual for Design and Construction of Road Tunnels— Civil Elements (Hung et al. 2009), which draws from an American Society of Civil Engi­ neers document that reports a consensus definition reached by the Underground Technical Research Council (see Essex 2007 citation in Appendix A). • Geotechnical Design Memoranda (GDM): “interpretive reports are used to evaluate design alternatives, assess the impact of construction on adjacent structures and facilities, focus on individual elements of the project, and discuss construction issues . . . the GDM may be prepared at different stages of a project, and therefore may not accurately reflect the final design or final contract documents. Since GDMs are used internally within the design team and with the owner as part of the project development effort, it is not appro­ priate to include GDMs as part of the contract documents.” Also termed geotechnical interpretive report. • Geotechnical Data Report (GDR): “a document that presents the factual subsurface data for the project without including an interpretation of these data. The purpose of the GDR is to compile all factual geological, geotechnical, groundwater, and other data obtained from the geotechnical investigations for use by the various participants in the project, including the owner, designers, contractors and third parties that may be impacted by the project. It serves

10 Guidelines for Managing Geotechnical Risks in Design–Build Projects as a single and comprehensive source of geotechnical information obtained for the project.” The GDR should contain the following information: – “Descriptions of the geologic setting; – Descriptions of the site exploration program(s); – Logs of all borings, trenches, and other site investigations; – Descriptions/discussions of all field and laboratory test programs; and – Results of all field and laboratory testing.” • Geotechnical Baseline Report (GBR): a document developed “to define the baseline conditions on which contractors will base their bids and select their means, methods and equipment, and that will be used as a basis for determining the merits of contractor claims of differing site conditions during construction.” The GBR should contain the following information: – “The amounts and distribution of different materials along the selected alignment; – Description, strength, compressibility, grain size, and permeability of the existing materials; – Description, strength and permeability of the ground mass as a whole; – Groundwater levels and expected groundwater conditions, including baseline estimates of inflows and pumping rates; – Anticipated ground behavior, and the influence of groundwater, with regard to methods of excavation and installation of ground support; – Construction impacts on adjacent facilities; and – Potential geotechnical and man­made sources of potential difficulty or hazard that could impact construction, including the presence of faults, gas, boulders, solution cavities, exist­ ing foundation piles, and the like.” In addition to the above terms, the supporting research found that DOTs use several terms to describe commonly practiced methods for conveying geotechnical information in DB RFPs. They are as follows: • Reconnaissance Report: Document that contains the results of a review of records and observa­ tions from the project site. • Geotechnical Summary Report: Document that contains the results of a review of records and geotechnical investigation of critical areas. • Preliminary Geotechnical Data Report: Document that contains the results of a partial geotech­ nical investigation that will eventually be included in a final GDR. 1.2.3 Design–Build Term Definitions It is also necessary to provide standard definitions for terms that relate to DB project delivery. Those terms follow. • Design–bid–build (DBB). The “traditional” project delivery approach where the owner com­ missions a designer to prepare drawings and specifications under a design services contract, and separately contracts for construction, by engaging a contractor through competitive bidding or negotiation. • Design–build (DB). The system of contracting under which one entity performs both architecture/ engineering and construction under a single contract with the owner. • Alternative technical concepts (ATC). An ATC is a specific modification of the baseline scope of work and its attendant contract requirements in a manner that is equal to or better than the baseline scope of work articulated in the projects solicitation. • Differing site conditions (DSC) clause. A contract clause designed to give a contractor cost and time relief for: (1) subsurface or latent physical conditions encountered at the site differing materially from those indicated in the contract; or (2) unknown physical conditions at the site of an unusual nature differing materially from those ordinarily encountered and generally

Introduction to Design–Build Geotechnical Risk Management 11 recognized as inherent in the work provided for in the contract [U.S. Code, Differing Site Conditions, Title 23 CFR 635.109 (2013)]. There are two types. – Type 1 DSC. Type 1 focuses on conditions that are indicated in the contract documents. Classic examples include (a) rock or water at different elevations than shown in the geo­ technical report, (b) unknown underground utilities, and (c) soil that contains different characteristics than identified in the contract documents. – Type 2 DSC. Type 2 is independent from what is set forth in the contract documents and defined by what one would reasonably expect to encounter in performing the work. Examples of this can be soil compacting or rock fracturing differently than one would reasonably expect. 1.2.4 The Differing Site Conditions Clause Some owners believe that the contractor should bear the risk of DSCs. The flaw in this form of logic is that neither the owner nor the contractor can accurately value the risk of geotechnical unknowns. When forced to price geotechnical risk, contractors include contingencies that could either price themselves out of the competition, or, if they do win the contract, the potential that the contingency might be insufficient for dealing with the actual conditions. Many sophisticated contractors will refuse to bid on a contract with unlimited DSC risk. This not only reduces competition but also increases the risk to the owner that the winning contractor will have underpriced the risk and may default if faced with a significant DSC for which it is liable. More important, if the potential geotechnical risks are not realized, the owner will have overpaid for the project, leaving the lucky contractor with a windfall. Time has shown that owners are in the best position to accept the DSC risk and the most common approach is to include a DSC clause in the DB contract. A landmark U.S. Claims Court decision provided a clear explanation of the purpose of the DSC clause (Foster Construction C.A. and Williams Brother Company, a Joint Venture, Etc. v. the United States 1970): The purpose of the changed conditions clause is thus to take at least some of the gamble on subsurface con- ditions out of bidding. Bidders need not weigh the cost and ease of making their own borings against the risk of encountering an adverse subsurface, and they need not consider how large a contingency should be added to the bid to cover the risk. They will have no windfalls and no disasters. The Government benefits from more accurate bidding, without inflation for risks which may not eventuate. It pays for difficult subsurface work only when it is encountered and was not indicated in the logs. The DSC clause provides cost and time relief for: (1) subsurface or latent physical condi­ tions encountered at the site differing materially from those indicated in the contract; or (2) unknown physical conditions at the site of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inherent in the work provided for in the contract. The owner only pays for the actual costs incurred if and when these condi­ tions are actually encountered, as opposed to the unliquidated contingency for a geotechni­ cal risk that may never occur. 1.3 Design–Build Project Risk Management Planning This section presents an overview of the geotechnical risk management planning in the DB project development and delivery. Figure 1.1 shows the generic risk assessment cycle. The figure shows that it is a continuing process and, as a result, the DB project risk management plan must include provisions for tracking project risks, updating the project risk register, and retiring risks when appropriate.

12 Guidelines for Managing Geotechnical Risks in Design–Build Projects Most agencies that use DB have their own policies and standard operating procedures for conducting formal risk analyses on DB projects. Geotechnical, utilities, and other subsurface risks are generally included in those documents and implementing this guide in no way alters those procedures. The practices described are intended to provide a sharper focus on the geotechnical risks and furnish the agency a set of tools for managing and mitigating risks due to geotechnical uncertainty. The guide also seeks to raise the visibility of geotechnical risks and contends that the combination of high uncertainty and the need to pursue an aggressive schedule on DB projects warrants giving geotechnical risks special focus by pursuing a policy of retiring geotechnical risks as early in the project as practical. Thus, the change, if there is one, is the focus on early risk retirement as the primary geotechnical risk management strategy. 1.3.1 Defining Geotechnical Risk Management and Risk Response ISO 31000 defines a risk as the “effect of uncertainty on objectives” and risk management as those “coordinated activities to direct and control an organization with regard to risk.” In this case, the risk is that actual site conditions will be found to be different from those that were reasonably anticipated at the time of DB contract award and establishment of the lump sum price for the project. Its effect is the possibility of scope changes that will result in cost and sched­ ule overruns. Therefore, geotechnical risk management involves coordinating the activities to reduce the uncertainty that lead to the point where the geotechnical risk is realized or is not real­ ized. These activities occur in two distinct stages. They are the activities that seek to characterize the site conditions before DB contract award and those that occur after the contract is consum­ mated. The pre­award activities involve preliminary geotechnical engineering, the development of geotechnical information to be contained in the DB RFP, and the other activities described in Section 1.3.3 below. The post­award activities (see Section 1.3.4) encompass the geotechnical studies conducted as part of the final design process and early subsurface construction activities that seek to disclose actual site conditions. In Figure 1.1, the first step is to identify geotechnical risks. Table 1.4 is a list of 29 subsurface risks identified by a survey of state DOT geotechnical personnel and corroborated by indus­ try geotechnical engineers who work on DB teams. The subsurface risks are ranked using an 1. Risk Identification 4. Risk Mitigation & Monitoring 2. Risk Quantification 3. Risk Evaluation Figure 1.1. Risk assessment process.

Introduction to Design–Build Geotechnical Risk Management 13 objective system based on survey respondent ratings of each risk’s frequency of occurrence and impact if realized. The three columns on the right side of Table 1.4 can be used as a checklist to ensure that the pre­award geotechnical risk identification process includes the major common risks. The table is not meant to be inclusive, and the risk analyst will want to ensure that agency geotechnical engineers are consulted to determine if other project specific risks not shown in the table are present. Once the DB project’s risk identification process is complete, the agency must deter­ mine how it will respond to each risk. Classic risk management theory offers four possible responses: 1. Avoid. This is done by removing the cause of the risk and may involve revisiting the project’s design to determine if this response is viable. 2. Transfer. This is done in the risk allocation process and should be governed by transferring the risk to the party that is best equipped to own the risk and deal with it effectively. This response often involves preparing to pay the other party to own the transferred risk. 3. Mitigate. Mitigation involves reducing the probability of occurrence and/or severity of impact of the risk to an acceptable level. Again, mitigation responses often involve additional resources. 4. Accept. This is the final response if a given risk cannot be avoided, transferred, or mitigated. Often this response demands the development of a contingency plan, as well as a specific amount of contingency funds set aside to cover the risk if it will be realized. Importance # Identified Geotechnical Risk Factors Present? Probability Impact High [1-10] 1 Landslides 2 Slope instability 3 Contaminated material 4 Highly compressive soils 5 Settlement of adjacent structure 6 Prediction of subsurface conditions due to inaccessible drilling locations 7 Subsidence (subsurface voids) 8 Soft clays, organic silts, or peat 9 Consideration for public sensitivity/reaction to excavations (parks, historic buildings, etc.) 10 Scour of bridge piers Medium [11-20] 11 Soft compressible soil 12 Seismic risk 13 Karst formations 14 Caverns/voids 15 Existing structures likely to be impacted by the work (other than utilities) 16 Groundwater/water table 17 Utility conflicts 18 Lateral spreading 19 Liquefaction 20 Rock faults/fragmentation Low [21-29] 21 Settlement in general 22 Underground manmade debris 23 Settlement of bridge approaches 24 Presence of rock/boulders 25 Eroding/mobile ground conditions 26 Chemically reactive ground 27 Unsuitable material 28 Groundwater infiltration 29 Replace in situ material with borrowed material Note: Based on NCHRP Project 24-44 survey. Table 1.4. Ranked geotechnical risks.

14 Guidelines for Managing Geotechnical Risks in Design–Build Projects Table 1.5 contains a listing of 25 geotechnical risk management tools found to be effective during the research. The tools are grouped by stage of project development and delivery in which they apply. The table provides the primary source of the given tool. A state abbreviation followed by a plus sign (+) indicates that the tool was observed to be used in other states as well. A detailed description of each tool may be found in Chapter 5. 1.3.2 Integrating the Management of Geotechnical Risk into the Overall Project Risk Plan In keeping with the findings of the supporting research that geotechnical risks are likely to be the first ones realized in the post­award phase of project execution, integrating them into the overall DB project risk register is a matter of giving the geotechnical risks elevated visibility during the formal risk analysis. There are several ways to achieve the heightened awareness of the geotechnical risks. The first example is to address geotechnical risks first and determine an appropriate risk response for each one. Then check all other risk responses to determine if they will interfere with the geotechnical risk strategy. An example resolving other risks within the context of the geotechnical risk profile might be a decision to relocate a given utility system that was brought # Tool Source Tools Used During RFP Development 1 Flexible footprint for NEPA clearance MO 2 Develop and furnish GBR in RFP WA+ 3 Geotechnical conditions database VA 4 Site conditions history from property owners during right-of-way (ROW) acquisition MN 5 Prescriptive geotechnical design UT+ 6 Performance specifications for post-construction performance (subsidence, etc.) MN+ Tools Used During Procurement and Award 7 Include differing site conditions clause SC+ 8 Progressive DB MD 9 Request of geotechnical and/or utilities ATCs CA+ 10 Define no-go zones for geotechnical ATCs UT+ 11 Competitor designated boring locations UT+ 12 Competitors permitted to conduct supplementary borings at own expense. MN+ 13 Unit prices for contaminated material, over-excavation, etc. MT+ 14 Weight geotechnical evaluation criteria MI+ 15 Include life-cycle criteria in best value award scheme TX+ Tools Used During Post-Award 16 Scope validation period VA 17 Multiple notices to proceed (NTP) with one designated for geotechnical investigation, design, and a second specifically to commence excavations, utility work, etc. UT 18 Contractor produced geotechnical baseline report for construction (GBR-C) OH 19 Negotiated GBR interpretation WA+ 20 Differing site conditions allowance WA+ 21 Contaminated material allowance MN+ 22 Unforeseen utilities allowance KY 23 Assign design–builder responsibility for utility coordination TX+ 24 Validate proposed life cycle elements during design CA 25 Encourage life cycle related value engineering proposals from subcontractors CA+ Table 1.5. Geotechnical risk management tools identified in the research.

Introduction to Design–Build Geotechnical Risk Management 15 into conflict by a geotechnical risk management decision to shift the alignment of the project to avoid potentially contaminated material. A second example comes from the Virginia DOT, where the risk response decision is to trans­ fer the geotechnical risk to the design–builder and give it a 120­day scope validation period after award to conduct its subsurface investigations and identify any potential DSC, after which DSC claims are not permitted. If an unexpected condition is uncovered during the scope validation period, execute a negotiated change to the project’s scope to provide the design–builder the necessary compensation at an early point in the project to mitigate schedule and cost impacts. A third example is Washington State DOT’s geotechnical risk acceptance clause for DB DSC, in which the agency sets a fixed dollar limit below which the design–builder is responsible for any DSC encountered and above which the state assumes all responsibility. 1.3.3 Geotechnical Risk Considerations During Preliminary Engineering and Procurement Pre­award geotechnical risk management activities involve the following: • Identifying the primary geotechnical risks for the specific DB project. • Conducting preliminary geotechnical information gathering to characterize the project site. • Preparing the project’s solicitation documents [request for quotation (RFQ) and RFP]. • Providing a conduit where requests for information (RFI) can be submitted and satisfied during procurement. • Determining the level of interactivity that the agency will permit with competing DB teams during proposal preparation using mechanisms like confidential one­on­one meetings, allow­ ing competitors to conduct their own site borings, etc. • Determining whether geotechnical ATCs will be permitted and, if so, how the agency will conduct the ATC review and approval process. Identifying the DB project’s primary geotechnical risks sets the stage for the remaining pre­award risk management activities (Gransberg et al. 2014). Many agencies will do this as a matter of course in the project’s risk analysis conducted as a part of their standard DB project development procedure. For DB projects with high geotechnical risk, the agency needs to ensure that staff members responsible for prepar­ ing the solicitation and award documents are made aware of major geotechnical risks and make provisions to manage them in the proj­ ect procurement strategy. Once geotechnical risks are identified, the agency can determine the level of geotechnical investigation that will be conducted during the preliminary process necessary to develop the DB RFP’s technical content. The pre­award geotechnical investigation activities actually range across a broad spectrum from furnishing only the site information available in the agency’s records, with no new geo­ technical data collection for the development of a GBR. The necessary qualifications and experience criteria for the design– builder’s geotechnical design staff and construction team fall out of the geotechnical risk identification process and will serve as evaluation criteria in the DB project’s RFQ. Solicitation document developers need to maintain a pragmatic outlook as the evaluation criteria are developed and ensure that the criteria match both the major identified risks and the potential availability of industry team members with the The Minnesota DOT took advantage of ATCs in the DB project delivery on the Hastings Bridge Replacement DB project. The DOT received an ATC that changed the foundation design to an innovative column-supported fill, which not only greatly reduced the long-term subsidence risk but also included the installation of instrumentation to monitor settlement over time and an extended warranty. The same design–builder also proposed an innovative plan for the rapid utility transfer from the existing to the new service that significantly reduced the construction schedule. All told, the Hastings Bridge Replacement DB ATCs significantly reduced the cost of the project, amply demonstrating the poten- tial for leveraging DB with ATCs to benefit the DOT by gaining early contractor involvement in the design during the procurement (Gransberg et al. 2014).

16 Guidelines for Managing Geotechnical Risks in Design–Build Projects appropriate credentials and past experience to meet them. One effective practice identified in the research was to quantify past experience in terms of the number of projects of similar scope, complexity, and magnitude rather than using an arbitrary number of years of similar experience. Experience has shown that allowing a certain amount of agency/competing DB team inter­ action has a positive impact on increasing the probability of having high quality proposals that are fully responsive to the DB project’s solicitation. Again, a spectrum of possible amounts of interaction exists, which ranges from merely accepting and answering RFIs to confidential one­ on­one meetings to accept ATCs, discuss specific geotechnical risks, and clarify ambiguities found in the DB RFP. It is common to permit some form of additional site investigation by the competing DB teams. This also falls in a range from permitting each competitor to designate locations for additional borings to be made at the agency’s expense with all new information provided to all competitors to permitting each competitor to conduct its own preliminary inves­ tigations at its own expense and not disclose the results. 1.3.4 Geotechnical Risk Considerations After Award Once the DB contract is awarded, the focus shifts from geotechnical risk management to completing the geotechnical engineering investigations necessary to support the design and getting early site development packages like utilities and drainage to a point where they can released for construction. Chapter 5 includes details on geotechnical risk management strat­ egies, methods, and tools. Three of the tools (progressive DB, scope validation period, and multiple construction notices to proceed) are designed to get the construction contractor into the field as early as practical to uncover the subsurface conditions and determine if there are indeed conditions that differ materially from those that would reasonably have been expected during price proposal preparation. The use of one of those tools shifts the geotechnical engi­ neering from being design­centric to construction­centric and recognizes that even the most extensive geotechnical investigations can still miss differing conditions. Therefore, the object of the post­award effort in this area is to expose those risks as quickly as practical at a point earlier enough in project execution that the cost impact of their remedies is minimized and where any schedule impacts occur at a point where the maximum project float is available to mitigate any delays. 1.3.5 Retiring Geotechnical Risks The ultimate goal of DB project geotechnical risk management is to eliminate the subsurface uncertainty so geotechnical risk can be retired and the project team can focus on completing the remainder of the project. Once a risk of any sort is retired, the line item contingency allocated to the risk can be released for use elsewhere in the project. Since subsurface risks will be exposed and remedied first, it makes sense to treat them differently from the remainder of the project risks. Agencies will want to consider structuring their budget in a manner that carries a separate lump sum geotechnical contingency that can be released once the project has reached a point where all possible subsurface risks have been retired. 1.4 How to Use the Guidelines The guidelines are organized into seven chapters. 1. Introduction to Design–Build Geotechnical Risk Management 2. Geotechnical Risk Identification

Introduction to Design–Build Geotechnical Risk Management 17 3. Qualitative Geotechnical Risk Analysis 4. Quantitative Geotechnical Risk Analysis 5. Geotechnical Risk Management Strategies, Methods, and Tools 6. Geotechnical Risk Monitoring, Control, and Retirement 7. Design–Build Project Geotechnical Risk Management Planning Workshop Template There are call­out boxes that emphasize the most important findings of the research and con­ tain appropriate quotations and other facts or examples of how geotechnical risk issues discussed in the text were overcome successfully in case study projects.