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Page 49
Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
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Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
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Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
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Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
×
Page 52
Page 53
Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
×
Page 53
Page 54
Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
×
Page 54
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Suggested Citation:"Appendix A - Project Delivery Method Primer." National Academies of Sciences, Engineering, and Medicine. 2019. Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery. Washington, DC: The National Academies Press. doi: 10.17226/25641.
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Page 55

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49 This appendix provides a concise summary of various project delivery methods used for capital projects. Those delivery methods include • Design–bid–build (DBB) • Construction manager-at-risk (CMR) • Design–build (DB) • Indefinite delivery/indefinite quantity (IDIQ) • Public–private partnership (PPP) • Integrated project delivery (IPD) Design–Bid–Build DBB is the traditional project delivery method in which an owner retains a designer to furnish complete design services and then advertises and awards the separate construction contract based on the designer’s completed construction documents. The owner is responsible for the details of design and warrants the quality of the construction design documents to the con- struction contractor. Figure 12 shows the basic relationships between project participants in a DBB delivery system. The owner “owns” the details of design during construction. As a result, the owner is financially liable for the cost of any design errors or omissions encountered in construction. This principle is called the “Spearin doctrine.” The construction phase of DBB projects is awarded on a low-bid basis. The following characteristics distinguish the DBB approach: • “There are separate contracts for design and construction; • Contractor selection is based entirely on cost; • Design documents are 100% complete” (Bearup et al. 2007, p. 3). DBB is also characterized by the greatest amount of competition in both the design and construction areas. All qualified designers can compete for the design without restriction. Additionally, all construction contractors that can furnish the required bonding are also able to compete without constraint. DBB is viewed as the traditional project delivery method in the United States, making it well understood and well accepted by both owners and members of the design and construction industries. In general, DBB procurements do not afford the contractor a chance to provide feedback or input to the design process. One exception is if alternative technical concepts (ATC) are solicited during bidding as is done by the Missouri Department of Transportation (Gransberg et al. 2014). If the contract permits contractor value engineering change proposals (VECPs), then an opportunity to make input also occurs after DBB award. In both cases, the owner has full control over the design and reserves the right to approve or disapprove both ATCs and VECPs. A P P E N D I X A Project Delivery Method Primer

50 Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery Construction Manager-at-Risk In this approach, the owner selects the contractor at early stages of design to provide pre- construction services to the project and to enter into a construction contract with a guaranteed maximum price (GMP) that is negotiated during the design process. Unlike DBB, CMR brings the builder into the design process at a stage when a contractor’s input can have a positive impact on the project. The CMR will become a member of the project team and will perform preconstruction services including cost estimating, scheduling, and constructability reviews. In CMR, the construction manager essentially becomes the general contractor at the time the GMP is established. The CMR is expected to provide realistic project cost estimates at specified points in the design production life cycle. Once the amount of design has been advanced to a point where the project is sufficiently defined, the owner will negotiate the GMP and enter into a construction contract with the CMR. Many agencies reserve the right to convert the contract to DBB procurement if an agreement cannot be reached on the GMP (Minchin et al. 2007). In this case, the CMR is paid its preconstruction fee, and the completed design is advertised and awarded to the lowest bidder. Figure 13 shows the contract structure for a typical CMR contract. OWNER DESIGNER-OF- RECORD GENERAL CONTRACTOR Design Subconsultants Trade Subcontractors Figure 12. Design–bid–build (Gransberg et al. 2017). OWNER DESIGNER-OF- RECORD CONSTRUCTION MANAGER GENERAL CONTRACTOR Design Subconsultants Trade Subcontractors Preconstruction ConstructionContractual Coordination Requirements Figure 13. Construction manager-at-risk (Gransberg et al. 2017).

Project Delivery Method Primer 51 CMR projects are characterized by a contract between an owner and a construction manager who will be at risk for the final cost and time of construction. The CMR is to furnish professional management of all phases of a project’s life to an owner whose organization may not have those capabilities. These projects use either a qualifications-based selection (QBS) or best-value fees procurement method to select the CMR. According to the Associated General Contractors of America (2014), the defining characteristics of the CMR are the following: • The designer and the CMR hold separate contracts with the owner. • The CMR is chosen based on criteria other than just the lowest construction cost, such as qualifications and past performance. Additional defining characteristics are: • “The CMR contracts directly with trades and takes on ‘performance risk’ (cost and schedule commitments); • Schedule allows for overlapping design and construction; • Transparency is enhanced because all costs and fees are in the open, which diminishes adversarial relationships between components working on the project, while at the same time eliminating bid shopping” (American Institute of Architects 2005, p. 2). Because the design selection process virtually mirrors the same process in DBB, implement- ing CMR does not inherently restrict competition among designers and design subconsultants (American Institute of Architects 2005). Owners occasionally require the designer in a CMR project to have previous CMR experience, which will impose a constraint on competition, but only if the owner chooses to do so. Because the constructor is selected on the basis of qualifications and past performance and must also have the capability to perform preconstruction services, CMR project delivery can constrain competition to those constructors that have previous CMR experience. Most public CMR laws require competitively bidding out the construction trade subcontract work packages. Design–Build DB is a project delivery method in which the owner procures both design and construction services in the same contract from a single, legal entity referred to as the design–builder. A variety of approaches exist for selecting the design–builder. The most common contracting processes are the one-step and two-step processes. The one-step process provides for competitive evalu- ation of technical proposals, with the contract award decision based on best value to the owner agency. Many of the DB contracts in transportation have been awarded based on the lowest price also. The best value is based on a combination of technical merit and price. The two-step process separates the technical proposal from the price. The method typically uses request for qualifications (RFQ)/request for proposal (RFP) procedures rather than the DBB invitation for bid procedures. There are a number of variations on the DB process, but all involve three major components. The owner develops an RFQ/RFP that describes the key requirements for the qualifications of the DB team and essential project requirements in performance terms. Next is the evaluation of proposals, and finally, with evaluation complete, the owner must engage in some process that leads to a contract award for both design and construction services. The design–builder is liable for all design and construction costs and normally provides a firm, fixed price in its proposal (Ibbs et al. 2003, El Wardani et al. 2006). Bearup et al. (2007) state that the defining characteristics of DB are as follows: • Single point of responsibility. • Schedule allows for overlapping design and construction. • Design–builder furnishes preconstruction services during design.

52 Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery Because the owner transfers responsibility for all design and construction in the DB contract, it also loses the ability to foster competition between design subconsultants and construction trade subcontractors. There is typically no requirement to bid for subcontract work packages competitively, and often the scale, complexity, and speed at which DB projects are executed precludes firms with no DB experience from being able to participate. Additionally, because the contract is awarded before design is complete, DB can also create an unfavorable risk environ- ment for subcontractors whose cost estimating systems lack the sophistication to be able to price work without competed construction documents (El Wardani et al. 2006). Design–Build Total Cost Figure 14 shows the basic elements of the DB delivery method. As in CMR, the builder has early constructability input to the design process. Because the owner no longer owns the details of design, its relationship with the design–builder must be based on a strong degree of mutual professional trust (Beard et al. 2001). The design–builder controls this project delivery process. As a result, DB has the ability to compress the project delivery period which is often used for “fast-track” projects. DB projects can and have been delivered using all three procurement methods. The highway industry has found that the experience with low-bid procurement for DB projects has been less than satisfactory, and the AASHTO Guide for Design–Build Procurement specifically recommends against it (AASHTO 2008). The Guide recommends the use of two-step, best-value procurement as the preferred method for highway transportation projects. Progressive Design–Build QBS procurement can also be used on DB projects and allows the owner to bring the design–builder on board at an early stage to assist in early project development activities. This variation is called progressive DB (PDB) and contemplates negotiating the construction cost during the design/preconstruction phase in much the same manner as CMR. In 2008, a detailed survey of nine airports in the United States showed that several of these airports had used the PDB process (Touran et al. 2009a). This was then combined with a negotiated GMP contracting process. The aim in PDB is to reduce the contingency that is OWNER DESIGNER-OF- RECORD GENERAL CONTRACTOR Design Subconsultants Trade Subcontractors DESIGN- BUILDER Figure 14. Design–build (Gransberg et al. 2017).

Project Delivery Method Primer 53 typically contained in a lump-sum DB price proposal during the design phase by not forcing the design–builder to commit to a price until the details of the design are reasonably stable. Indefinite Delivery/Indefinite Quantity Previous research on IDIQ practices identified three different IDIQ contracting models which are determined in accordance with the number of contractors selected to participate in the contract and the expected number of work orders to be issued (Alinger 2010, Rueda 2013). Figure 15 shows this classification and highlights the different IDIQ contracting models. Additionally, Table 14 illustrates the structure of each contracting model and describes the most appropriate conditions for successfully using each of them. These conditions are dis- cussed in more detail throughout the report. Figure 15. Generic IDIQ contracting models (Rueda and Gransberg 2014). IDIQ Model Diagram Typical Contract Characteristics Single work order contract • When the agency foresees a future necessity which most likely will be fulfilled with one work order but cannot fairly determine the total quantity of resources that will be ultimately required and/or the final delivery schedule. • Often used for emergency standby services, such as hurricane debris removal. Single award contract • For repetitive tasks or services contained in a narrow scope of work, allowing a certain degree of uniformity among work orders; • When only one contractor has the capabilities to perform all work orders to be issued under the IDIQ contract; or • When the agency considers that the ultimate number of work orders to be issued under the IDIQ contract will not justify the award of multiple contractors. Multiple award contract • For repetitive tasks or services contained in a broad scope of work, making it hard to determine a typical composition of work orders; • When more than one contractor has the capabilities to perform all work orders to be issued under the IDIQ contract; and • When the agency considers that the number of work orders to be issued under the IDIQ contract will justify the award of multiple contractors. Source: Adapted from Rueda and Gransberg 2014. Table 14. IDIQ contracting models structure and typical use.

54 Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery OWNER DESIGNER-OF- RECORD GENERAL CONTRACTOR Design Subconsultants Trade Subcontractors DESIGN- BUILDER OPERATIONS & MAINTENANCE CONTRACTOR Developer/ ConcessionaireBanks/Lenders Project Sponsors/ Equity Providers $ Return on Equity $ Debt Service (Only If DBFOM) Figure 16. Public–private partnership contract structure (Gransberg et al. 2017). Public–Private Partnerships The distinguishing feature of PPP project delivery is the inclusion of private financing into the project delivery process. In some cases, PPP projects also have post-construction operations and maintenance provisions as well. Both features shift the traditional set of roles and responsibilities for design and construction. The result is potential alternatives that are not available on projects funded with public monies alone. When private financing is available, statutory constraints may be reduced, giving the PPP concessionaire the ability to pay for things that the public agency cannot, expediting the overall completion of the construction (FHWA 2016). The second advantage comes from the pro forma financial analysis conducted by the potential concessionaire prior to deciding to pursue the project. These analyses are conducted to deter- mine if an attractive return on investment is possible from the project and include a detailed evaluation of third-party impacts to the design and construction. The result is the development of a detailed project delivery strategy at a much earlier point in the process than in all other ACMs. Finally, in PPP projects involving post-construction operations and/or maintenance, the very fact that the concessionaire has a fiduciary interest in minimizing life-cycle costs of the constructed facility will facilitate design decisions aimed at attaining the lowest life-cycle cost (Barutha and Scheepbouwer 2016). The contract structure is shown in Figure 16. One can see that the owner only has contract privity with the developer, who in turn has an internal arrangement for the necessary design and construction services like in DB. It also has a financial partner, and if there is a post-construction phase, the developer typically has an operating company on its team. Since PPP projects typically are initiated much earlier in the project development process than other ACMs, the developer is often responsible for securing nearly all the required environmental as well as other required

Project Delivery Method Primer 55 permits. In most cases, the developer is given full control of the project delivery process with the agency assuming an oversight role to fulfill its due diligence duties required by Title 23 of the Code of Federal Regulations on federally funded projects (Barutha et al. 2019). The inclusion of private financing makes PPP project delivery a different case than other ACMs when it comes to the selection of the concessionaire/developer (Barutha and Scheepbouwer 2016). Frequently, airports utilize PPP delivery to provide complex technical systems where the heart of the competition is between different proprietary technologies. Examples are people movers and baggage handling systems. PPPs also provide the airport with the option to obtain needed services that generate a revenue stream without the requirement to obtain additional funding because the revenue potential can be used to amortize the capital costs if the concession- aire is allowed to design, build, finance, operate, and own the facility. Parking garages and rental cars centers are examples of this approach. Thus, the selection process becomes a competitively negotiated procurement, with much less specificity than those used in other ACMs where the airport bears the capital costs. Integrated Project Delivery IPD is a more recent project delivery method which is distinguished by a contract between the owner, the designer, and the contractor where risk and reward are shared (Cohen 2010). The multiparty agreement, shared risk/reward, liabilities waivers, and full cooperation and trust between project members are all characteristics of a full-fledged IPD. Figure 17 is a conceptual model of the IPD contract structure. Public owners are often not able to use multiparty con- tracts and the shared risk/reward requirement of a true IPD because of procurement regulations (Airports Council International–North America et al. 2012). According to one source, “in all likelihood, initial usage of IPD on aviation projects may not be the pure form” (Airports Council International–North America et al. 2012, p. 7). Because this delivery method is relatively new in the United States, there are little data on IPD performance, and it is not discussed further in this synthesis. OWNER DESIGNER-OF- RECORD GENERAL CONTRACTOR Design Subconsultants Trade Subcontractors Multi-party Contract 2-Party Contract Figure 17. Integrated project delivery relationship between project participants.

Next: Appendix B - Overview of Airport Funding »
Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery Get This Book
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About $1.5 trillion will be spent globally on airport infrastructure by 2030, according to the International Air Transport Association. Most of that enormous amount of money will be spent on projects that must be constructed without disrupting airport operations.

Given the focus on schedule and on the cost of failing to complete the construction during the periods of planned outages, the need for a highly qualified construction contractor with a proven record of timely and quality production is key to the success of airport projects across the globe.

The TRB Airport Cooperative Research Program's ACRP Synthesis 102: Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery aims to benchmark the state of the practice with respect to the use of qualifications-based selection (QBS) to award construction projects.

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