Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery (2019)

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34 As an important component of data and information gathering on the use of procurement selection in airports, the synthesis team embarked on interviews with select airports in the United States. The general idea was to interview airports that had used some form of qualifica- tions-based selection (QBS) for construction services procurement and had experience with a wide variety of project delivery methods. The outcome of the earlier electronic survey showed that airports that use a QBS approach for contractor selection are rare. So, the choice of airports was limited to airports that had used a variety of project delivery methods such as design–bid– build (DBB), design–build (DB), construction manager-at-risk (CMR), and indefinite delivery/ indefinite quantity (IDIQ) and had used some form of QBS approach for construction contractor selection. Another factor that affected the choice of airports for interviews was the airport’s willingness to interview. The team used all of their contacts from previous research projects or personal relationships to complete the reported interviews. Table 10 lists the airports that participated in this process. Of the seven airports listed, one interview was face to face, five were through telephone, and one airport provided written responses to the team’s questions. As the list shows, airports interviewed encompassed various sizes and represented a broad geographic distribution (Figure 1). The team also interviewed a non-airport entity as prescribed in the work plan to see if there was something to be learned from non-airport projects. New York’s Metropolitan Transit Agency (MTA) was interviewed because they have used a procurement method based mostly on qualifications. The team could not identify any airport that has used the QBS for construction in a traditional DBB project. All examples of using QBS were through either IDIQ contracts or alternative contracting method (ACM) project deliveries, mostly CMR. Airport Project Delivery Policies Table 11 gives an overview of the variety of alternative project delivery methods used or authorized for use by airports interviewed. Needless to say, all airports are authorized to use, and do use, traditional DBB delivery method. From Table 11, it seems clear that airports are permitted to use and do use the most common alternative project deliveries such as DB and CMR. None were allowed to use the integrated project delivery (IPD) method although this is a new delivery method with good potential, used with success in some other sectors such as private health care and building sectors. Procurement and Delivery System Selection Decision None of the seven airports interviewed could use DBB combined with a QBS approach for construction services. Examples of QBS were found in the IDIQ contracts (sometimes called C H A P T E R 4 Case Examples of Qualifications-Based Selection Projects

Case Examples of Qualifications-Based Selection Projects 35 on-call contracts) where the contractor is selected based on past performance and qualifications. Also, in the construction manager-at-risk (CMR) approach, some airports do not consider price in contractor selection. In all other cases, the closest cases to qualifications-based selection were the best-value (BV) selection where price played a role. Table 12 provides a summary of these airports’ practices in contractor selection. A quick review shows that there are very few examples of the use of QBS in contractor selection. However, almost all airports are permitted and do exercise their option is selecting contractors considering qualifications as a major factor. In general, airports compared to other transportation sectors have considerable freedom in their choice of project delivery and procure- ment. The freedom is mainly due to the fact that airports’ sources of funding are more varied than highway and transit agency funds, which primarily come from federal and state sources. Most airports have sources of revenue other than federal and state funds. As an example, the main source of airport revenue for a small hub airport interviewed was parking fees. Rent and lease fees from airport retail businesses was another source of revenue. An airport can use these revenues without the restrictions that come from using Airport Improvement Program or state funds. Airport Designation NPIAS classification Austin–Bergstrom International Airport AUS Medium hub primary Boston Logan International Airport BOS Large hub primary Dallas/Fort Worth International Airport DFW Large hub primary Gerald R. Ford International Airport GRR Small hub primary Memphis International Airport MEM Small hub primary Phoenix Sky Harbor International Airport PHX Large hub primary Seattle–Tacoma International Airport SEA Large hub primary NOTE: NPIAS = National Plan of Integrated Airport Systems. Table 10. List of airports interviewed. Alternative Contracting Methods Authorized Authorized, Not Used Not Authorized, Interested in Using Not Authorized Design–build 6 1 Progressive design–build 4 2 Construction manager-at-risk 7 Public–private partnership 2 2 2 Integrated project delivery 6 Indefinite delivery/indefinite quantity 7 Table 11. Alternative delivery methods and their use in the interviewed airports. Airport Procurement Method Using QBS Austin–Bergstrom International Airport IDIQ, called “competitive field solicitation” under Texas Code Boston Logan International Airport CMR and IDIQ contracts Dallas/Fort Worth International Airport IDIQ, called “competitive field solicitation” under Texas Code Gerald R. Ford International Airport On-call (IDIQ) contracts Memphis International Airport None; IDIQ contracts are used only for design services Phoenix Sky Harbor International Airport IDIQ, CMR, and PPP/DBOM Seattle–Tacoma International Airport IDIQ contracts Table 12. Airport practices in the use of qualifications-based selection. The Grand Rapids Gerald R. Ford International Airport used a 5-year IDIQ contract and QBS to procure an on-call contractor to perform maintenance work and small projects. The contractors’ experience, management approach, availability, and being a local firm were evaluated in the QBS plan. A completed project was used as a model to negotiate the details of the on-call contract with the contractor.

36 Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery Among the airports studied, Massport (the organization in charge of Boston Logan Inter- national Airport) uses CMR on all their projects with an estimated cost of more than $5 million. The selection process is based on the contractor’s experience, past projects, skill sets of individuals assigned to the project and their past performance, experience with CMR method, availability, capacity, and financial strength. Currently, Massport is developing a major people- mover project estimated at $1.5 billion. The intent is to use the CMR approach, but the CMR selection is at least a year into the future. Phoenix Sky Harbor International Airport uses QBS in their CMR contracts as permitted by the state laws. The contractor does not even submit fees for public CMR projects. Phoenix Airport has a highly mature ACM program and very few outside statutory constraints. According to the interview, proprietary equipment/systems installations such as people-movers are projects best done using public–private partnership (PPP) or design–build–operate–maintain (DBOM) and using a QBS approach for contractor selection. The selection process in QBS procurement is based on experience and past performance of the contractor, availability of the contractor to perform the work, and previous work with the agency. They need to ensure that the contractor can assign a team that gives the airport its full priority to the job down to subcontractor level. They usually ask for key subcontractors to be identified early in the process to get them to commit to the schedule. Both of these airports, Boston and Phoenix, consider the interview process as essential in determining the most qualified team. It helps them determine if the contractor’s team is going to be one where a healthy business relationship can be developed and maintained. IDIQ contracts, also called on-call contracts, are used by almost all airports for smaller projects and maintenance work where the scope of work is defined as the need arises. A contractor is selected for a multiyear contract containing a “not to exceed” price ceiling. The contractor is usually selected based on qualifications, past experience, and previous work with the agency, as well as a list of work rates by pay item. To separate the element of price from the selection process, the agency selects the designated awardee based on qualifications and then negotiates for their rates. If an agreement with the designated awardee cannot be reached, the airport negotiates with the second contender. An example of the selection process for on-call contracts is found in Grand Rapids Gerald R. Ford International Airport, which used an on-call contractor for performing maintenance work and small projects on a 5-year contract. They first identified a relatively major project and used it as a model in negotiating with the contractor to develop the pricing for the final on-call contract. The airport evaluated the contractor’s experience, management approach, availability, and being a local firm to make a QBS award. Another example of IDIQ benefits came from a large hub airport which believed that the on-call nature of the contract provided the airport the ability to react to emergencies as well as the ongoing routine work for which the contract was awarded. The airport also felt that the contractor has an incentive to complete all work in a manner that will make them competitive for the next project. Although QBS was rare in the search conducted, almost every project where qualifications were considered involved an ACM. A notable exception was a $122 million concourse modern- ization project where the airport went to a two-step procurement process at the 100% design completion: Step 1, a request for qualifications (RFQ) where a short list of qualified contractors was identified, and Step 2, where the shortlisted contractors were then invited to submit a proposal and a lump-sum bid. The owner selected the awardee based on the “best bid,” a combination of proposal quality and the bid price. No weight information was provided to the proposers, and the owner used its judgment on evaluating price and quality. This approach was used partly because the owner had specific goals in mind such as a given level of disadvantaged business enterprise participation, meeting threshold levels of participation by local contractors, and lack of disputes by bidders in previous projects. Using the two-step process allowed the owner to consider factors that could not be controlled under a traditional bidding process. All of the airports interviewed used a two-step process for selecting the contractor in CMR and

Case Examples of Qualifications-Based Selection Projects 37 DB contracts. In one DB project, the airport during the second step, asked for design fees from the contractor as well as pricing information, though not a fixed-price bid. The shortlisted contractors were asked to submit a lump-sum price for design fees and a percentage fee to be applied for DB services, general conditions, and subcontracts. A guaranteed maximum price was to be established after the completion of the design phase. Most airports do not ask for lump-sum bid prices on DB projects, unlike DB projects in the transit and highway sectors where lump-sum bids are the rule. One airport said that they feel strongly that the qualifications-based approach (in fact the BV, because they consider price as well) can better achieve their goals. Important criteria from the airport authority’s point of view are (1) the contractor’s ability to complete the work, (2) their long-term availability to serve the airport, and (3) their safety and security capabilities during their work. The traditional bidding process does not let the airport evaluate the contractor on these criteria effectively. The team conducted an interview with New York’s Metropolitan Transit Authority (MTA), a non-airport entity. The usual mode of procurement for the MTA is selection through bidding, but for larger projects with a high level of complexity and where there is a significant impact on traveling public and other stakeholders, they can use a BV approach for selecting the contractor. The MTA can procure certain projects considering contractors’ qualifications rather than bids only when the design is 100% complete. Because the process considers the price in addition to qualifications, this can be classified as a BV approach. Why Is QBS Used? There were only two airports that did not consider price in their procurement process (other than IDIQ contracts), so we focused on their reasons for using the QBS approach. Both thought that project complexity and complicated sequence of work were extremely important and that CMR is effective in dealing with these factors. Other factors mentioned included impact of operations during construction and need for early contractor involvement for achieving constructa- bility. Another airport that does not use QBS thought that if they used QBS, the top three reasons would be project complexity, need for early contractor involvement, and impact of operations during construction. Another airport felt that impact of operations during construction was the most important factor. Two other airports thought that when new technology is included in the design, then the use of PPP could be effective, these being project deliveries where the use of QBS can facilitate the process. To summarize, the most important reasons for the use of QBS are • Project complexity. • Complicated sequence of work. • Impact of operations during construction. • Need for early contractor involvement. • Owner’s need to select a contractor with whom they can establish a relationship. Summary of Consensus There was broad consensus among the individuals interviewed for the case examples that implementation of QBS accrued tangible benefits in most cases outweighed the challenges associated with its implementation. Table 13 is a summary of the perceived benefits and challenges. The case examples confirmed the idea that QBS can be used as a valuable risk management tool to increase the certainty that an airport will award the project to a qualified contractor. It also provides a mechanism to bring past performance into the contractor selection decision.

38 Value, Benefits, and Limitations of Qualifications-Based Selection for Airport Project Delivery Advantages Challenges • Best-qualified team is selected. Many respondents want a team that has worked with them before. • Early involvement of the key members of project teams. • Enhanced cooperation, collaboration, and communication among project teams. • Higher quality of construction. • Increased efficiency throughout the project process. • More accurate project sequencing and scheduling. • Negotiating the guaranteed maximum price in PDB and CMR. • Contractor’s perception that increased subjectivity will negatively impact competitiveness. • Reduced construction cost certainty at the time of contractor selection. • Determining appropriate project performance indicators. Table 13. Perceived QBS advantages and challenges.