Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods, Volume 3: Research Overview (2020)

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4 C H A P T E R 2 2.1 Introduction This chapter discusses the review of ACM state of practice conducted as part of this research. The review focused on post-award contract administration. For D-B, this included design and construction. For CM-GC, this included preconstruction services and construc- tion. The United States has a long history of implementing D-B-B, including projects deliv- ered to establish the Interstate highway system. Only over the past couple of decades have ACMs—such as D-B and CM-GC—been used in transportation. To achieve best results, research suggests that agencies new to ACMs should begin using ACMs on smaller, less com- plex projects to slowly learn the process before implementing these methods on larger proj- ects (Gambatese et al. 2002, City of Seattle 2011) as a way to slowly introduce this change in culture, philo sophy, and practice (Miller et al. 2000, Molenaar and Gransberg 2001, Pietro- forte and Miller 2002, Gransberg et al. 2008, Minchin et al. 2014). The need to build ACM experience suggests that there may be tools or processes unique to ACMs that promote proj- ect success. However, there has been little research or documentation cataloguing of exist- ing ACM tools and processes for post-award contract administration. Over time, states have developed their own manuals to provide guidance for D-B, CM-GC, and ACMs, in general. The ACM state-of-practice review addressed several perspectives, including ACM legislation, existing ACM manuals, and the research literature. The initial summary findings indicated the following: • State legislation for D-B is more widespread than for CM-GC; • State manuals covering D-B are more widespread than for CM-GC; • State agencies use specific tools and processes for ACM contract administration; however, there was no comprehensive documentation of these tools; • Tools and exist for administering contracts for D-B-B, as well as for D-B and CM-GC. However, the stakeholder roles and timing sometimes differ for ACM projects; and • Tools and processes included both tangible documents (e.g., a cost–savings matrix) and recommended practices (e.g., constructability reviews). 2.2 Federal and State Legislation The federal government takes a proactive position on advancing transportation in the nation. Congress declares that it is in the national interest to promote the use of innovative technologies and practices that increase the efficiency of construction of, improve the safety of, and extend the service life of highways and bridges [Moving Ahead for Progress in the 21st Century Act (MAP-21) 2012]. The examples provided consists of innovative contract- ing methods, including the design–build and the construction manager–general contractor State of the Practice

State of the Practice 5 contracting methods. The FHWA Every Day Counts program advanced the use of ACMs through training and project support. FHWA completed two Every Day Counts initiatives to enhance innovation and improve highway planning, design, construction, and operation. ACMs are becoming more mainstream, and FHWA is supporting them through its resource center programs (FHWA 2016e). At the state transportation level, Florida Department of Transportation (Florida DOT) initiated D-B in 1987 (Ellis et al. 1991, FHWA 1996). FHWA established Special Experimental Project Number 14 (SEP-14) Innovative Contracting in 1990 to encourage and enable state transportation agencies to test and evaluate D-B and CM-GC projects on an experimental basis (FHWA 2016c). The Design–Build Contracting Final Rule (Federal Register 2002) was based on the results of D-B projects under SEP-14, in compliance with the Transportation Equity Act for the 21st Century (TEA-21) (1998). The Design–Build Contracting Final Rule established regulations for D-B contracting as 23 CFR 636 (FHWA 2016c). The rule pro- vided regulations concerning the criteria and procedures for approving the nonexperimental use of D-B projects (Federal Register 2002). D-B regulations were updated in accordance with the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) (2007). The updates allowed a D-B request for proposal (RFP) to be released prior to receiving National Environment Policy Act of 1969 (NEPA) review process clear- ance. However, final design and construction could commence only after the completion of the NEPA review process (Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users 2007). Similarly, CM-GC was also authorized for federally funded transportation projects under MAP-21, Section 1303. This act built on SEP-14, which initially encouraged limited deploy- ment of CM-GC in federally funded transportation projects (FHWA 2016b, FHWA 2016c). Section 1303 described the preconstruction and construction phases of CM-GC; the competitive selection of CM-GC with regard to qualifications, experience, best value, or other appropriate factors; and the requirement to complete the NEPA review process prior to proceeding with construction (MAP-21 2012). A final rule for CM-GC contracting was estab- lished and became effective on January 3, 2017 (Federal Register 2017). Key ACM dates for transportation include • 1987: Florida DOT D-B program • 1990: SEP-14 • 2002: D-B Contracting Final Rule • 2005: SAFETEA-LU • 2011–2012: Every Day Counts-1 • 2012: MAP-21 • 2013–2014: Every Day Counts-2 • 2017: CM-GC Contracting Final Rule The use of ACMs for transportation generally requires state legislation. Most—but not all—states started implementing legislation for D-B before CM-GC. Therefore, more states have legislation related to D-B, as compared with CM-GC. State legislation was researched through FHWA (2016a) and the Design–Build Institute of America (2016). In addition, numerous online resources and staff were consulted during the summer and fall of 2016. As of March 2019, varying levels of state legislation were authorizing D-B for transportation projects. Only North Dakota did not have D-B legislation for transportation. In comparison, 33 states did not have CM-GC legislation for transportation. Table 2.1 indicates which states had D-B and CM-GC legislation as of this date. Appendix A, Table A.1, provides a more detailed listing of ACM legislation for transportation in each state.

6 Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods 2.3 Alternative Contracting Manuals Manuals and policies are document formats commonly used by state transportation agencies to communicate guidelines. Table 2.2 summarizes the manuals developed by state agencies to communicate guidance related to ACMs as of March 2019. A complete list of state manuals is provided in Appendix A, Table A.2. D-B, CM-GC, ACM, and construction manuals are all documents in which states may communicate guidelines for ACMs. The research team’s findings—based on studying exist- ing manuals—are summarized as follows: • 22 states had manuals specifically for D-B, • Three states had manuals specifically for CM-GC, AL AK AZ AR CA CO CT DC DE FL GA HI ID IL D-B CM-GC IN IA KS KY LA ME MD MA MI MN MS MO MT NE D-B CM-GC NV NH NJ NM NY NC ND OH OK OR PA RI SC SD D-B CM-GC TN TX UT VT VA WA WV WI WY D-B CM-GC Table 2.1. States with design–build and construction manager–general contractor legislation. Manuals AL AK AZ AR CA CO CT DC DE FL GA HI ID IL D-B Manuals CM-GC Manuals ** ACM Manuals Construction Manuals IN IA KS KY LA ME MD MA MI MN MS MO MT NE D-B Manuals * CM-GC Manuals ACM Manuals Construction Manuals NV NH NJ NM NY NC ND OH OK OR PA RI SC SD D-B Manuals * * * CM-GC Manuals ACM Manuals Construction Manuals TN TX UT VT VA WA WV WI WY D-B Manuals * * CM-GC Manuals ACM Manuals Construction Manuals Note: ** = project specific; * = documents instead of a complete guidebook. Table 2.2. State departments of transportation with manuals related to alternative contracting methods.

State of the Practice 7 • Six states had manuals for ACMs in general, and • 26 states did not have a manual for D-B, CM-GC, or ACMs. The CM-GC manuals tended to cover the following topics: • Introduction, • Procurement, • Preconstruction Services, • Contract Administration, and • Appendices. These topics were covered at various levels. Some manuals covered a topic extensively; other manuals did not cover that same topic at all. For example, the CM-GC guidance found in the Utah DOT was seven pages long and focused on procurement issues only. Alternatively, the CM-GC manuals for Arizona DOT and Colorado DOT covered all five of the aforemen- tioned topics. The Arizona DOT manual was 57 pages of text and 58 pages of appendices. The Colorado DOT manual was 83 pages of text and 216 pages of appendices. Most manuals helped clarify roles and responsibilities. For example, in the Preconstruction Services sections, services included collaboration with the design team, value engineering, scheduling, and cost model- ing. Constructability reviews are a key task for the contractor during design. Colorado DOT described the extensive nature of constructability reviews with the following: As part of the collaborative design process, the Contractor provides constructability reviews for the feasibility and practicality of any proposed means and methods; selected materials, equipment, and labor; material availability; site improvements; earthwork and foundation considerations; and coordi- nation of the Drawings and Specifications, verification of quantities, and so forth. Through this review the Contractor should provide alternatives that provide cost or schedule savings or limit impacts on the traveling public (Colorado Department of Transportation 2015a). The preconstruction services could also include developing a construction management plan, subcontractor and supplier plans, disadvantaged business enterprises plan, emerging small business plan, and on-the-job training plan. Arizona DOT included developing the guaranteed maximum price (GMP) proposal as part of the preconstruction services. However, Colorado DOT considered it a separate contracting phase. For the construction phase, both the Arizona DOT and the Colorado DOT manuals highlighted topics that had unique features for CM-GC, such as quality assurance–quality control, measurement and payment, maintenance and protection of traffic, record keeping, risk pools, and force accounts. Because the contractor was involved through the design phase, contract modifications and value engineering propos- als during construction were minimized. Some ACM state manuals did not address CM-GC. In contrast to CM-GC manuals, D-B manuals tended to include chapters on project develop- ment, which typically led into project procurement. For example, some of the chapters included in the California Department of Transportation (Caltrans) D-B manual are Introduction; Project Development; Procurement Documents; RFP Issuance, Proposal Evaluation, and Contract Execution; and Contract Administration. Colorado DOT added sections on risk management and streamlined D-B. Arkansas DOT added a section on the FHWA–Department oversight process for D-B projects. Some D-B manuals—such as those from Colorado, New York, and Pennsylvania—were lengthy, with more than 100 pages of text (not including appendices). Other D-B manuals—such as those from Massachusetts, North Carolina, Ohio, Utah, Vermont, and Virginia—were brief, with less than 20 pages of text (not including appendices). Some D-B manuals focused on D-B selec- tion (e.g., Utah) or procurement (e.g., Virginia and Massachusetts). The majority also covered D-B project administration. Some state transportation agencies—such as those in California, Michigan, Nevada, and Pennsylvania—included D-B guidelines to clarify roles and responsi- bilities within their ACM manuals. The agency was often reminded not to direct the D-B firm,

8 Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods but instead to verify conformance to the contract requirements. Otherwise, the agency might be accepting liability, risk, and cost for directives that were given. A review of the D-B and CM-GC manuals revealed a variety of processes and tools used in ACMs. This review was conducted by reading all existing D-B and CM-GC manuals, identify- ing tools mentioned in the manuals, and organizing them according to the categories of the AASHTO Guide Specifications for Highway Construction (2008b). Manuals were reviewed until a saturation point was reached, meaning that the same tools were reappearing in the selected manuals with no additional tools being identified. Some of the identified tools may also have been used with D-B-B. Those tools underwent further investigation to determine whether the overlapping tools had unique applications or practices in ACMs. 2.4 Alternative Contracting Method Research Design–Build Research Accelerated project delivery is a common reason for selecting D-B (Ellis et al. 1991, Molenaar et al. 1999, Chan 2000, Construction Management Association of America 2012, Gransberg and Loulakis 2010). Time savings in D-B projects are typically associated with overlap in the design and construction phases, as well as streamlining of the construction phase itself because of the early engagement of contractors. Many researchers have studied ACM in general and D-B more specifically. A significant portion of the existing ACM literature focuses on quantifying ACM performance. A meta- analysis of 30 studies comparing the performance of D-B-B, CM-GC, and D-B confirmed 2 decades of research showing that ACMs significantly improved project speed and reduced project cost growth (Sullivan et al. 2017). However, most existing studies did not pinpoint why such improvements occur, and most did not identify the D-B tools and processes that led to this superior performance. Some of the post-award tools identified in the literature considered important for D-B projects included co-location, communication channels, partnering, third-party coordination, constructability, risk allocation, quality assurance–quality control roles, alternate technical con- cepts, value engineering, and warranties (Ellis et al. 1991, FHWA 2006, Gransberg et al. 2008, Gransberg and Windel 2008, Gransberg and Loulakis 2010). Additional factors that could influ- ence performance included incentives (e.g., early completion incentive, traffic management, revenue sharing, and project quality incentives) and disincentives (e.g., late completion penalties and stipulated damages), according to FHWA (2006). However, incentives and disincentives can be used with D-B and D-B-B projects. They are not unique to D-B. Construction Manager–General Contractor Research Similar to D-B, accelerated project delivery was a common reason for selecting CM-GC (City of Seattle 2011, Construction Management Association of America 2012, Schierholz 2012). Moreover, FHWA’s Every Day Counts initiative promoted CM-GC as a way to foster innovation, mitigate risk, improve design quality, improve cost control, and optimize con- struction schedule (FHWA 2016d). Studies have compared the performance of CM-GC to other delivery methods (Sanvido and Konchar 1998, Francom et al. 2016). Here again, most studies did not focus on identifying the CM-GC tools and processes that affected project performance. Gransberg and Shane (2010) summarized 15 studies that identified the benefits of CM-GC. Some of the post-award tools and processes identified in the literature included fast-tracking, constructability input, early cost estimating, early work packaging, value

State of the Practice 9 engineering, third-party coordination, and shared risk (Gambatese et al. 2002, Schierholz 2012, Gransberg et al. 2012). To achieve improved project performance and make full use of the CM-GC method, appropriate tools and processes for preconstruction services and construction are needed. Preconstruction services can be divided into four categories: design- related, cost-related, schedule-related, and administrative (Gransberg and Shane 2010, Grans- berg et al. 2012). Not all types of preconstruction services in these four categories are needed on every CM-GC project. Some of these services included a series of meetings, such as design reviews, constructability reviews, operability reviews, and regulatory reviews. The meetings served as a tool to reach a specific goal. Other services—such as preparing project schedules and cost estimates—allowed the contractor to use standard tools to achieve a product early and throughout design. For example, an Independent Cost Estimator is a tool that an agency can use to check the contractor’s cost model for fairness, budget alignment, and completeness (Gransberg et al. 2012). CM-GC requires the agency to take an active role in project delivery: This role of the CM-GC firm does not replace the public agency’s responsibility for monitoring the progress of the work, [for] processing payment applications (which is far more complex with CM-GC than the traditional design–bid–build process), and [for] active participation in evaluating and prioritiz- ing alternates, overall decision-making, and total project budget management (Gambatese et al. 2002). The designer’s role changes as well: Designers are required to take a much more active role in working with the owner and constructor during the entire design process, for such things as early and continuous value engineering, right-of-way phasing, real-time pricing, increased coordination meetings, accelerated designs, etc., during the early stages as well as throughout the entire design process (Minchin et al. 2013). Based on their case study research, Gransberg et al. (2012) listed 11 CM-GC tools, most of which focused on procurement activities. This further reinforces the value of this research in identifying a portfolio of tools and processes for CM-GC post-award contract administration. 2.5 Summary The state-of-practice review indicated that there was a strong base of ACM legislation in a majority of states. Additionally, there were a number state agencies that developed their own D-B, CM-GC, and ACM manuals. These manuals had varying levels of detail and guidance. A majority of published research on ACM looked at performance variations, advantages and disadvantages of ACMs, and lessons learned. However, an organized comprehensive catalog of best practice tools and processes for ACM post-award contract administration does not exist. The guidebooks developed in this research fill this need and provide support to state agencies embarking on D-B and CM-GC highway construction projects.