Legal Issues Related to Large-Scale Airport Construction Projects (2020)

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Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. ACRP LRD 38 19 tion means and methods as well as material specifications to be used during airport construction, and is similar to specifi- cations prepared by the Construction Specification Institute or the Federal Highway Administration. This 662-page document consists of general provisions, earthworks, flexible base courses, rigid base courses, flexible surface courses, rigid pavements, fencing, drainage, and turfing, as well as lighting installation re- quirements and other miscellaneous requirements that must be followed on airport construction projects. The responsibility of managing design and construction of airport facilities lies on the airport authority itself. However, depending upon the delivery method chosen, the management process can vary. If the airport uses DBB, then it will hire an architect to design the facilities. The designer must follow the FAA guidelines provided in design standards and follow all ap- plicable federal, state, and local regulations while designing the facilities. For DBB projects, after the plan, profiles, and cost esti- mates of the facilities are prepared, the airport asks construction contractors to bid on the project. Based on the federal contract procurement regulations, the airport will generally choose the lowest responsive bidder to perform the job. On DBB projects, design reviews will be performed by the airport authority or a third-party designer. During construction, if any change orders are issued due to design errors, unforeseen site conditions, or scope changes, the owner will be responsible for the costs as- sociated with those changes. During the construction phase, the airport will either perform a QA of the contractor’s work itself or hire a third party to perform this task. If the airport authority chooses to deliver the facilities using the CMAR delivery method, then it selects a construction man- agement firm during (or before) the design phase. The firm is generally selected using a QBS process. During the design phase, the firm coordinates with the designer hired by the owner and may perform value engineering and constructability reviews, which could result in significant cost savings for the airport au- thority. After the design is completed, the construction manage- ment firm helps the airport identify the subcontractors who will construct the project, potentially retaining some scope that it will self-perform. All of the design reviews and construction QA work are performed by the firm on behalf of the airport. If the airport chooses the lump-sum DB, progressive DB, or PPP delivery method, the airport first selects the lump-sum DB/ progressive DB firm or PPP developer (most likely based on the best-value procurement method) and transfers responsibility for all remaining design work as well as all construction work to the designer–builder or PPP developer, as applicable. Under each of these delivery methods, design reviews and construc- tion QAs are generally done by third parties. A. CMAR Case Study Results In the various CMAR case studies, the participants agreed that there were no major differences in managing the design and construction of CMAR and DBB airport projects. Regard- ing staffing requirements, one participant mentioned that the same level of staffing was required for both delivery methods, project at a time when it was otherwise amending its Title V permit (needed because it was building the new central utility plant while the old plant was still running). At that time, there was a moratorium on adding further PM10 (particulate matter 10 micrometers or less in diameter) emissions; therefore, the airport had to buy rights from others to cover the additional PM10 emissions that the new plant would produce while both the new and old plants were operational. Unfortunately, the designer–builder for the central utility plant project failed to obtain the required permit from the local air quality management district for the project’s boilers. In ad- dition to the resulting fine, this failure was problematic because the permit from the management district covered the authority to both construct the central utility plant and operate it once it was complete. This created the potential for the airport to have a completed project but be unable to operate it. Ultimately, the airport had to call upon key figures within the U.S. Environ- mental Protection Agency and the local air quality management district to resolve these permitting issues. Although this delayed the project 120 days, it could have resulted in much more sig- nificant delays (months or years) if the airport had not main- tained good relationships with these agencies, which it could utilize to help resolve this issue as quickly as possible. One of the key lessons learned by the airport from this experience was the need to diligently track the status of required permits, even when the airport has shifted the responsibility for obtaining that permit to a designer–builder (or some other contractor). While the designer–builder may be responsible for any fine and related damages for failure to meet its contractual obligations, such fail- ures can, nevertheless, delay the airport’s anticipated schedule for bringing a project online, which is not something that can be addressed adequately by means of contractual remedies. VIII. DESIGN AND CONSTRUCTION The FAA has developed engineering, design, and construc- tion standards for airport projects and has issued a series of Ad- visory Circulars (ACs) that are related to design and construc- tion standards for civil airports, heliports, and seaplane bases. In addition, the FAA has design and engineering standards re- lated to runway/taxiway, airport signage, airport terminals, air- port equipment buildings, airport training facilities, etc. (FAA 2018b). Whenever design and engineering standards change, the FAA issues these changes through AC 150. For example, AC 150/5360-13, issued in 1988, addresses the planning and design guidelines for airport terminal facilities and access facili- ties (FAA 1988). Architects responsible for designing airport fa- cilities may—but are not required to—refer to these guidelines. Nevertheless, it should be noted that “AC 150 may be used by certificated airports to satisfy specific requirements of Title 14 CFR Part 139, subparts C (Airport certification manual) and D (operations)” (FAA 2018a). The FAA has also issued airport construction standards for the construction of airport facilities. AC 150/5370-10G, known as Standards for Specifying Construction of Airports, includes 11 parts (FAA 2014c). This document specifies the construc-

Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. 20 ACRP LRD 38 (e.g., concessionaires for a new or replacement terminal) early in the procurement process. The airport owner did not involve the concessionaires until halfway through the construction phase and, based on critical feedback from the concessionaire, had to make major structural changes, which resulted in a significant change order. If the concessionaires had been involved earlier, the airport felt that the needed changes would have been antici- pated and addressed without causing major change orders and delays during construction. After this experience, one member of airport management staff advised: “Build terminals from the inside out and not the outside in.” B. Progressive DB Case Study Results The airport’s approach to quality assurance/quality control (QA/QC) for the two case study progressive DB contracts dif- fered significantly from the approach they would normally take on DBB projects. Instead of hiring its own third-party reviewer, the airport required the designer–builder to hire a third party, with the airport limiting its role to performing quality checks. This allowed the airport to reduce its staffing for the project significantly. Despite some legal concerns that having the de- signer–builder hire the third-party reviewer created a potential conflict of interest, the airport determined that this structure was not problematic. Specific to the airport’s use of progressive DB, the individuals interviewed noted that the airport remained very involved in the design review process even though the designer–builder was responsible for the design. Despite this involvement, the airport missed a few design details that the interviewees said the airport would have changed had it caught them. They also noted that the airport likely remained more involved in design develop- ment than it should have been after establishing the GMP. The most significant lesson learned by the case study par- ticipant on the progressive DB projects for terminal replace- ment was the need to have efficient administrative procedures in place to process change orders. Typically, the airport’s board is required to approve all change orders over a certain threshold. By itself, this requirement can create an administrative choke point. In this case, the problem was exacerbated because the board only met once a month. To address this issue, the board gave airport management special authority to issue change orders for this project on an as-needed basis up to the total max- imum budget set by the board (which included all soft costs and a contingency) and required the airport to report back to the board on a quarterly basis. To further avoid stagnation of issues, the airport established standing weekly meetings between the internal project team and the airport executives to review out- standing issues. Both measures helped the airport avoid delays in resolving issues with the two designer–builders. The other significant lesson learned by the owner on the progressive DB case study project was that on larger projects, retainage requirements often lead to increased complaints from small business subcontractors, who have difficulty waiting to receive the portion of their payment held in retainage until the end of the project. During construction of the case study provided that the architectural staff was reduced because the construction management firm was doing most of the design review work that a designer would perform on a DBB project. One important benefit of the CMAR delivery method, identified by the case study participants, was that the firm con- ducted the constructability review process during the design phase, which helped to reduce the project’s construction costs. However, it did not reduce the cost and time associated with the airport staff. When using the CMAR delivery method, the case study participants found that there was one more level of design review than what is typically done for their DBB projects, which may improve the quality of design. To this point, one partici- pant mentioned that on its CMAR project, if the designer did not catch an error during the design phase, then the construc- tion management firm handled that issue. The firm also took the responsibility of estimating, scheduling, and phasing for this particular CMAR project, which on DBB projects are activities that are generally conducted by an architect. Regarding change management, one participant agreed that change orders were not affected by the chosen delivery method. Another participant stated that the risks regarding the unknowns of the bidding costs were reduced in CMAR proj- ects in contrast to DBB; however, the risks remained the same during the construction phase. In one project, there were sig- nificant change orders, but they were due to changes in scope initiated by the owner and were not the fault of the construc- tion management firm. In another of the case study projects, the design engineers made material design errors; however, the design engineers claimed that the change orders resulted from the CM rushing the project. Ultimately, the airport decided not to bring claims against the engineers to avoid embroiling the project, including the CM, in legal challenges. The airport felt that this decision resulted in the smooth progress of the project because it avoided the potential distraction of the CM having to negotiate these issues with the designer. For one of the CMAR case study projects, the airport’s con- sultants had difficulty tracking and responding to the high num- ber of design-related change orders. Consequently, the airport failed to manage these change orders in a timely manner. As a result, the airport had to extend certain milestones, and had to pay subcontractors to accelerate their work in order to complete the overall project on time (this was a schedule-driven project). In addition, according to the airport, the CM for this project failed to process the subcontractors’ claims for additional com- pensation in a timely manner. This resulted in subcontractors not being paid on time. Ultimately, the unpaid subcontractors sought relief from the airport, even though the airport was not in a position to address their concerns about nonpayment be- cause the airport had not received the claim from its contractual counterpart (i.e., the CM). Although the airport had no direct legal obligation to the subcontractors, this situation created public relations and internal managerial complications for the project. A key lesson learned by one of the CMAR case study partici- pants was that airports should involve potential concessionaires