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. 30 ACRP LRD 38 XV. CONCLUSIONS The major objectives of this digest are: (1) to provide an over- view of key legal topics that arise in large-scale airport construc- tion projects, including topics related to the use of alternative PDMs; and (2) describe the lessons learned by airports related to those topics for projects delivered using CMAR, lump-sum DB, and progressive DB PDMs. Legal issues were defined as those issues causing risks to the parties and potentially result- ing in legal liabilities or implications. To achieve these objec- tives, the project team performed a literature review to identify the various legal topics, then conducted case studies on three CMAR, one progressive DB (two contracts), and one lump-sum DB airport projects. Though these projects differed materially in size, they were each large relative to their respective airports. The case studies included content analyses of RFPs and con- tract documents as well as interviews with management-level personnel and the attorneys of the airports. Interviews covered legal issues related to selecting the PDM, project funding, con- tract procurement and management, environmental permit- ting, design and construction phase, insurance programs, dis- pute resolution, remediation of hazardous materials, project incentives and disincentives, project handover, and operation and maintenance issues. The major issues and lessons learned by the participants are summarized in the following sections. Note that the lessons learned from these case study projects might be unique for these projects, and so readers should use caution when utilizing these findings in other CMAR, progres- sive DB, and lump-sum DB projects. A. Conclusions from CMAR Case Study Projects Based on the literature review and the case studies conduct- ed, the major conclusions and lessons learned are summarized as follows: Procurement regulations: Although CMAR is generally permitted under applicable federal law, airports should check state and local procurement laws to ensure their ability to use it. For the airports in the study, the funding sources for the projects—and the legal requirements related to those sources of funding—did not dictate the selection of this delivery method. Selection of CMAR: The major factors cited by the partici- pants in the study for selecting the CMAR delivery method in- stead of DBB were (1) complexity of the project; (2) potential use of value engineering and constructability reviews; (3) ease of project phasing from design to construction; and (4) owner’s ability to maintain a level of control over design similar to DBB. Procurement procedures: From the CMAR cases studied, with CMAR being a relatively new PDM for airports, the lack of precedent reference contract documents when preparing these documents was a challenge. In addition, when using federal funding, the airport agencies needed to obtain approval from the FAA to use the QBS process. Contract management: Management of CMAR projects differed significantly from management of DBB projects. For the case study projects, the design and contract management A. CMAR Case Study Results All participants in the case study mentioned that there was no difference with regard to the operation and maintenance phase for DBB and CMAR projects. For these case study proj- ects, contractors were not responsible for operating and main- taining the completed facilities; instead, after completion of the project, the CM handed over the facilities to the airport. The warranties the airports required for materials and equipment on these projects were typically the same as for the airports’ DBB projects. However, one participant mentioned that based on the air- port’s experience using CMAR, in future projects the airport intends to involve their operations and maintenance staff in the project as early as possible. The goal of such involvement would be to have such staff help design a facility that is easy to operate and maintain (noting that the airport could take this action on DBB projects as well). This participant gave an example regard- ing high windows constructed in the facility that were difficult to access for cleaning and maintenance. If the airport had in- volved the operations and maintenance personnel early in the design phase of the project, this problem could have been ad- dressed properly. B. Progressive DB Case Study Results The airport did not find any difference with regard to the operation and maintenance phase for its DBB projects and the terminal expansion project it delivered using progressive DB. C. Lump-Sum DB Case Study Results As described in Section XIII.C, considering that the designer–builder for the case study project was the entity with the most knowledge regarding how the central utility plant was to operate, the airport required the designer–builder to perform extensive training for the airport staff who would operate the project. Even with robust operations manuals, the airport deter- mined that without this training, the ramp-up process for their operations staff would have been much more difficult. The line between the construction and operations phases was somewhat blurred by the airport, requiring the designer– builder to operate the new central utility plant for a number of months after completion. Having the designer–builder operate the facility for this period helped the designer–builder train the airport’s staff for the new plant. The designer–builder’s perfor- mance of operations was also important because the airport needed to simultaneously operate both the old and the new central utility plants for a short period of time as the airport transitioned from the old plant to the new one. One key lesson learned by the airport after this transi- tion phase ended was the need to ensure that the designer– builder provide comprehensive and clear as-built drawings and other documentation regarding the completed project. The designer–builder for this project fell short in this regard, which com plicated various aspects of the project’s operations and maintenance.

Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. ACRP LRD 38 31 Selection of progressive DB: Of the factors the airport con- sidered in choosing progressive DB, the most important were (a) the expedited project delivery schedule that compressing the design and construction periods would enable and (b) the abil- ity of progressive DB (relative to DBB) to shift the risk of design errors to the designer–builder and still allow the owner to have input into design decisions up until setting the GMP. Procurement process: The airport used a two-step procure- ment process to procure the designer–builder (RFQ followed by an RFP), with the intent of first reducing the number of pro- posers based on qualifications alone, and then selecting the designer–builder based on the proposer’s approach to the proj- ect and proposed fee. One of the airport’s key lessons learned was the need for the procurement documents to clearly specify which PDM the airport will use to deliver the project, which would have reduced the complexity of the evaluation process. Contract management: The owner noted a significant de- crease in the number of staff it needed for the design review process, which reflected the fact that responsibility for design was shifted to the designer–builder. Despite this shift in re- sponsibility, the airport found that it was extremely important to closely track and participate in the design development pro- cess, including the need to have a very engaged design manager. The airport also determined that during the design phase, the designer–builder, who included a design fee based on a lump- sum amount (as opposed to time and materials), was less re- sponsive to the owner’s attempts to coordinate on design issues, which hindered progress on the project. Design and construction management: The most signifi- cant lesson learned by the airport was the need to efficiently process change orders in order to keep work progressing on the contract, especially considering that large complex projects can produce a higher number of change orders than normally en- countered. Similar to other projects at the airport, the airport used an OCIP, which, from their perspective, was an effective way to manage insurance for the project. Project incentives and disincentives: Similar to the CMAR case study projects, the terminal expansion progressive DB con- tracts provided that the designer–builder would be entitled to a share of any savings the designer–builder realized under the GMP set by the parties. One of the interviewees noted that the incentive provision was sometimes counterproductive because the designer–builder tried to reduce costs by compromising project quality, which ultimately was not in the airport’s best interest. Project handover: The most significant lesson learned by the airport related to the handover process was that by having the designer–builder coordinate the entire tenant (e.g., concession- aires) buildout and turnover process, the airport could avoid the need to resolve disputes (and related liability) in cases where the constructed facilities did not meet the tenants’ expectations. The issues related to environmental permitting and the dis- pute resolution processes were fairly typical compared to DBB projects. processes (estimating, bidding, and recommending construc- tion contractors) were conducted by the construction man- agement firm, compared to a DBB project where owners were responsible for these tasks. One case study participant recom- mended that the CM be given more flexibility in choosing the construction subcontractors, and that the selection of these sub- contractors not be based only on cost. The project participants stated that it would be helpful if airport personnel could receive adequate training before using the CMAR delivery method. Design and construction management: Airports in the case study perceived many benefits from having a construction management firm coordinate with an owner’s designer during the design process. In part, these benefits came from construc- tability reviews, as well as from the CM providing cost estimates at different design levels in order to ensure that the projects re- mained on track and within the owner’s budget. This process may reduce typical construction claims related to design errors. In addition, the construction management firm may recom- mend construction subcontractors for the project, potentially resulting in fewer claims and other legal issues arising during construction, due to the subcontractors’ familiarity with the construction management firm and its management of the sub- contractors. CMAR may also help reduce claims due to the con- struction management firm being responsible for costs above the established GMP, provided that such overruns are not own- er-caused. However, if the CM firm is incapable of performing its responsibilities, all of these issues may increase significantly. One of the key lessons learned by the case study participants was the need to ensure the involvement of future tenants early in the design phase in order to reduce the potential for future legal challenges during construction, operations, and maintenance. Project incentives and disincentives (e.g., sharing of cost savings): Because federal procurement laws do not allow for providing incentives from federal funds, the airport needs to ensure that it does not use federal monies to make incentive payments to the CM. The remaining issues related to insurance, environ mental requirement compliance and permitting processes, dispute resolutions, project handover, and project labor agreements are similar for both CMAR and DBB projects. Additionally, legal issues related to hazardous materials are similar for both CMAR and DBB projects, with the only noted difference being that the CM may assist in the remediation of hazardous materials during CMAR projects. As for operation and maintenance, to reduce any legal issues that arise during this phase, it is advised that the operation and maintenance personnel be involved during the early phases of design. B. Conclusions from Progressive DB Case Study Project Based on the literature review and the case study conducted on the terminal expansion (the first progressive DB project pur- sued by the airport delivering the project), the major conclu- sions and lessons learned are summarized as follows: