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 9 • Level of design detail and control. Depending on the project, the owner should decide what level of detail and control it would like to have over the design, because each PDM spells out a certain level of the owner’s control over the design. The owner should make this decision before it develops extensive design details because development of such details might exclude potential PDM options. For example, if the design- er–builder is selected when a detailed design is already in place, there will be less opportunity for the designer–builder to develop its own design solutions; furthermore, such a de- tailed design will limit the ability of the owner to effectively shift the risk of design errors to the designer– builder, thus exposing the owner to potential claims. While DBB may give the owner the highest level of control, it sacrifices the contractor’s input into the design process. Lump-sum DB has the lowest level of owner control over the design, which might lead owners to raise quality concerns if they are not experienced in the lump-sum DB oversight process. Similar to the question of owner control over design, is a question about what type of technical specifications are best suited for each PDM, whether prescriptive or performance based. To the extent possible, lump-sum DB, progressive DB, and PPP contracts should use performance-based technical specifica- tions. Althugh it is expected that the owners will prescribe details regarding certain aspects of a lump-sum DB, progres- sive DB, or PPP project (similar to providing a design that is too developed), the use of prescriptive specifications can stunt the designer–builder’s innovation and potentially lead to claims in the event that the prescriptive specification is in conflict with other requirements. Related to these considerations is a determination as to whether the owner will be able to effectively train its repre- sentatives (staff and consultants) so that they perform only the level of design review appropriate for the selected PDM (e.g., training to avoid reviewing designs under a lump-sum DB or PPP project as though it were a DBB project). Failure to use an appropriate level of design review, or to otherwise use procedures appropriate for the chosen PDM, can easily lead to increased costs and delays. • Risk assessment and management. Various PDMs dictate different levels of risk for the owner, as well as various levels of timing, when transferring and mitigating these risks. Thus, the owner should decide on the levels and types of risk it is willing to take and how the various PDMs will allow it to address those risks and otherwise help the owner achieve the goals it has set for the project (e.g., completion by a specified date). Some PDMs, such as DBB, have a long history of statu- tory laws and standard contracts entailing well-established risk management processes. However, CMAR risk allocation between the airport and the CM is depicted by the CM bear- ing the risk of the trade subcontractors as well as the overall project performance. Unlike DBB and CMAR, the major risk in lump-sum DB is the risk of design errors or omis- sions, which is transferred from the owner to the designer– builder. ily implemented when compared to full privatization, and still provide some of the same benefits. On a larger scale, this form of PPP is used by airlines for financing terminal developments through long-term lease arrangements in which the airline funds and manages the project with support from the hosting airport authority (ACINA et al. 2012). However, all PPP projects do not necessarily have an operational component. Some PPP projects have a finance, design, build, and maintenance compo- nent, which is called design–build–finance–maintain (DBFM). III. SELECTION PROCESS FOR A PROJECT DELIVERY METHOD With the increased use of alternative PDMs in various in- dustries, there has been an effort to help owners select the most appropriate PDM for a particular project (Touran et al. 2009). To this point, the Associated General Contractor, Airport Con- sultant Council, and Airports Council International–North America jointly developed the Airport Owner’s Guide to Project Delivery Systems (ACINA et al. 2012). This guide identifies some key questions to be asked by decision makers before selecting a delivery method for airport projects and describes various selection approaches based on owners’ requirements and the level of risk that an owner might take in a project. The guide also identifies the major issues to consider when selecting a PDM for an airport project and divides them into four groups: project- related, agency-related, legal, and life-cycle issues (Touran et al. 2009). Based on a review of the literature pertinent to airport proj- ects, several key attributes need to be taken into consideration when selecting a PDM (ACINA et al. 2012; Touran et al. 2009). These include the following: • Statutory authority. Legal counsel for the owner should re- view applicable legislation to verify which PDMs are autho- rized for use in a particular project, or what steps it may need to take to get the required authorization to use a particular PDM for a specific project (see more details in Section II.B). • Human resources. The availability of the owner’s in-house staff, in terms of both numbers and qualifications, is crucial. This is because additional management services may need to be procured if there are inadequate in-house staff. If the airport owners’ staff is highly experienced in DBB projects, then DBB is a good candidate. Additionally, with the many similarities between CMAR and DBB, airport staff may have most of the skills needed to manage a CMAR project, which requires fewer employees compared to DBB, because much of the work can be delegated to the construction manager. However, the airport staff need to be skillful in managing and negotiating the GMP during the preconstruction phase. For lump-sum DB projects, the owner needs to ensure that staff can effectively oversee the project without taking back design liability, which can occur if staff try to implement the project as if it was delivered through DBB; this can make lump-sum DB harder to administer than a CMAR or pro- gressive DB.

Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. 10 ACRP LRD 38 • Costs of maintaining and decommissioning the facility. In DBB, owners can check the maintainability of their design before award, but with limited contractor input. In CMAR, however, the owner can get the contractor’s advice on the maintenance of the project, especially if the contractor has previously operated facilities of a similar nature. In lump- sum DB, quality control is the responsibility of the design- er–builder. With a design that is still not known, the owner might have concerns about the maintainability of the prod- uct, and conventionally require a multiyear warranty. For projects delivered using the PPP delivery method, a private developer is responsible for maintaining the facility and the owner is at less risk for design errors or construction defects, since the private developer is effectively providing a warranty covering those risks. • Life-cycle costs. Owners in DBB projects specify the intend- ed service life by the choice of a specific design or product, with very little contractor input into life-cycle cost issues. In CMAR, the owner maintains roughly the same level of con- trol, yet can get input from the contractor on the life-cycle performance of the facility. In contrast, lump-sum DB and progressive DB projects are primarily based on performance specifications, with many details undefined at the award of a contract. Airports need to set clear-cut life-cycle perfor- mance criteria and resort to a designer–builder’s innovation in achieving these criteria. For PPP projects, the private de- veloper must consider life-cycle cost issues, because it is re- sponsible for designing, building, operating, and maintain- ing the facility. Under this model, the private developer must assess the trade-offs between certain design solutions and long-term facility performance, since a poor design solution could ultimately result in the developer being responsible for increased operations and maintenance costs, which offset any initial savings. The private entity also will be responsible for rectifying any failure of the project to meet contract re- quirements during the operations and maintenance phase of the project. A. CMAR Case Study Results None of the case study project owners had any significant experience in using the CMAR delivery method prior to the case study projects. However, since the start of the case study projects, most of the owners have used CMAR for additional airport capital projects, with one participant having completed five CMAR projects over the last 5 years. Another project par- ticipant just finished one CMAR project, and selected a CMAR consultant for the next capital project. This study found that most of the case study owners decided to use CMAR well in advance of 1 year prior to project procurement. One project in this case study was split into two separate CMAR contracts, in response to the proposing teams stating their concerns that their bonding capacities would be taken up by one large contract. Ironically, the owner ultimately awarded both CMAR contracts to the same CM. Although this concern was raised on a CMAR project, it is important to note that con- • Size and complexity of the project. Depending on proj- ect size and complexity, some PDMs are better suited than others. Specifically, airport projects are seen to be very com- plex, given that they employ a whole series of special systems that are seen nowhere else (Touran et al. 2009). Although DBB has been successfully implemented in projects of all sizes, CMAR, lump-sum DB, and progressive DB seem to be more suitable for large complex projects, including those with complex managerial requirements. • Stand‐alone project or part of a capital development pro- gram. This could dictate use of one PDM over another, be- cause it would affect management requirements. • Impacts to airport operations or businesses. With most air- port projects being executed while airport operations are ongoing, such a setting may dictate scheduling and phas- ing constraints to reduce delays on flight and passenger op- erations. Certain PDMs could be better suited to achieving this goal. In DBB, the owner addresses this issue in the RFP document by dictating requirements for operations manage- ment and phasing strategies. In a CMAR, with the CM’s ex- pertise and direct involvement in the process, the CM can help mitigate the effects of disruptive construction activi- ties. However, increasing the number of parties involved in a CMAR project could be viewed as a management hurdle. Similar to other PDMs, in a lump-sum DB or progressive DB project, the owner can incorporate the management of disruptive operations as a performance criterion in the RFP. • Funding source. Discussed in more detail in the Section IV (Project Funding), the appropriate project funding source or financing mechanism should match with the PDM, because some contracting laws make some funds difficult to use for certain PDMs. • Airport stakeholders. Airports are unique in terms of their far-reaching effects on many different airport stakeholders. It is important to select a PDM that aligns the goals of the various stakeholders. Depending on the project, such stake- holders include the Transportation Security Administration (TSA), airlines, rental car companies, and key utilities. In- volvement of such stakeholders can lead to more time spent in the design and development phase of the project (Touran et al. 2009). A DBB’s linear process allows time for negotia- tions with various stakeholders, who also have the oppor- tunity to view the 100% complete design. In CMAR, con- structability advice as well as transferring responsibility of third-party agreements to the CM could have a significant positive effect on obtaining the agreement of stakeholders. In contrast, time available to get these agreements could be compressed in lump-sum DB projects, because both design and construction are awarded in a single contract. • Schedule. The ability to fast-track the project, with construc- tion starting before design is complete, is an inherent fea- ture of lump-sum DB, progressive DB, and most PPPs. In contrast, for DBB (and, to an extent CMAR and progressive DB), the process is sequential.