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 13 An alternative to the two-step approach described above is a process where the first step is an evaluation of the proposers’ qualifications submitted in response to a, RFQ. This phase re- sults in either prequalification or a short list. Under prequali- fication, all proposers meeting the minimum criteria move on to the next phase. With a short list, the airport invites a small number of the most qualified proposers, generally three to five, to move on to the next phase. The second step then involves the remaining proposers responding to a separate RFP by sub- mitting both a technical proposal—for example, a design solu- tion or approach to project management—and a separate price proposal, with the result most often being the selection of the proposer who provides best value to the owner. The two-step procurement process allows an owner to select a contractor based on cost and other factors. This best-value selection process ensures that airports award contracts to con- tractors that are qualified, have submitted an acceptable techni- cal proposal, and have a reasonable bid price. Airports can use an independent third-party estimating consultant to check the costs of the bidding parties. This type of selection process can be used to select contractors, independent of the alternative deliv- ery method used, including the selection of CMs under CMAR, designer–builders under lump-sum DB or progressive DB, and developers under PPPs. Owners typically use some form of a best-value selection process to award an alternative PDM contract. Accordingly, when using an alternative PDM for an airport construction project, an airport should familiarize itself with how to effec- tively implement nonprice evaluation factors and, potentially, innovative procurement tools (e.g., one-on-one meetings). During this familiarization process, owners should be particu- larly aware of avoiding potential protests. If a protest does arise, independent of which PDM and selection processes an airport utilizes, case law generally establishes that a court may set aside the owner’s selection decision if the decision (a) lacks a rational basis or (b) violates to a prejudicial effect an applicable procure- ment regulation [Allied Technology Group, Inc. v. United States, 649 F.3d 1320, 1326 (Fed. Cir. 2011)]. The discussion below ad- dresses each of these general considerations. However, because protests will generally be brought under applicable state law, airport owners should become familiar with the protest proce- dures and case law for their own jurisdictions. Under the first potential basis for a protest, the test that courts generally apply in response is “whether the contracting agency provided a coherent and reasonable explanation of its exercise of discretion” [Centech Group., Inc. v. United States, 554 F.3d 1029, 1037 (Fed. Cir. 2009))]. When applying this test, courts note that “the disappointed bidder bears a heavy bur- den of showing that the award decision had no rational basis” ( Centech Group, 554 F.3d at 1037). While this is a high threshold for a protestor to meet, it still means that an airport’s award de- cision (e.g., selection of a best-value proposal) must at least be rationally related to the process set forth in the RFP documents. The test for the second potential basis for a successful protest is whether the protestor has demonstrated “a clear and preju- B. Progressive DB and Lump-Sum DB Case Study Results The progressive DB and lump-sum DB projects in the case study utilized bond financing backed by airport revenues, and one of the projects utilized a small amount of federal grant funding. Similarly to the CMAR case study projects, funding issues did not affect or otherwise help the airports to determine the PDM chosen to deliver their projects. V. CONTRACT PROCUREMENT The contract procurement process related to procuring con- struction contracts and professional services in airport projects is subject to a variety of procurement laws and regulations based on the types of the funding used for the projects. Airport owners need to follow the applicable FAA procurement and contract- ing standards outlined in 2 C.F.R. § 200.318 (General procure- ment standards) through § 200.326 (Contract provisions) for AIP-supported projects, regardless of the PDM being utilized (Touran et al. 2009). Federal funding for construction projects comes largely through the FAA AIP. In addition, even PFCs are not federal funds distributed by the FAA, this program is authorized and regulated by the federal government, and the use of PFCs comes with its own restrictions (Alfert et al. 2012). For the details about PFC-funded projects, see the Passenger Facility Charge Audit Guide for Public Agencies (FAA 2000). If project funding in- cludes federal, state, and local funds, then the procurement laws related to federal, state, and local agencies need to be followed while procuring construction, design, or consultant services. In such a case, if there is no conflict among these laws, then all the requirements will apply. In the event a federal requirement conflicts with state or local requirements, then federal law will prevail over the state and local requirements. Note that some federal requirements may apply to non-federally funded proj- ects (see Advisory Circular 150/5100-15A, FAA 1989). To the extent permitted by applicable state and local pro- curement regulations, airport authorities may use QBS, or best- value processes, in which the selection of contractors is not based exclusively on price, but instead is based on a number of factors set forth in the RFP. Under such approaches, the airport can use the proposer’s qualifications and other factors, includ- ing price, to select a contractor, provided the RFP specifies the criteria, scoring, and award processes. The QBS and best-value procurement processes can involve either one or two steps. In a one-step procurement, proposers submit both technical and price proposals to the owner in a single package. The airport authority applies predetermined weights to the technical and price proposals and uses the total weighted score to select the contractor. In a two-step procure- ment process, airport authorities ask for an unpriced technical proposal from contractors, and only those contractors that the airport determines are technically qualified are invited to sub- mit sealed bids. The contract is awarded to the lowest bidder that is technically qualified.

Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. 14 ACRP LRD 38 tial damages and the insertion of a cap on liability, which is not typical for DBB contracts. One of the key lessons learned from the contract procure- ment phase for the CMAR case study projects was the impor- tance of securing the needed authority to use a QBS process to select a CM. If a project will utilize FAA funding through the AIP, the airport needs to obtain permission from the FAA to use a QBS process to select a CM (refer to the FAA Advisory Circular AC 150/5100‐14D). Similarly, for one of the case study projects, the airport needed to have its City Council pass an ordinance to get approval for this selection process. Additionally, it was found that the QBS selection process was very helpful in identifying the approach that the CM firms intended to use to manage the construction work, especially the phasing of the projects from design to construction. Another lesson learned from the case studies was that it is helpful to select the CM early in the design phase, so that the CM’s construction expertise can be used during the design pro- cess. In one of the case study projects, the owner selected the CM when the design was already 60% complete. The owner felt that bringing in the CM this late in the design process resulted in less opportunity for the CM to provide valuable engineering and constructability input. Consequently, this particular owner has made it a requirement on subsequent projects that the CM be brought in very early during the design phase in order to maximize the value of involving a CM in the project. According to this owner, the CM should be given more latitude in select- ing construction subcontractors and should not be limited to recommending low-bid contractors, but should be given an opportunity to select subcontractors that can provide the best value to the owner. B. Progressive DB Case Study Results The airport authority chose to use a two-stage procurement process to procure progressive DB contracts for a terminal ex- pansion. The first step resulted in the airport short-listing sev- eral proposer teams in response to an RFQ. The airport issued an RFP to the short-listed teams, and two of these short-listed teams submitted proposals. A key element of the evaluation process was the use of one-on-one interviews with the proposer teams. During these interviews, the airport gave the proposers a problem to solve, with the goal of evaluating both the solution presented by the team and how the team worked together to come up with that solution. The key lesson learned by the airport in relation to procure- ment, was the need to clearly define the project scope in the procurement documents. The RFQ for the case study project provided that the airport would evaluate designers and contrac- tors separately, which prevented DB teams from officially team- ing up ahead of the submission of qualifications. The RFQ also provided that the airport would deliver the project by means of either a progressive DB, CMAR, or some other delivery method. This greatly complicated the evaluation process. Although one entity may have had extensive experience with CMAR, it may not have had experience with progressive DB, or vice versa. As a dicial violation of applicable statutes or regulations” [(Centech Group, 554 F.3d at 1037)]. In this context, to show prejudice, the protestor must demonstrate that “but for the alleged error, there was a substantial chance that [the protestor] would receive an award—that it was within the zone of active consideration” [Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996)]. By way of example, to mount a successful protest of an award decision based on an airport’s failure to correctly follow procurement regulations (e.g., requirements governing com- munication with proposer teams), the proposer must demon- strate both that the regulation was applicable to the project, and that but for this failure, the proposer had a realistic chance to have been awarded the contract. While the burden to establish a successful protest is clearly on the protestor, it is important for airports to appreciate that even unsuccessful protests can be extremely disruptive to the procurement process and can result in both lost time and lost political good will. Consequently, it is important to make all reasonable efforts to avoid potential protests. Though there are many variables involved, to help avoid protests, an airport should (a) understand any limits to its procurement authority, including any limits to use of alternative PDMs/procurement tools; (b) draft procurement documents that clearly set forth the rules of engagement and evaluation criteria for the procure- ment; and (c) strictly adhere to those rules and criteria. A. CMAR Case Study Results Each of the CMAR case study projects used a two-step pro- curement process to select a CM, starting with an RFQ followed by an RFP. The RFQ requested information about the firm’s experience in completing CMAR projects, key personnel quali- fications, communication process, value engineering and con- structability experience, and approach to project management. The airport owners for these case study projects also added re- quirements for the CM to show their approach to providing ser- vice plans for the construction phase. Based on the statements of qualifications submitted in response to RFQs, the airports used the selection criteria set forth in the RFQs to select the CM firms it would “prequalify.” Pursuant to the RFQs, the prequalified CM firms were al- lowed to move on to the second step of the procurement pro- cess. The airport issued RFPs to prequalified CM firms inviting them to submit technical proposals related to their approaches to design and project management. Then the airport invited these CM firms for interviews. During the interview process, the selected firms clarified their proposals and demonstrated their clear understanding of the projects. All key members of the project teams were required to attend these interview ses- sions. After the interviews, the qualified firms submitted fee pro posals in a separate sealed envelope. One airport did not conduct structured interviews with the prequalified CM firms, but rather conducted a question-and-answer session. Addition- ally, in one of the case study projects, during this session, pro- posers were able to push back on the insurance requirements set forth in the RFP; this resulted in a mutual waiver of consequen-