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Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. ACRP LRD 38 15 of the procurement. The proposer protested the decision, but administratively, the airport could not address the protest at that time. This created unnecessary intrigue and doubt regarding the viability of the procurement until the very end. The airport determined that while this may not be a problem on smaller projects that have shorter procurement periods, it could be a significant issue for complex airport projects that have procure- ments that span several months (if not well over a year). Another key lesson learned by the airport was the need to train the airport representatives responsible for reviewing tech- nical proposals on how to identify any potential issues regarding data manipulation, and not just to review proposals for technical competence. In one of the projects, a proposer had manipulated the data provided by the airport owner for the weather model that the proposers were required to use. The data manipulation resulted in more favorable weather assumptions (and therefore electricity cost savings) for the project than what the airport had set. One of the proposal evaluators initially caught and fixed the anomaly, but did not immediately report the data manipulation as potential fraud, which would have been the basis for disquali- fying the proposer. Although this issue ultimately came to light, more thorough training could have resulted in identifying this as a potential issue earlier in the proposal evaluation process. VI. CONTRACT MANAGEMENT A key aspect of effective contract management is having an in-depth understanding of the type of PDM and related con- tracts used for the project. Typically, airports can select from three primary types of contracts for their professional services and construction contracts: firm fixed price/lump-sum, reim- bursable cost plus, and GMP (ACINA et al. 2012); the chosen PDM will often dictate which of these three types of contract the airport can use. In a firm fixed price/lump-sum contract, the contractor agrees to construct the defined scope of work with a fixed price or lump-sum cost. In this type of contract, the contractor is re- sponsible for cost overruns during construction. However, if the cost overrun is due to a change in the scope of work, then the owner issues a change order to pay for the change. Once under contract, contractors are encouraged to be as efficient as pos- sible in order to cut costs and maximize profits because if there is a cost underrun, the contractor will keep the cost savings. In a reimbursable cost-plus contract, the proposers submit a list of fees, unit prices, rates, and markups for the services to be performed. Once under contract with the selected con- tractor, the owner reimburses the cost of the work performed by the contractor based on these rates. For this type of contract, the owner takes the risk for construction cost overruns, un- less the overruns are a result of mistakes by the contractor. The owner keeps any cost savings, and does not share those savings with the contractor. Any changes made in the scope or project must be reimbursed to the contractor. Under this type of con- tract, the contractor has no incentive to be efficient in terms of saving costs. result, it was harder for the airport authority to determine which entities to short-list. C. Lump-Sum DB Case Study Results In contrast to the progressive DB case study, where the owner used a two-step procurement process with separate RFQ and RFP documents, the airport authority for the lump-sum DB project for a central utility plant used a three-step procurement process based on a single RFP (i.e., the phases were not sepa- rated into separate procurement documents). The procurement phases were as follows: ⢠Step 1: Submission of qualification packagesâProposers were required to receive 80% of the total potential points to proceed to the next phase. ⢠Step 2: Submission of preliminary designâProposers were required to receive 90% of the total potential points to pro- ceed to the next phase. ⢠Step 3: Submission of a price proposalâThe selection deci- sion among the remaining proposers was based entirely on the price proposal. Although there was healthy competition for the lump-sum DB contract, and the airport authority was pleased with the results of this three-step process, the authority recognized that it was an expensive way to procure the project because the proposers needed to design the project to roughly 30% to submit a bid. It was favorable to the owner that the economy was slow at the time because it resulted in increased market interest. The owner believes that had it used the same approach to procure the proj- ect now, it would not have received as much interest. The airport for the central utility plant project also used sev- eral innovative procurement tools that the owner believes were effective. These tools included a question/answer process, confi- dential one-on-one meetings with proposer teams, aesthetic re- view process, and alternative technical concept process. Of note, the winning proposer submitted and used an alternative techni- cal concept (approved by the airport) that modified the projectâs thermal storage requirements and permitted the proposer to completely avoid having a basement, as well as the many utility relocations that use of a basement would require. This resulted in significant cost savings and a reduction in operational im- pacts. Since the alternative technical concept process allowed proposers to interject their own proprietary concepts in place of existing RFP requirements, the owner ensured that the alterna- tive technical concept process was available to all proposers on an equal basis, so that the owner would avoid legal challenges to the procurement based on potential claims of unfairness. A key lesson learned by the airport was the need to insert interim decisions made by the airportâs governing body (e.g., the board), where they could address any protests received to date, in order to avoid holding all protests until the end of the procurement. Specifically, on the case study project, the airport determined that a particular proposer did not receive the re- quired minimum number of points to proceed to the next phase
Legal Issues Related to Large-Scale Airport Construction Projects Copyright National Academy of Sciences. All rights reserved. 16 ACRP LRD 38 performed either in-house by the airport or by an independent third party. A. CMAR Case Study Results In contrast to DBB projects, for which there are well- established forms of contract, most participants in the case study stated that there were not many precedent CMAR con- tract documents they could utilize for their projects. As a result, the case study participants modified the AIA and engineersâ joint contract documents committeeâs contracts to prepare their contract documents. The airportsâ legal counsel and architects participated in the contract preparation processes. Participants also found that managing a CMAR contract was significantly different from managing a DBB project. For DBB projects, a full-time architect is involved on site to make sure that the contractor builds the project according to the required plans and specifications. In contrast, for the case study CMAR projects, this work was done by the CM firm, and there was very little involvement of the designer on site. Participants reported that the way the CM firm engaged with the owner during the design and construction phases was the greatest difference between the CMAR and DBB. One partici- pant said that the airport mostly used third-party consultants to manage their CMAR contracts, with only a few airport em- ployees involved in managing the projects; this is a significantly different approach compared to the traditional DBB method. However, two participants said that there was no difference in the number of airport staff members needed for these two delivery methods. Regarding the training provided to airport staff on the CMAR process, all the project participants agreed that airport staff and management need to be educated about the CMAR process before starting a CMAR project. According to the case study participants, this process should include third-party train- ing on the difference between CMAR and DBB, as well as best practices for working with CM firms, in order to avoid potential claims and other legal issues. One of the case study participants reported that this effort should also include educating local contractors on the CMAR process. To this point, this particular airport performs a contracting open house every year in order to let local contractors know about contracting opportunities. B. Progressive DB Case Study Results For both progressive DB contracts associated with termi- nal expansion, the owner noted a significant decrease in the number of staff it needed for the design review process, which likely reflected the fact that responsibility for the design was shifted to the designerâbuilder. Despite this shift in responsibil- ity, the airport authority found it extremely important for both the airport and the designerâbuilder to have design managers that were fully engaged and willing to work with each other to resolve outstanding design issues ahead of reaching the GMP. As the design progressed, it was critical for the airport that the designerâbuilderâs design manger actively track the progress of the estimated construction cost against the airportâs budget, and GMP contracts are considered a hybrid of fixed-price/lump- sum and reimbursable cost-plus contracts. Under a GMP con- tract, the owner and the contractor agree on a target or maxi- mum cost for construction. If construction costs overrun this target, then the contractor is responsible for the cost overrun. If construction costs fall below the target, these savings are shared between the owner and contractor, based on predefined con- ditions. Generally, the GMP is secured only after most of the design is completed. GMP contract types are often used in CMAR and progressive DB projects. Traditional DBB projects mostly use lump-sum or cost-reimbursable contracts for project construction, and lump- sum DB projects use fixed-price/lump-sum contracts. Airports sometimes use progressive GMP contracts for large and com- plex CMAR or progressive DB projects. For progressive GMP contracts, construction packages are issued for bid in various phases, and the overall GMP is established based on the results of those bids, which makes the process of setting the GMP âpro- gressive.â This method requires that the contractor continue to design, package, bid, and contract the work until the project reaches a point at which the owner is comfortable in agreeing to the final GMP price for the entire project. This method gives the contractor and the owner some certainty regarding the cost of the project. Airports use various standard contract terms and conditions developed by different agencies for design, consulting, and con- struction contracts. Some associations of the construction indus- try have developed ConsensusDOCs® contracts. This is an alter- native contract document developed by 40 leading design and construction industry associations. In addition, the American Institute of Architects (AIA) and the Engineers Joint Contract Documents Committee have developed standard contract terms and conditions to be used in various types of contracts. Many airports use these documents as starting points to prepare their own contract documents; however, for more complex projects, there is often a need for airports to substantially revise and tailor their standard contracts in order to adequately address unique circumstances, risk allocations, and unique legal issues for their particular jurisdictions. For PPP projects, standard contracts cannot be used because the contract types vary widely based on the type of PPP used (e.g., full privatization, revenue risk, or availability payment) and the characteristics of the project. Proper contract management procedures are the key to suc- cessful project implementation. The airport authority needs to effectively coordinate with the designer and the construc- tion contractors to complete the project successfully. For DBB projects, these responsibilities often lie with airport in-house personnel because such personnel often have years of experi- ence doing this work, but they can be handled by an outside CM as well. In the case of CMAR projects, the CM performs this job on behalf of the owner. For lump-sum DB and progressive DB projects, oversight of a designer is not required because the designerâbuilder is responsible for both design and construc- tion. However, even for lump-sum DB and progressive DB proj- ects, there is a need for quality assurance (QA). This QA work is
