Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods, Volume 2: Construction Manager–General Contractor Delivery (2020)

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1 This chapter provides an overview of NCHRP Research Report 939: Guidebooks for Post- Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods, Volume 2: Construction Manager–General Contractor Delivery. It identifies the guide- book’s audience and describes how agencies can select tools and strategies for their construction manager–general contractor (CM-GC) projects. For context, the chapter provides a brief history of CM-GC delivery for U.S. highway projects. It also explains the industry need for contract administration guidance, and it introduces key terms. The guidebook includes a more comprehensive glossary following References and Bibliography. After a brief expla- nation of the research approach, the chapter provides a list of tools that agencies can use to administer CM-GC contracts. Later chapters and Appendix A explain the tools in more detail. 1.1 Overview This guidebook is a practitioner’s guide for construction administration on CM-GC projects. Whether your agency is using the CM-GC contracting method for the first time or has signifi- cant experience with the method, this guidebook provides useful strategies and tools to support CM-GC project administration. Highway agency personnel are the audience for the guidebook. As an AASHTO publication, the guidance must apply at a national level. Each agency will need to adapt the strategies and tools to their unique agency policies and practices. This guidebook will help agencies incorporate contract administration into their CM-GC procedures manuals. 1.2 Construction Manager–General Contractor Background The use of alternative contracting methods has accelerated the delivery of highway design and construction projects. These changes have come through the innovative efforts of FHWA and state agencies around the country over the last 30 years. Led by documented successes on large, high-profile projects such as I-15 in Utah, the Intercounty Connector in Maryland, and the Sellwood Bridge in Oregon (Sellwood Bridge Project 2017), alternative contracting methods have resulted in shorter project delivery times with less disruption to the traveling public. The CM-GC method is the newest of the alternative contracting methods, and it may show the most promise for accelerating delivery times while reducing project risk for the agency and the contractor. Section 1303 of the Moving Ahead for Progress in the 21st Century Act (MAP-21) fully authorizes the use of CM-GC for federally funded transportation projects. FHWA published a final rule for CM-GC contracting on December 2, 2016 (Federal Register C H A P T E R 1 Introduction

2 Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods 2016). Of all the alternative contracting methods in use by highway agencies, CM-GC has seen perhaps the most rapid growth since 2012. 1.3 Industry Need for a Guidebook The CM-GC contracting process requires significant procedural and cultural changes on the part of agency staff. Agencies are developing manuals on procurement guidance for these delivery methods. However, a review of current alternative contracting methods manuals reveals the existence of only a few manuals addressing contract administration pro- cesses. AASHTO’s A Guidebook for CM/GC Contracting for Highway Projects (Gransberg et al. 2013) and NCHRP Synthesis 402: Construction Manager- at-Risk Project Delivery for Highway Programs (Gransberg and Shane 2010) primarily focus on the pre-award phases of the method. This guidebook specifically addresses the post-award phase. It provides effective tools for the post-award contract administration of CM-GC projects. 1.4 Key Guidebook Terms This section provides a short list of key guidebook terms. A more comprehensive glossary follows References and Bibliography. Alternative Contracting Method (ACM): The traditional contracting method is design– bid–build (D-B-B). Alternative contracting methods include design–build (D-B), construction manager–general contractor (CM-GC), and alternative technical concepts (ATC). Other synonymous terms are innovative contracting method and alternative project delivery method. Construction Manager–General Contractor (CM-GC): A contract between an owner and a construction manager who will be at risk for the final cost and time of construction. In this agreement, the owner authorizes the construction manager to provide input during project design. It may consist of two separate contracts: preconstruction services and construction (Gransberg and Shane 2010). Design–Bid–Build (D-B-B): The traditional project delivery method for building highways and making highway improvements where the agency (or a consulting engineer working for the department) designs the project, solicits bids, and awards the construction contract to the lowest responsive bidder (construction contractor) to build the project (Molenaar et al. 2005). Strategy: A plan of action for accomplishing specific goals. In this guidebook, strategies address goals relating to CM-GC administration, such as team alignment, construction quality, or construction efficiency. Tool: A tool is used to perform an operation. In this guidebook, it is a tactic or process—such as checklists, spreadsheets, guidelines, and structured meetings—relating to CM-GC contract administration. 1.5 Guidebook Development This practitioner’s guidebook is based on CM-GC contract administration practices used by a wide cross section of transportation agencies. It was developed through a review of current literature and agency manuals, case studies, and interviews with agency personnel. The innovative efforts of the highway agencies should not be underestimated. The CM-GC con- tracting process requires significant procedural and cultural changes.

Introduction 3 More than 100 practitioners contributed to this guidebook in the case studies, tool validation and calibra- tion, and guidebook testing. A brief summary of the research follows. The corresponding research report provides a detailed description of the work. State-of-practice reviews—Thirty-one transportation agencies’ alternative contracting methods manuals and documents relevant to post-award alternative contracting methods contract administration identified contract administration tools for CM-GC contract administration. Process model development—A detailed process model of the CM-GC contract adminis- tration process was developed to aid in data collection and guidebook layout. The pro- cess model revealed the CM-GC contract administration phases of Alignment, Design, Preconstruction Services, Construction, and Closeout. Project case studies—A diverse set of 11 CM-GC projects were the subject of case study interviews. The team interviewed every state Department of Transportation (DOT) that had an active CM-GC highway project at the time of the research and worked with these state DOTs to gather data on their projects. About half of the projects had a total project cost greater than $50 million (including design, preconstruction services, and construc- tion), while the other half were between $10 million and $50 million. No CM-GC highway projects that cost less than $10 million were identified during preparation of the guidebook. Tool effectiveness evaluation and calibration—Thirty-two tools appropriate to CM-GC contract administration were identified through the case studies and state-of-practice reviews. A modified Delphi approach was used to calibrate the effectiveness corresponding to project size, level of complexity, and phase of contract administration. Guidebook development and testing—In addition to a thorough NCHRP panel review, the research team met with agencies from across the country to test the guidebook on ongoing and completed CM-GC projects. 1.6 Overview of Post-Award Project Phases and Tools The CM-GC project delivery process offers the opportunity for enhanced performance in areas such as cost, schedule, and quality through early con- tractor involvement. The CM-GC process maintains the contractual separa- tion of engineering consultant and constructor. However, agencies involve the CM-GC throughout the design process to infuse construction knowledge, means, and methods into the design. The first phase of the CM-GC process involves a contract for preconstruction services. When enough of the design is complete and a construction price is agreed upon, the team will complete the first construction work package. Agencies use a range of construction payment methods, including lump sum by milestone or payment of items with unit price from actual field measurements. Agencies design CM-GC projects in house or through a consultant contract. Including a construction manager during the design process and the potential use of multiple construction work packages make the CM-GC contract administration processes different from D-B-B. Process modeling for this guidebook revealed that CM-GC contract administration processes vary from agency to agency and even within agencies. However, key CM-GC processes were found on all projects across agencies. CM-GC projects proceed through five overlapping phases from the agency’s perspective of project administration: • Alignment, • Design, Agencies involve the CM-GC throughout the design process to infuse construction knowledge, means, and methods into design.

4 Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods • Preconstruction Services, • Construction, and • Project Closeout. There are three key distinctions of CM-GC contracting when comparing it to a traditional D-B-B contract administration: • Involvement of the construction manager in design for risk mitigation and constructability input, • Integration of an independent cost estimator to assist in reaching a guaranteed maximum price or construction agreed-upon price, and • Use of multiple contract work packages to expedite construction. Agencies have developed a number of tools to accomplish the administrative tasks in these five phases and with these three key distinctions. Table 1.1 lists the tools and describes the phases for use. Chapters 4 through 8 describe the application of these tools across the five phases. Tools for agency contract administration vary depending on the phase of project develop- ment, the specific task, project complexity, and project size. Objectives and tasks change across phases, as do the tools used for contract administration. Agencies apply some tools during one phase only and apply others across multiple phases. It is not necessary to use all of the tools in this guidebook to have a successful project. Tool selection should consider project goals, complexity, size, and phase. Chapters 4 through 8 detail the effectiveness of tools across various levels of complexity, size, and phase. Appendix A provides full information about each tool with advice for application and examples from the agency case studies. 1.7 Reader’s Guide The target audience for this guidebook is state transportation agency personnel. The guide- book contains information for agency leaders, CM-GC project managers, and technical staff. Consultants, engineers, and contractors will also benefit from the guidebook because it allows them to understand their roles and responsibilities in the process and to offer the right tools for their projects. The guidebook will assist agencies with achieving the cost and time savings that MAP-21 and the Fixing America’s Surface Transportation Act envision through the use of CM-GC. A Strategic Perspective for Agency Leaders To maximize the benefits of CM-GC contract administration tools, the guidebook suggests five overarching contract administration strategies: Alignment, Scope, Preconstruction Services Quality, Construction Quality, and Construction Efficiency. Chapter 2 discusses these strategies in detail. Agency leadership is the primary audience for this chapter. Strategies support the use of the tools in this guidebook and the creation of new, agency-specific tools. Moreover, agency leaders must be aware of and commit to transforming organizational culture, mentoring individual behavior, and developing pro- cedures for alternative contracting methods. Agencies that are effective at modifying their cul- ture and procedures specific to CM-GC contract administration will ensure the integration of strategies and tools in all project phases. For example, agency leadership must support a close Agency leaders must commit to transforming organizational culture, mentoring individual behavior, and developing procedures for alternative contracting methods.

Introduction 5 working relationship between the construction manager, engineer, and independent cost estimator. This is a significant change in culture from the traditional D-B-B contracting method, which intentionally separates these parties. The application of CM-GC contracting impacts agency culture in all phases of contract administration. Agency leadership can support this change through the application of the strategies and tools found in this guidebook. Guidebook Organization Chapter 2 describes overarching management strategies that help categorize and recom- mend tools for use in CM-GC contract administration within an agency. Chapter 3 discusses Tools for Construction Manager–General Contractor Contract Administration Contract Administration Phases A lig nm en t D es ig n P re co ns tr uc ti on C on st ru ct io n C lo se ou t 1 Kickoff Meeting 2 Roles and Responsibilities 3 Glossary of Terms 4 External Stakeholder Coordination Plan 5 Regulatory Agency Partnering 6 Co-Location of Key Personnel 7 Construction Manager–General Contractor Management Fee Table 8 Construction Manager–General Contractor–Specific Partnering 9 Continuity of Team Members 10 FHWA Involvement Overview 11 Permit Commitment Database 12 Discipline Task Force 13 Independent Party Design Review 14 Plan Standards 15 In-Progress Design Workshops 16 Deviations from Agency Standards 17 Over-the-Shoulder Reviews 18 Open-Book Estimating 19 Public Announcements 20 Delegation of Authority 21 Cost-Comparison Spreadsheet 22 Cost-Modeling Approach 23 Construction Manager–General Contractor Bid Validation 24 Independent Cost Estimator 25 Cost–Savings Matrix 26 Opinion of Probable Construction Cost Process 27 Risk Pools 28 Contractor-Controlled Quality Control Testing 29 Contractor Involvement in Establishing Quality Control Standards 30 Real-Time Electronic Quality Management Information 31 Witness and Hold Points 32 Payment Checklist Table 1.1. Construction manager–general contractor contract administration tools.

6 Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods the CM-GC process at the pre-award phase and touches on key topics, such as the reasons why agencies select CM-GC and how much design they complete prior to CM-GC involvement. Chapters 4 through 8 are the heart of this guidebook. Each of these chapters introduces one of the five post- award phases and briefly describes the tools available in that phase. These chapters help to clarify an agency’s role in administering alignment, design, preconstruction, construction, and closeout. Chapter 9 describes the steps that agencies can take to implement the strategies and tools in this guide- book. It also provides guidance on performance measures and continuous improvement. Finally, Appendix A provides details of each tool identified in a consistent format, along with descriptions and successful examples from various agencies. Finally, readers should be aware of two companions to this guidebook. AASHTO’s A Guidebook for CM/GC Contracting for Highway Projects (Gransberg et al. 2013) emphasizes setting projects up for success by focusing on the pre- award phases of the process. It serves as an excellent precursor to this guidebook. As part of the research for this CM-GC guidebook, the research team also developed NCHRP Research Report 939: Guidebooks for Post-Award Contract Administration for Highway Projects Delivered Using Alternative Contracting Methods, Volume 1: Design–Build Delivery. While the organiza- tional and administration processes differ between CM-GC and D-B, many of the strategies and tools overlap. This guidebook should be used in conjunction with AASHTO’s Guidebook for CM/GC Contracting for Highway Projects and NCHRP Research Report 939: Guidebooks for Post-Award Contract Adminis- tration for Highway Projects Delivered Using Alternative Contracting Methods, Volume 1: Design–Build Delivery.