Guidebook for Implementing Alternative Technical Concepts in All Types of Highway Project Delivery Methods (2020)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

27 C H A P T E R 3 Managing the ATC design process can be likened to traditional value analysis conducted during the design phase of a project. Lee et al. (2011) define value analysis as “a systematic analy- sis of a project, product, or process aimed at improving quality and performance and reducing operation, maintenance, and life-cycle costs and environmental impacts.” Figure 5 in Chapter 1 shows the relative placement of the design process in each ACM. Most DOTs split the process into two parts, preliminary engineering and final engineering, with typical activities as shown in the following: • Preliminary engineering. Conduct environmental analysis, conduct schematic development, hold public hearings, determine ROW impact, determine project economic feasibility, obtain funding authorization, develop ROW, obtain environmental clearance, determine design criteria and parameters, survey utility locations and drainage, make preliminary plans such as alternative selections, assign geometry, and create bridge layouts. • Final engineering. Acquire ROW; develop plans, specifications, and estimates (PS&E); and finalize pavement and bridge design, traffic control plans, utility drawings, hydraulics studies/ drainage design, and cost estimates. The entity that will complete the two stages of design is dependent on the project delivery method. In DBB and CMGC, the owner and/or its design consultant will normally complete both preliminary and final engineering. In DB and PDB, the owner and/or its consultant will generally complete preliminary engineering as part of developing the DB RFP, and the winning design-builder will perform the final engineering. P3 projects are often awarded at some point before or during the preliminary engineering stage, and the concessionaire typically is respon- sible for obtaining permits, ROW, utilities, and other preliminary engineering activities. Most P3 teams will include a DB team that will ultimately complete final engineering. Essentially, the goal of the agency designers is to determine whether the project’s concept can be modified by ATCs and still provide the required technical functionality while accruing a benefit to the overall project in terms of cost, schedule, or life-cycle savings. Many agencies outsource a portion of the project development and design effort. For example, it is common to find a general engineering consultant being given the responsibility for developing the RFP in ACM projects. Therefore, it is important to determine what adjustments, if any, should be made in the routine professional services procurement process to accommodate ATCs. 3.1 Characteristics of an ATC Project Selecting appropriate ATC projects is a key element of project risk management. While ATCs can theoretically be used on any project, the agency will want to carefully consider whether or not the specific project has features where contractor input may actually accrue Accounting for ATCs in Design

28 Guidebook for Implementing Alternative Technical Concepts in All Types of Highway Project Delivery Methods tangible benefits. NCHRP Synthesis 455 includes the following list of project characteristics that indicated an ACM project would benefit from including ATCs in the procurement process (Gransberg et al. 2014): • The final design is strongly correlated to actual construction means, methods, and/or equipment. • Contractor construction submittals (shop drawings, final material selection, etc.) are expected to be substantially different among different contractors. • Potential cost and time savings benefits are expected to outweigh the cost of the agency review process and in DBB the cost of baseline redesign. • Project permits will allow the design to vary from the approved “preferred alternative” without the need to allow time to revisit and revise necessary permits. • The design team anticipates ACM contractor value engineering change proposals. • The details of nonpermanent construction engineering features like MOT plans, staging plans, construction site drainage plans, etc., are best determined by the ACM contractor. • Risk mitigation measures for managing risks like utilities, differing site conditions, etc., are possible by permitting competing entities to revise the baseline design. 3.2 Risk Analysis and Mitigation This section discusses the subject of risk related to ATCs only. At a higher level, including ATCs in an ACM project procurement is actually a risk management tool. It is a mechanism to involve proposers in the pre-award design process, giving them an ability to suggest modifica- tions that might help manage the cost, time, and performance risks associated with the quality of the construction documents and the ultimate constructability of the specific design solution articulated in the solicitation. Figures 7 through 10 show risk profiles during the project devel- opment and delivery process for DBB, CMGC and PDB, DB, and P3 ATCs and are based on a concept proposed by Molenaar (2005). The ATC process is overlaid on the project risk profile across the project development and delivery process for each ACM. Figure 7 shows the risk profile for DBB ATCs; this figure assumes that all risks are ultimately quantified as costs and provides a simplified look at the impact of ATCs on the total project risk. It is important to note that 100% final design is not completed until after the award of the construction contract. Thus, managing that task is a new aspect to be considered before decid- ing to use ATCs in DBB. Looking at Figure 7, one can see that the period between the 100% baseline design and the 100% ATC design falls into the “known/unknowns” range because while the contractor’s bid price is known, the impact on the delivery schedule remains unknown until the baseline is modified to incorporate all approved ATCs. Figure 8 illustrates the risk profile for CMGC and PDB ATC projects. It assumes that approximately 30% design completion is achieved at the time of the solicitation. This is certainly not a hard rule, but it is indicative of observed industry practices. These two ACMs do not require that ATCs be technically evaluated and approved before contract award. Figure 8 shows the process used by the Utah DOT, which calls its CMGC ATCs “PTCs.” The same approach can be easily adopted for PDB contracts. Figure 9 is the DB risk profile. This ACM enjoys a long history of ATC usage that dates back to 2002. It requires that ATCs be proposed, reviewed, and approved during the procurement period and also allows for importing attractive ATCs from nonwinning proposals via the use of stipends. The actual incorporation of the additional ATCs occurs after the selection of the successful offeror and after award of the contract via change order. That task is labeled “ATC Design Modification Period” in Figure 9.

Accounting for ATCs in Design 29 Finally, Figure 10 is the profile for P3 ATC projects. These differ from the other four ACMs in that a set of baseline requirements is established rather than a baseline design. P3 contracts involve extensive negotiations, and often concessionaire-/developer-initiated ATCs are key to the process of reaching commercial close after the P3 contract has been awarded. Commercial close essentially occurs when both the agency and the concessionaire agree on the final scope of work. 3.2.1 Cost and Schedule Risk Figures 7 through 10 graphically illustrate project total risk quanti- fied in terms of dollars. However, transportation projects typically are more sensitive to changes in time than in cost. This is because finish- ing late usually involves additional user costs that are not quantified in tangible dollars. According to West et al. (2012), experience shows that both cost and schedule risk can be mitigated by implementing con- structability reviews. The ATC process makes the ACM contractors’ constructability reviews a competitive process and rewards contractors for being innovative; therefore, including ATCs in an ACM project acts as a risk management tool. 100% Baseline Design 30% Baseline Design 70% Baseline Design 100% ATC Design CATC 1-on-1 Meetings Begin ATC 1-on-1 Meetings Begin ATC Approval ATC Proposal Period ATC Approval Period ATC Design Modification Period Construction Complete Project Plan & Concept Pe rc en ta ge o f T ot al P ro je ct C os t Total Project Cost Unrecognized Cost (Unknown/ Unknowns) Known and Quantified Cost (Known/Knowns) Known but Unquantified Costs (Known/Unknowns) Project Development and Delivery Process - DBB DBB Contract Award Figure 7. DBB ATC risk profile during the project development and delivery process (adapted from Molenaar 2005). “Because ATCs often revise the design to be more compatible with a given contractor’s means, methods, and equipment, schedule and performance risk appear to be reduced.“ (Gransberg et al. 2014)

30 Guidebook for Implementing Alternative Technical Concepts in All Types of Highway Project Delivery Methods ATC Project Development and Delivery Process - CMGC,* and PDB* 100% Design 30% Baseline Design 100% PTC Design PTC 1-on-1 Meetings Begin PTC Approval PTC Design Modification Period Construction Complete Project Plan & Concept Pe rc en ta ge o f T ot al P ro je ct C os t Total Project Cost Unrecognized Cost (Unknown/ Unknowns) Known and Quantified Cost (Known/ Knowns) Known but Unquantified Costs (Known/ Unknowns) *Assumes that CMGC and PDB contract awarded at 30% design completion. CMGC PDB RFP Issued CMGC PDB Contract Award Preconstruction/Design Phase Qual Eval/ Select Period Figure 8. CMGC and PDB ATC risk profile during the project development and delivery process (adapted from Molenaar 2005). Recent research (Gransberg et al. 2018; NCHRP Project 20-07/Task 373, “Utility Coordina- tion Using Alternative Contracting Methods”) has found that ATCs can be used specifically for subsurface risk mitigation on projects delivered by ACMs. In both studies, standard ATCs were separated from a refinement termed PAEs. The major difference is that PAEs are required of all competitors and must be approved prior to submission of their bids to be considered responsive. For example, the Minnesota DOT’s Hastings DB bridge project solicited ATCs and the winning proposal included a major geotechnical engineering design change to incorporate a “column-supported fill” as a better remedy for very poor subsurface conditions on one end of the bridge. The same project also required that all proposers submit a PAE consisting of a plan to minimize construction vibrations that might damage several historic riverfront buildings abutting the project limits. The competitors were also required to include an approved PAE for the rapid transfer of utility services that were attached to the bridge. 3.2.2 ATC Performance Risk ATC performance risk is defined as those issues that are inherent to the ultimate perfor- mance of a given ATC that the agency cannot insure prior to approving the ATC. There are

Accounting for ATCs in Design 31 100% ATC Design Project Development and Delivery Process - DB 100% Design 30% Baseline Design CATC 1-on-1 Meetings Begin ATC 1-on-1 Meetings Begin ATC Approval ATC Proposal Period ATC Approval Period ATC Design Modification Period Construction Complete Project Plan & Concept Pe rc en ta ge o f T ot al P ro je ct C os t Total Project Cost Unrecognized Cost (Unknown/ Unknowns) Known and Quantified Cost (Known/ Knowns) Known but Unquantified Costs (Known/ Unknowns) DB RFP Issued DB Proposals Submitted DB Contract Award ATCs from Nonwinning Proposals (if req’d) Design Phase Figure 9. DB ATC risk profile during the project development and delivery process (adapted from Molenaar 2005). three issues that should be considered when managing ATC scope risk. The first is the inclusion of a requirement for proposers of ATCs to warrant each ATC’s viability within the context of the baseline design and statutory/regulatory requirements. A typical clause to manage this risk is found in a Georgia DOT RFP: For ATCs that require a subsequent NEPA approval, the Department will provide an overall sched- ule allocation that it believes it can achieve the approval for, assuming the Contractor provides all the supporting information. Schedule relief will be granted if the Department is unable to achieve the approval by the specified timeframe. . . . In the event the contractor is unable to make the ATC work during the contract duration, the contractor is required to provide the baseline scope requirements outlined in the RFP at no additional cost. This kind of risk mitigation clause is commonly used for the types of scope risks that may not be possible to resolve before contract award. Besides the permitting issues, DOTs have included language relating to design deviations, utility coordination, and aesthetics.

32 Guidebook for Implementing Alternative Technical Concepts in All Types of Highway Project Delivery Methods The second issue regards the latitude for a proposed ATC to significantly alter the configu- ration of the project. The Colorado DOT uses an approach termed Alternative Configuration Concept (ACC) to manage this risk. An ACC is essentially a proposed change that creates a significant alteration of the project’s footprint or design intent or greatly alters the underlying design criteria, such as state standard specifications and details, used to develop the baseline design. This risk is best managed by developing a clear definition of those areas in which changes may and may not be proposed, i.e., allowing only limited-scope ATCs. The crux of the issue is the trade-off between enhanced innovation and the time and resources needed to review and approve the proposed alternatives. To address the in-house time/resource issue, a number of DOTs have chosen to put a limit on the number of ATCs that a given competitor can propose, whereas others specify a minimum value of the potential benefits before an ATC is accepted for review. If the agency clearly states the given project’s critical success factors in the RFP, as mentioned in Section 2.3, and links the evaluation criteria to the goals, it will actively encourage proposals of ATCs that offer improvements related to the specified project goals, thus providing more focus to the ATCs being submitted. Project Development and Delivery Process - P3 100% Design Baseline Req’ts Construction Complete Project Plan & Concept Pe rc en ta ge o f T ot al P ro je ct C os t Total Project Cost Unrecognized Cost (Unknown/ Unknowns) Known and Quantified Cost (Known/ Knowns) Known but Unquantified Costs (Known/ Unknowns) P3 RFP Issued CATC 1-on-1 Meetings Begin ATC 1-on-1 Meetings Begin ATC Approval ATC Proposal Period ATC Approval Period 100% ATC Design P3 Proposals Submitted P3 Contract Award ATCs from Nonwinning Proposals (if req’d) ATC Design Modification Period Commercial Close Figure 10. P3 ATC risk profile during the project development and delivery process (adapted from Molenaar 2005).

Accounting for ATCs in Design 33 The third ATC scope risk issue deals with the degrading of overall project quality to find cost and time savings. This risk is typically an artifact from the low bid mentality that still pervades the highway construction industry, but it remains present in most procurements. Essentially, from this perspective a lower cost design solution is almost always preferred over a higher cost baseline design. In fact, this perspective doesn’t recognize that degrading proj- ect quality fails to satisfy the “equal to” portion of the ATC definition. Most DOTs include an explicit clause regarding this risk that is similar to one used by the Washington State DOT: “Concepts that simply delete scope, lower performance requirements, lower standards, or reduce contract requirements are not acceptable as ATCs.” Many DOTs do not ask for cost data to be submitted so that the evaluation of the ATC is focused on technical improvements without regard to their impact on cost. For example, the Washington State DOT’s DB manual states (Washington State DOT 2010): “At no time during the ATC submittal and review process shall the Proposer disclose any pricing infor- mation related to the ATC, including but not limited to, estimated increases or decreases to the Proposer’s Price Proposal, if any.” Washington’s rationale for this approach is that is does not consider contract cost savings in the “equal to or better” determination as it might create an uneven playing field for pro- posers who are not bidding on an equivalent project scope and it is hard to identify whether a proposed price benefit materialized in the final proposal. It must be noted that this particular approach is not a generally accepted practice, mainly due to local statutory requirements to demonstrate that changes made to approved baseline designs demonstrate quantifiable cost and/or schedule benefits. Most of the example ATC submittal packages contained in the appendices of this report require submission of pricing information in some form. 3.3 Scope Development This section addresses the issue of potential changes to a project’s early scope development process when ATCs are anticipated. Each individual project will have its own unique set of scope definition challenges, and there is no single solution for all projects. Nevertheless, the research has identified a number of effective practices that may be useful to agencies as they develop pro- cedures to scope ATC projects. Those practices are as follows: • Flexibility. Develop environmental permitting, ROW, and utility coordination documents with as much design flexibility as feasible. This would include avoiding being too prescrip- tive in conceptual designs evaluated to reach a preferred alternative and avoiding making commitments that would eliminate possible ATC concepts related to specific means and methods unless absolutely necessary to obtain the necessary permits and consents. • Means and methods. Identify those areas of the project where final design is dependent on means and methods assumptions. Designate these features of work as categories where ATCs will be solicited, and instruct project development personnel to default to flexibility as design assumptions/decisions are made. As an example, the winning bidder for Missouri DOT’s New Mississippi Bridge had an ATC approved that redesigned the drilled shafts in the baseline foundation design to accommodate its own drilling equipment. The contractor made them larger in diameter, and, as a result, was able to reduce the total number of shafts, resulting in cost and time savings for this activity. • Key project objectives. Determine whether the project would benefit from incentivizing key project influences, such as schedule or minimizing traffic disruptions, and develop appropri- ate incentive/disincentive schemes that could be coupled with potential ATCs to successfully achieve the project’s key objectives.

34 Guidebook for Implementing Alternative Technical Concepts in All Types of Highway Project Delivery Methods 3.4 Design Packaging This section will cover the concept of packaging the design into several features of work that align with the anticipated subcontracting plan, to make it easier to evaluate changes imposed by a proposed ATC, as well as to facilitate the allocation of design risk. The SHRP 2 Report S2­R10­RW­1: Project Management Strategies for Complex Projects (Shane et al. 2014) cites the early determination of design and construction work packages and establishing the sequence of work as effective tools for managing complex projects. The first step is to break the scope of work into packages where each design work package has its corresponding set of construction work packages. This requires the designer to anticipate the winning proposer’s subcontracting plan. An agency’s major responsibility during an ATC project’s development is the baseline design package definition. The construction will ultimately be completed via general contractor and trade subcontractor work packages (also called bid packages). Thus, it is logical to schedule the design completion in a manner that directly relates to the sequence in which the project will be built, to ensure that the base- line design progresses in a manner that unequivocally supports construction progress and that the construction activities are not delayed because design activities are not complete. This is especially critical in ACM projects in which early construction work packages are expected to commence before the final design is complete. Additionally, the sum of the design and construction work packages also forms the format for the project’s work break- down structure. Once all the packages have been defined, each should be reviewed for ATC-driven change potential. The design work packages should be sequenced in a manner that facilitates the possible incorporation of ATCs, if possible. Doing so reduces the amount of design effort that is lost on the baseline design and retains a maximum amount of flexibility during the ATC review and approval process. In ACM projects, such as DB, the previous analysis leads to determining the technical con- tent of the project’s RFP. For example, after evaluating ATC potential on each design package, the result will be a set of design packages where either the potential for value-adding ATCs is low or the agency will not permit ATCs. The remaining design packages, if any, are those with attractive ATC potential. This will then provide guidance on the level of prescriptiveness for each package. The low/no ATC packages may be comfortably presented with a higher level of prescription, whereas the required technical content of the remaining packages will tend to consist of performance criteria or specifications. Remembering that the purpose of including an ATC provision is to provide an oppor- tunity to enhance the value of the final constructed product, the analysis of ATC poten- tial described above might also result in fewer ATCs as the competing DB/P3 contractors are provided greater latitude to responsively propose design solutions via the lower level of specificity contained in the design packages with ATC potential. The desired result is that the agency’s resources are focused on proposed alternative concepts that its design team did not recognize during the preparation of the RFP rather than revisiting alternatives that were initially excluded. 3.5 NEPA/Permitting Constraints Permit processing time and outcomes are outside the control of both an agency and its contractors. Thus, an agency may need to consider deciding whether or not to include ATCs before the permitting process is started, to avoid creating unintentional commitments that will

Accounting for ATCs in Design 35 stifle potential time and cost savings brought by ATCs. A typical clause from a DOT ATC guid- ance manual addresses the issue in this manner: All applicable laws must be followed for the project development including specifically, but not limited to, environmental clearance, ROW procurement and utility work. The process requires the DOT to define the minimum design requirements for the alternate proposals. The minimum require- ments should include compliance with all State and Federal laws and full compliance with all previous State and Federal approval actions (i.e., NEPA, Access Justification, Reports, Design Exceptions, etc.), unless available time exists in the delivery process to allow these items to be re-addressed. The poten- tial of affecting these previous actions should be considered during the ATC guideline development for each individual project. This further supports the concept of crafting environmental documents to give the agency the maximum amount of flexibility to entertain ATCs. 3.6 Summary The ATC process provides an opportunity to consider design solutions that an agency did not consider during project development. In many cases, this is because the solutions have never been used before in an agency’s area of responsibility. The industry members that compete for ACM projects often work throughout the nation and thus are exposed to a greater variety of project designs than typical state DOT engineers would be. Additionally, specialty design subconsultants and trade subcontractors have a vested interest in staying on the cutting edge of the state of the art in their fields. Thus, by allowing a “second bite at the apple” via the ATC process, the agency can increase both the effectiveness and efficiencies of the designs that will be constructed. Lesson Learned: ATCs have been demonstrated to be an effective risk manage- ment tool for the following specific risks: • Permit/environmental delay • Differing site conditions • Utility coordination • Others