Ord 09-05
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ORDINANCE NO. 9-05
AN ORDINANCE OF THE CI1Y COMMISSION OF THE
CI1Y OF DELRA Y BEACH, FLORIDA, AMENDING
SECTION 36.05 OF THE CI1Y CODE, "BIDDING
PROCEDURES", CLARIFYING THE USE OF
CONSTRUCTION MANAGEMENT AT RISK CONTRACTS;
AMENDING SECTION 36.11 "DEFINITIONS", PROVIDING
FOR THE DEFINITION OF CONSTRUCTION
MANAGEMENT AT RISK CONTRACTS; PROVIDING A
SAVING CLAUSE, A GENERAL REPEALER CLAUSE AND
AN EFFECTIVE DATE.
WHEREAS, the City Commission wishes to clarify the purchasing procedures
regarding the use of Construction Management at Risk Contracts.
NOW, THEREFORE, BE IT ORDAINED BY THE CI1Y COMMISSION OF
THE CI1Y OF DELRA Y BEACH AS FOILOWS:
Section 1. That Chapter 36, "Finance; City Property Transactions", of the Code of
Ordinances of the City of Delray Beach, Florida, Section 36.05, "Bidding Procedures", be and the
same is hereby amended to read as follows:
Sec. 36.05. BIDDING PROCEDURES.
~
(A) Specifications. In the case of sealed competitive bidding for any purchase of, or to cover
any contract for, the acquisition of goods, services, or structures, and regardless of the anticipated
whole cost, the City shall furnish to each bidder a uniformly equal description, specification, or plan,
together with specifically stated alternatives thereto, which will cover all aspects of type, kind,
character, quality, or quantity of, and the maximum allowable time for the delivery of the goods, or
the completion of the contract for which bids are invited. Furthermore, in the case that emergency
requirements may render time, as such, to be of the essence of the contract, those oJ:iginal
specifications (available to all bidders) shall contain a formula which evaluates time in terms of
dollars per calendar day or fraction thereof, which may be properly used in effecting a determination
of the lowest competent bidder, and which shall be the basis for the calculation of any penalties to
be assessed against the contractor in a final setdement for his failure to meet the previously
established completion time schedule. Where possible, specifications shall be those in general use in
an appropriate trade or industry, and shall be referred to by name and tide (as in the case of the
standardized specifications issued by the American Society for Testing Materials).
(B) Deposits, Penalty Bonds. Bidders may be required to make those deposits as may be
deemed requisite to cover the cost of any plans or specifications; these deposits being redeemable
("
")
upon application of the bidder when the plans and specifications are returned in acceptable order.
Bidders may also be required to post penalty bonds as may be deemed necessary to protect the City
fully in an eventuality as the inability of the vendor or contractor properly to fulfill the terms of the
purchase order or contract for any and every reason.
(C) One-Price, Cost-Plus, and Dollar Amount Bids and Construction Management at Risk Contracts.
Invitations to bid shall define the nature of the bid in terms of these categories as a one-price bid, a
cost-plus bid, cost-plus fixed fee bid, construction management at risk contract or a dollar amount
as it may be determined by a stated formula (but only one category shall be defined in the
invitation).
(1) In the case of a one-price bid, the whole cost to the City shall be inclusive of
all cost and expense elements as engineering, legal, or technical consultation fees, job-
preparation expense, insurance premiums, shipping charges, stand-by time, and the living or
traveling expenses of job personnel (although a detailed schedule of all costs and expenses
shall not be required to be disclosed in the case of a one-price bid), together with a schedule
of proposed terms of payment and any allowable discounts.
(2) A cost-plus, or any sliding scale, bid may be invited with the concerted
approval of the City Manager and the Director of Environmental Services in the case of a
proposed project for which reasonable cost or expense estimates do not appear feasible (as
in the case of a project involving possible removal of unknown quantities of concealed
rock). Under this circumstance, the bid shall set forth the total of all of the details of
determinable costs and expenses together with schedules of the variable cost elements as
unit-costs, per diem costs, and the like, as are required by the bid invitation.
æ A construction management at risk contract shall be with a
person/firm/company ("CM") that replaces the general contractor and works for a fee with
the City and its architect/engineer through the design phase to contain the budget and
schedule. The CM shall provide a guaranteed maximum price for the entire project and shall
manage the contractor(s) for quality and schedule. The CM shall be selected by Cit;y based
upon the qualifications of the CM as it pertains to the project that is to be constructed.
Section 2. That Chapter 36, "Finance; City Property Transactions", of the Code of
Ordinances of the City of Delray Beach, Florida, Section 36.11, "Definitions", be and the same is
hereby amended to read as follows:
2
ORDINANCE NO. 9-05
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Sec. 36.11. DEFINITIONS.
For the purpose of this subchapter, the following definitions shall apply unless the context
clearly indicates or requires a different meaning.
Change order. A written order or agreement signed and issued by the City, directing the
vendor or contractor to make changes to the purchase of supplies, equipment, services or
construction.
Construction Management at Risk Contract. Is a contract for the construction of a City project
whereby the person/ firm/ company ("CM") that has entered into the contract with the City manages
construction of the project by contractors and provides services such as estimating. scheduling.
constructability review. and value engineering. Generally. the CM acts in a fiduciary capacity toward
the City and the CM's compensation is limited to a guaranteed maximum price as defined in a
contract and payment of a management fee.
Contract modification. Any written alteration in specifications, delivery point, rate of delivery,
period of performance, price, quantity, or other provisions of any contract accomplished by mutual
action of the parties to the contract.
Design-build firm. An individual, association, partnership, corporation, or other legal entity
which:
(i) Is certified under F.S. § 489.119 to engage in contracting through a certified or
regÏstered general contractor or a certified or regÏstered building contractor as the qualifying agent;
or
(ii) Is certified under F.S. § 471.023 to practice or to offer to practice engineering; certified
under F.S. § 481.219 to practice or offer to practice architecture; or certified under F.S. § 481.319 to
practice or to offer to practice landscape architecture.
Design-build contract. A single contract with a design-build firm for the design and construction
of a public construction project.
Design criteria package. Concise, performance-oriented drawings or specifications of the public
construction project. The purpose of the design criteria package is to furnish sufficient information
so as to permit design-build firms to prepare a bid or a response to a request for proposal, or to
pennit the City to enter into a negotiated design-build contract. The design criteria package shall
specify performance-based criteria for the public construction project, including, but not limited to,
the legal description of the site, survey information concerning the site, interior space requirements,
material quality standards, schematic layouts and conceptual design criteria of the project, cost or
budget estimates, design and construction schedules, site development requirements, provisions of
utilities, stormwater retention and disposal, and parking requirements, as may be applicable to the
project.
3
ORDINANCE NO. 9-05
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Design criteria proftssional. An individual, association, partnership, corporation, or other legal
entity who holds a current certificate of regÏstration under F.S. Ch. 481, to practice architecture or
landscape architecture or a firm who holds a current certificate as a regÏstered engineer under F .S.
Ch. 471, to practice engineering and who is employed by or under contract to the City for the
providing of professional architect services, landscape architect services, or engineering services in
connection with the preparation of the design criteria package.
Section 3. That should any section or provision of this ordinance or any portion
thereof, any paragraph, sentence, or word be declared by a Court of competent jurisdiction to be
invalid, such decision shall not affect the validity of the remainder hereof as a whole or part thereof
other than the part declared to be invalid.
Section 4. That all ordinances or parts of ordinances in conflict herewith be and the
same are hereby repealed.
Section 5. That this ordinance shall become effective upon its passage on second and
final reading.
\ ~ P ASSEQ ~ND 4,DOPTED in regular session on second and final reading on this the
_ day of ~~Ü---- ,2005.
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ATTEST:
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City Clerk
First Reading ~\ \~~Ð5
Second Reading 3 \ \ \ 05
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4
ORDINANCE NO. 9-05
MEMORANDUM
FROM:
MAYOR AND CI1Y COMMISSIONERS
CITY MANAGER m1
AGENDA ITEM # \~ F - REGULAR MEETING OF MARCH 1. 2005
ORDINANCE NO. 9-05
TO:
SUBJECT:
DATE:
FEBRUARY 25, 2005
This ordinance is before Commission for second reading and public hearing to amend Section 36.05
of the City Code, "Bidding Procedures", clarifying the use of Construction Management at Risk
Contracts; amending Section 36.11 "Definitions", to provide that the City may use a Construction
Manager at Risk Contract on construction projects.
Our process for implementing capital infrastructure construction has traditionally been the
Design/Bid/Build (DBB) method. The project is designed either in house or by a consultant,
construction documents are published for solicitation of competitive bids, and a contactor is awarded
the construction contract generally on a low bid basis. This process has generally worked well
however, on occasion the City has experienced problems with contractors selected on the
predominant basis of price. In view of this, and at the direction of the Commission, we have
investigated alternative methods of construction delivery by governmental agencies; the Design/Build
(BD) method and the Construction Manager (CM) at Risk method. The attached Environmental
Services memo explains each method in detail.
At the first reading on February 15,2005, the City Commission passed Ordinance No. 9-05.
Recommend approval of Ordinance No. 9-05 on second and final reading.
S:\City Clerk\agenda memos\Ord.9-0S Management At Risk Contracts.03.01.0S
City Of Delray Beach
Department of Environmental Services
M E M 0 RAN
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FROM:
David T. Harden, City Manager
Richard C. Hasko, P.E., Environmental Services Director ¥
TO:
SUBJECT:
CONSTRUCTION DELIVERY METHODS
DATE:
February 8,2005
As with many municipalities, our process for implementing capital infrastructure construction has
traditionally been the Design/Bid/Build (DBB) method. The project is designed either in house or by
a consultant, construction documents are published for solicitation of competitive bids, and a
contractor is awarded the construction contract generally on a low bid basis. While this process has
generally worked well in the implementation of our capital program, we do, on occasion, experience
problems with contractors selected on the predominant basis of price. These issues usually relate to
adequacy of resources to perfonn the work, experience in perfonning the work or financial condition
of the finn. In view of this, and at the direction of Commission, we have investigated alternative
methods of construction delivery. Two other methods currently in use by governmental agencies are
Design/Build (DB) and Construction Manager (CM) at Risk.
Under the Design/Build method, a design criteria package is prepared and advertised to solicit
contractors to bid the work. The design criteria package basically describes the characteristics and
parameters of the project, and the categories by which the contractor will be selected which are not
limited to or predominantly based on price. There are no plans, specifications or bid documents
prepared. Bidder responses are then reviewed by a selection committee similar to the process by
which we select professional consultants. The successful contractor will be selected on the basis of
qualifications to perfonn the work and not exclusively "low bid". Subsequent to contract award, the
contractor is responsible for preparation of construction documents and, of course, the actual project
construction activities.
The CM at Risk method is similar to Design/Build in that the Construction Manager is selected on the
basis of qualifications and not price. The successful contractor takes an active role in the preparation
of construction documents, either working closely with the professional consultant, or perfonning
value engineering activities if the plans are completed at the time of contracting. In addition to a
negotiated contract administration fee, the CM enters into an agreement with the City to construct the
project for a Guaranteed Maximum Price (GMP). The City pays only the actual construction cost of
the project up to but not exceeding the GMP. If costs exceed the GMP, the contractor absorbs the
overage.
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A comparison of these three common project delivery methods indicates the following:
· The traditional Design/Bid/Build method in most cases will probably result in the lowest
project cost. This is, however, totally dependent on the quality of the contractor winning the
bid. Some contractors will intentionally or through lack of experience, underbid projects.
While their bid will appear to represent the best value, they will submit change orders and
extras over the course of the project which will inflate the final project cost and, sometimes
amount to more than other bids originally submitted for the work. There can also be other
problems as previously described with contractors that cannot dedicate adequate resources to
the project to complete it in a timely manner or are not financially viable. To a large extent,
these issues can be minimized or avoided through the use of a prequalification process which
staff is currently working to develop.
· The Design/Build option offers the benefit of time savings in that the City does not have to
include the eight to ten week advertising and bidding components of the traditional
Design/Bid/Build process. Project cost is not the deciding parameter in selecting the
contractor. Contractor selection is based on additional criteria and qualifications. Projects
constructed using the Design/Build method can be cost effective relative to the value of the
construction, however, the City sacrifices a good deal of control over the project. As long as
the contractor confonns to the parameters detailed in the design criteria package and meets all
building code requirements, he is free to specify such materials and construction methods as
will benefit his profit margin. There remains the potential for change orders using this
method as well if the City requires modifications during plan preparation and review that were
not addressed in the design criteria package. Project costs may be maintained or reduced at
the sacrifice of quality.
· The CM at Risk option provides the best opportunity for the City to ensure a quality project
by a quality contractor. Contractor selection is made exclusively on the basis of qualifications
so there is no opportunity for underbidding to get the work. In addition, the participation by
the CM in the design phase of the project has the effect of incorporating constructibility
considerations into the planning process. This can ultimately result in cost savings when the
construction project commences. This process has the benefit of providing the City with a
guaranteed maximum cost for the project. Since the CM will be conservative in his
estimating, this method can appear a bit more expensive, however, remember that the City
will only pay the actual construction cost. There can also be a time savings realized using this
option since the contractor solicitation process can occur simultaneously with plan
preparation. Finally, because of the requirement for the CM to provide a GMP, the potential
for change orders is greatly reduced.
In conclusion, it may not be practical to implement alternate delivery methods for many of our
underground infrastructure projects because of the nature of the work and relatively small magnitude
of the projects. There may, however, be an application for the Design/Build or the CM at Risk
methods in the context of vertical improvements such as the Old School Square Garage or perhaps
even some of the City's planned parks projects requiring a variety of trades for construction of the
improvements.
Cc: Susan Ruby, City Attorney
Brian Shutt, Asst. City Attorney
[ITY DF DELIAY BEA[H
CITY ATTORNEY'S OFFICE
Dad
ANIBIcaClty
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1993
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200 NW 1st AVENUE · DELRAY BEACH, FLORIDA 33444
TELEPHONE 561/243-7090 · FACSIMILE 561/278-4755
Writer's Direct Line: 561/243-7091
MEMORANDUM
DATE:
February 4, 2005
TO: City Commission
David Harden, City Manager
~~
FROM: Brian Shutt, Assistant City Attorney
SUBJECT: Ordinance No. 9 -05. Construction Manaaer at Risk
The attached ordinance amends Chapter 36 of the Code of Ordinances to provide
that the City may use a Construction Manager at Risk contract on construction
projects.
The construction manager at risk contract is with an entity that replaces the
general contractor. The CM at risk works for a fee with the City and its
architect/engineer while developing a design. The CM at risk shall then provide
the City with a guaranteed maximum price for the entire project. The CM at risk
shall be selected by the City based on its qualifications.
Our office requests that this item be placed on the February 15, 2005 City
Commission agenda. Please call if you have any questions.
Attachment
cc: Chevelle Nubin, City Clerk
Richard Hasko, Director of Environmental Services
ORDINANCE NO. 9-05
AN ORDINANCE OF THE CI1Y COMMISSION OF THE
CI1Y OF DELRA Y BEACH, FLORIDA, AMENDING
SECTION 36.05 OF THE CI1Y CODE, "BIDDING
PROCEDURES", CLARIFYING THE USE OF
CONSTRUCTION MANAGEMENT AT RISK CONTRACTS;
AMENDING SECTION 36.11 "DEFINITIONS", PROVIDING
FOR THE DEFINITION OF CONSTRUCTION
MANAGEMENT AT RISK CONTRACTS; PROVIDING A
SAVING CLAUSE, A GENERAL REPEALER CLAUSE AND
AN EFFECTIVE DATE.
WHEREAS, the City Commission wishes to clarify the purchasing procedures
regarding the use of Construction Management at Risk Contracts.
NOW, THEREFORE, BE IT ORDAINED BY THE CI1Y COMMISSION OF
THE CI1Y OF DELRA Y BEACH AS FOILOWS:
Section 1. That Chapter 36, "Finance; City Property Transactions", of the Code of
Ordinances of the City of Delray Beach, Florida, Section 36.05, "Bidding Procedures", be and the
same is hereby amended to read as follows:
Sec. 36.05. BIDDING PROCEDURES.
(A) Specifications. In the case of sealed competitive bidding for any purchase of, or to cover
any contract for, the acquisition of goods, services, or structures, and regardless of the anticipated
whole cost, the City shall furnish to each bidder a uniformly equal description, specification, or plan,
together with specifically stated alternatives thereto, which will cover all aspects of type, kind,
character, quality, or quantity of, and the maximum allowable time for the delivery of the goods, or
the completion of the contract for which bids are invited. Furthermore, in the case that emergency
requirements may render time, as such, to be of the essence of the contract, those original
specifications (available to all bidders) shall contain a formula which evaluates time in terms of
dollars per calendar day or fraction thereof, which may be properly used in effecting a determination
of the lowest competent bidder, and which shall be the basis for the calculation of any penalties to
be assessed against the contractor in a final settlement for his failure to meet the previously
established completion time schedule. Where possible, specifications shall be those in general use in
an appropriate trade or industry, and shall be referred to by name and tide (as in the case of the
standardized specifications issued by the American Society for Testing Materials).
(B) Deposits, Penalty Bonds. Bidders may be required to make those deposits as may be
deemed requisite to cover the cost of any plans or specifications; these deposits being redeemable
upon application of the bidder when the plans and specifications are returned in acceptable order.
Bidders may also be required to post penalty bonds as may be deemed necessary to protect the City
fully in an eventuality as the inability of the vendor or contractor properly to fulfill the terms of the
purchase order or contract for any and every reason.
(C) One-Price, Cost-Plus, and Dollar Amount Bids and Construction Management at Risk Contracts.
Invitations to bid shall define the nature of the bid in terms of these categories as a one-price bid, a
cost-plus bid, cost-plus fixed fee bid, construction management at risk contract or a dollar amount
as it may be determined by a stated formula (but only one category shall be defined in the
invitation).
(1) In the case of a one-price bid, the whole cost to the City shall be inclusive of
all cost and expense elements as engineering, legal, or technical consultation fees, job-
preparation expense, insurance premiums, shipping charges, stand-by time, and the living or
traveling expenses of job personnel (although a detailed schedule of all costs and expenses
shall not be required to be disclosed in the case of a one-price bid), together with a schedule
of proposed terms of payment and any allowable discounts.
(2) A cost-plus, or any sliding scale, bid may be invited with the concerted
approval of the City Manager and the Director of Environmental Services in the case of a
proposed project for which reasonable cost or expense estimates do not appear feasible (as
in the case of a project involving possible removal of unknown quantities of concealed
rock). Under this circumstance, the bid shall set forth the total of all of the details of
determinable costs and expenses together with schedules of the variable cost elements as
unit-costs, per diem costs, and the like, as are required by the bid invitation.
ΠA construction management at risk contract shall be with a
person/ firm/ company ("CM") that replaces the general contractor and works for a fee with
the Cit;y and its architect/engineer through the design phase to contain the budget and
schedule. The CM shall provide a guaranteed maximum price for the entire project and shall
manage the contractor( s) for qualit;y and schedule. The CM shall be selected by Cit;y based
upon the qualifications of the CM as it pertains to the project that is to be constructed.
Section 2. That Chapter 36, "Finance; City Property Transactions", of the Code of
Ordinances of the City of Delray Beach, Florida, Section 36.11, "Definitions", be and the same is
hereby amended to read as follows:
2
ORDINANCE NO. 9-05
Sec. 36.11. DEFINITIONS.
For the purpose of this subchapter, the following definitions shall apply unless the context
clearly indicates or requires a different meaning.
Change order. A written order or agreement signed and issued by the City, directing the
vendor or contractor to make changes to the purchase of supplies, equipment, services or
construction.
Construction Management at Risk Contract. Is a contract for the construction of a Cit;y project
whereby the person/ firm/ company ("CM") that has entered into the contract with the Cit;y manages
construction of the project by contractors and provides services such as estimating. scheduling.
constructabilit;y review. and value engineering. Generally. the CM acts in a fiduciary capacit;y toward
the City and the CM's compensation is limited to a guaranteed maximum price as defined in a
contract and payment of a management fee.
Contract modification. Any written alteration in specifications, delivery point, rate of delivery,
period of performance, price, quantity, or other provisions of any contract accomplished by mutual
action of the parties to the contract.
Design-build firm. An individual, association, partnership, corporation, or other legal entity
which:
(i) Is certified under F.S. § 489.119 to engage in contracting through a certified or
registered general contractor or a certified or registered building contractor as the qualifying agent;
or
(ii) Is certified under F.S. § 471.023 to practice or to offer to practice engineering; certified
under F.S. § 481.219 to practice or offer to practice architecture; or certified under F.S. § 481.319 to
practice or to offer to practice landscape architecture.
Design-build contract. A single contract with a design-build firm for the design and construction
of a public construction project.
Design criteria package. Concise, performance-oriented drawings or specifications of the public
construction project. The purpose of the design criteria package is to furnish sufficient information
so as to pennit design-build firms to prepare a bid or a response to a request for proposal, or to
pennit the City to enter into a negotiated design-build contract. The design criteria package shall
specify performance-based criteria for the public construction project, including, but not limited to,
the legal description of the site, survey information concerning the site, interior space requirements,
material quality standards, schematic layouts and conceptual design criteria of the project, cost or
budget estimates, design and construction schedules, site development requirements, provisions of
utilities, stormwater retention and disposal, and parking requirements, as may be applicable to the
project.
3
ORDINANCE NO. 9-05
Design criteria professional An individual, association, partnership, corporation, or other legal
entity who holds a current certificate of registration under F.S. Ch. 481, to practice architecture or
landscape architecture or a firm who holds a current certificate as a registered engineer under F.S.
Ch. 471, to practice engineering and who is employed by or under contract to the City for the
providing of professional architect services, landscape architect services, or engineering services in
connection with the preparation of the design criteria package.
Section 3. That should any section or provision of this ordinance or any portion
thereof, any paragraph, sentence, or word be declared by a Court of competent jurisdiction to be
invalid, such decision shall not affect the validity of the remainder hereof as a whole or part thereof
other than the part declared to be invalid.
Section 4. That all ordinances or parts of ordinances in conflict herewith be and the
same are hereby repealed.
Section 5.
final reading.
That this ordinance shall become effective upon its passage on second and
PASSED AND ADOPTED in regular session on second and final reading on this the
_ day of , 2005.
MAYOR
ATIEST:
City Clerk
First Reading
Second Reading
4
ORDINANCE NO. 9-05
Message
Page 1 of 10
Hasko, Richard
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From: Ruby, Susan
Sent: Friday, January 21,2005 1 :39 PM
To: Shutt, Brian; Hasko, Richard
Subject: Emailing:08.htm
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ARTICLES
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July/August 2004 . Vol. 68 . No.1
July/August 2004
Megaproject Procurement: Breaking from Tradition
by Gerald Yakowenko
Looking beyond design-bid-build to find another project delivery method that's
right for the megaproj ecl.
Previous Issues
Subscriptions
Public Roads Home
Many factors determine the success of a major project. But one factor that is
increasingly important is the selection of the best and most appropriate project
delivery method or combination of methods-the system that sets the
contractual arrangements for project design, construction, and in some cases,
operations and maintenance. It is vital that megaproject managers establish an
acquisition strategy early in project development because of the direct bearing
on both the management's organization of roles and responsibilities and risk
ownership allocation between the public and private sectors.
URS Gr6atl~e trr.agmg Grvup..'Earlft Tech
The future Miami Intermodal Center, shown here from above, is the first
major transportation project to use the construction manager-at-risk
approach to project delivery.
Although contracting agencies historically have required the use of the traditional
project delivery method known as "design-bid-build," the tide is shifting. More
innovative project delivery methods are finding their way into transportation
2/8/2005
Message
Page 2 of 10
construction projects and changing how major projects are carried out.
Under the traditional design-bid-build approach, the contracting agency, or its
designated engineering cons ultant, designs the project and prepares the
construction contract documents. The construction contract then is bid publicly
and awarded to the lowest responsive bidder. Over time, some in the industry
have raised concerns about the efficiency of this contracting method in terms of
project cost, schedule, and productivity.
In response, the Federal Highway Administration (FHW A) initiated an
experimental program in 1990, called the Special Experimental Project No. 14
(SEP-14) Innovative Contracting Practices. This experimental program enables
States to evaluate nontraditional contracting methods that are not in full
compliance with FHWA's contracting policies but provide an open, competitive
procurement. Under SEP-14, project owners seeking Federal aid may apply for
approval to use nontraditional construction contracting techniques-methods of
award other than the lowest responsive bid-to implement value-oriented
procurement processes.
Project Delivery Methods
Several public agencies have applied nontradit ional project delivery methods to
major projects in the United States by using this new flexibility in contracting
practices. Two such methods are "design-build" and "construction manager-at-
risk." Each of these delivery methods offers certain advantages and
disadvantages in comparison with the traditional design-bid-build method.
However, the appropria te use of a particular method will depend on many
factors, including the project budget, schedule, risk allocation, the contracting
agency's level of expertise, and the ability of the owner to define the scope of
work clearly. No single project delivery strategy is appropriate for all major
projects, and contracting agencies should consider the merits of each method in
relation to their project needs. (See "Kev Considerations in Selectinq Project
Delivery Methods".)
Key Considerations in Selecting Project Delivery Methods
There is no one-size-fits-all delivery method for every project. In selecting a
project delivery system that is right for a project, owners should gauge the
level of complexity and uniqueness of the project, and maintain an appropriate
level of control. Below are some key factors to consider:
· Size of Project. The more complex and costly a project, the greater the
need for professional management and advice.
· Owner Capabilities. Realistically assess in-house capabilities in
evaluating project procurement methods and construction management
capabilities.
· Time Considerations. If the project needs to be constructed in a
severely compressed timeframe, methods adaptable to fast-track
construction should be considered, but also weighed against the
increased cost and risk of fast tracking.
· Likelihood of Changes. If the scope of work cannot be defined
adequately or if requirements are likely to change considerably during
the project, this factor should be evaluated against the potential cost of
such changes.
· Risk Allocation. The contracting agency should perform a study to
2/8/2005
Message
Page 3 of 10
assess the appropriate allocation of risk associated with all phases of
the project development process and the costs associated with this
allocation.
Although many owners have some experience in using design-build, this is a
relatively new delivery system for most transportation agencies. Design-build
uses a single contract for both the design and construction of a project. From the
owner's perspective, the concept of having one firm responsible for both design
and construction is appealing. On the other hand, the construction manager-at-
risk method provides the contracting agency with the services of a construction
management firm that will typically provide recommendations for the project
schedule, budget, and constructability during the design phase. In addition, the
contracting agency and the construction manager typically agree on a
guaranteed maxim urn price for the construction of the project and then the
construction manager becom es responsible for issuing subcontracts and
managing all construction, just as a prime contractor would under the traditional
design-bid-build method. Both alternatives allow construction to start as the
design proceeds and can reduce project cost and duration.
FDOr. Dfstm:;t Síxl Earth Tech
This panoramic photo shows the future site of the rental car
facility that will be one component of the MIC project in Miami-
Dade County, FL. The facility represents work that will be
completed under the first contract packag e, using the
construction manager-at-risk delivery method.
Sticking to Tradition
The traditional design-bid-build method is the most popular project delivery
system. It is intended to minimize risk to the contractor by defining all of the
construction requirements in the plans, specifications, and contract documents.
In this method, the project owner may contract with a consulting engineering firm
to design the complete facility and prepare t he contract documents. The
contracting agency then solicits bids and awards a construction contract to the
lowest responsive bidder. Because of its wide use and acceptance, the
traditional des ign-bid-build system is well understood with well-established and
clearly defined roles for the contracting agency and the contracting industry.
The design-bid-build method was used in the Nation's first megaproject, Boston's
Central ArteryfTunnel (CAfT or the "Big Dig") Project. Managed by the
Massachusetts Turnpike Authority, the project now totals $14.6 billion and is in
its 13th year of construction. The Big Dig's major com ponents include:
. Replacement of the 6-lane elevated highway with an 8- to 10-lane
underground ex pressway directly beneath the existing road, culminating
at its northern limit in a 14-lane, 2-bridge crossing of the Charles River.
. Extension of Interstate 90 (the Massachusetts Turnpike) from its former
terminus south of downtow n Boston through a tunnel beneath South
Boston and Boston Harbor to Logan Airport.
"When the preliminary engineeri ng on the Big Dig started in the 1980s, the
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Massachusetts Highway Department had strict bidding requirements governed
by Massachusetts law," says Carl Gottschall, project administrator at FHWA's
Massachusetts Division Office. "Design-bid-build was our only option for project
delivery-but that's not to say that it wasn't the right one."
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The Central Artery/l-93 in Boston, shown
here, carried 190,000 vehicles per day, two
and half times its original capacity. The
Central ArterylTunnel Project which
replaces the elevated highway with a
tunnel is the Nation's first transportation
megaproject. The project team is using the
traditional design-bid-build method of
delivery .
Located in the downtown of an old city, the Big Dig is "one of the most
technically difficult and environmentally challenging infras tructure projects ever
constructed," says Gottschall. Over time, the project's scope, cost, and schedule
expanded considerably from original estimates, and the environmental review
process took roughly 10 years. Inflation also added a considerable amount to the
project cost over the more than 20-year period it is taking to complete the
project. Given the value of the properties that were in the paths of the new roads,
project development engineers worked not only with environmental and other
oversight and permitting agencies, but also with community groups, businesses,
and political leaders to create consensus on how the project could, should, and
would be built.
"Overall, I think that design-bid-build was the most cost-effective project delivery
method, given that the project was so large and complex," says Gottschall.
"Building such infrastructure within a dense urban core-where extensive
changes in project scope were inevitable-would have made it almost
impossible to pin down a price upfront."
Michael Lewis, director of the design unit for the CAIT project, agrees: "Design-
bid-build provided the owner with flexibility to modify the project in response to
environmental, political, and community issues." He adds, "A contractor would
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have found it very difficult to react to such intrusions."
Despite the greater rigidity of that approach, design-bid-build provided enough
room to expedite the project schedule and allow innovative design. The
Massachusetts Turnpike Authority was successful in im plementing a value
engineering program for various phases of the project development. Innovations
were proposed and evaluated based on merit (that is, cost, schedule, and
quality). In addition, value engineering change proposals, submitted by
construction contractors, also contributed to improved quality and cost savings.
"Still," says Lewis, "while design-bid-build didn't close the door on innovation,
there may have been opportunities for additional innovat ion using alternative
project delivery systems."
According to Lewis, certain segments-such as those that were particularly
challenging from a technical perspective-could have benefited from a different
style of delivery. Likewise, since the interface between design and construction
was so important, increased collaboration between the design and contracting
communities might have led to more efficient solutions. Lewis notes that other
project delivery methods require less hands-on management by the owner and
less mediation of the disputes that often arise between designers and
constructors.
"Overall, design-bid-build was the right solution for the project as a whole," says
Lewis, "but we would have benefited if the whole spectrum of delivery options
had been available to us to use on individual project components with unique
challenges."
Another Option: Design-Build
With the design-build project delivery method, the project owner selects an
organization to com plete both design and construction under a single contract.
Specifically, once the contracting agency identifies the end result parameters
and establishes the design criteria, the prospective design-builders develop
proposals that optimize their construction abilities. The contracting agency then
typically conducts a best value analysis, based on cost and technical factors,
such as design quality, timelines, and management capability. Once the contract
is awarded, the design-builder becomes responsible for completing the design
and all construction at the contract's fixed price, usually on a lump sum basis.
The design-build contracting method enabled the
contractor for Utah's 1-15 project to incorporate
innovative building techniques such as
mechanically stabilized earth (MSE) walls, like the
one shown here. MSE walls afforded flexibility,
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given the expected amount of settlement under
embankments and fills.
Design-build enables owners to fix total project costs earlier in the project
development process and may simplify and expedite project administration
because design and construction are completed by a single entity. By fostering
collaboration between designers and contractors, construction knowledge can be
incorporated into design. Additionally, by giving the contractor more flexibility in
the selection of design, materials, and construction methods, this method allows
the design-builders to provide innovation in the preliminary design.
The first major project to seek and win SEP-14 approval to use design-build was
the Interstate 15 Corridor Reconstruction Project (1-15 Project) in Salt Lake City,
UT. This $1.59 billion project included the reconstruction and expansion of 27
kilometers (17 miles) of interstate, 144 bridges, and 3 major interchanges.
Originally, a consulting firm hired by the Utah Department of Transportation
(UDOT) estimated that the project would require betw een 8 and 10 years to
construct using the design-bid-build contracting method. Six years later, in
January 1996, after opinion surveys had indicated that the public preferred
timelier construction (with more traffic disruption in less time rather than less
traffic disruption over more time), and after Salt Lake City had been awarded the
2002 Winter Olympic Games, UDOT decided to use design-build instead.
"Utah needed to shorten the overall project duration and also hoped to promote
innovation and improved performance," says Michael Morrow, field operations
engineer at FHWA. "Design-build appeared to be the only contracting tool to get
the job done."
UDOT provided proposers with "30-percent plans "-meaning that the entire job
was designed to the 30-percent draft stage-which included alignment of the 1-
15 Project and extensive geotechnical investigations. This work enabled UDOT
to identify conflicts with utilities and railroad s and determine the additional right-
of-way clearances that would be needed. The agency selected the team whose
proposal was considered to be the best value.
"The best value selection process allowed UDOT to select the proposal that
would create the most long-term value for its constituency," says Thomas
Warne, former executive director of UDOT during the construction of the 1-15
Project and current president of a management and marketing consulting firm.
"The process creates an environment where contractors provide addit ional or
enhanced work products for an equal or lower price."
In 1997, after the State obtained aim ost 400 right-of-way clearances and passed
special legislation to use design-build, the project was awarded to a joint venture
design-build firm.
To provide appropriate design services for the 1-15 Project, the contractor
subcontracted with more than 20 other firms to provide specific portions of the
design services. To expedite construction, the contractor used a fast-track
process that allowed partially completed design plans and specifications to be
released for construction. The design-builder also was able to incorporate more
innovative approaches into design and construction than would have been used
under the traditional project delivery system.
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An artist's rendering of the central station at the future
Miami Intermodal Center shows a train passing through on
the Earlington Heights Extension of Miami's Metrorail. The
center links bus lines, Tri-Rail (commuter rail), and
Amtrak®, along with Metrorail. Early in the planning
process, the architect, engineers, contractor, and owner
(FDOT) agreed on the budget, schedule, quality, and other
factors-like the type of metal to use in the roof of the train
station-to avoid unexpected surprises once the project is
underway.
"Design-build unleashed the creativity of the contractor to use construction
methods previously not considered," says UDOT Executive Director John Njord.
The company improved the seismic design criteria, for example, "and used new
techniques to accelerate, reduce, or eliminate settlement," says Njord.
In the end, the 1-15 Project was completed ahead of schedule and under budget.
Use of design-build instead of design-bid-build saved the public an estimated 60
million vehicle hours of delay between 1996 and 2010.
"For the 1-15 Project, design-build was clearly the right choice," says Njord.
"UDOT gained a higher level of respect from the public by completing the work
ahead of schedule and under budget."
Although design-build was right for the 1-15 Project, it is not necessarily right for
every project. Some projects, such as those with major unknow ns in scope,
unresolved environmental or permitting issues, or third party concerns that are
not resolved, may not be suitable candidates for design-build. "Design-build isn't
for every project," says Warne. "But where there are schedule issues,
opportunities for innovation, or cost concerns, design-build may be the delivery
system of choice. "
The design-build project delivery method currently is available as an approved
method for all contracting agencies in the Federal-Aid Highway Program. New
regulations released by FHWA in December 2002 now allow the use of design-
build contracting for transportation infrastructure projects. FHW A's final rule on
design-build contracting, which was required by the Transportation Equity Act for
the 21 st Century (TEA-21), was published in the December 10, 2002, Federal
Register. TEA-21 defined "qualified projects" as those whose total estimated
costs exceed (1) $5 million for intelligent transportation system projects and (2)
$50 million for all other projects. In the final rule, FHW A allows contracting
agencies to use design-build for nonqualified projects under SEP-14, and the
FHWA division offices are delegated this approval authority.
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Construction Manager-at-Risk
A third project delivery method, construction manager-at-risk (CM@Risk) is
widely used in the vertical building industry but seldom used in transportation
projects. In the CM@Risk delivery system, the construction manager prov ides
advisory assistance to the owner prior to construction and also acts as a general
contractor during construction. In the preliminary design phase, the manager
offers advice on schedule, budget, and construction.
The agency chooses a construction manager using qualifications-based
selection procedures. Choosing a manager typically takes place at the same
time or shortly after the contracting agency selects the consulting engineerin g
firm, which will perform the project design. During the design phases of the
project, the construction manager represent s the interests of the owner,
providing valuable recommendations on constructability and cost reduction
opportunities. When the design is partially complete (typically 50 to 90 percent),
the construction manager submits a guaranteed maximum price to the owner
and warrants that the project will be built at a price not to exceed that figure. The
construction manager ass urnes the risk of meeting that price by functioning as a
general contractor and subcontracting most, if not all, of the construction work.
Because a commitment is made to the contractor earlier in the process and
because the contractor assumes more risk than under traditional methods,
upfront costs may be higher in comparison with the bid price of a traditional
contract. Also, the contractual relationship between owner, designer, and
construction manager can become strained once construction begins when the
manager shifts from a professional advisory role of construction manager to the
contractual role of general contractor.
The first major project in which the construction manager-at-risk approach was
implemented was the Florida Department of Transportation's (FDOT) Miami
Intermodal Center (MIC) in Miami-Dade County. The MIC is a $1.35 billion
multimodal center for the Miami International Airport and includes:
· A four-story rental car facility with spaces for approximately 6,500
vehicles, fleet storage capacity of approxim ately 3,500 vehicles, fueling
and washing facilities, and customer service facilities.
· A MIC "core" consisting of facilities to accommodate a bus depot, Tri-Rail
(commuter rail), patron parking, an MIC-MIA connector station, Amtrak,
Metrorail, and employee services.
· Roadway improvements, including drainage, lighting, and MIC terminal
access roadways.
"With construction manager-at-risk, FDOT was able to select the construction
manager on qualifications-based criteria, not just cost," says Kouroche
Mohandes, FDOT's MIC program manager. "This provided FDOT with the widest
latitude to coordinate quality horizontal and vertical construction, which the MIC
required."
The State agency selected construction manager-at-risk so that it could receive
constructability input, uphold the project schedule, and control budget and costs.
With CM@Risk, FDOT was able to form a project team early in the process and
in a partnering env ironment, since the construction manager's advisory role
fosters a more team-oriented approach.
"By incorporating the contractor's perspective and input into planning and des ign
decisions, we can reach early agreement on project features to expedite
construction," says Andrew DeTizio, major projects engineer at FHWA's Florida
Division. "This also helps improve project quality and contain costs."
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After being granted SEP-14 approval to use CM@Risk, FOOT selected a
construction management company in May 2001. Construction is packaged into
several separate guaranteed maximum price contracts, the first two of which are
now underway. Because the MIC is just getting started, any successes or
lessons that may be learned from FOOT's experience with CM@Risk are not yet
known.
"Ultimately, construction manager-at-risk fosters teamwork between the
architect/engineer, construction manager, and FOOT," says DeTizio. "We expect
this teamwork to result in a better final product."
Approval from FHWA's headquarters on SEP-14 is necessary for using the
CM@Risk delivery mechanism. Since the selection of a construction manager
(and ultimately the firm that provides construction services) is qualifications-
based, FHWA requires contracting agencies to evaluate this technique under
SEP-14. CM@Risk has applicability for vertical buildings and also may be
appropriate for other types of transportation projects, such as intelligent
transportation system projects.
Additional Resources
· "Briefing FHW A Initiatives to Encourage Quality Through Innovative
Contracting Practices Special Experimental Projects NO.14 - (SEP-14)"
www.fhwa.dot.gov/programadmin/contracts/sepa.htm
· Utah State University's "Innovative Contracting" Web site
www.ic.usu.edu
· "AASHTO Joint Technical Committee on Design-Build" Web site
http://design.transportation.org/dbreferences.htm I
Going Forward
The Big Dig, 1-15, and MIC megaprojects illustrate the diverse scenarios that
warrant variations in project delivery methods.
"It's an understatement to say that managing the design and construction of a
megaproject is a very challenging undertak ing," says FHWA's Deputy
Administrator J. Richard Capka. "The management and synchronization of a
vast and complicated array of sequential and concurrent activities require a great
deal of innovative planning to determine how the work will be packaged for the
private sector team mem bers to deliver. "
Having the flexibility to select from a variety of contracting tools provides owners
with an opportunity to tailor design and construction to specific project needs and
constraints. Although a major project's delivery method may not be the sole
contributor to success, it is key to the efficient and effective integration of public
and private sector talent in a manner that postures the project for ultimate
success.
Gerald Yakowenko is the leader for the Contract Administration Group in the
Office of Program Administration at FHWA Headquarters.
For more information, contact Gerald Yakowenko at 202-366-1562 or
Qerald. vakowenko@fhwa.dot. QOV.
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O'HWA
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Other Articles in this issue:
MeQaproiects - They Are a Different Breed
Great Expectations
Building Public Trust
The Life Cvcle Continuum
From HiQhwavs to Skyways and Seaways - the Intermodal ChallenQe
ReducinQ U ncertaintv
AccountinQ for MeQaproiect Dollars
Megaproject Procurement: Breaking from Tradition
SharinQ Experiences and Lessons Learned
A Well-Conceived Plan Will Pull It All T oQether
July/August 2004 . Vol. 68 . No.1
TFH RC Home I FHW A Home I Feedback
United States Department of Transportat ion - Federal Highway
Administration
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