Originally posted Wednesday, 04 September 2013

Written by Wylie Bearup

The success of building projects often relies on the tools at hand. Until recently, the only project delivery “tool” available to public Owners was the traditional Design-Bid-Build (DBB), or low bid approach, which was not always the best tool for more complex projects. Using DBB, many projects experienced significant cost overruns and schedule delays that had the potential to result in mediation, arbitration, and even litigation. In fact, this outcome became so prevalent that some in the construction industry referred to this approach as “Design-Bid-Build-Litigate.” In the early 2000s, legislative changes in procurement laws across the country made more options available to public Owners, creating the opportunity for more successful public works capital construction projects. So what exactly are these new tools, and how can public Owners use them effectively? We’ll answer those questions here and provide some best management practices on the use of these new methods based on the experiences gained by staff with the City of Phoenix, Arizona, over the past 12 years.

During the 2000 legislative session, the Arizona State Legislature passed a series of new laws that allowed the use of alternative project delivery methods in addition to the traditional DBB approach for public entities at all levels of government and for all types of projects. These alternate project delivery methods in Arizona include Design-Build (DB), Construction Manager at Risk (CMAR), and Job Order Contracting (JOC). Although the delivery method names and specific procedures may vary across the country, the more common elements of these methods will be discussed here. One attribute common to all of these methods is the consideration of qualifications of the contractor during the selection process.

Delivery Method Overview

The Design-Bid-Build (DBB) approach has been used by public Owners for years now, so it’s fairly well understood. The process is applied in a very linear fashion: The Owner first selects a designer and that designer prepares a complete set of plans and specifications. The Owner then issues the Invitation for Bids, and finally, the Owner awards a contract to the “lowest responsible, responsive bidder.” By using the single selection factor of bid price, the DBB approach assumes that all contractors have equal experience and technical qualifications; therefore, all are assumed to have an equal probability of success in delivering the project. For less complex, more straightforward projects, this assumption may be true, and DBB has been used very successfully in such cases. For more complicated projects, however, one of the alternate methods may have a higher probability of success by considering qualifications in the selection process.

The Design-Build (DB) approach combines the design and construction into a single, integrated team that delivers both phases of the project through a single contract. In Arizona, the design-builder can be selected through a “qualifications only” approach, called a One-Step selection, or through a best value approach, called a Two-Step selection, which considers both qualifications and price. With the correct technical expertise to manage the process, the DB approach can have distinct advantages, in that the Owner only needs to execute one selection process and does not take on liability of the completeness and accuracy of the design documents. The Owner does need to be very thorough and precise in communicating the functional needs of the finished project, which can be challenging without the assistance of well-trained staff or a qualified consultant.

The Construction Manager at Risk (CMAR) method is similar to DBB, in that there are separate contracts with the designer and the construction manager who ultimately construct the project. But CMAR comes with two major differences over DBB—1) the CMAR is selected using a qualifications-based process, and 2) the CMAR is brought into the project early in the design phase to provide valuable professional advice to the Owner.

Job Order Contracting is a method structured specifically for small projects under $1 million in value. It is particularly well suited for recurring repair and maintenance tasks requiring a low level of design. Job Order Contracting uses a stand-by contracting approach, with projects executed over a three- to five-year duration.

Selecting a Delivery Method

In general, the City of Phoenix uses two different processes in selecting a delivery method: a Simplified Method for more routine projects and an Analytical Method for larger, more complex projects.

In the Simplified Method, the Owner first selects project factors that are important in delivering a successful project. Some examples of factors considered include Owner input during the design process, creative and innovative design aesthetic, quality of the finished project, delivery speed, Owner’s ability to manage cost and schedule growth, final cost certainty, litigation avoidance, and overall project value. Next, the delivery methods being considered are then rated in their relative ability to successfully accomplish each of the project factors. For example, in a comparison between CMAR and DB when considering Owner input during the design process, CMAR would have an advantage over DB because the Owner holds a separate, direct contract with the designer. For the same project when considering delivery speed, DB would have an advantage over CMAR through the integration of design and construction within a single team. Similar comparisons are made for all of the project factors and the delivery method selected is the one with the most advantages.

Two shortcomings of the Simplified Method are that (1) it assumes all project success factors are equally important and (2) it uses an absolute value in assigning an advantage to one delivery method over another. For these reasons, the more detailed Analytical Method may be appropriate for extremely large, signature-type projects such as the $600 million Phoenix Convention Center Expansion project. On that project, the success factor “creative and innovative design” was relatively more important than “delivery speed,” so the Analytical Method was used to select the best delivery approach.

The Analytical Method assigns weights to each of the project success factors and then rates the delivery methods in their ability to successfully deliver each factor. Continuing with the Convention Center Expansion example, innovative and creative design was given a weight of 10. CMAR was given a rating of 5 in its ability to deliver on high design, and DB was given a rating of 1 in recognition of the difficulty in achieving high design without a direct, contractual relationship between the Owner and designer. Delivery methods are then scored on each factor (WEIGHT times RATING), so CMAR received a score of 50 (10×5) and DB received a score of 10 (10×1) for ability to deliver high design. Other factors are scored similarly and the factors scores summed for a total delivery method evaluation. On the Convention Center Expansion project, CMAR received a Total Score of 236 points and DB received a Total Score of 156 points. CMAR was chosen as the delivery method, and that choice resulted in a highly successful, award-winning project.

The methods described above are used on unique projects or the first time that a project of a particular type is being constructed. Once an analysis has been done and the project completed successfully, future projects of the same type are executed using the same delivery method. The graph below lists the typical project types completed using each particular delivery method.

Method Project Type
DBB: Typical streets improvements, storm drains, waterlines
DB: Fast-tracked projects, speed premium
CMAR: Buildings, water/wastewater & aviation facilities; complex horizontal jobs
JOC: Renovation, remodel, small new construction < $2M

Best Management Practices

One key best management practice is to develop a rigorous, repeatable, defensible selection process. In Arizona, the selection process for all alternate project delivery method projects begins with a Request for Qualifications (RFQ). In the City of Phoenix, the following steps are followed in the execution of an RFQ:

  1. Advertise project to generate interest in the industry
  2. Prepare and issue the formal Request for Qualifications (RFQ) document
  3. Receive Statements of Qualifications (SOQs) from interested firms
  4. Establish a qualified selection panel to evaluate the SOQs
  5. Receive evaluation results from panel members, compile scores, and prepare shortlist of top qualified firms
  6. Interviews and final evaluation of the shortlisted firms
  7. Selection panel members arrive at final recommendation of the best-qualified firm
  8. Recommendation for contract award is forwarded to City Council for approval
Figure 1
 A. General Information 50 points
 B. Experience of the Firm on Similar Projects 200 points
 C. Experience of Key Personnel 200 points
 D. Understanding of the Project 250 points
 E. Quality Control & Safety Programs 100 points
 F. Subcontractor Selection Plan 100 points
 G. Overall Evaluation of Firm    100 points
         TOTAL
1,000 points

Development of a good RFQ (Step 2 above) requires the preparation of an effective evaluation plan that consists of criterion with relative weights based on the properties and parameters of the specific project. Criteria to be used and the weights of each should be carefully considered for each project and revised as needed. Figure 1 shows a sample evaluation plan.

Another key best management practice is the execution of Preconstruction Services when using CMAR and DB. A major benefit of these two methods is the early contractor involvement in delivery of preconstruction services which contributes to project success by:

  • Providing early feedback to designer and Owner on probable costs of construction, so the project can be scoped appropriately for the Owner’s budget
  • Improving the quality and completeness of design documents through constructability reviews
  • Planning construction activities through computer modeling to achieve maximum efficiency onsite
  • Reducing project duration through phasing of construction activities and long lead procurement of critical materials and systems

Lessons Learned

Some of the lessons learned in using alternate project delivery methods over the past 12 years include:

  • The ability to pick the “Best Qualified” contractor for a particular project based on past performance and experience
  • Using qualifications to select both the designer and the contractor results in better relationships among all project team members
  • Early contractor involvement throughout design phase yields tremendous benefits to the project
  • Contractors and subcontractors provide a higher level of service when motivated by the opportunity for repeat business
  • Using negotiations to arrive at the final price of construction results in a better quality product consistent with Owner’s expectations.
  • An enhanced ability to meet Green Building goals with minimal cost impact to the project

Summary

By working with well-qualified architects, engineers, and contractors, the City of Phoenix has developed processes to evaluate and apply all delivery methods allowed by State procurement laws. Each capital construction project is evaluated critically, and the appropriate method is chosen for each to maximize the probability of success. The key to success is selecting the right project delivery tool.

Wylie Bearup, PE, PhD, is the Street Transportation Director/City Engineer for the City of Phoenix and Professor of Practice at Del E Webb School of Construction at Arizona State University.