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US Army Corps of Engineers BUILDING STRONG ® Early Contractor Involvement: HPOs Key to Success Luis A. Ruiz, P.E. Chief, Geotechnical Branch Jacksonville.

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Presentation on theme: "US Army Corps of Engineers BUILDING STRONG ® Early Contractor Involvement: HPOs Key to Success Luis A. Ruiz, P.E. Chief, Geotechnical Branch Jacksonville."— Presentation transcript:

1 US Army Corps of Engineers BUILDING STRONG ® Early Contractor Involvement: HPOs Key to Success Luis A. Ruiz, P.E. Chief, Geotechnical Branch Jacksonville District SAME Post Meeting Jacksonville, FL 28 August 2013

2 BUILDING STRONG ® Agenda Background ECI Contracts Basics HPO Projects Solicitation Design phase Contract administration Lessons learned Wrap-Up


4 A Priority of Two Administrations Now, even as we continue our recovery efforts, we're also focusing on preparing for future threats so that there is never another disaster like Katrina. The largest civil works project in American history is underway to build a fortified levee system. And as I just as I pledged as a candidate, we're going to finish this system by next year so that this city is protected against a 100-year storm. 4 President Barack Obama Xavier University, New Orleans August 29, 2010

5 BUILDING STRONG ® Best Practices System Program Management Acquisition Strategy Acquisition Strategy Design Build / Cost Plus Contracts Design Build / Cost Plus Contracts Best Value Source Selection Best Value Source Selection Early Contractor Involvement (ECI) Early Contractor Involvement (ECI) Program Management Support Contract Program Management Support Contract Construction Materials Construction Materials Government Furnished Borrow Government Furnished Borrow Supply Contracts for Sheet Piles & Borrow Supply Contracts for Sheet Piles & Borrow Improved Techniques Improved Techniques Value Engineering – systems study complete Value Engineering – systems study complete Pile Load Tests – in advance of contract award Pile Load Tests – in advance of contract award Press Pile, Spiral welded piles Press Pile, Spiral welded piles Deep soil mixing, sand blanket and wick drains Deep soil mixing, sand blanket and wick drains Earned Value Management System (EVMS) Earned Value Management System (EVMS) Leverage National & Regional Resources Leverage National & Regional Resources 5

6 BUILDING STRONG ® ECI Contracting A Fixed Price Incentive contract IAW FAR A project delivery method where the Corps engages the services of a general contractor to provide preconstruction services concurrent with design effort The contract includes the Governments ability to exercise an option for the construction Provides for successive target price adjustments as the design matures, with the objective of managing the final construction cost to optimum. Contract includes terms and conditions to allocate risk among the parties 6

7 BUILDING STRONG ® What it aint… Design Contract Government retains design responsibility either through in-house or with a separate AE contract. Preconstruction services are not Brooks Act services. Non-competitive acquisition Contract is procured IAW FAR 15 and application of FAR Price and non-price factors are evaluated. Design-Build Contract Two separate entities (designer & construction manager/general contractor) Both report to the owner (Government). 7

8 BUILDING STRONG ® PhaseTraditional Acquisition (D-B-B) Early Contractor Involvement (ECI, also I-D-B-B) DesignCompleted prior to advertisement of construction contract Preconstruction Services – construction contractor provides input on design constructability, VE, means & methods, construction phasing, etc AwardComplete designs are used to advertise and award construction contract Construction option - awarded when major design decisions are complete and price negotiated (designs may be <100%) ConstructionNTP and construction begins after award of contract Construction can begin prior to final designs being completed Acquisition Strategies Comparison 8

9 BUILDING STRONG ® Relative Project Delivery Timelines P&D Funding Construction Funding Design Construction Design Construction Design Construction Time ECI Project Delivery Design Bid Build Project Delivery Design-Build Project Delivery Total duration equal or less than ECI, but cannot commence design/construction until construction funding is received. CM selection and design begins with P&D funds. PY -1 PY ECI delivery advantage depends upon timing of design and construction funds. 9

10 BUILDING STRONG ® ECI Contract Fixed-price Incentive (successive targets) contract (FAR clauses and ) RFP will provide SOW for preconstruction services (Base) Concept engineering solution with typical sections for proposal preparation for construction initial target pricing (Option) Ceiling price Evaluation criteria, based on best value tradeoffs, including price Negotiated Procurement Award of preconstruction services (Base) as a Firm Fixed Price Exercise of Construction (Option) as a Firm Price Incentive 10

11 BUILDING STRONG ® 11 Contract Schedule ITEM NO.SUPPLIES/SERVICESQUANTITYUNITUNIT PRICEAMOUNT 0001 BASE Preconstruction Services FFP 1Lump Sum $____________ 0002 OPTION Construction Phase FPI Initial Target Cost Initial Target Profit 1Lump Sum $____________ NTE $____________ An example of ECI Solicitation Line Items are shown below. This is remitted with the proposal. Additional line items may be added for long lead items if required.

12 BUILDING STRONG ® When to Use ECI Urgency - very tight mandated schedules Funding - funding stream is available Complex one of a kind project, with no standard design Size - large enough to attract experienced firms Uncertainty – risk in delaying award while requirements are being developed 12

13 BUILDING STRONG ® When to Use ECI - Other Challenging site, or other unique aspects that would benefit with a Contractors input during design phase It would be advisable to have a collaborative effort during design and construction between Designer, Builder, Owner, User to ensure Project success 13

14 BUILDING STRONG ® New Orleans ECI Projects 14 LPV ,800 FT T-Wall LPV ,600 FT T-Wall LPV ,100 FT T-Wall LPV ,720 FT DSM Seabrook Gate IHNC West Closure Complex (PRO)

15 BUILDING STRONG ® New Orleans East Largest Deep Soil Mixing Project in the World 15

16 BUILDING STRONG ® New Orleans East Levee 16 OldLevee New Levee Bayou Sauvage National Wildlife Refuge ~1 Football Field Over 1 Superdome of Clay (4.9 mil cy) Required

17 BUILDING STRONG ® Raise and Strengthen Levees / Floodwalls Orleans Metro Higher Floodwalls and Levees New T-wall Old I-wall New Orleans East St. Bernard Parish New 32-foot T-wall Old Levee Elevation 17

18 BUILDING STRONG ® Miles Long (2 miles constructed per month) 50 Eiffel Towers of Steel St. Bernard Floodwall MRGO MRGO Central Wetlands

19 BUILDING STRONG ® Top of Floodwall: EL +32 Top of Stabilization Slab: EL Top of Base Slab: EL YEAR STILL WATER ELEVATION*: EL YEAR STILL WATER ELEVATION*: EL St. Bernard Floodwall, near the IHNC Tie-In St. Bernard Floodwall, near the IHNC Tie-In (not to scale) HURRICANE KATRINAS STILL WATER ELEVATION* AT THIS LOCATION: EL +18 *Still water elevation does not include waves Katrina storm surge elevations were much higher elsewhere along the Gulf Coast. 19 Designed for a 100-year Surge

20 BUILDING STRONG ® 20 Seabrook Floodgate Complex


22 BUILDING STRONG ® West Closure Complex The WCC removed 26 miles of levees and floodwalls from the first line of defense The WCC removed 26 miles of levees and floodwalls from the first line of defense 22

23 BUILDING STRONG ® West Closure Complex 23

24 BUILDING STRONG ® Solicitation Award Preconstruction Services early in design phase (15 – 30%) Pricing schedule includes: Preconstruction services Initial Target Cost: option Initial Target Profit: option Selection of Contractor – ECI Specific Evaluation Factors Experience with preconstruction services Local market knowledge Plan to involve major subcontractors Oral interviews Sufficient design information for contractors to adequately provide an Initial Target Cost SOW section defining preconstruction services and expectations ECI specific clauses 24

25 BUILDING STRONG ® Solicitation – Scope of Work Preconstruction services and expectations Cost estimating (live market conditions) Design consultation Constructability reviews Subcontractor input Value engineering – cost control Bid package development Design and construction scheduling Construction phasing Risk management Project orientation and partnering Construction/design integration – design liaison 25

26 BUILDING STRONG ® Solicitation – Scope of Work Escape clause – Govt. not obligated to exercise option: Poor preconstruction participation Excessive team turnover and lack of commitment Lack of Congressional authorization/appropriation Cant negotiate within funds available Competitive subcontractor pricing – Govt. attends subcontractor bid openings Defines production point for use in FAR (100% design) Addresses payment processes 26

27 BUILDING STRONG ® Solicitation - Clauses Successive Target Pricing Midway Target Price scheduled when all major design decisions have been made Midway Target Price includes: + Midway Target Cost (MTC, Based on 35-90% Design) + Midway Target Profit (MTP, 1.5% - 3% of MTC) Midway Target Price < Ceiling Price Midway Target Price recognizes significant scope changes If Midway Target Price is under ceiling, the contracting officer may elect to exercise the construction option Addresses similar details for final Firm Target Cost and Profit at 100% design 27

28 BUILDING STRONG ® Solicitation - Clauses Adequate Accounting System: Self certification that accounting system is in compliance with FAR (c)(1) Earned Value Management System (EVMS) Certification Offerors accounting capable of supporting EVMS EVMS - Size dependent: Under $20M: not applicable $20M to $50M: offeror self-certifies compliance Over $50M: offeror self-certifies and is audited 28

29 BUILDING STRONG ® Solicitation - Clauses FAR , Incentive Price Revision – Successive Targets Defines ceiling price (ECC) Outlines alternative if firm fixed price agreement is not reached: Profit adjustment formula (% negotiated) Profit increases if final price is lower than Initial Target Cost Profit decreases if final price is higher than Initial Target Cost Final price determined after completion of work, using profit from profit formula Failure to agree is not subject to Disputes clause Incentive Profit can go up as CM controls/cuts costs between the Midway and Firm Target Prices. 29

30 BUILDING STRONG ® 30 Example: Profit Adjustment Formula Scenario:Example Paragraph (d)(3) blanks are negotiated at the Midway Target Pricing with the following values: Increase/Decrease Profit by 5%, Range of FTP is 2% - 6% Initial Trgt Cost (ITC):$17,000,000Firm Trgt Cost (FTC) :$16,000,000 Initial Trgt Profit (ITP):$800,000Firm Trgt Profit (FTP): *$850,000 Initial Trgt Price:$18,140,000Firm Trgt Price:$17,170,000 Ceiling Price: + $18,300,000Ceiling Price:** $18,300,000 + The ceiling price was inserted in the solicitation [paragraph (a), blank no. 2] as $18,300,000. * The Firm Target Profit is calculated based on the following: FTP = ITP – (5%) [FTC-ITC] - or – FTP = 800,000 – (5%) [$16M-$17M] = $850,000. ** Under this scenario, the project scope did not change between the initial target pricing and the Midway Target Pricing. Therefore, no change to the ceiling price was warranted and the FTC is lower than the ITC and the Contractors profit increased. You should notice that the Construction Reserve amount (2% of the FTC) has been lowered to $320,000.

31 BUILDING STRONG ® Design Phase Jointly develop bid packages & design schedule: design team, CM, Corps & User Design estimates shared until negotiation point reached (IGE still close hold) Exercise construction option at optimum stage of design (project dependent) Establish Final Target 100% design - settle as FFP w/incentives Tie payment during design to design milestones Control designer bright ideas after construction option is exercised 31

32 BUILDING STRONG ® Validation Phase (HPO Only) Construction of access roads Necessary for Project Access & Pile Load tests Construction of Working Platforms Set-up of Contractors staging areas Perform Pile Load Tests Support completion of Final Designs Establishment of No-Work Zones Allowed Pre-Ordering Steel H-Piles Test Sections Complete DSM Mix Designs 32

33 BUILDING STRONG ® Managing Cost & Pricing Data After Construction Award Cost and Pricing data were required for the firm target proposal only. Otherwise, consent packages and Vouchers gave the Government a good look at the Contractors actual pricing without a further requirement for cost and pricing data. 33

34 BUILDING STRONG ® ECI Contracting Benefits Model allowed to arrive at well documented fair and reasonable costs ECI contract vehicle allowed the Government to make common sense changes to the contracts prior to fixing the price Facilitated both price increases/decreases Encompassed the Non-Federal sponsor concerns Eliminated the need for modifications Streamlined the administrative process for both the Government and the Contractor and saved costs for both parties Allowed for additional resources as necessary to maintain the contract completion dates 34

35 BUILDING STRONG ® Lessons Learned Approach ECI with different mindset – more open way of doing business on all sides Better education of entire team of what ECI means (particularly customer) Staff big and staff early (Voucher Validators, Scheduler, Cost Estimators) Coordination - SOW for A-E and ECI contractor Collocation of Team Members Facilitate interaction between designers and contractor Review risk analysis at each major milestone 35

36 BUILDING STRONG ® Lessons Learned (cont.) Establish control of late sponsor comments by emphasizing schedule and bid packages Clearly define process for notifying PDT of design changes, amendments and modifications Allocate resources according to design schedule (more Civils early, more Mechanicals later) Allow more time for joint estimates or different approach to joint estimates Improve sub-contractors involvement in pre- construction phase Good risk decisions made w/ contractor input 36

37 BUILDING STRONG ® HQUSACE Policy Legal Sufficiency Requirements 1.Why FFP contract not suitable 2.Use FAR , Incentive Price Revision – Successive Target clause 3.Ensure the contractor has an adequate accounting system 4.Ensuring adequate price competition and fair and reasonable pricing (include cost realism) 5.Negotiating the ceiling price – Recommend offerors to propose 6.Level of design at award of preconstruction services 7.Scope of preconstruction services 8.Structure of the contract and predominance 9.Funding the construction management contract (P&D vs Constr.) 37

38 BUILDING STRONG ® ECI Results HPO Contract Initial Target Price Initial Ceiling Price Final Negotiated Price Difference LPV Archer, Western, Alberici$294,894,736$411,600,000$342,275,251$69,324,749 LPV 145 Chalmette Levee Constructors$357,245,988$488,000,000$237,128,127$250,871,873 LPV 146 St. Bernard Levee Partners$280,484,886$452,000,000$272,294,417$179,705,583 LPV Cajun Construction$300,000,000$380,000,000$349,999,235$41,582,109 IHNC-01 Seabrook Alberici Constructors $154,000,000 $181,450,000 $164,511,456$16,938,544 Sub-Totals >>>$1,462,857,130$1,924,850,000$1,366,427,142$558,422,858 Savings to the Government:29% 38

39 BUILDING STRONG ® The Delivery Team Committed to ensuring that New Orleans could handle a 100-year storm surge by 1 June




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