PROJECT DELIVERY METHODS (Refer to Chapter 4)

INTRODUCTION A project delivery method is a system used by an agency or owner for organizing and financing design, construction, operations, and maintenance services for a structure or facility by entering into legal agreements with one or more entities or parties. Project delivery method describes how the participants are organized to interact, transforming the owner’s project goals and objectives into a finished facility.

INTRODUCTION (CONT.) The owner usually considers the following factors to decide how project resources are to be organized: Past practices, traditions, and experience; The advice of consultants; Funding sources and constraints; The effective use of staff and working capital; The interests of other project stakeholders.

OWNER-PROVIDED DELIVERY Mostly applicable to projects where the scope of the work is within the owner’s range of skills, experience, and resources. Owners perform some or all of the design services and construction work themselves. e.g. simple modifications to an existing facility, projects with limited cost or complexity, repetitive projects.

DESIGN BID-BUILD (DBB) DBB has been the most common method of project delivery for public projects, and for many private projects as well.

DBB Design Bid-Build is effective on projects where the owner needs both professional design services and construction services where the designer does not require detailed knowledge of the means and methods of construction.

DBB DBB provides the owner with a high degree of control. Preferred project delivery system for owners who: Wish to closely monitor projects Are public owners and must account in detail for expenditures. Are obligated by statute to procure professional design services by qualifications-based selection (QBS) regulations and constructors by competitive bidding.

DBB The owner The owner may perform defines project goals and objectives, secures the financing, and specifies the standards and contract terms. The owner may perform planning, conceptual design and full design, or may engage an outside design professional (designer) for some or all of these tasks. During this planning and preliminary stage, owner and designer work as a team to obtain required permits and conduct necessary site investigations.

DBB The designer provides Complete architectural and engineering design services Complete construction bid documents Prospective contractors prepare their bids from these complete and specific bid documents. The bidders submit their proposals to the owner (often w/ designer) , who determines the most responsive (typically the lowest) bid meeting project requirements. In certain circumstances, owner may select a contractor outright and negotiate contract terms directly.

DBB Advantages Disadvantages Known quantity to all parties Well-defined contractual relationship Firm fixed-price contract Contains considerable contractual protection to owner Insulated from many of the risks (e.g. cost overrun, labor inefficiency, etc.) Disadvantages Quality of constructor may not be assured Usually more time consuming Lack of coordination among participants

CONSTRUCTION MANAGEMENT (CM) Many owners engage construction managers (CMs) to assist in developing bid documents and overseeing project construction. CM: A professional or a firm trained in the management of construction processes. Generally interposed between the owner and some or all of the other participants.

CM Two general types Agency Construction Managers (ACM) Construction managers-at-risk (CM-at-risk)

CM ACM acts as an agent of the owner and extends the owner’s internal capabilities in performing traditional owner responsibilities. The level of service by the ACM can range from on-call advice to full project management. In some cases, the owner hires the ACM before design begins and ACM may participate in the selection of and contracting with the designer or might even be the designer.

CM CM-at-risk typically contracts with the owner in two stages. Manages and undertakes services during conceptual & preliminary design phases with the design professional. On completion of design, owner and CM-at-risk then agree on a price and schedule for the completion of the construction work.

CM Advantages Disadvantages Reduced change orders and claims Owner approval of subcontractors Good communication among all parties Disadvantages Higher cost to owner due to reduced competition

DESIGN-BUILD (DB) A single entity to provides both design and construction services. Contract may either be negotiated with a single design-builder or result from competitive proposals.

DB Selection can be based on low price or on a set of value criteria (experience, staff, bonding capacity, etc.) or both. Provides the owner with a single point of contact for project responsibilities, eliminating the need to assist in resolving designer-contractor disputes.

DB Costs are typically defined and maintained to a higher degree. Coordination of fast-track management to achieve early completion is greatly simplified. Makes many decisions that owner would make under DBB, due to delegation of increased authority.

DB Advantages Disadvantages Better communication among all parties Allows construction input early in design phase Easier incorporation of changes, if any A clear understanding and documentation of design-build processes enhances the quality of design-build projects Disadvantages Initial cost may be higher due to increased contractor risk Lack of checks and balances

CONTRACT TYPES Purchase of actual construction service Lump sum Single fixed price Unit price Price per unit of the different elements of the construction project Reimbursable Cost plus fixed fee Guaranteed maximum price (GMP) Cost plus percentage fee

DESIGN-BUILD VARIATIONS Funding Option Variations Turnkey Developer Financed Projects Turnkey Variations

Funding Option Variations Private capital and developer participation offer private owners several variations on design-build. Lease-develop-operate arrangement: The owner gives a private operator a long-term lease to use, operate, and expand an existing facility. Public-private partnership or wrap around: Ownership of or fiduciary responsibility for a project is assigned to a private party. That party designs, builds, and may even own, operate and maintain the new facility.

Turnkey Turnkey adds to the design-builder’s responsibilities the operation and/or maintenance of the completed project. Turnkey delivery has the potential for bringing a new project on line more quickly. Three forms of turnkey project delivery: Design-build-operate-transfer Design-build-operate-maintain Design-build-own-operate-transfer

Developer-Financed Projects For highly specialized projects and circumstances, financing from a private or public developer or other third parties can offer additional variations on design-build and turnkey project delivery, each with new roles for owners, designers, and contractors.

Turnkey Variations Variations on turnkey add financing as a key component. While financing arrangements are unique for each project, developer financed projects generally resemble one of the turnkey delivery methods: FDBT (Finance, design, build, transfer) FDBOT (Finance, design, build, operate, transfer) FDBOOT (Finance, design, build ,own, operate, transfer) In each case, the transfer of the project occurs only after the developer’s interests and financial obligations have been satisfied.

FAST-TRACKING Fast-track approach compresses the schedule by sequencing the start of construction on underlying project elements (e.g. foundation, basic supporting structures) before final design is complete for interior or adjacent elements. Fast-tracking is not a method of delivery, rather, it’s a management strategy within delivery methods. While often successful in achieving schedule reductions, problems on fast-track contracts can create a domino effect on follow-on contracts for the project. Fast-track is more successful on projects that are straightforward and have a high level of predictability.

Flowchart of Project Delivery

DB vs. Standard Process

Current Trends DB is the predominant delivery method in Europe and Japan Steady increase in United States and Canada (graph) Contractor-led has 95% of the market