Progressive Design-Build: Examining the Basics September 25, 2017 Michael C. Loulakis, Esq., DBIA President/CEO Capital Project Strategies, LLC mloulakis@cp-strategies.com

Introduction Project delivery studies show benefits of Design-Build Done Right: Early contractor involvement Highly qualified teams Group cohesion and team integration Most private sector owners readily understand these benefits Qualifications dominated procurement practices Collaborative development of design Negotiation of ultimate project price

Introduction (cont’d) Unfortunate reality – many public sector owners do not use Design-Build Done Right Price is often dominant selection factor Use bridging documents vs. performance requirements Little meaningful collaboration prior to contract award

Introduction (cont’d) Challenges created by these practices Bridging documents can stifle innovation Owners susceptible to change orders for problems in their design documents Competitive procurements are costly and take time for all parties Is there a way for owners to exercise substantial design control and comply with Design-Build Done Right principles?

Progressive Design-Build’s Core Features Design-builder retained by owner early in project’s life Design-builder selected primarily, if not exclusively, on qualifications Final project cost and schedule commitment is not established as part of the selection process Two phases of work Preliminary services Final design and construction, once the parties have agreed upon price and other commercial terms

Core Features (cont’d) Design-builder collaborates with owner during Phase 1 to create or confirm project’s basis of design Design-builder advances design Decisions based on cost, schedule, operability, life cycle and other considerations Ongoing, transparent, cost estimates to achieve budget requirements

Core Features (cont’d) Formal commercial proposal for Phase 2 “Appropriate” level of definition, often at 40-60% design completion Dependent on amount of control owner desires to maintain over design definition and reduction of contingency Phase 2 initiated upon acceptance of commercial proposal

Core Features (cont’d) Owner right to exercise “off-ramp” End relationship and use design to advance project Right to have designer complete design and become designer-of-record Early work packages for discrete work elements

Why Owners Choose Progressive Design-Build Interest in contracting with design-builder very early in design process Complex projects requiring high level of collaboration Higher degree of cost certainty and transparency during design development Owner wants to remain actively involved in making design decisions Avoids time and expense of owner creating design baselines for procurement Streamlines and simplifies procurement process Reduced or limited need for stipends

Why Owners Choose Progressive Design-Build (cont’d) Ability to use early work packages and fast track Removes some of owner’s time pressures in reviewing and acting upon design submittals Allows owner participation in subcontractor and supplier selection Offers transparency into design-builder’s proposal cost Provides collaborative way to establish “single point of responsibility” – there is no design “handover”

Why Owners Choose Fixed Price Design-Build Interest in awarding contract with full competition Opportunity for more creative technical approaches Opportunity for multiple technical approaches Opportunity for best value and lower prices Restrictive procurement regulations Prohibit progressive design-build Preclude early involvement of subcontractors

Why Owners Choose Fixed Price Design-Build (cont’d) Concerns over attributes of progressive design-build (e.g., negotiating price or exercising “off-ramp”) Marketplace concerns with progressive design-build Success and comfort in using fixed price design-build – procurement infrastructure already developed

CMAR vs. Progressive Design-Build Benefits of CMAR Ability of owner to have a direct contract with a designer who is independent of contractor Easier ability to exercise “off-ramp” Benefits of progressive design-build Owner does not have to manage/procure designer Slight schedule benefit Ability to obtain performance guarantee and other benefits of design-build

Progressive Design-Build Procurement Pick the right team through streamlined and simple procurement The right team is the one that: Will work well and collaboratively with owner Offers best chance to meet owner’s project goals and required outcomes Owner believes is trustworthy, fair, qualified and transparent

QBS and Best Value Qualifications based selection Best value Solely non-price factors Team qualifications and past performance Innovative ideas No price information Best value Both price and non-price factors Price factors might include Phase 1 services and overall design-build fee (low weighting)

Other Procurement Decisions One-step or two-step Statutory requirements? Deliverables required for shortlisted proposers? Pricing information? Proprietary meetings Interviews Stipends

Lessons Learned from Procurement of Progressive DB Projects Process may benefit in having Phase 1 services divided into 2 or more components Confidential meetings are extremely valuable in obtaining real insights from proposers Owners often try to resolve too many commercial and contractual details during procurement Process benefits from post-award discussions Contract will essentially be subject to modifications once contingency and risk pricing are developed

Unique Contracting Issues Scope of Phase 1 services, including cost modeling Ability of design-builder to rely upon owner-furnished information Early work packages Design-builder self-performance Subcontractor and vendor procurement and involvement in Phase 1 Commercial proposal Exercising off-ramp Contract should reflect collaborative nature of relationship

What Should an Owner Do to Prepare for Implementing Progressive DB? Assess appropriateness of process Use experienced consultants Understand procurement limitations Have a strong cost estimator on team Make early decision on subcontractor procurement and design-builder self-perform Ensure the team is willing and able to collaborate and trust

Dulles Rail, Phase I $1.6 billion contract for first phase of WMATA extension to airport Virginia PPTA procurement process Investment by design-builder in the preliminary engineering through unsolicited proposal Negotiated lump sum price at completion of 30% design (preliminary engineering) after open book process Project on line 2014 Allowances used to overcome certain pricing issues Interim agreements used to address ROW/utility/design issues pending federal funding

DC Water Headquarters New HQ to be built over an operating pumping station 2-phase procurement with shortlist of 3 Design competition – iconic design that would satisfy permitting agencies, based on $55MM budget $75,000 stipend Skanska USA Building, with Smith Group as lead architect Weighted criteria approach used for technical approach Solicitation of only lead constructor and lead designer Pricing information provided for informational purposes Single contract with two phases GMP proposal will be provided at 80% design

City of Houston, Northeast Water Purification Plant Expansion Project 320 MGD treated water facility Estimated cost in excess of $1B Approximately two years of preliminary engineering expected Completion by 2024 Two step procurement with shortlist of 3 Best value approach, with price proposal to include: Design-builder’s fee and Basis of Design services Indicative pricing Full contract approach Early work packages expected Solicitation of full teams

Other Progressive Design-Build Projects Substantial number of water/wastewater projects Northern Treatment Plant, Colorado South Florida Water Management District Los Angeles World Airports Port of Seattle International Arrivals Facility

Progressive Design-Build: Examining the Basics September 25, 2017 Michael C. Loulakis, Esq., DBIA President/CEO Capital Project Strategies, LLC mloulakis@cp-strategies.com