Port of Galveston Parking Structure Delivery Methods 02/27/2010 Pictured: Trinity Well Field 1.5-MG Tank, New Braunfels Utilities (CMAR Method) Port of Galveston Parking Structure Delivery Methods Board of Trustees Galveston Wharves Board Meeting February 26, 2019

Agenda Parking Garage – 2,000 Spaces Procurement Local Government Code Construction / Procurement Methods Competitive Bidding Method Competitive Sealed Proposal Construction Manager at Risk Design Build P3 Key Considerations

Overall Port Project Goals Accommodate on-going operations During construction and parking structure operations Improve aesthetics and compatibility with existing context Green roof, sustainable design Facades, commercial, retail space Provide cruise terminal and public parking Convenience Reasonable price Address stakeholder involvement Accommodate input

Other Project Considerations • Confirmation the site suitability make any adjustments • Address the significant construction challenges and develop plans during design to minimize or eliminate interruptions to ongoing Port and Cruise Line operations. • The logistics of the parking structure on cruise days as to entrance and exit of passengers and their vehicles in the critical time window.

Current Texas law provides the authority for Port of Galveston to use delivery options Chapter 2269 of Title 10 Subtitle F TX Government Code A General Provisions B General Powers and Duties C Competitive Bidding Method D Competitive Sealed Proposal Method E Construction Manager – Agent Method F Construction Manager –At- Risk Method G Building Using Design-Build Method H Design-Build Procedures for Certain Civil Works Projects I Job Order Contracts Method J Enforcement Chapter 2267 of Title 10 TX Government Code – Public And Private Facilities and Infrastructure Public Private Partnerships

It’s the Board’s choice Project Delivery Method advantages disadvantages Owners have to carefully consider advantages and disadvantages and the relative priority and weight of each project delivery option and how they match project objectives and expectations. Select project delivery method with the highest probability to meet owner goals and objectives

Design-Bid-Build (DBB) Attributes Most widely used Owner engages engineer for design services Engineer completes 100% design Owner solicits bids or proposals Owner engages contractor for construction Sub- contractors Vendors Contractor Owner Design Engineer

DBB Advantages and Disadvantages Most understood; owner comfort zone No legal barriers Engineer works for owner; owner controls design Suitable for competitive bidding to get lowest initial price Selection can be best value and not lowest price No contractor input to address key Project considerations Owner warrants design to contractor Initial low price may not be the final price Most adversarial process; change order and dispute prone Quals/Exp to extent of weighting Don’t know who bids until bid day and what prices are ( 100% design complete) Best value (with price weighting and “pressure”) No innovation - “build the design” Use as default content layout

Design-Build-Bid Competitive Sealed Proposals Competitive Bidding Selection based 100 % on price- low responsible bidder’s price “Responsible Bidder” hurdle relatively low Ties owner inflexibly to price Owner concerns over lose of control Competitive Sealed Proposals Best value: Trade-off between price and non-price considerations Low price may not be the best value A higher price is the “premium” you pay for best value

CMAR Attributes Two contracts; design and construction Maintains traditional owner-designer- engineer relationship Contractor - consultant in design phase, at-risk general contractor in construction phase Contractor input during design phase (preconstruction services) Collaboration- distinctive feature Sub- contractors Vendors CMAR Owner Design Engineer

CMAR Advantages Time and cost-effective procurement process Maintains control of design Address key project considerations with collaboration Reduce design misunderstandings, RFIs and change orders Estimating and scheduling expertise during design Accelerated schedule; construction prior to design complete Earlier cost certainty Owner control and decision-making in design process Life-cycle costing, operability and ease of maintenance considerations easily incorporated into design

CMAR Disadvantages CMAR selected on cost elements before project price is known Owner warrants design to CMAR Potential new procurement territory by owner; learning curve needed High level of owner staff involvement during design; may slow design down Inability to agree on the project cost; use off ramp

Design-Build (DB) Attributes One contract - design and construction Single point accountability Design-builder responsible for efficacy of design Design Engineer (engineer-of-record) is Design-Builder Owner loses traditional owner-design engineer relationship Owner can have “technical advisor” Sub- contractors and Vendors Sub- consultants Design-Builder Owner Technical Advisor

DB Advantages Address key Project considerations in a collaborative manner Time and cost-effective procurement process Single point of accountability - design and construction; Design-Builder warrants design to owner Cost certainty known at time GMP is given; i.e. % design complete Selection of Design-Builder based on qualifications, experience and a cost proposal Accelerated project schedule; construction prior to design complete Owner control and decision-making in design process Life-cycle costing, operability and ease of maintenance considerations easily incorporated into design

DB Disadvantages Design-Builder selected on price elements before GMP is known Potential new procurement territory by owner; learning curve needed Owner loses trusted advisor relationship with engineer; Design-Builder is engineer-of-record; loses some control of design Owner advisor(s) may be needed to assist in RFP procurement, design and project/contract oversight and monitoring High level of owner staff involvement during design

Guaranteed Maximum Price (GMP) Owner achieves competitive bidding; full transparency of competitive procurement If bidding results in lower GMP, owner pays lower amount If bidding results in higher GMP, owner only pays GMP Savings can be shared- Owner decision Self-performance by contractor as per TX law, owner flexibility and decision Owners pay no more than GMP and can share the savings if actual costs are under GMP

Construction Initiation Prior to Design Complete Traditional Approach Design Bid & Award Construction Design CMAR and DB Approach Bid & Award time and money savings Construction $

Typical Structure for P3 Owner Advisory Team (Technical. Financial and Legal) Establish viability, PSC, vfm analysis Develop and implement procurement Ongoing monitoring, oversight Public Owner Concession Agreement Project sponsor Private equity fund Other investors- pension funds, pother project participants Finance Documents Equity Documents Private Sector Concessionaire Commercial banks Taxable bonds Private activity bonds Equity Participants Equity Lenders Debt Design-Build Agreement O&M/Facilities Management Services Agreement Design-Build Operation and Maintenance Use as default content layout P3 Attributes Design, construction, O&M and financing under a single contract Transfers project/service delivery rights and obligations to private sector in return for a revenue stream Negotiated agreement with significant risks and responsibilities and control to private sector

P3 Advantages Monitor and oversee performance Payment only if performance is received Could include design- construction-finance and O&M (one stop shopping) Strong performance guarantees Port could receive an up- front concession fee Maximum ability to transfer risk Revenue risk and debt repayment key risks Less administrative burden

P3 Disadvantages Significant time and cost to establish viability, procure and contract Lose of control Revenue stream and rates in play Not a timely solution to achieve parking structure No contractor input to address key Project considerations City still retains accountability to public and City and other stakeholders Repayment of concession fee at a higher cost of capital Cost and time to “unwind” Ongoing oversight and monitoring Design, construction and O&M efficiencies need to overcome higher cost of capital

Recommendation – Design-Build Provides for the highest probability of the Port achieving its Project expectations. Ability for the Port to react in the most time and cost-efficient manner to deliver this Project. Ability to develop a Project cost that provides the best value with regards to scope and quality for the available funds.

Recommendation – Design-Build Optimum ability to confirm site suitability in collaborative manner or make adjustments to address construction challenges and develop plans during design to minimize or eliminate interruptions to ongoing Port and Cruise Line operations. to consider the logistics of the parking structure on cruise days as to entrance and exit of passengers and their vehicles in the critical time window.

Recommendation – Design-Build Potentially reduce schedule and costs with contractor input during design Achieve better project cost certainty earlier the design process Provide for single point of accountability and responsibility for design and construction Ability to initiate construction prior to design Ability to best control design and estimating to allow the budget not to be exceeded

Thank you for your time Questions Douglas Herbst douglas.herbst@freese.com

Why Consider CMAR and DB? Could Attain Benefits if procured and implemented right! Faster delivery time (on time or ahead of schedule) Better and sooner price certainty Address key Project considerations More cost-effective final price; potential for cost savings (capital and O&M) (on budget or under budget) Minimal disputes; increased collaboration and not confrontation Better risk management (DB better than CMAR) Better life cycle costing potential Use as default content layout

Costs -The Value Proposition Value for money (Vfm) Public Sector Comparator (PSC) P3 Concession

Design Services – Collaboration is Key Owner in control of decision-making Collaboration with designer, builder, owner and its technical advisor Design to budget flexibility Time and cost-efficient design from construction perspective Project Kickoff 30% Price and Schedule 60% Price 90% Price (sounds a lot like CMAR) GMP typically at 60%, but flexible

Fundamental Questions What project delivery method? What procurement method? What contract format? Select project delivery method with the highest probability to meet owner goals and objectives… and Do it right!

Project Delivery Under Texas Law Current Texas law provides authority for Local Governmental Entities to use various methods Need to confirm legal authority for Port to use TX Government Code Chapter 2269 and 2267 Port is “within City” and City appears to have such authority There are different and additional legal requirements and limitations for each method There are flexibilities and choices Under Chapter 2269 Determine option that provides best value for any method other than competitive bidding. Address delegation of authority - “governing body may delegate”.

Competitive Sealed Proposals and Collaborative Project Delivery Use Competitive Sealed Proposals when…… Use Collaborative Project Delivery when….. You want to select your contractor on other factors than just low price Your project is complex and/or has construction challenges You want a project price before you select the contractor You value contractor input and believe you will get better project results because of it You want to minimize change You value collaboration and not confrontation Your project schedule is sensitive or critical and/or your budget is absolute You want more control over design decisions based on life cycle costing, schedule, operability and other considerations on areal time basis Use as default content layout

Fundamental Questions What project delivery method? What procurement method? What contract format? Select project delivery method with the highest probability to meet owner goals and objectives… and Do it right!

Project Delivery Options Available Traditional Delivery Collaborative Delivery (Public Private Partnerships) Partnerships) Multiple Contracts Single Contract Project Delivery Project/Service Delivery DBB-1 DBB -2 CM-a CMAR DB DBO DBOF DBOOF Design  N/A Construction O&M Finance Ownership Notes: DBB-1 = Design-Bid-Build, Competitive Bidding DBB-2 = Design-Bid-Build, Competitive Sealed Proposals CM-a = Construction Management Agent CMAR = Construction Management at Risk DB = Design Build DBO = Design Build Operate DBOF = Design Build Operate Finance DBOOF = Design Build Operate Own Finance Owner Decides Best Option

DBB Has Its Drawbacks Very time consuming Adversarial relationship can develop between owner, engineer, and contractor (if bid price = cost to build) Can lead to unsatisfactory results - cost, schedule, and quality Can lead to change orders and disputes No input from contractor during design Constructability considerations can impact cost and schedule Use as default content layout

CMAR and DB Comparison Key Difference Similarity Project Attribute Procurement Selection Qualifications or qualifications and cost parameters Qualifications and cost parameters Contracts 2 contracts- design and preconstruction and construction 1 contract- design and construction Contractor involvement during design Yes along with significant owner involvement Initiation of construction Prior to 100% design complete Owner control of Design Yes; owner contracts with trusted advisor/ engineer of record No; engineer of record on design build team; owner can use technical advisor Design Risk Owner Design Builder Project Price GMP * Price Transparency Yes Potential to share in cost savings * Owner flexibility to convert to lump sum; at owner’s discretion Key Difference Similarity

Example: Project Objectives Matrix to Rank Delivery Options Project Objective/ Delivery Option (Score 1 to 5; 5being the best to meet objective) Weighting (100% total) DBB CB DBB CSP CMAR DB P3 Design and construction schedule i.e., on schedule or sooner On or below budget Collaboration amongst owner team and Stakeholders Develop design and construction plan to meet goals Beneficial “builder input” Minimize shutdowns and public inconveniences Construction coordination with urban environment and traffic control plans Construction sequencing and staging Construction easements Appropriate project risk allocation and management Ability for early procurement of materials Others Use as default content layout multiple criteria decision making matrix

Parking Structure Project Objectives Design and construction schedule i.e., Need for parking structure is “immediate” Determine optimum budget Collaboration and concurrence amongst Port, City and other Stakeholders on project scope Develop design and construction plan to meet goals Design to accommodate on-going operations and peak demands Beneficial “builder input” Minimize cruise operations, Port operations and public inconveniences Address construction constraints with site logistics plan Construction sequencing and staging Appropriate project risk allocation and management Ability for early procurement of materials and early initiation of construction Use as default content layout

P3s Design-Build

3 months, $30,000 P3s Design-Build 27 months; $65 million

P3s Design-Build 3 months, $30,000 27 months; $65 million