Project Delivery Approaches for Wastewater Utilities in Minnesota June 24, 2008 Metropolitan Council Environment Committee

Project Delivery Options Discussion Topics Why consider alternate forms of project delivery? Spectrum of available delivery options defined Project characteristics that favor specific delivery options

Traditional Design-Bid-Build Only Delivery Approach Formerly Allowed for Public Utilities Where traditional approaches are not required by legislation, alternative delivery approaches are often used to deliver major new construction Alternate forms of project delivery commonly used for construction ranging from residential housing to industrial processing plants and power generating facilities Minnesota state statutes specifically allow alternate delivery approaches for wastewater collection and treatment facilities

Drivers for Using Design-Build Schedule (by far the most common reason) –Regulatory compliance –Population growth –Derailed or otherwise delayed project Need for innovation/potential cost savings –Industry input on treatment process/technical solutions –Challenging problems that invite competitive solutions Avoiding low bid quality –Bad experience with poor quality contractors –Looking for a procurement method to select contractors on qualifications –Can be done with Design-Bid-Build also, but more difficult to implement Risk transfer, single point of responsibility –Specify the results, but not the way to get there –Design-Build-Operate most comprehensive risk transfer approach

Basic Project Delivery Options Design-Bid-Build (DBB) Lump Sum Design-Build (LS) Traditional Delivery Design-Build or “Alternate” Delivery

Design-Bid-Build Procurement Defined, proven process Distinct milestones to ensure expected results Project components defined in detail Traditional “cast” of participants Plan Project Procure Engineering/ Design Consultant -selection based on qualifications, technical approach Engineering/Design Review/Approve Design Bid Construction Project -selection based on price (with exceptions) Construction OversightOperate Construction Services ConstructionWarranty Startup Owner Consulting Engineer General Contractor

Lump Sum Design-Build Procurement Many “flavors” - two-phase procurement most common Variable milestones depending on the project Performance requirements defined in detail Somewhat different “cast” of participants Design, Build, Startup Verify DesignOperations Warranty Project Support Plan Project Solicit qualified teams -short list qualifications based on capability, capacity, experience, references Design Concept/RFP Review Quals Select short list and Issue RFP- defines performance criteria Proposal Period Select from short- listed teams -selection based on “best value” (technical + price) Preliminary Design RFP Clarifications Owner Owner’s Advisor Design- Builder Quals

Key Comparisons Between Traditional and Design-Build Approaches Traditional Design-Bid-Build Owner controls most aspects of design detail... discrepancies become change orders Multiple procurements Quals for engineers, price for contractors Multiple contracts/points of contact among designers, contractors Design-Build Owner controls performance criteria, but not design detail...and is not responsible for discrepancies One procurement, many phases Qualifications, then combination of technical and price (“best value”) Single contract/single point of accountability

Key Comparisons Between Traditional and Design-Build Approaches Traditional Design-Bid-Build Standardized selection process Specifications-based requirements Others? – Collaboration - limited to design period – Innovation – design function – Schedule - constrained – Price – low bid – Quality – not typically a factor in contractor selection Design-Build Each procurement unique Performance-based requirements Others? – Collaboration – can include Contractor – Innovation – team function – Schedule - potentially faster – Price – “best value” proposition – Quality – typically part of selection criteria

Expanded Project Delivery Options Design-Bid-Build (DBB) Construction Management at Risk Lump Sum Design-Build (LS) “Progressive” Design-Build (GMP) Design-Build- Operate (DBO) Traditional Delivery Design-Build or “Alternate” Delivery “Design-Build Lite” Early involvement by Contractor during design Maximum opportunity to collaborate on design Owners have an “off-ramp” if they don’t agree with GMP Cost guarantee extends to operations Comprehensive risk transfer Option for Owner to operate

What Types of Projects Fit the Design-Build Model? Numerous variations, continuously evolving Variable milestones depending on the project Manages to unknown challenges through risk allocation Design, Build, Startup Verify DesignOperations Warranty Project Support Plan Project Solicit qualified teams -short list based on capability, capacity, experience, references Design Concept/RFP Review Quals Issue RFP- defines performance criteria; variable level of design Proposal Period Select from short- listed teams -selection based on “best value” (technical + price) Preliminary Design RFP Clarifications Issue: Schedule How can the procurement process be varied if schedule is critical? Issue: Schedule How can the procurement process be varied if schedule is critical? Issue: Design Effort How much pre- design is required to ensure you get what you want (versus performance specifications)? Issue: Design Effort How much pre- design is required to ensure you get what you want (versus performance specifications)? Issue: Selection Criteria What criteria are important to success? What’s the best indicator of future performance? Issue: Selection Criteria What criteria are important to success? What’s the best indicator of future performance? Issue: Price How do you evaluate proposals beyond price? Does low price always win? Issue: Price How do you evaluate proposals beyond price? Does low price always win? Issue: Design Approvals How much oversight of design should you have? Issue: Design Approvals How much oversight of design should you have? Issue: Risk Sharing How are risks best shared? Issue: Risk Sharing How are risks best shared? Issue: Quality How do you ensure quality? Issue: Quality How do you ensure quality? Issue: Scope What elements of the projects should be DB versus traditional delivery? Issue: Scope What elements of the projects should be DB versus traditional delivery?

Issue: Schedule How can the procurement process be varied if schedule is critical? Issue: Schedule How can the procurement process be varied if schedule is critical? Issue: Design Effort How much pre- design is required to ensure you get what you want (versus performance specifications)? Issue: Design Effort How much pre- design is required to ensure you get what you want (versus performance specifications)? Issue: Selection Criteria What criteria are important to success? What’s the best indicator of future performance? Issue: Selection Criteria What criteria are important to success? What’s the best indicator of future performance? Issue: Price How do you evaluate proposals beyond price? Does low price always win? Issue: Price How do you evaluate proposals beyond price? Does low price always win? Issue: Design Approvals How much oversight of design should you have? Issue: Design Approvals How much oversight of design should you have? Issue: Risk Sharing How are risks best shared? Issue: Risk Sharing How are risks best shared? Issue: Quality How do you ensure quality? Issue: Quality How do you ensure quality? Issue: Scope What elements of the projects should be DB versus traditional delivery? Issue: Scope What elements of the projects should be DB versus traditional delivery? Issues: Schedule How can the procurement process be varied if schedule is critical? Selection Criteria What criteria are important to success? What’s the best indicator of future performance? Design Effort How much pre-design is required to ensure you get what you want (versus performance specifications)? Price How do you evaluate proposals beyond price? Does low price always win? Scope What elements of the projects should be DB versus traditional delivery? Design Approvals How much oversight of design should you have? Risk Sharing How are risks best shared? Quality How do you ensure quality? The Challenge: Match Delivery Approach to Owner Needs and Preferences Control/Risk Allocation Cost/Competition Time Quality/Innovation

Best Delivery Option is Project Specific Interceptors –New sewers highly dependent on land acquisition – traditional approach often works best –Sewer rehabilitation or replacement does not involve land issues – good opportunity for D/B Treatment Plants –Greenfield process or new plants offer opportunity for process innovation, operating cost considerations – D/B or D/B/O could be good choice –Plant rehab or expansion that requires close coordination with existing processes – traditional approach usually best. Also consider the capacity and capability of the local marketplace

Questions?