Procurement and Construction Management and Oversight What Board Members Need to Know Jerry Smiley, AICP 24 July 2013

2 Major Capital Projects Alternative Contracting Approaches OperationsMaintenance Pre-Planning and Acquisition FinanceDesignConstruction RTD Union StationDART Orange Line

3 Major Capital Projects Alternative Contracting Approaches – Risk Allocation Contractor’s Risk / Contractor’s Control Owner’s Risk / Owner’s Control Design-Bid- Build/CMGC (DBB/CMGC) Design-Build (DB) Design-Build- Operate- Maintain (DBOM) Public Private Partnerships (DBOM+F/BOT/ BOO)

4 $ Design-Bid-Build Project Structure and Approach Architect/ Engineer Architect/ Engineer General Contractor PD&E PE Final Design Procurement Construction $$$ BUDGETBID ESTIMATE BUDGET Owner Subcontractors and Suppliers Contractor Selected

5 Design-Bid-Build Overview Pros Standard contracting approach Transparent procurement process Public acceptance Fairest to bidders, level playing field Cons Slowest method Cost not established until bids received Design change impacts In some cases, fosters adversarial relationships and increases probability of disputes Owner retains greatest control, but assumes greatest risk

6 $ Design-Build Project Structure and Approach Design-Builder PD&E PE Procurement Final Design Construction $$ BUDGET BID ESTIMATE Owner Contractor Selected Subcontractors and Suppliers Architect/Engineer

7 Design-Build Summary Pros Project costs are determined earlier Constructability and value engineering benefits accrue to Owner Single point responsibility Reduced claims exposure Tends to be the fastest method Cons More complex contracting approach Competition may be limited Requires earlier project definition Reduces design input by Owner Changes are more costly Substantial risk is shifted to the contractor, contractor assumes more control

Construction Manager/General Contractor Project Structure and Approach Consultants General Contractor PD&E Final Design $ $ Owner Subcontractors and Suppliers Contractor Selected Construction PE $ 8 Procurement BUDGET GMP 8

CMGC Overview Pros CMGC participates in developing design, budget and schedule Design assistance reduces E&O Allows for fast-track (non-linear) construction Reduces uncertainties (change orders) Owner knows costs upfrontCons No significant input by Owner in design Complex process requiring qualified staff CMGC’s role changes from CM to GC once construction starts Owner does not transfer E&O risk In some areas, relatively few true construction managers Owner retains significant control, owner retains significant risk 99

Public Private Partnerships Project Structure and Approach PD&E $ Owner Subcontractors and Suppliers Partner Selected Construction and Testing Construction and Testing Design $ 10 Procurement Concessionaire O&M Contractors Revenue Operations Revenue Operations Maintenance Design-Builder Architect/Engineer BUDGET 10

PPP Overview Pros Advance infrastructure projects years in advanceAdvance infrastructure projects years in advance Value for money through optimal risk transfer and risk management Accountability through performance incentives Operational and project execution risk is transferred to the private sector Cons Contracts are much more complicated Difficult to anticipate all possible contingencies that could arise in long-term contract Re-negotiation of contracts can be high Performance enforcement Owner only controls what is negotiated, risk depends on skill of negotiators 11

CapacityRiskCapability 12 What Questions Should You Be Asking?

13 Risk Allocation Principles Risks are unavoidable Risk should be allocated to maximize probability of success Assessing who is best able to manage risk Optimum risk shifting should be the goal – not maximum risk shifting Shifting unreasonable risk to the contractor o Reduces competition o Increases contingencies o Increases project disputes

Why are we choosing the selected procurement model? Would the project be able to move forward using another model? Is this model in the agency’s best long- term financial interest? Do we have the staff to properly execute this model? 14 What Questions Should You Be Asking?