1. CAPITAL PROJECT DELIVERY METHODS APRIL 20, 2015 – SACUBO Annual Conference By Al Stoverink, AVC for Facilities Arkansas State University

2. LEARNING OBJECTIVES & OUTCOMES:  1) Understand and make informed decisions relative to the basic concepts and processes of alternative methods of contracting for construction.  2) Select the method of delivery most compatible to the campus situation and expectations.  3) Establish a schedule and work flow process for the development and management of a capital project from start to finish.

3. PLANNING, DESIGN, AND CONSTRUCTION PROCESS  SPACE PROGRAMMING—Purpose/Needs Defined  CONCEPT PLAN, OPINION OF PROBABLE COST (OPC), & SCHEDULE  SCHEMATIC PLAN & ESTIMATE  DESIGN DEVELOPMENT & ESTIMATE  CONSTRUCTION DOCUMENTS & ESTIMATE  CONTRUCTION ADMINISTRATION  PROJECT CLOSE-OUT

4. PROCESS ACTIVITIES  DESIGN PROFESSIONAL SELECTION  COMMISSIONING AGENT SELECTION  CONSTRUCTION MANAGER SELECTION (if applicable)  BUDGET/FINANCING PLAN (When Final?)  ADVERTISED BIDDING PROCESS (if applicable)  VALUE ENGINEERING/ADJUSTMENT (VE or VA)

5. COMMON DECISION FACTORS  SITUATIONAL FACTORS SITE SCOPE METHODS OF FINANCE SCHEDULE CONSTRAINTS FAST TRACK APPLICABILITY LABOR & CONTRACTOR MARKET  RISK ASSESSMENT PER ABOVE

6. DELIVERY TYPES  Traditional Design-Bid-Build  Design-Build  Construction Management At Risk (Arkansas ADM) Bid Fees & GC’s Agency  Multiple Prime Contracts

7. DELIVERY TYPES  Negotiated Construction Contract  Cost Plus: T & M/Unit Cost + Fixed Fee  Job Order Contract  Privatized Designed-Build-Finance Housing  Performance Contracting  Integrated Project Delivery

8. TRADITIONAL DESIGN- BID - BUILD  Traditional delivery process with design, bidding, and construction in separate, sequential steps.  Construction contract is awarded to the lowest bidder, who then utilizes the subcontractors included in his or her bid.

9. ADVANTAGES DESIGN-BID-BUILD  Process most familiar to institutional design and construction community.  Owner controls the design, which is completed under direct owner-A/E contract prior to construction.  Direct way to provide competitive pricing for entire construction contract.

10. DISADVANTAGES DESIGN-BID-BUILD  Project cannot be expedited with fast-track process; drawings and specs must be 100% complete to bid.  Construction contract is awarded to low bidder, without consideration of his or her qualifications.  No contractor assistance with estimating, plan checking, and constructability reviews during design phase.

11. DISADVANTAGES DESIGN-BID-BUILD  Not an open-book process; bid shopping can occur and actual overhead and profit amounts are unknown.  Adversarial, change-order-oriented environment can occur between owner, A/E, and contractor.  Construction price is not fixed until after design and bid phases are completed.  Time-consuming redesign and rebid is generally required if bids come in over budget.

12. DESIGN-BUILD  Design and construction are provided under a single design-build contract initiated at the beginning of the project.  A DB contract is awarded on the basis of price and/or qualifications, in a one- or two-step selection process.

13. ADVANTAGES DESIGN-BUILD  Single point of responsibility for both design and construction of the project.  A/E and contractor work together through all phases of the project.  Guaranteed maximum price (GMP) is fixed early in design phase of the project.  Construction contract is awarded on basis of design-build team qualifications and/or price.

14. ADVANTAGES DESIGN-BUILD  Project can be expedited with fast-track construction, which can also reduce costs.  Less adversarial relationship is encouraged between owner, A/E, and contractor.  Change orders are generally reduced due to A/E-contractor collaboration and contractual relationship, and GMP.  Contractor is motivated to ensure owner satisfaction when selections are based on qualifications and performance.

15. DISADVANTAGES DESIGN-BUILD  Works best with simple project types where requirements can be fully documented in request for proposals (RFP).  Much pre-planning is needed to prepare sufficient material for the request for quotations (RFQ)/RFP process.  Owner has less control of design process, with the A/E typically working for the contractor.

16. DISADVANTAGES DESIGN-BUILD  Design changes can result in costly impacts to drawings or construction work in progress.  Disagreements related to intended quality of work can occur.  May not work any better than DBB if mutual trust relationships are not built.  Is not legal in some states—e.g. in Arkansas only K-12 authorized

17. CONSTRUCTION MANAGER AT RISK  Construction is performed through a CM@R who works with the owner and A/E through design and bids and manages subcontracts to complete the work.  The CM@R must complete the project within the agreed- upon GMP amount, or else is at risk to cover the additional costs.

18. ADVANTAGES CM @ RISK  A/E, owner, and contractor (CM@R) work together through all phases of the project.  GMP may be fixed early, during the design phase of the project.  Project can be expedited with fast-track construction, which can also reduce costs.  Construction contract is awarded on basis of CM@R qualifications and past performance.

19. ADVANTAGES CM @ RISK  Construction work is competitively priced through low bids of prequalified subcontractors.  Less adversarial relationship is encouraged between owner and A/E-contractor.  Change orders are generally reduced due to A/E and contractor coordination through the design phase, and GMP.

20. ADVANTAGES CM @ RISK  Owner controls the design, which is completed under direct owner-A/E contract.  Provides more design-change flexibility for complex building types.  Contractor is motivated to ensure owner satisfaction when selections are based on qualifications.

21. DISADVANTAGES CM @ RISK  Fast-track construction presents risks related to incomplete construction documents.  Design changes during construction can result in costly changes to construction work already in progress.  CM@Rs must learn to provide quality preconstruction services.

22. DISADVANTAGES CM @ RISK  May not work any better than DBB if mutual trust relationships are not built.  Is not legal in some states.

23. CONSTRUCTION MANAGEMENT FEES & GC BID  Construction is performed through a CM, who is selected on the basis of the lowest bid of Fees and General Conditions.

24. ADVANTAGES CM FEES & GC BID  A/E, owner, and contractor (CM) can work together through all phases of the project.  GMP may be fixed early, during the design phase of the project.  Project can be expedited with fast-track construction, which can also reduce costs.  Change orders can be reduced with improved A/E and CM coordination through the design phase.

25. ADVANTAGES CM FEES & GC BID  Owner can control the design, which is completed under direct owner-A/E contract.  Provides more design-change flexibility for complex building types.  Ensures lowest CM fee and/or general conditions amounts through bid process.

26. DISADVANTAGES CM FEES & GC BID  CM qualifications or past performance are not considered in the CM selection process.  The lowest bid of fees and/or general conditions is not an indicator of CM capabilities.  Fee and/or general conditions savings can be much less than the cost of CM inefficiencies.  Fast-track construction presents risks related to incomplete construction documents.

27. DISADVANTAGES CM FEES & GC BID  CMs must learn to provide quality preconstruction services.  May not work better than DBB if mutual trust relationships are not built.  Is not legal in some states.

28. AGENCY CONSTRUCTION MANAGEMENT WITH DESIGN-BID-BUILD  Agency construction manager is hired as a consultant to help represent the owner’s interests during the construction phase of a DBB project or Multiple Primes project.

29. ADVANTAGES AGENCY CM  Same pros as noted for DBB process.  Agency CM can provide industry experience and estimating, scheduling, and project management expertise for the owner’s benefit.

30. DISADVANTAGES AGENCY CM  Same cons as noted for DBB process.  Agency CM has no direct accountability for the success of the construction process.  Owner must pay the fees of an agency CM in addition to the contractor’s fees for the construction work.  Agency CM must be committed to representing the owner first and foremost, or a loss of control can result.

31. MULTIPLE PRIME CONTRACTS  Multiple direct owner-contractor prime construction contracts that are bid for various trades, or groupings of trades, as needed to complete the entire scope of construction.

32. ADVANTAGES MULTIPLE PRIMES  Construction method required by the procurement law in certain states.  Can reduce markups of general contractors who otherwise would oversee the entire scope of work.  Can be preferred by some established subcontractors who have prime contracts with the owner.  Project can be expedited with fast-track construction, which can also reduce costs.

33. DISADVANTAGES MULTIPLE PRIMES  No single point of responsibility for the construction of the various trades related to the project.  Construction is awarded to multiple low bidders, without consideration of their qualifications.  The owner is responsible for conflicts and inefficiencies between the multiple prime contractors.

34. DISADVANTAGES MULTIPLE PRIMES  No contractor assistance with estimating, plan checking, and constructability reviews during design.  Not an open-book process—bid shopping can occur and actual overhead and profit amounts are unknown.  Adversarial, change-order-oriented environment can occur between owner, A/E, and contractor.

35. DISADVANTAGES MULTIPLE PRIMES  Construction price is not fixed until after the design and all bid processes are completed.  Time-consuming redesign and rebid is generally required if bids come in over budget.  Is not legal in some states.

36. NEGOTIATED CONSTRUCTION CONTRACTS  Private sector project construction is performed by an often informally selected general contractor, whose contract is developed through a negotiation process.

37. ADVANTAGES NEGOTIATED  Informal contractor selection and award process can be expedited.  Informally negotiated contract can be informally terminated if needed.  Terms and conditions of private sector contracts are often more oriented toward the owner’s interests.

38. DISADVANTAGES NEGOTIATED  Negotiated contracts are generally not legal for use by public owners.  Informal contractor selection processes may not identify the most qualified contractors.  This process can lead to perceptions of favoritism toward often-utilized contractors.

39. COST-PLUS: TIME & MATERIAL OR UNIT-PRICE PLUS FIXED FEE  These contracts do not attempt to establish the total construction contract amount in advance, but use instead the actual documented construction costs or pre-established unit prices, plus agreed-upon contractor fee markups, to determine the contractor’s compensation as the work progresses.

40. ADVANTAGES COST + FIXED FEE  Does not rely as much on accurate estimating or bidding of the work.  Reduces potential for change-order-related conflicts.  Open-book process allows the owner to keep track of actual costs and appropriate compensation.  Good process if budget is not limited or phased completion levels are flexible.

41. DISADVANTAGES COST + FIXED FEE  Is not conducive to effective overall project budget management.  Is not legal in some states.

42. JOB ORDER CONTRACTING  Open-end construction contracts with general contractors and/or subcontractors who are selected through a fee markup bidding process, and who perform multiple projects through job orders under the open-end contract. Typically smaller scale under $1M, but in some states larger scale projects are performed.

43. ADVANTAGES JOC  Expedites projects by eliminating project-specific bid phases and reducing design documentation requirements (less design time & fees)  Allows for construction price negotiation based on an established construction cost unit-price book.  Less adversarial relationship is encouraged between owner and contractor.  Can be utilized with single or multiple job order contracting (JOC) contractors.

44. DISADVANTAGES JOC  Works best on small- to medium-sized projects with easily identified construction components.  Allowable JOC project size is limited by the procurement codes of most jurisdictions.  Although process is more informal, files and documentation must be carefully kept for audits.  Is not legal in some states.

45. PRIVATIZED DESIGN- BUILD-FINANCE  Turnkey design, construction, financing, and possibly operation of a facility by a private sector developer, with varying levels of legal, financial, and ownership participation by the public owner.  Commonly used in campus housing.

46. ADVANTAGES PRIVATIZED  Same advantages as DB except  Owner generally pays for facility through lease payments over time, rather than through bond sales or other financing methods.  Some design and quality control can be incorporated into the terms of the ground lease, when applicable.  The owner may receive ownership of the building at the end of the ground lease term.  The project cost may not be included on the owner’s financial statements in some cases.

47. DISADVANTAGES PRIVATIZED  Same disadvantages as DB except  Less control of design, quality, and maintainability with developer managing the design and construction process.  Developer may be able to build projects less expensively, but at lower quality levels.  Developer may not have access to tax-free financing and reasonably expects to make a profit on the project.  Projects are often included on owner balance sheets by bond/credit rating agencies anyway.

48. PERFORMANCE CONTRACTS PC  Performance contracts are based on the ability to finance the project through guaranteed savings generated as a result of the facility improvements that are constructed/installed in the project scope.  Savings are typically derived from energy consumption reductions, but can also include operational savings and capital cost avoidance.  An Investment Grade Audit (IGA) is performed by an Energy Service Company (ESCO) to define the scope, costs, and savings.

49. ADVANTAGES PC  Financing revenue stream is guaranteed. ESCO writes a check to owner if projected savings are not met.  Owner generally pays for facility through payments over time, based on lease/purchase financing, federal loan funds, or public bond sale.  Design and quality control can be incorporated into the terms of the PC.

50. ADVANTAGES PC  The owner may contract operations of installed system components with ESCO or maintain 100% owner operation.  Eliminates expensive engineering up front costs and achieves a wide scope of Facility Improvement Measures (FIMS) on fast track.  Achieves major capital improvements of Deferred Maintenance scope without requiring new resources.

51. DISADVANTAGES PC  First cost may be higher due to risk mitigation by ESCO.  ESCO may oversell scope with poor M&V definition.  Owner loses some flexibility in future budgeting by committing existing resources to long term obligations.  Risk of adversarial relationship if dispute arises over cause of Guaranteed Savings not being met.

52. INTEGRATED PROJECT DELIVERY  An emerging delivery method that attempts to increase project team collaborations and the use of new technologies by integrating various elements of the contracts and work efforts of the A/E and contractors. This process builds on the ideas of partnering and project alliances to establish a performance-based and results-oriented approach. The benefits of a more collaborative process and the use of BIM technologies suggest that this may be the project delivery process of the future.

53. ADVANTAGES INTEGRATED  Shared responsibilities, risks, and savings can be built into integrated A/E and contractor agreements.  BIM technologies are utilized to streamline and coordinate the work of the A/E and the contractors, where subcontractor shop drawings are developed directly from A/E design documents.  Time savings and error reductions can result from collaborative use of BIM technologies.  A non-adversarial, collaborative relationship is encouraged between all project team members.

54. DISADVANTAGES INTEGRATED  New contract forms with integrated responsibilities, risks, and savings are needed to manage projects effectively.  Most owners, A/Es, and contractors are still unfamiliar with the use of this process.  For most effective use of BIM technologies, subcontractors must be selected early in the design phase to participate in the collaborative design process with the A/E. This requires that competitive pricing for major portions of subcontractor trade work be accomplished without competitive subcontractor bids.

55. YOU GET 3 WISHES 1.BUDGET 2.QUALITY 3.SCHEDULE THE RIGHT PROJECT DELIVERY METHOD WILL GET YOU 2 OUT OF 3

56. ADDITIONAL RESOURCES  APPA at appa.org BOK – Body of Knowledge PDC – Part 4 - Planning, Design, and Construction