1. 2005 AASHTO Value Engineering Conference Using VE in Design Build Presented by: Jerry R. Blanding Innovative Contracting Engineer FHWA – NRC July 21, 2005 Sheraton Gunter Hotel San Antonio, TX

2. Using VE in Design Build I.Regulatory Definitions II.DB Final Rule – History & Application III.VE & DB A Federal Perspective IV.Additional Resources

3. Value Analysis/ Value Engineering 23 CFR § 627.3 Definitions Value engineering. The systematic application of recognized techniques by a multi-disciplined team to identify the function of a product or service, establish a worth for that function, generate alternatives through the use of creative thinking, and provide the needed functions to accomplish the original purpose of the project, reliably, and at the lowest life-cycle cost without sacrificing safety, necessary quality, and environmental attributes of the project.

4. Why is Design-Build different from Design Bid Build? Design-Build 23 USC 112 (b)(1) Competitively Bid (Low bid) Construction Contracts 23 USC 112(b)(2) Qualifications based Selection, Engineering / Design Services

5. 23 CFR Part 636 - Design Build Design-bid-build means the traditional project delivery method where design and construction are sequential steps in the project development process. Design-build contract means an agreement that provides for design and construction of improvements by a contractor or private developer. The term encompasses design-build- maintain, design-build-operate, design-build-finance and other contracts that include services in addition to design and construction. Franchise and concession agreements are included in the term if they provide for the franchisee or concessionaire to develop the project which is the subject of the agreement.

6. Value Analysis/ Value Engineering Design Build Final Rule: 23 CFR § 627.5 (e) In the case of a Federal-aid design-build project … the (State) shall fulfill the …requirement by performing a value engineering analysis prior to the release of the Request for Proposals document.

7. Using VE in Design Build – Florida DOT Example All projects with an estimated cost of $20 million or more shall have a minimum of one VE study conducted during project development. The estimated cost shall includes all costs associated with the project including but not limited to: Design Right of Way Construction Administrative Cost.

8. Using VE in Design Build – Florida DOT example The VE study shall be conducted during one of the following phases of project development: Initial Concepts Comparison of Alternatives Final Design For Design Build Projects, the VE study shall be conducted prior to the release of the Request for Proposal (RFP) Document. The greatest potential for improvement is during the Initial Concepts or Comparison of Alternatives review period.

9. Design Build: Where We Are And How We Got Here A Brief Look Back

10. TRB Task Force A2T51 - Innovative Contracting January 1988 - 23 representatives of the highway industry participated Mission of TRB Task Force A2T51 Compile information on contracting practices Assess how current practices affect quality, progress and cost Suggest measures for improving contracting practices and promoting quality in construction December 1991 - TRB Circular #386 – Innovative Contracting Practices

11. Special Experimental Project No. 14 Innovative Contracting Initiated 2/13/90 Objective - Evaluate project specific contracting practices which Maintain product quality Reduce life cycle cost Practices proposed for evaluation Cost-plus-time Bidding Lane Rental Warranty Procedures Design-Build

12. TEA-21 Design-Build Legislation Section 1307 FHWA implemented the Final Rule in January 2003. After the final rule, states can use design-build without HQ approval for “Qualified Projects” ITS projects > $ 5 million Other projects > $50 million SEP-14 will continue for smaller projects unless Congress approves language in the reauthorization bill eliminating this threshold. In 2005 FHWA will complete the required ‘Report to Congress’ on the effectiveness of design build.

13. Existing SEP-14 Design-Build Contracts vs. “Qualified Projects” 17% 83% December 2002 FHWA SEP-14 data http://www.fhwa.dot.gov/programadmin/contracts/sep14a.htm

15. Advantages of Design-Build 1.Single Point of Responsibility 2.Quality / Innovation 3.Potential Time or Cost Savings 4.Improved Risk Management 5.Earlier Knowledge of Firm Costs 6.Lower Incidence of Claims 7.Reduced Project Administration

16. Critical Characteristics for Public Sector Design-Build Projects Design-Build Selector Georgia Institute of Technology / University of Colorado http://www.colorado.edu/engineering/civil/Design-Build/DBS/ Poor DB Projects Don’t Have: Well Defined Scope Shared Understanding of Scope Owner’s Construction Sophistication Adequate Owner Staffing Established Budget Established Completion Date

17. Suitability NEPA, and major ROW and utility issues must be clear Should have a “Strong design component” Reasons for selection should not be: Obligation of funds Compensate for inadequate agency resources

18. NEPA - RFP Release: Where Does VE Fit? NEPAConstructionFinal Design Design-bid-build Design-build NEPA Design-Builder’s Design and Construction ROD, FONSI, CE PS&E RFQ RFP Draft RFP Owner PE

19. FHWA Perspective on Using VE in Design Build VE is a mandate for NHS projects $25 million and over VE must be performed prior to release of the RFP Multiple VE’s may be appropriate for major projects VE studies are performed to add value to a project, not simply to reduce costs. All valid suggestions should be included in the study report. Management must determine what impact the VE suggestions may have on the environmental or public hearing agreements.

20. FHWA Perspective on Using VE in Design Build VE should be performed on NEPA alternatives or on selected RFP requirements. FHWA has not objected as long as VE is done prior to release of RFP at a reasonable point with the coordination of the Division Office.

21. Innovative Contracting Best Practices Web Site Utah State University http://www.ic.usu.edu Practical information on warranties, A+B, lane rental and design-build contracting What is it? Why should you use this? Criteria for project selection? Who is currently using it? Example provisions

23. Additional Resources on SEP-14 Design-Build Projects FHWA HIPA-30 web page http://www.fhwa.dot.gov/infrastructure/progadmin/ contracts/d_build.htm WSDOT Design-Build Process for Highway Projects http://www.wsdot.wa.gov/designbuild/db/dbguideb ook.htm

25. THE END – QUESTIONS? Jerry R. Blanding Innovative Contracting Engineer FHWA – NRC Baltimore 410-962-2253 jerry.blanding@fhwa.dot.gov