EVOLUTION OF DESIGN BUILD IN THE W/WW INDUSTRY

Transcription

1 EVOLUTION OF DESIGN BUILD IN THE W/WW INDUSTRY Thomas O. Crowley, P.E. Carollo Engineers Southwest Section AWWA October 17, 2017

2 Agenda Project Delivery Overview Oklahoma Legislation Project Delivery Methods Selecting a Project Delivery Method Summary

3 Agenda Project Delivery Overview Oklahoma Legislation Project Delivery Methods Selecting a Project Delivery Method Summary

4 Spectrum of Delivery Methods Alternative Project Delivery (APD) Design-Bid-Build CMAR Design-Build DBO DBFO DBFOO JOC Public-Private- Partnership (P3) 4

5 Industry Trends Suggest Continued Use of APD Water Design Build Council Report (period: ) Projects in Arizona, California, Florida, and Texas accounted for 65% of the design-build market sales Alternative Delivery to equal or exceed DBB market share by 2016 (due primarily to increase of D/B) Increasing number of states allowing D/B as delivery method (and correspondingly owners) 5

6 Drivers for Utilizing APD Common Drivers Applicability/Ne ed Qualification-Based Selection of Contractors?? Collaborative Design Development?? Project with Complexity and/or Unknowns?? Early Negotiation of Pricing?? Minimization of Change Orders?? Reduced Project Schedule?? Risk Allocation Control?? Improved Efficiency?? Cost Escalation Control?? Equipment Procurement Accelerated Schedule?? Staffing Resources (O&M)?? Alternative Financing Options?? 6

7 Considerations for Selecting Delivery Method Project Delivery Method 7

8 Agenda Project Delivery Overview Oklahoma P3 Legislation Project Delivery Methods Selecting a Project Delivery Method Summary

9 Oklahoma P3 Experience Anecdotal Experiences for specific reasons: OKC Boathouse District City of Lawton CNG Station OKC CNG Station Gained access to private financing and specific technical/business experience

10 SB430 and HB1534 SB430 and HB1534 approved in 2017 legislative session Codified a formal P3 process Furnishes authority to explore the options SB430 provides a process and authority for state agencies HB1534 provides a process and authority for county and municipal agencies. Areas of interest: water, service, transportation, and anything that saves money.

11 HB 1534 Responsible government entity may pursue a P3 or accept proposals. Approval process details are as determined by the entity. May cancel process at any time Intellectual property remains property of proposer if not selected. Language may allow municipal government sot accept unsolicited P3 proposals. Effective November 1, 2017 Design-Bid-Build Design-Build DBO DBFO DBFOO CMAR JOC Public-Private- Partnership (P3)

12 Overview of Delivery Methods 1. Contractual Relationship 2. Cost and Design Development Timeline 3. Advantages/Disadvantages 4. Typical Applications of and Reasons for using Delivery Method 5. Example Project 12

13 Design-Bid-Build (DBB) Method Alternate Terminology Competitive Bidding Owner Pricing Structure Fixed Bid Price (LS) Legend Working Relationship Contractual Relationship 13

14 Construction Manager at Risk (CMAR) Method Alternate Terminology Construction Manager/General Contractor (CM/GC) Owner Pricing Structure Negotiated GMP Legend Working Relationship Contractual Relationship 14

15 Owner (Design Engineer) CMAR Cost Model Timeline - CMAR Cost Model Development GMP Design Definition 0% 30% 60% 90% 100% Initial Cost Estimate 15

16 Advantages/Disadvantages - CMAR Advantages Qualifications-based selection Collaborative relationships and teamwork Contractor input into design Cost model established earlier in project Shortened schedule potential Ability to design and deliver project to fixed budget Disadvantages Involvement of CMAR during design does not relieve owner of design risk Negotiating GMP sometimes difficult Managing multiple contracts Performance guarantees not available 16

17 Typical Applications/Reasons for Using CMAR Typical Applications Projects that require contractor input during design (complexity and/or need for contractor innovation) Treatment facility upgrades requiring innovative ideas and design/construction flexibility Typical Reasons Contractor design input important Controlling scope relative to budget is important Contractor innovation Contractor quality (qualifications-based selection) Owner wants to retain control of design 17

18 Example Project (CMAR) New pump station 150 mgd avg flows 300 mgd (ultimate) Duel 84 dia. pipelines Construction Cost: $46 Million 91 st Ave WWTP UP05 Effluent Pump Station City of Phoenix (AZ) Reasons for CMAR Proven standard method of delivery for owner Significant reliance on contractor input Schedule Construction sequencing plan critical 18

19 Example Project (CMAR) City of Olathe, KS Water Treatment Plant 2 Membrane Plant 13 mgd Construction Cost: $20 Million Modified CMAR - Engineer produced two 30% designs - Contractor provide GMP at 30% - Owner had contractor and engineer contract together - No owner s agent Reasons for CMAR Select engineer and contractor separately Cost certainty 19

20 Job Order Contracting (JOC) Method Alternate Terminology Work Order Contracting Delivery Order Contracting Owner Pricing Structure Fixed Unit Prices or Negotiated GMP Legend Working Relationship Contractual Relationship 20

21 Advantages/Disadvantages - JOC Advantages Ability to initiate construction very quickly Simplification of design development and acquisition Price and performance predictability Disadvantages Typically limited to small and minor projects Limited aggregate fee for total work orders 21

22 Design/Build (D/B) Method D/B Variations Fixed-Price Performance-Based Prescriptive-Based Progressive Owner Pricing Structure Fixed Bid Price (LS) or GMP Legend Working Relationship Contractual Relationship 22

23 Owner (Owner s Advisor) Design- Builder Cost Model Timeline Fixed Price D/B Performance Prescriptive Lump Sum Proposal Design Definition 0% 30% 60% 90% 100% Design Definition and Initial Cost Estimate 23

24 Owner (Owner s Advisor) Design- Builder Cost Model Timeline Progressive D/B Cost Model Development GMP Design Definition 0% 30% 60% 90% 100% Design Definition and Initial Cost Estimate 24

25 Advantages/Disadvantages - DB Advantages Qualifications-based selection Shortened schedule potential Transfer of design-related performance risk to D/B team Single point of responsibility Performance guarantees available Innovation from D/B team allows potential cost savings Early cost determination Single contract to manage Disadvantages Owner does not hold design contract D/B contract price established prior to complete design Procurement/selection of D/B more complicated than D/B/B Existing conditions and permitting uncertainty prior to D/B contract 25

26 Reasons Owners Choose Design/Build Page 19 The Municipal Water and Wastewater Design-Build Handbook - WDBC, Second Edition 26

27 More design definition with RFP; less owner change opportunity Less design definition with RFP; more owner change opportunity Price Options for D/B Procurement (CA) Total onstruction Cost Change Orders GMP Contingency SAVINGS Cost + Fee Total Construction Cost Lump Sum Fixed Price Fixed Price OPTION 1. Lump Sum (Bid) OPTION 2. Guaranteed Maximum Price Stipulated Price Conversion 27

28 Example Projects (Fixed-Price DB) Synagro Kern Industrial Center Compost Facility -500 tons/day -45 acre site -$25 Million Westminster, CO Northwest Water Treatment Plant 15 mgd - $22 million Performance Based Weak Owner s agent 28

29 Example Projects (Progressive DB) Clifton Water District Membrane Project 12 mgd $15.1 million GMP at 30% Colorado Springs Utilities Bailey Water Treatment Plant 50 mgd $124 million GMP at 100% Owner s agent Operated plant for 6 months Owner s agency was fired 29

30 Design-Bid-Operate (DBO) Method Alternate Terminology N.A. Pricing Structure Fixed Bid Price (LS) 30

31 Advantages/Disadvantages DBO (P3) Advantages Single point of responsibility Shortened schedule potential Transfer of design and operational risk to DBO team Innovation from DBO team allows potential cost savings Potential lower initial capital outlay Lower life-cycle costs (relative to D/B) Reduced City staffing Disadvantages Decreased Owner control of design and operations High level of Owner oversight Complex procurement process Potential decreased competition Potential lack of public support with P3 ventures 31

32 Advantages/Disadvantages DBOF (P3) Advantages Single point of responsibility Shortened schedule potential Transfer of design, operation and construction risk to DBO team Innovation from DBO team allows potential cost savings Potential lower initial capital outlay Lower life-cycle costs (relative to D/B) Reduced Owner staffing Preservation of bonding capacity Disadvantages Decreased Owner control of design and operations High level of Owner oversight Complex procurement process Potential decreased competition Potential lack of public support with P3 ventures Higher cost of capital Reduction in flexibility for project and site Rarely used delivery method Elimination of collection risk for debt obligations 32

33 Typical Applications/Reasons for Using DBO Typical Applications New facility that requires significantly more O&M staff Treatment facility processes that are outside owners treatment experience Sidestream treatment process (i.e., cogeneration) Revenue generation opportunity (i.e., energy generation) Typical Reasons Owner chooses to relinquish responsibility to DBO Lack of owner funding available (DBOF) Owner not staffed or experience with treatment process(es) 33

34 Example Project - DBOF Biosolids Recycling Center PWD (Philadelphia, PA) Thermal Drying Facility Through JV of 5 Firms 200,000 Tons of Biosolids per Year Cost: Approximately $66 million for Construction Alternate Delivery Drivers Incorporate cutting-edge technologies Shrink operations and cut annual truck deliveries Project management and permitting ease Project financing Saving an estimated $200 million over the 23-year life of contract Schedule (2008 to 2012 Target) Design, build, and operate at the BRC site within 5 years 34

35 Agenda Project Delivery Overview Oklahoma Legislation Project Delivery Methods Selecting a Project Delivery Method Summary 35

36 Overview of Selection Process 1. Identify Project Goals/Drivers 2. Determine Suitable Delivery Methods 3. Define Criteria and Assign Weighting 4. Evaluate SELECT DELIVERY METHOD 36

37 Step 1. Identification of Project Package Drivers and Goals Typical Questions to Ask to Understand Drivers/Goals Does schedule need to be accelerated? Allocation of design risk to contractor? When is cost certainty required? Qualifications-based selection of contractor? Contractor involvement during design a benefit? Project complexity and level of unknowns? Low-bid required/desired? Operations contract? Financial return on investment potential (investor interest)? Early equipment procurement required? Would project benefit from contractor flexibility/innovation?

38 Step 2. Determine Suitable Delivery Methods Drivers Schedule Risk Allocation Control Cost Certainty Qualifications-Based Selection Improved Efficiency Collaborative Design Development Minimization of Change Orders Early Equipment Identification Contractor Flexibility/Innovation DBB D/B DBO PD/B Suitable Delivery Methods to Evaluate

39 Step 3a. Define Evaluation Criteria Level of Control Schedule Delivery Method Cost Risk Allocation 39

40 Step 3b. Obtain Stakeholder Input to Determine Relative Importance of Evaluation Criteria % Risk Allocation Cost Level of Control Schedule Level of Control/Innovation 24 Schedule 26 Cost 30 Risk Allocation 20 TOTAL 100 Determine Weighting through meeting of focus groups followed workshop (similar to project prioritization)

41 Step 4. Utilization of Evaluation Matrix to Select Preferred Delivery Approach Weighting DBB CM/GC D/B PD/B Factor Rank Score Rank Score Rank Score Rank Score LEVEL OF CONTROL SCHEDULE COST RISK ALLOCATION Total Points = Least Favorable; 2 = Less Favorable; 3 = Neutral; 4 = Favorable; 5 = Most Favorable OR Weighting DBB CM/GC D/B PD/B Factor Rank Score Rank Score Rank Score Rank Score LEVEL OF CONTROL O&M Considerations Sustainability Level of City Control Project Quality City Resources SCHEDULE COST RISK ALLOCATION Total Points = Least Favorable; 2 = Less Favorable; 3 = Neutral; 4 = Favorable; 5 = Most Favorable

42 Agenda Project Delivery Overview Oklahoma Legislation Project Delivery Methods Selecting a Project Delivery Method Summary 42

43 Design Build Can Be Successful if Implemented Correctly There should be reasons/drivers for design build Risk allocation is key Risk should be allocated to the party most suitable to accept it Owner needs to provide oversight as required Design assurance Cost assurance Every owner needs an off-ramp 43

44 Contractor Engineer) Cost Model Timeline - DBB Lump Sum Bid Design Definition Owner (Design 0% 30% 60% 90% 100% Cost Estimate Cost Update Cost UpdateBid Estimate 44

45 Advantages/Disadvantages - DBB Advantages Owner and contractor familiarity High level of owner control over design elements Project scope fully defined at commencement of construction Competitive bidding environment Procurement typically handled by owner s staff (no consultant) Disadvantages Sequential schedule Construction cost only determined at bid time (engineer s estimate along the way) Selection based on low bid from contractor (qualified?) No construction contractor input during design Greater potential for disputes and change orders Owner warrants design to contractor 45

46 Typical Applications/Reasons for Using DBB Typical Applications Well-defined, relatively straight-forward project Schedule is not a driver Pipeline projects Treatment facility replication upgrades without significant of unknowns anticipated Typical Reasons Delivery method that the owner is used to Confidence in pool of potential contractors Initial low cost is the most important criteria for selection Perception of cost competitiveness Complete owner control over the design is important Alternative delivery is not allowed or difficult to incorporate into procurement policies/procedures 46

47 Example Project (DBB) Los Osos Water Reclamation Facility San Luis Obisbo County (CA) New Greenfield WRF 0.8 MGD (Phase 1); 1.2 MGD (Buildout) Secondary Treatment + Tertiary Treatment 40 acre site Construction Cost: $30 Million Considered Using Design/Build Schedule Cost savings Owner wanted to gain experience with D/B D/B innovation in selection of secondary treatment process Converted to DBB Schedule no longer a driver Owner selected secondary treatment process Confidence with preliminary design (limited design risk) Familiarity with traditional approach Cost competition most important 47

48 Comparison of D/B Approaches Fixed-Price D/B Price competition (lump sum bid) Price established at time of contract award Owner s involvement in design is limited after contract award Design/Builder is not involved in preliminary engineering Competitive procurement requires time/cost investment Progressive D/B Owner substantially involved in design phase Procurement of Design-Builder efficient and streamlined Price established after contract award Flexibility to design to budget Negotiating price can sometimes be challenging 48

49 Typical Applications/Reasons for Using JOC Typical Applications Commonly utilized for contracting the minor repair, rehabilitation, or alterations of facilities when the work is of a recurring nature but the delivery times, type and quantities of work are indefinite 49

50 Typical Applications/Reasons for Using D/B Typical Applications Projects that require contractor input during design Treatment facility upgrades requiring innovative ideas and design/construction flexibility Typical Reasons Schedule is a driver Controlling scope relative to budget is important Contractor innovation Contractor quality (qualifications-based selection) Single point of responsibility 50

51 Example Project - DBO Water Reclamation Facility Pima County (Tuscon, AZ) New Greenfield Water Reclamation Facility 32 mgd WRF Cost: $277 million NPV ($153 million for capital portion) Alternate Delivery Drivers Schedule Innovative Technology Allocation of Risk Schedule Procurement Strategy & Planning: ~24 to 30 months following master plan DBO Procurement: 12 months Project Delivery: 42 months (target) 15 Year Operation Contract with 5 Year Extension 51

52 Level of Control Level of Control Sub Criteria O&M Preferences Sustainability Contractor Quality Project Quality City Resources (Staffing) Description Will the City be able to implement their O&M preferences? Does the delivery method affect the ability to be incorporate project sustainability requirements? To what extent will the City be able to control selection of contractor? How does the delivery method impact the quality of the project including opportunities for innovation in design, construction, and project delivery? How does the procurement method impact the City s staffing needs? 52

53 Schedule Schedule Sub Criteria Implementation Duration Construction & Operational Flexibility Description How does delivery method impact project implementation schedule/project duration? Does the delivery method readily allow for changes to the project if operational or construction improvements are identified; or unknowns require adjustments 53

54 Cost Cost Sub Criteria Cost Competitiveness Cash Flow Cost Certainty Market and Industry Viability Description Will the delivery method produce a project cost that is within the range of costs for other methods of delivery? Are the cash flow requirements of the delivery method consistent with the City s financial plans and funding level? Will the delivery method provide cost certainty that can be determined early in the development of the project and how soon? Are the market and industry conditions such that the delivery method would result in a process that is competitive? 54

55 Risk Allocation Risk Allocation Sub Criteria Description Project Size & Complexity Impact on Public Legislative & Legal Contractual Regulatory Compliance Right-of-Way & Environmental Permitting Control Does the project s size and complexity provide an opportunity to realize the advantages associated with a delivery method? Will the delivery method result in a project that will reduce or minimize impact to the public? Does the City have the necessary State and Local authorizations to utilize the delivery method? How does the delivery method allocate risk and is it in a manner acceptable to the City? Does the delivery method impact the City s ability to comply with regulatory and permitting requirements that will be imposed on the project? Will timing for acquisition of right-of-way or environmental permits be impacted by the delivery method? 55