Is It Time for Design-Build?

Transcription

1 Is It Time for Design-Build? NASTT Pacific NW Chapter January 24, 2013 John Parnass Davis Wright Tremaine LLP Seattle, Washington

2 Where Are We Now? Trenchless market still dominated in Washington by traditional design-bid-build build Not aware of any public sector projects using this method for small diameter trenchless Construction industry generally moving in direction of D/B and alternatives: Best value GC/CM Integrated Project Delivery

3 Yes, Design Build Is An Option Every owner, regardless of size, can use DB if permission obtained from CPARB Must meet certain criteria (RCW ) Substantial fiscal benefit (or lump sum bidding not practical) Qualified team assembled by owner, Project value greater than $10 million, and One of the following: Highly specialized Design is repetitive in nature, or Regular interaction with end user not critical for effective design

4 Design Build Selection(RCW ) Issue RFQ Cost / price not considered at this phase Select qualified firms finalists Issue RFP to finalists Describe project requirements in detail Provide target budget May but need not provide preliminary drawings Score and evaluate proposals Award contract after negotiations with firm submitting highest scored proposal

5 Design-Build Pros and Cons Pros Single point of responsibility More complete risk transfer Allowance for incentive payments Best utilized for projects where routine functionality is key (i.e., road or prison vs. custom sports stadium) Cons Loss of control over final design Potential need for bridging documents Current lack of market expertise Trenchless is well suited to Design Build Few owners really care how it looks Loss of design control OK as long as key performance parameters met

6 Normal Approach to Subsurface Risk Owner is said to own the risk of subsurface conditions, subject to risk allocation clauses in Contract Typical risk allocation concepts/rules: Differing Site Conditions (DSC) Clause Geotechnical Baselines Specifications Failure to disclose/withholding critical information High rate of MTBM claims in Washington since first MTBM project in 1993: 43 projects total More than 50% major claim rate Potential for Design Build model to mitigate this occurrence

7 Issues for Trenchless Projects Many open/evolving issues, for example: Preliminary Geotechnical Information Should owner conduct? If so, for what purpose? Geotechnical Reports Who forms baselines? How and when are they written? Differing Site Condition Liabilities Who owns the risk? D/B risk transfer v. traditional owner owns the ground risk clash How to price this risk if transferred to D-B team? Should you even include a DSC clause?

8 Three Potential Approaches Pure Design/Build No preliminary geotech investigation by owner Contractor 100% responsible for investigation and subsurface risk Modified Design/Build i Limited geotech investigation by owner Data presented without vouching for accuracy, Contractor required to conduct full investigation Collaborative GBR Full normal geotech investigation by owner, followed by negotiated baselines through collaborative approach

9 Pure Design/Build Provide no subsurface data or baseline Require proposers to conduct investigation before and after proposal and assume 100% risk Most consistent with D/B in theory but potentially not feasible in all cases if: Proposers don t have easement access for drill rigs Proposers use different drill rigs or different assumptions Proposers can t develop a proposal price based on available data WA law currently requires price to be included with proposal

10 Modified Design/Build Is being used by various owners Give bidders enough information on which h to base bids, but then require contractor to assume 100% responsibility for completing the investigation and selecting construction methods suitable for the actual conditions This approach can work fine for both sides, but the following two cases illustrate that it won t necessarily eliminate the risk of dispute

11 Pitt Des Moines v. U.S. (1996) FACTS RFP to build large (900, g) tank RFP contained 4 drawings of work area, including Building 5 Bidder concluded Building 5 wall thickness was 14 based on pre-proposal investigation Navy (owner) had knowledge that 14 thickness was wrong but didn t disclose Bidder submitted technical/cost proposal using 28 auger cast piles for Building 5 wall support system Navy awarded fixed price D/B contract with 2 phases (1) design and (2) installation

12 Pitt Des Moines v. U.S. (1996)(cont d) After award, contractor discovered walls were much thicker/heavier had to modify design to 48 auger piles plus ground freezing Claimed for $1.13 million extra costs Navy argued that the contractor failed to conduct adequate post-award design investigation, and claim should be rejected RULINGS Court split the baby First, it held that contractor was misled by Navy s preproposal lack of disclosure

13 Pitt Des Moines v. U.S. (1996) (cont d) But the Court also held that contractor did not perform reasonable post-award investigation in its capacity as the design engineer under Phase 1 of the Contract Comments Using D/B method, in itself, didn t stop Court from applying superior knowledge doctrine If the Navy had not been sitting on adverse information, then the outcome would have been different In other words, the Court allowed the owner to shift the risk of post-award investigation to contractor and upheld the use of preliminary only disclaimer in the context of D/B

14 Metcalf Construction v. U.S. (2011) Navy D/B contract to build family housing units in Hawaii for $48 million Navy supplied a Soil Reconnaissance Report (SRR) to proposers stating slight expansion potential existed for soils, but that this was for preliminary information only RFP required successful awardee to conduct independent soils investigation After award, contractor t hired geotech who concluded d that soils had moderate to high swelling potential The expansive soils caused contractor to have to modify its building pad design and delayed the project

15 Metcalf Construction v. U.S. (2011) (cont d) Contractor argued it reasonably relied on the SRR and that for preliminary information only was an unenforceable disclaimer. It also relied on a pre-bid Q&A statement (i.e., departures from SRR will be dealt with by change order ) Navy argued contractor couldn t reasonably rely on SRR because of (1) preliminary only clause and (2) the Q&A response doesn t modify the contract unless put in writing which did not occur Court dismissed DSC claim, mainly based on RFP requirement that contractor conduct its own post- award geotech investigation

16 Collaborative GBR The ASCE GBR Guidelines (2007) suggest this approach: Owner prepares GBR for Bidding (GBR-B) B) with key baselines of anticipated i t physical conditions but with discrete sections of the report left blank Bidders interpret the baselines in the GBR-B, fill in the gaps and blanks in the GBR-B and present their own GBR for Construction (GBR-C) Owner reviews the GBR-C and negotiates revisions and clarifications After completed, the GBR-C supersedes the GBR-B Probably better suited, if at all, to large tunnel projects Presumes that Owner is fully liable for all ground conditions as in traditional lump sum, sealed bidding Potential traps for unwary in the GBR-C Modifications made by Bidder in GBR-C would generate claims prior to construction

17 The End Will the small diameter trenchless market evolve into DB and other alternatives the way the rest of the construction world is? Will that evolution be impaired by continuing to use concepts and contracts that are not suited to DB? The road ahead is promising for this model of contracting and it will be successful if intelligently and fairly planned.