Project Delivery Approaches for

Wastewater Utilities in Minnesota

June 24, 2008

Metropolitan Council Environment Committee

Project Delivery OptionsDiscussion Topics

• Why consider alternate forms of project delivery?• Spectrum of available delivery options defined• Project characteristics that favor specific delivery

options

Traditional Design-Bid-Build Only Delivery Approach Formerly Allowed for Public Utilities

• Where traditional approaches are not required by legislation, alternative delivery approaches are often used to deliver major new construction

• Alternate forms of project delivery commonly used for construction ranging from residential housing to industrial processing plants and power generating facilities

• Minnesota state statutes specifically allow alternate delivery approaches for wastewater collection and treatment facilities

Drivers for Using Design-Build• Schedule (by far the most common reason)

– Regulatory compliance– Population growth– Derailed or otherwise delayed project

• Need for innovation/potential cost savings– Industry input on treatment process/technical solutions– Challenging problems that invite competitive solutions

• Avoiding low bid quality– Bad experience with poor quality contractors– Looking for a procurement method to select contractors on qualifications– Can be done with Design-Bid-Build also, but more difficult to implement

• Risk transfer, single point of responsibility– Specify the results, but not the way to get there– Design-Build-Operate most comprehensive risk transfer approach

Basic Project Delivery OptionsDesign-Bid-Build

(DBB)

Lump SumDesign-Build

(LS)

Traditional Delivery Design-Build or “Alternate” Delivery

Design-Bid-Build Procurement

•Defined, proven process•Distinct milestones to ensure expected results•Project components defined in detail•Traditional “cast” of participants

Plan Project

Procure Engineering/ Design Consultant -selection based on qualifications, technical approach

Engineering/Design

Review/Approve Design

Bid Construction Project -selection based on price (with exceptions)

Construction Oversight Operate

Construction Services

Construction Warranty

Startup

Owner

Consulting EngineerGeneral Contractor

Lump Sum Design-Build Procurement• Many “flavors” - two-phase procurement most common• Variable milestones depending on the project• Performance requirements defined in detail• Somewhat different “cast” of participants

Design, Build, Startup

Verify Design Operations

Warranty

Project Support

Plan Project

Solicit qualified teams-short list qualifications based on capability, capacity, experience, references

Design Concept/RFP

Review Quals

Select short list and Issue RFP-defines performance criteria

Proposal Period

Select from short-listed teams-selection based on “best value” (technical + price)

Preliminary Design

RFP Clarifications

Owner

Owner’s AdvisorDesign-Builder

Quals

Key Comparisons Between Traditional and Design-Build Approaches

Traditional Design-Bid-Build• Owner controls most

aspects of design detail...discrepancies become change orders

• Multiple procurements• Quals for engineers, price for

contractors• Multiple contracts/points of

contact among designers, contractors

Design-Build• Owner controls performance

criteria, but not design detail...and is not responsible for discrepancies

• One procurement, many phases • Qualifications, then combination

of technical and price (“best value”)

• Single contract/single point of accountability

Key Comparisons Between Traditional and Design-Build Approaches

Traditional Design-Bid-Build• Standardized selection process• Specifications-based

requirements• Others?

– Collaboration - limited to design period

– Innovation – design function– Schedule - constrained– Price – low bid– Quality – not typically a factor in

contractor selection

Design-Build• Each procurement unique

• Performance-based requirements

• Others?– Collaboration – can include

Contractor– Innovation – team function– Schedule - potentially faster– Price – “best value” proposition– Quality – typically part of selection

criteria

Expanded Project Delivery OptionsDesign-Bid-Build

(DBB)

Construction Management at

Risk (CM@Risk)

Lump SumDesign-Build

(LS)

“Progressive”Design-Build

(GMP)

Design-Build- Operate

(DBO)

Traditional Delivery Design-Build or “Alternate” Delivery

• “Design-Build Lite”• Early involvement

by Contractor during design

• Maximum opportunity to collaborate on design

• Owners have an “off-ramp” if they don’t agree with GMP

• Cost guarantee extends to operations

• Comprehensive risk transfer

• Option for Owner to operate

What Types of Projects Fit theDesign-Build Model?

• Numerous variations, continuously evolving• Variable milestones depending on the project• Manages to unknown challenges through risk allocation

Design, Build, Startup

Verify Design Operations

Warranty

Project Support

Plan Project

Solicit qualified teams-short list based on capability, capacity, experience, references

Design Concept/RFP

Review Quals

Issue RFP-defines performance criteria; variable level of design

Proposal Period

Select from short-listed teams-selection based on “best value” (technical + price)

Preliminary Design

RFP Clarifications

Issue: ScheduleHow can the procurement process be varied if schedule is critical?

Issue: ScheduleHow can the procurement process be varied if schedule is critical?

Issue: Design EffortHow much pre-design is required to ensure you get what you want (versus performance specifications)?

Issue: Design EffortHow much pre-design is required to ensure you get what you want (versus performance specifications)?

Issue: Selection CriteriaWhat criteria are important to success? What’s the best indicator of future performance?

Issue: Selection CriteriaWhat criteria are important to success? What’s the best indicator of future performance?

Issue: PriceHow do you evaluate proposals beyond price? Does low price always win?

Issue: PriceHow do you evaluate proposals beyond price? Does low price always win?

Issue: Design ApprovalsHow much oversight of design should you have?

Issue: Design ApprovalsHow much oversight of design should you have?

Issue: Risk SharingHow are risks best shared?

Issue: Risk SharingHow are risks best shared?

Issue: QualityHow do you ensure quality?

Issue: QualityHow do you ensure quality?

Issue: ScopeWhat elements of the projects should be DB versus traditional delivery?

Issue: ScopeWhat elements of the projects should be DB versus traditional delivery?

Issue: ScheduleHow can the procurement process be varied if schedule is critical?

Issue: ScheduleHow can the procurement process be varied if schedule is critical?

Issue: Design EffortHow much pre-design is required to ensure you get what you want (versus performance specifications)?

Issue: Design EffortHow much pre-design is required to ensure you get what you want (versus performance specifications)?

Issue: Selection CriteriaWhat criteria are important to success? What’s the best indicator of future performance?

Issue: Selection CriteriaWhat criteria are important to success? What’s the best indicator of future performance?

Issue: PriceHow do you evaluate proposals beyond price? Does low price always win?

Issue: PriceHow do you evaluate proposals beyond price? Does low price always win?

Issue: Design ApprovalsHow much oversight of design should you have?

Issue: Design ApprovalsHow much oversight of design should you have?

Issue: Risk SharingHow are risks best shared?

Issue: Risk SharingHow are risks best shared?

Issue: QualityHow do you ensure quality?

Issue: QualityHow do you ensure quality?

Issue: ScopeWhat elements of the projects should be DB versus traditional delivery?

Issue: ScopeWhat elements of the projects should be DB versus traditional delivery?

Issues:ScheduleHow can the procurement process be varied if schedule is critical?Selection CriteriaWhat criteria are important to success? What’s the best indicator of future performance?Design EffortHow much pre-design is required to ensure you get what you want (versus performance specifications)?PriceHow do you evaluate proposals beyond price? Does low price always win?ScopeWhat elements of the projects should be DB versus traditional delivery?Design ApprovalsHow much oversight of design should you have?Risk SharingHow are risks best shared?QualityHow do you ensure quality?

The Challenge: Match Delivery Approach to Owner Needs and Preferences

Control/Risk AllocationControl/Risk Allocation

Cost/CompetitionCost/Competition

TimeTime

Quality/InnovationQuality/Innovation

Best Delivery Option is Project Specific

• Interceptors– New sewers highly dependent

on land acquisition – traditional approach often works best

– Sewer rehabilitation or replacement does not involve land issues – good opportunity for D/B

• Treatment Plants– Greenfield process or new

plants offer opportunity for process innovation, operating cost considerations – D/B or D/B/O could be good choice

– Plant rehab or expansion that requires close coordination with existing processes – traditional approach usually best.

Also consider the capacity and capability of the local marketplace

Questions?