Alternative Quality Management Systems for Highway Construction (2015)

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CHAPTER 3 : QUALITY ASSURANCE ORGANIZATIONS 3.1 Introduction Quality Assurance Organizations (QAOs) in the highway industry have been evolving since the 1960s. They have moved from a recipe of prescriptive quality specifications, to developments in materials inspections and testing, implementation of statistical process control (SPC), and ultimately towards performance-based quality management (Hughes 2005; Smith 1998; Halstead 1979). While the bulk of the research, innovations, and strategies of highway project quality acceptance have been focused on the construction phase of the project (Hughes 2005; Halstead 1979), there is recognition that design has to be an integral part of the discussion of highway project quality (Burati Jr. 1992). The importance of including design into the QAO has been made increasingly evident due to introduction of alternative delivery methods and changing philosophies about the use of consultants in roles historically filled by transportation agency staff. In practice, highway projects QAOs have been adjusting to the needs of the alternative delivery methods and other changing conditions on a project-by-project basis. This chapter provides guidance for development of QAOs on future projects by identifying a set of fundamental QAOs and a proposed approach for applying each. Five QAOs have been developed through a triangulation of literature review, contract document analysis and case study evaluation, yielding a consistent and efficient approach to QAO planning in the highway sector. 3.2 Methodology Identification of the five QAO models consisted of three distinct phases. A thorough literature review and national survey were used to identify a theoretical framework with 14 potential QAOs. The second phase employed a content analysis of 66 contract and policy documents to identify the QAO’s that are currently in use by industry. The QAOs identified in phases one and two were analyzed based on the agency’s quality roles and responsibilities within each QAO. If the agency shared a role, directly contracted the role out to an independent firm, or had sole responsibility, it was considered an agency project quality role and responsibility. Many of the initially identified QAOs were variations of the fundamental QAOs, depending on how the agency performed the role and/or if the non-agency quality roles and responsibilities were contracted to a single party or multiple parties. These variants were consolidated into five fundamental models. The five fundamental QAOs presented that follow are based on agency roles for the traditional and three of the most common alternative project delivery methods: DB, CMGC and PPP. 70

3.3 Quality Assurance Organization (QAO) Presentation Each QAO is graphically represented using the generic QAO framework, shown in Figure 3-1. The generic framework shows all of the project quality roles, their relationships, and the surrounding project quality activities. The generic framework includes both design and construction. Design quality has not been traditionally included in highway QA discussions, but is required for the alternative delivery methods that are becoming prevalent in the industry. A dotted line is used to indicate whether the agency, contractor, designer, concessionaire, or design builder is responsible for each project quality role. Items above a dotted line are the responsibility of the agency. A vertical dotted line below a horizontal dotted line separates the responsibilities between the designer and the contractor. Project Acceptance Construction Acceptance Design Acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Quality Assurance Designer’s Responsibility Owner’s Responsibility Constructor’s Responsibility Owner’s Responsibility Independent Assurance (if req’d) - functional audit -physical audit Independent Assurance (if req’d) - functional audit -physical audit Figure 3-1 – Generic Quality Assurance Organization (QAO) Model 71

3.4 Fundamental Highway QAOs The five fundamental QAOs for the highway construction and design industry identified by this research are listed below:  Deterministic – The traditional approach to quality within the highway industry. The agency retains all project quality roles, responsibilities and activities.  Assurance – The agency is responsible for all aspects of the quality except for design and construction QC.  Variable – Design and construction take different approaches to quality. For example, the STA may assign both design phase QC and acceptance to an outside party, while the construction phase QC only may be assigned to an outside party. This approach was found on DB projects.  Oversight – the agency takes on an oversight role by assigning design QC, design acceptance, construction QC and construction acceptance to outside parties.  Acceptance – The agency is responsible for verification testing and final acceptance. All other quality roles and responsibilities are assigned to the concessionaire. This approach was found only in PPP arrangements. Figure 3-2 shows a summary of the five QAOs in respect to both the level of agency control and the approach to quality management. There are two distinct approaches to managing quality: reactive and proactive. The reactive approach aims to detect and correct existing problems, “in other words, the designer of a product/process/service incorporates a system of checks and measures that serves to isolate and catch defects as and when they occur. By their very nature, reactive quality assurance strategies are better suited to identify problems and resolve them and as such are clearly defensive in nature” (Desai and Mital 2009) . The reactive approach inspects the quality into the final product. Conversely, the proactive approach to managing quality aims at preventing problems, defects and/or errors before they occur. The proactive approach provides the project team with Figure 3-2 – Fundamental highway industry QAOs based on approach to control and quality Deterministic Assurance Variable Oversight Acceptance Approach to Quality Reactive Proactive High Low Level of Agency control over quality 72

the ability to build quality into the final product beginning at the design stage instead of inspecting it at a later stage. (Desai and Mital 2009) The sections that follow present each of the five QAOs with a description of the assignment of the roles and responsibilities, the approach to managing quality, the applicable project delivery methods, and the existing variations on the fundamental QAO. The description of the assignment of the roles and responsibilities clearly identifies the team member responsible for each task. It also discusses the level of owner control for that QAO. The approach to quality indicates if the QAO results in a reactive or proactive approach to quality. The discussion identifies the project delivery methods where the QAO has been implemented in the industry as well as the feasibility of the application of the QAO to other project delivery methods. Lastly, the discussion identifies the variations of the QAO. 3.4.1 Deterministic The Deterministic quality management organization, as shown in Figure 3-3, is the traditional quality organization on highway construction projects and the primary parties of STA, designer and contractor understand this QAO well. The agency’s roles in the Deterministic QAO include design QC, design acceptance, and construction acceptance. The agency can use third party consultants to perform any of their roles, but the agency is ultimately responsible for ensuring these roles are successfully completed on the project. The STA provides guidelines to the contractor as to possible necessary tests and inspections appropriate for the project, but the contractor is responsible for creating the construction QC plan. “The STA’s role is to approve the QC program, monitor contractor procedures, test results, perform independent tests and determine acceptance” (Smith 1998). Project acceptance is not required because the agency is responsible for all quality acceptance (design and construction) on the project. The Deterministic QAO represents the baseline for alternative QAO discussions and comparisons for the remainder of this paper. Because of the controlling role of the owner in the deterministic this organization, it is considered a reactive approach to quality (Postma et al. 2002). In this QAO, the agency develops the designs, specifies the materials to be used, and watches over the construction (Gransberg et al. 2008). In the Deterministic QAO, “the contractor works within a very controlled environment like that in a method specification project. Assurance, using method specifications is based on the owner having complete control of the process and enumeration of contractor means and methods. Detailed owner-directed inspection is the primary control process and final acceptance of the work is essentially automatic” (Smith 1998). 73

Project Acceptance Construction Acceptance Design Acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Quality Assurance Designer’s Responsibility Owner’s Responsibility Constructor’s Responsibility Owner’s Responsibility Independent Assurance (if req’d) - functional audit -physical audit Independent Assurance (if req’d) - functional audit -physical audit Figure 3-3 – Deterministic QAO The lack of any sort of collaboration in the Deterministic approach contributes to the frequently contentious relationship between the owner and the contractor. This adversarial relationship is so pronounced that the Deterministic QAO is sometimes referred to as the “catch and punish” method (Postma et al. 2002). There is no place for collaboration because the contractor and the designer have no input in the acceptance of their own product, they are merely responding to what the agency dictates within the RFP, plans, specifications, and bidding documents. Difficulties can arise when there are conflicts because the quality expectations are not explicitly called out by the bidding documents and/or when contract change orders are needed. The Deterministic QAO implementation commonly occurs on DBB projects, especially when the STA internally performs the design, rather than outsourcing the design to a consultant. Gransberg and Shane (2010) concluded that the quality systems used in DBB pertain to CMGC because the owner still occupies the same contractual position with respect to the designer and builder (Gransberg and Shane 2010). The Deterministic QAO would be most appropriately 74

applied to CMGC if the scope of preconstruction work for the contractor was limited to items not directly relating to the design: cost estimates and project scheduling. In contrast, the Deterministic QAO is not well suited for a DB project. This is because one of the benefits of the DB delivery method is that the agency can transfer some of the risks associated with the quality of design and construction, which requires a shift in authority for each of these tasks. Applying the Deterministic QAO to a DB project would mean the agency would retain the quality authority for design and construction which no longer allows the design builder to manage and assume the risks associated with those tasks (Gransberg et al. 2008). 3.4.2 Assurance In the Assurance QAO, the agency has the responsibility for acceptance in design and construction and the decisions to release the design for construction and to release construction for final payment. These responsibilities can be performed in-house or by an independent consultant/engineer. Designer’s Responsibility Owner’s Responsibility Constructor’s Responsibility Owner’s Responsibility Project Acceptance Construction Acceptance Design Acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Independent Assurance (if req’d) - functional audit -physical audit Quality Assurance Independent Assurance (if req’d) - functional audit -physical audit Figure 3-4 – Assurance QAO 75

Figure 3-4 graphically depicts the Assurance QAO as applied to a dual contract project (separate contracts for the designer and the contractor). The designer and the contractor are responsible for performing QC of their respective fields. Because the agency is still responsible for all quality acceptance on the project, project acceptance is not necessary. While the contractor and the designer are perform their own QC, typically the agency will perform independent assurance and testing to verify the QC tests results (Gransberg et al. 2008). The Assurance QAO is a small step beyond the Deterministic QAO. Because the agency is still responsible for all design and construction quality acceptance on the project without input from either the designer or contractor, the owner still has a very controlling role in the project. The quality responsibilities have not shifted very far from the Deterministic method and there is still a focus on inspections and materials testing as the way to assure quality, rather than an emphasis on building quality in. Additionally, because the owner is so heavily involved in dictating the quality of the project, the designer and the contractor have minimal accountability for quality. The high level of agency control over the quality on the project also prohibits collaboration between the agency and the designer and contractor regarding quality. The lack of collaboration along with the strong emphasis on assuring quality through inspections of the final products makes the Assurance QAO a reactive approach to quality. The Assurance QAO has been applied to both DBB and DB projects. When applied to DBB projects as shown in Figure 3-4, everything above the dotted line is the agency’s responsibility and the vertical dotted line represents the separate design and construction contracts. When applied to the DB delivery method, with a single contract for design and construction, all QC activities are the responsibilities of the design builder, as shown in Figure 3-5. Gransberg et al. (2008) speculated on reasons this method would be applied to DB projects. They suggested that agencies, which have limited experience with the DB method, apply quality management policies and procedures that are still evolving from the DBB method where the contractor controls construction QC and the STA has control over all QA functions and over design QC (Gransberg et al. 2008). Design Quality Control Construction Quality Control Construction Quality Assurance Design Quality Assurance Design Builder’s Responsibility Figure 3-5 – Assurance QAO, single contract 76

Another variation on the Assurance QAO used DB projects is the shared variation. This variation shares the responsibilities for design acceptance and construction acceptance between the owner and the design builder, shown in Figure 3-6. This organization still falls into the Assurance QAO because the owner still has a role in the assurance on the project and as a result, no project acceptance is necessary. When sharing roles between stakeholders on a project, it is critical that a clear identification of all roles in the shared task are specifically addressed and assigned to prevent confusion on the project. The shared variation of the Assurance QAO could also be applied to the CMGC delivery method but the contractor would be responsible for construction acceptance and the designer would be responsible for design acceptance. Design Quality Control Construction Quality Control Design Builder’s Responsibility Construction Acceptance Design Acceptance Figure 3-6 – Assurance QAO, shared assurance variation 3.4.3 Variable The Variable QAO differs from the four others because it is described by the function of the model rather than by the role of the agency. The defining characteristic of the Variable QAO is that the approach to quality between design and construction is different. An example of this method has been found on a DB project when the agency is responsible for the construction acceptance but not design acceptance, as shown in Figure 3-7. Because the agency is no longer responsible for design acceptance, the agency must perform project acceptance on the design side of the project (Gransberg et al. 2008). As a result, the design phase of the project is considered to be a proactive approach to quality. On the construction side however, the agency still maintains control of construction acceptance, resulting in a reactive approach to quality on the construction side. For the DB example considered in Figure 3-7, the agency is taking a different approach to quality on the design phase from the construction phase. This results in implementing two different approaches to quality across not only the agency but also the design builder, which can complicate attempts at creating continuity across the project. 77

Project Acceptance Construction Acceptance Design Acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Independent Assurance (if req’d) - functional audit -physical audit Quality Assurance Independent Assurance (if req’d) - functional audit -physical audit Constructor’s Responsibility Owner’s Responsibility Designer’s Responsibility Owner’s Responsibility Figure 3-7 – Variable QAO, construction assurance single contract The Variable QAO is a mixed approach to quality between the design and the construction phases. Figure 3-8 illustrates another variation on this QAO. Here, the STA has the responsibility for design acceptance, and is not responsible for the construction acceptance or construction QC. In this case, the design phase of the project is a reactive approach to quality and the construction phase is a proactive approach requiring the owner to perform project acceptance for construction activities. Again, this version of the Variable QAO has a mixed approach to quality between the design and construction phases, complicating efforts to have a single quality philosophy across the entire project. A critical element of a proactive approach to quality and successfully shedding the acceptance responsibility from the agency is the agency’s identification of the quality requirements to be included in the RFP. Agencies must provide enough guidance so that respondents can include the appropriate services and approach to quality in their proposals (Gransberg et al. 2008). While this arrangement requires fewer agency resources over the duration of the project, these 78

resources must then be focused on the quality requirements within the contract not on the detailed technical details of the project. While the variation in Figure 3-8 results in a proactive approach to construction quality, it results in a reactive approach to design quality by the agency maintaining control of the design acceptance function. The reactive approach forces the agency to focus on the testing and inspections required to perform design acceptance. This requires the traditional skills possessed by a transportation agency, focused on checking all the technical details of the project. The Variable QAO can be difficult for an agency to manage because the project team must have the abilities to manage both proactive and reactive quality approaches within one team. Design Quality Control Construction Quality Control Construction Acceptance Design Acceptance Design Builder’s Responsibility Figure 3-8 – Variable QAO, design assurance variation single contract As with the previous model, the last variation of the Variable QAO that would be feasible also occurs when the design phase quality management is reactive and the construction phase is proactive. In this case, the agency is responsible for both design acceptance and design QC, while the contractor/design-builder is responsible for construction acceptance and construction QC. This variation is shown in Figure 3-9. This organization has not occurred in industry at this point, but it does still possess the mixed approach to quality between design and construction phases, so it is a valid variation of the organization. The reverse of this variation, in which the agency is responsible for construction acceptance and QC while the designer is responsible for design acceptance and QC, would not occur because construction QC always resides with the contractor. 79

Design Quality Control Construction Quality Control Construction Acceptance Design Acceptance Design Builder’s Responsibility Figure 3-9 – Variable QAO, agency has complete design quality responsibility The Variable QAO construction assurance variation has been implemented on Design-Build projects as shown in Figure 3-7. Currently there are no examples from the data showing that the design assurance variation is in use in the industry. No examples have been found of this variation of the Variable QAO being applied to either DBB or CMGC projects; however, there is nothing within the variation itself, which would prevent it from being implemented on a dual contract (DBB or CMGC) project. 3.4.4 Oversight In the Oversight Quality Assurance Organization, shown in Figure 3-10, the agency is responsible for the decisions to release the designs for construction and to release construction for final payment. The designer is responsible for design acceptance and design QC, while the contractor is responsible for construction acceptance and construction QC. Because the agency does not have any responsibility for the design or construction acceptance, it is responsible for performing project acceptance. In the Oversight QAO the agency no longer has direct control over the day-to-day quality management of the project and is no longer dictating how to produce the quality required by the project; rather the agency’s role is to ensure that both the designer and contractor quality management plans are effective at meeting the agency’s quality requirements stipulated in the contract and that the plans are being implemented. 80

Project Acceptance Construction Acceptance Design Acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Independent Assurance (if req’d) - functional audit -physical audit Quality Assurance Independent Assurance (if req’d) - functional audit -physical audit Constructor’s Responsibility Designer’s Responsibility Owner’s Responsibility Owner’s Responsibility Figure 3-10 – Oversight QAO The Oversight QAO is a proactive approach to quality, at least as far as the agency’s role in quality is concerned. The producers, the designer and the contractor, are responsible for all aspects of the quality for the products that they produce for the agency. The Agency’s primary responsibility in the Oversight Organization is oversight of the quality of the project, which is conducted through project acceptance. The agency can conduct project acceptance either with in-house staff or with an independent quality firm contracted directly to the agency. To perform the project acceptance role in-house effectively, the agency will have to teach its staff the different skill set required to be successful. The designer and contractor’s approach to quality does not have to be proactive, unless required by the agency’s contract. The designer and/or contractor can create a quality acceptance plan in which their approach to managing quality is reactive (focused on inspecting final product rather than finding the defects before they are implemented). Either way, designers and contractors have not historically had much responsibility for the acceptance aspects of a project and may need specific acceptance training 81

to learn how to perform this function. While the agency always ultimately has the risk for quality on a project, in the Oversight QAO, quality risk shifts to the designer and the contractor. Shifting the risk results in both the designer and contractor having to “buy-in” into the quality assurance of the project because they are each responsible for creating their respective quality acceptance plans which ensure that the quality goals and requirements of the project are met. Because the Oversight QAO shifts the responsibility for acceptance to the designer and the contractor, the level of integration between the agency, designer and contractor increases and requires a higher level of collaboration among the three in order to meet the quality requirements for all parties. In this QAO, all parties are involved in the quality management of the project and the designer and contractor have contractual accountability for not only the quality of the final product that they deliver to the agency, but also the actual processes of delivering that product. Because of the high level of collaboration required by the Oversight QAO, it would be difficult to implement on a project with a linear approach where the designer and the contractor are not involved early in the project; as a result, the Oversight QAO would not be a good choice for a DBB project. However, in project delivery methods when the designer and contractor are brought in early on a project, such as DB and CMGC, the Oversight organization would be complimentary to the collaborative nature of these methods. In a design-build project, all acceptance and QC for the project would fall to the design-builder, as shown in Figure 3-11. Design Quality Control Construction Quality Control Construction Quality Assurance Design Quality Assurance Design Builder’s Responsibility Figure 3-11 – Oversight QAO, single Contract Variation 3.4.5 Acceptance The Acceptance QAO is specific to PPP projects. In this organization, the owner only has responsibility for final project acceptance and owner verification testing while the party contracted to complete the project is responsible for all other quality responsibilities on the project as shown in Figure 3-12. Since the agency is no longer providing 100% of the financing 82

for design, construction, operations, and maintenance, there is a shift in financial liabilities, which also pertains to the shift of the quality responsibilities (Gransberg et al. 2008). Since the United States has not fully embraced the PPP delivery method, there were limited projects to include in this research. The Acceptance QAO is based on several Texas DOT projects that are using the PPP delivery method. There are some variations of the PPP method across the globe, but because they are not implemented within the business environment of the United States, they were not included in the document review, or the survey responses. Project Acceptance Construction Acceptance Design acceptance Design Quality Control Construction Quality Control Design Released for Construction Construction Released for Final Payment Independent Assurance (if req’d) - functional audit -physical audit Quality Assurance Independent Assurance (if req’d) - functional audit -physical audit Owner’s Responsibility Concessionaires’s Responsibility Owner Verification Figure 3-12 – Acceptance QAO Out of the all project QAOs, the agency has the least amount of direct control over the QM of the project in the Acceptance QAO. The agency’s primary focus, as required by FHWA Technical Advisory 6120.3, is to perform design and construction quality oversight to satisfy their legal responsibilities to the public (Gransberg et al. 2008). This requires the agency to perform owner verification testing commonly performed by an independent engineer. The independent engineer 83

is hired jointly by the concessionaire and the agency to perform not only owner verification testing but also independent assurance and any other quality acceptance activities that are now part of the concessionaire’s responsibility, but the agency pays for 100% of owner verification testing. Notice that even the decision of accepting design for construction and accepting construction for final payment is a responsibility of the concessionaire due to the financial liability of the concessionaire to correct any design or construction deficiencies during the operations and maintenance period (Gransberg et al. 2008). Because the agency’s involvement in the quality of the project is establishing the quality requirements, approving submitted quality management plans and ensuring that quality plans are being implemented, the Acceptance QAO is a proactive approach to quality management. The agency will have some oversight responsibilities to meet the due diligence requirements for federal funding, but these responsibilities are not considered to dominate the overall quality management of the project. This oversight is usually conducted through agency verification by either in-house staff or an independent engineering consultant contracted to the agency. The designer, contractor and/or concessionaire create the quality plans required by the contract and as long as they meet the requirements of the contract, the agency approves them. In the Acceptance approach, succinctly stating the quality requirements in the contract with the project team is the primary responsibility of the agency for creating successful quality on the project. Collaboration for the Acceptance QAO is low because after stating the quality requirements within the contract documents for the Concessionaire, the agency is minimally involved in the project. As a result the meeting the quality requirements for the project is placed in the hands of the concessionaire, while the agency performs enough of an oversight role to ensure that they are meeting the federal requirements for due diligence and making sure the concessionaire is following their own project quality management plan 3.5 Summary The quality roles and responsibilities on a project are shifting on highway projects due to the use of different project delivery methods, the needs of the industry for faster and better projects, and the growing acceptance of the utilization of consultants by STAs. The five fundamental QAOs for the highway design and construction industry range from the agency having sole responsible for all quality functions except construction QC, to the agency only being responsible for final acceptance and meeting federal requirements. Table 3-1 summarizes the roles and responsibilities of the five QAOs. When DB is the project delivery method, all of the non- agency quality responsibilities become the responsibility of the design-builder. The Acceptance QAO has only been found in PPP projects, so the concessionaire is the party performing all non- agency quality roles and responsibilities. 84

Table 3-1 – Roles and responsibilities of the five fundamental QAOs Quality Assurance Organization Design Acceptance Design QC Construction Acceptance Construction QC Deterministic Agency Agency Agency Contractor Assurance Agency Designer Agency Contractor Variable Designer Designer Agency Contractor Oversight Designer Designer Contractor Contractor Acceptance Concessionaire Concessionaire Concessionaire Concessionaire Further investigation of each of the organizations was conducted to identify the approach to quality, the level of owner control, and the delivery methods for which it is applicable. The approach to quality was expressed as reactive, heavily focused on final product inspections; or proactive, building quality into the process. The level of owner control was expressed as high, medium, or low. It was found that as the level of owner control moved from high to low, the approach to quality moved from reactive to proactive. Lastly, the applicable delivery methods were identified. These were identified through actual examples in industry or if the QAO could align with the project delivery method based on the timing of the parties’ involvement, the level of collaboration involved in the QAO, and the level of owner control. A summary of all of these results is shown in table 3-2. Table 3-2 – Characteristics of the five fundamental quality assurance organizations Quality Assurance Organizations Quality management approach Level of owner control Identified delivery methods Potential delivery methods Example States and Agencies using QAO Deterministic Reactive High DBB, CMGC None All Assurance Reactive High DB CMGC, DBB NM, SD, LA, MS, NC, AK, FL Variable Mixed Medium DB CMGC NC, FL, MN, VA, UT, ME, CA Oversight Proactive Low DB CMGC CA, CO, MN, MO, NV, OR, TX, UT, VA, WA, WASH DC, FHWA Eastern Federal Lands Highway Diversion, Alberta Canada Acceptance Proactive Low PPP None TX, FL 85

During the reduction process there were some common traits/factors observed among all of the QAO models. 1. Construction QC is the responsibility of the contractor. “The contractor is, as is any manufacturer, the only one who can control the quality of his work.” (Shilstone 1992) 2. Project quality acceptance is always performed by the agency. 3. Final project acceptance is always performed by the agency. 4. The contract verbiage regarding the roles and responsibilities for quality has to be very concise and documented to be successful. 5. The decision as to the QAO of a project has to be determined at the time of the first request for proposal, whether it is design, construction, or both at the same time. The quality management responsibilities have to be clearly laid out in the Request for Proposals in order for the designer and/or the contractor to be able to appropriately provide for the amount of risk they will be assuming on the project. 86