Evaluation of Project Delivery Methods (2009)

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TCRP G-08 – Project Delivery Methods Chapter 1 - Overview CHAPTER 1 - OVERVIEW Introduction The objective of this research effort is to develop a guidebook to help transit agencies evaluate and choose the most appropriate project delivery method for their projects. The project delivery method (PDM) is the process by which a construction project is comprehensively designed and constructed for an owner including project scope definition, organization of designers, constructors and various consultants, sequencing of design and construction operations, execution of design and construction, and closeout and start-up. In some cases, the project delivery method may encompass operation and maintenance. Currently available project delivery methods have moved far beyond the traditional design-bid-build method. With the rapid change in procurement laws, public agencies now share the ability of their private sector counterparts to acquire construction services via alternative project delivery methods, such as construction management, design-build, and other hybrid systems which can include maintenance, operations, and/or warranties. This chapter presents the organization of this research report. The chapter will then review the steps envisaged in the original proposal and summarize the work accomplished during this effort. Another major deliverable of this effort is the Guidebook that is prepared separately but contains many parts of this final report. Specifically, Chapters 2, 5, 6, 7, and 8 of this final report are repeated in the guidebook. The guidebook was designed with the objective of developing an easy-to-use and practical tool for transit agencies to help them choose the most appropriate project delivery method (PDM). The guidebook is the deliverable that is going to be used by the practitioners. This final report on the other hand, while containing the essential elements of the guidebook, is prepared with the aim of demonstrating the research approach, the interview data and statistics, and the validation process used for testing the system. Research Plan and the Work Accomplished Figure 1.1 depicts an overview of the research plan as envisaged in the proposal. This plan closely follows the tasks identified in the RFP. Task descriptions below come from the TCRP Request for Proposal and are followed by a brief description of the work accomplished. Northeastern University The Research Report 3

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview Tasks 1 &2 – Data, case studies, industry workshop, interviews Tech Memo Task 3 – Critique pertinent issues Task 7 – Interim report Tasks 5 & 6 – Eval. of each method in the context of 3-tier app. Task 4 – The project delivery selection framework (3-tiered approach) Task 8 – Finalize Decision matrix Task 9 – Executive Summary, Guidebook and Final Report Panel Review Figure 1-1 - Overview of the Research Plan Task 1. Collect and review relevant literature, case studies, research findings, and other appropriate material, inside and outside of the transit industry. The team conducted a thorough literature search on the material relevant to project delivery methods, public transportation especially transit projects, and decision support systems. References cited in this report are presented in Appendix A. Appendix B, the bibliography, contains the sources that are relevant to this research. Many of the sources in the bibliography are annotated to facilitate the literature evaluation by the reader of this report. The results of this task’s literature review have been used in Tasks 2 and 3 to confirm findings from the structured interviews and identify trends in the pro/con analysis. Northeastern University The Research Report 4

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview Task 2. Identify agencies, suppliers, and individuals with experience in using the various project delivery and contracting methods. Prepare a plan for in-depth interviews that includes a list of proposed interviewees, a draft summary of pertinent interview issues, and an interview guide for project panel review and approval. Conduct in-depth interviews with those entities approved by the project panel. Produce a technical memorandum describing the findings and lessons learned. Based on the results of the literature review, the research team began to identify its case studies. The team was able to identify and gain access to information on nine projects worth more than $3.0 billion that represent the cross-section of delivery methods and are located across the United States (Table 1.1). The researchers used a rigorous structured interview methodology to develop three extensive questionnaires (for DBB, CMR, and DB projects) and submitted a sample to panel for comments. A copy of the questionnaire is presented in Appendix D. In each case the team members traveled to the transit agency and interviewed the project director and other appropriate personnel including the project’s contractor in some cases. The results of these structured interviews were reported in the Technical Memorandum that was envisaged in the original proposal. These results were corroborated with a workshop that was organized and conducted by the project team in Minneapolis as part of the DBIA Transportation conference in April 2007. Workshop participants represented owners, contractors, consultants, and attorneys. An important outcome of this task and the feedback from the workshop was the decision to focus the remainder of the research on four distinct project delivery methods: DBB, CMR, DB, and DBOM. Table 1-1 - Transit Projects Interviewed Case # Project Agency/Location Project Delivery Method 1 T-REX (Southeast Corridor Light Rail) Regional Transportation District/ Denver, CO Design-Build 2 Weber County Commuter Rail Utah Transit Agency/ Salt Lake City to Ogden, UT CM-at-Risk 3 University Line Utah Transit Agency/ Salt Lake City, UT Design- Build 4 Medical Center Extension Utah Transit Agency/ Salt Lake City, UT Design- Build 5 Greenbush Commuter Rail Massachusetts Bay Transportation Authority/ Boston, MA Design- Build 6 Hudson Bergen Light Rail New Jersey Transit Authority/ Hudson, NJ Design- Build- Operate-Maintain 7 Silver Line Project Massachusetts Bay Transportation Authority/ Boston, MA Design-Bid-Build Multi-Prime 8 Portland Mall Project TriMet/ Portland OR CM-at-Risk 9 I-205 Light Rail Extension Project TriMet/ Portland OR Design- Build Northeastern University The Research Report 5

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview A detailed report of these interviews is presented in two chapters in this report. Chapter 3 provides detailed statistics and qualitative data on all the interviewed projects. Chapter 4 presents a set of conclusions and lessons learned from the interviews and literature search. These lessons learned were later used in developing the 3-tier project delivery selection system. Task 3. Describe and critique pertinent issues related to each project delivery method in terms of its application to transit in the United States. As a separate effort, describe and critique pertinent issues related to contracting out operations and maintenance when the transit agency has determined to do so in the context of new construction projects. The original proposal contained a proposed listing of pertinent issues related to each project delivery method (Table 1.2). This list was augmented as a result of literature search and interviews. Each issue in this revised list was carefully evaluated and critiqued in relation to the four main project delivery methods, i.e., DBB, CMR, DB, DBOM. A concise set of advantages/disadvantages for each of these critical issues is included in this report in Chapter 5. These pertinent issues became the cornerstone of the project delivery selection system developed in this research project. Table 1-2 - Pertinent Issue Critique Matrix DBB CMR DB DB w/OM Issue Type Project Delivery Method Pro Con Pro Con Pro Con Pro Con Project- level Issues • Project Size • Risk management • Risk allocation • Schedule • Cost • LEED certification • Other Agency- level Issues • Agency experience • Staffing required • Staff capability • Agency goals & objectives • Agency control of project • Third party agreements • Other Northeastern University The Research Report 6

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview Northeastern University The Research Report 7 DBB CMR DB DB w/OM Issue Type Project Delivery Method Pro Con Pro Con Pro Con Pro Con Public Policy/ Regula- tory Issues • Competition • DBE/small business impact • Labor • Fed/State/ Local laws • FTA/EPA regs. • Stakeholder/ community input • Other Life Cycle Issues • Life cycle cost • Maintain- ability • Sustainable design goals • Sustainable construction • Other Other Issues • Construction Claims • Adversarial relationships • Other Task 4. Develop a framework and methodology for analyzing the advantages and disadvantages of the project delivery methods--both with and without contracting for operations and maintenance--for use by transit agencies in evaluating and selecting options. Task 5. Using the framework developed in Task 4, document, evaluate, and compare the merits of each respective type of project delivery and contracting method, discussing the advantages and disadvantages of each. The team’s approach in developing the selection system was such that Tasks 4 and 5 were accomplished simultaneously. Comparing and evaluating the merits of each type of project delivery (Task 5) was indeed part of the methodology’s framework (Task 4). The research team developed a three-tiered approach to the framework solution, which was based on existing industry standards and the new research being conducted in this study: • Tier 1 – Analytical Approach • Tier 2 – Weighted Matrix Approach • Tier 3 – Optimal Risk Allocation Approach The Tier 1 Analytical Approach provides a framework for agencies to define project goals and examine the advantages and disadvantages of each delivery method within the context of these

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview goals. The motivation for this approach is to help agencies understand project delivery method attributes and to determine if their specific project goals align with the attributes of a particular delivery method. The Tier 1 approach also provides a “go/no go” review to determine if one or more project delivery methods should be excluded from the examination. At the completion of Tier 1, the agency may not have a single, clear and logical choice for a project delivery method. If this is the case, the agency will be advised to move to the Tier 2 selection process with the best delivery method options and create a more detailed analysis to select the final project delivery method. The first tier is designed as a simple and straightforward selection method. Any owner, no matter what their level of experience with alternative project delivery methods, will be able to use this tier. The Tier 2 Weighted-Matrix Approach provides a means for the agency to further examine and document a project delivery decision for an individual project. In case an obvious choice was not found in the Tier 1 Analytical Approach, the Tier 2 approach provides the agency with a process to select a delivery method by prioritizing project objectives and selecting the delivery method that best aligns with these objectives. The Tier 2 Weighted-Matrix Approach is founded upon successful delivery decision tools developed by academics and professionals over the past 20 years. In tier 2 the user concentrates on a few key parameters that affect the choice of project delivery method, assign appropriate weights to each parameter and calculate a score for each competing delivery method. The Tier 3 Optimal Risk-based Approach will leverage the current cutting-edge risk-based cost estimating methods that have emerged in transit and highway agencies in the past few years. The user should first complete Tier 1 and Tier 2. The risk-based approach as proposed here consists of two phases. The first phase is a qualitative approach consisting of developing a risk allocation matrix that clearly portrays owner’s risk under competing delivery methods. By reviewing these risks, the agency will have an opportunity to decide if a specific delivery method is superior. If this analysis cannot provide a definitive answer to the delivery selection question, then a quantitative approach should be considered. The quantitative approach emphasizes the effect of the Project Delivery Method on project cost and schedule. It is expected that most of the times the delivery method decision can be made by completing the first two tiers. It is important to note that the level of effort involved in using Tier 3 (especially the quantitative approach) is considerably larger than either Tier 1 or Tier 2. Task 6. Using the framework developed in Task 4, discuss and analyze the impacts, advantages, and disadvantages of including operations and maintenance in the project delivery contract. During the interviews it became apparent that while including operation and maintenance with DBB or CMR is theoretically feasible, none of the agencies are using this option. Further it seemed unlikely that transit agencies were going to attach operations and maintenance to DBB or CMR contracts in the foreseeable future. This observation was corroborated during our transit workshop as part of the DBIA conference in Minneapolis. Because of this, it was decided to concentrate on DBB, CMR, DB, and DBOM for the guidebook. This change in the original scope was approved by the project’s panel. As a result, this effort considered the impacts, advantages, and disadvantages of including operations and maintenance in the context of the DBOM delivery method. Northeastern University The Research Report 8

TCRP G-08 – Project Delivery Methods Chapter 1 - Overview Northeastern University The Research Report 9 Task 7. Prepare an interim report documenting the results of Tasks 1 through 6. The interim report shall also contain a detailed outline of the guidebook. The interim report was submitted and approved by the project panel. Task 8. Based on the results of Tasks 1 through 7, develop a decision matrix at the macro level to guide decision makers on selecting the most appropriate project delivery and contracting method(s) in various transit environments. Based on the framework developed in Task 4 and the results of tasks 3, 5, and 6 the team finalized the development of the project delivery selection system in this task. An important component of this task was the evaluation and testing of the system by a select number of subject experts. Task 9. Prepare the guidebook, a stand-alone executive summary, and a final report documenting the entire research effort. Organization of the Report This final report is divided into ten chapters and five appendices. The first chapter (the current chapter) provided an overview of the work accomplished in this research project. Chapter 2 will present the results of the literature search by identifying distinguishing characteristics of transit projects, providing clear definitions of various delivery methods, and identifying the appropriate point in time when various delivery methods can be adopted. Chapter 3 will provide an extensive description of the case study projects and the structured interviews. Chapter 4 provides summary results and lessons learned from the interviews and literature search. Chapter 5 describes pertinent issues affecting the choice of project delivery method and the advantages/disadvantages of each project delivery method based on a pro/con analysis of each issue in connection with the delivery method. Chapters 6, 7 and 8 describe the project delivery selection framework for the proposed three tiers. Chapter 9 describes the validation process and a summary of research can be found in the last chapter. Appendix A contains a reference list. Appendix B is an annotated bibliography, a comprehensive collection of useful and relevant resources that should benefit the serious researcher in the area of project delivery methods. Appendix C presents a review of the research regarding the legal authority for public entities to utilize alternative project delivery methods in various states. In Appendix D a sample questionnaire is presented that was used in interviewing project directors. The last appendix (Appendix E) shows the assessment questionnaire used by the research team in evaluating the decision system developed in this research.