Applying Risk Analysis, Value Engineering, and Other Innovative Solutions for Project Delivery (2017)

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88 NCHRP Research Report 850 includes the research results related to project delivery methods performed including the following: • Summary of Innovative Project Delivery Methods Literature • Summary of DOT Project Delivery Guidance Review • Comparison of DOT Project Delivery Processes • Project Delivery Survey • Summary and Conclusions Summary of Innovative Project Delivery Methods Literature Literature produced by numerous sources related to innovative approaches to project delivery was reviewed. Table 10 contains a summary of these sources. Summary of DOT Project Delivery Guidance Review The research team reviewed 13 documents related to project delivery as a part of its initial research effort. This includes the applicable policy, procedure, and guidance documents from 12 state DOTs. The findings from this review point to the following general conclusions: • Inconsistency of the project delivery terms used There is a high degree of inconsistency with respect to terminology. The terms project delivery, project development, and project life cycle are used interchangeably in several of the documents reviewed. Project delivery generally refers to the construction project delivery as a whole and may be conceived as the combination or integration of Project Development (the construction process) and Project Management (the management approach). Project Development generally is used to illustrate the development of a construction project from the beginning to the end, whereas Project Life Cycle is regarded as a more generic term to describe a project from the initial stage all the way to the closing stage. • Inconsistency of the project delivery scope In addition to the different terms used to define project delivery, the scope of the proj- ect delivery also varies. The phases and tasks required during the entire project delivery process seem different for all the DOTs investigated. Some DOTs provide very detailed and technically oriented descriptions to address the content of project delivery, while other DOTs have their unique or concise versions of the project delivery process. For alternative project delivery methods, such as the Design-Build method, the process also varies greatly. C h a p t e r 6 Project Delivery Methods Research Results

project Delivery Methods research results 89 No. Publisher/Author Title Notes 1. NCHRP NCHRP Synthesis 455: Alternative Technical Concepts for Contract Delivery Methods (2014) This publication explores the broader application of Alternative Technical Concepts (ATCs) to projects using different delivery methods. 2. Mike Ofili, Georgia Southern University State of Accelerated Bridge Construction in the U.S. (2015) This research paper provides a good up-to- date overview of the use of Accelerated Bridge Construction (ABC) methods currently in use by state DOTs. 3. NCHRP NCHRP Report 662: Accelerating Transportation Project and Program Delivery: Conception to Completion (2010) This publication explores the challenges and opportunities for accelerating project and program delivery. Several case studies are explored where various state DOTs have applied innovative methods. 4. NCHRP NCHRP Synthesis 402: Construction Manager-at-Risk Project Delivery for Highway Programs (2010) The synthesis identifies three different models for CMR project delivery in use and effective practices and lessons learned that have been gleaned from the experiences of seven highway case studies. 5. FHWA Framework for Prefabricated Bridge Elements and Systems (PBES) Decision- Making (2005) Excellent DOT resource for guidance on making decisions about whether to use ABC methods on a project. 6. NCHRP NCHRP Project 20-68A, Scan 07-01, Best Practices in Project Delivery Management (2009) This report focuses on Best Practices that public transportation agencies are using to deliver projects more efficiently, at lower cost with successful public involvement. 7. NCHRP NCHRP Report 787: Guide for Design Management on Design-Build and Construction Manager/General Contractor Projects (2014) The purpose of this research is to identify or develop a set of practices for establishing and executing an effective and efficient DM process for fast-track transportation construction projects, specifically those developed using the D-B and CMGC delivery systems. 8. NCHRP NCHRP Synthesis 391: Public Sector Decision Making for Public–Private Partnerships (2009) This synthesis examines the information available in the U.S. and internationally that is needed to properly evaluate the benefits and risks associated with allowing the private sector to have a greater role in the financing and development of highway infrastructure, and how that information can be used in the decision-making process. 9. NCHRP NCHRP Synthesis 443: Practical Highway Design Solutions (2009) The objective of this synthesis was to identify current knowledge and practice in the application of Practical Design approaches to roadway project development. 10. Colorado DOT Project Delivery Selection Matrix This document provides a formal approach for selecting project delivery methods for highway projects. It considers Design-Bid- Build, Design-Build, and CMGC methods. Table 10. Innovative project delivery methods literature reviewed.

90 applying risk analysis, Value engineering, and Other Innovative Solutions for project Delivery • Various levels of thoroughness for the content of guidelines Many states have developed certain guidelines for conducting project delivery efforts; how- ever, the consistency of information and thoroughness of the guidelines vary greatly. Some efforts only identify the policy of the project delivery, while others prescribe detailed project delivery activities, especially for those dealing with project development. Comparison of DOT Project Delivery Processes Table 11 contains a sampling of project delivery processes for 12 state DOTs. The information reinforces the observations made by the research team. Project Delivery Survey Several key pieces of information were gleaned from the survey covering project delivery. The sur- vey revealed that transportation agencies are generally delivering projects that typically cost around $25 million or less. In addition, these projects are generally delivered using Design-Bid-Build methodologies, with Design-Build and CMGC procurements becoming more prevalent. A limited number of agencies had used Public Private Partnerships (P3). Both the number and the total dollar amount of projects have been relatively constant or marginally increasing since 2010. The majority of survey respondents are delivering between $750 million and $1.5 billion in construction contract awards per year. The biggest challenges faced are funding; utilities and right of way; and an aging workforce. Funding allocations are mostly controlled by transportation agencies with some local stakeholder involvement and the types of projects have principally been for rehabilitation of highways and bridges. The following is a summary of survey findings: • Responding transportation agencies indicated that 50% of project delivery responsibilities are divided amongst functional units or divisions in DOTs and transportation agencies, while another 40% indicated that project delivery responsibilities resided with a Program/ Project Management unit or division. The remaining agencies indicated they were some- where between the two. • Approximately 21% of transportation agencies have project development and delivery respon- sibilities located in a centralized headquarters. Another 55% indicated that project develop- ment and delivery responsibilities reside in regional or district offices, while 24% indicated that such responsibilities reside in both a centralized headquarters and regional or district offices. • Transportation agencies use a diverse set of delivery methods, but indicated that Design- Bid-Build and Design-Build deliveries are the most common methods used. The responding transportation agencies indicated that they have used the following methods: – Design-Bid-Build has been used by 89% of responding agencies – Design-Build has been used by 83% of responding agencies – CMGC has been used by 56% of responding agencies – P3 methods were used by 22% of responding agencies – Early Contractor Involvement (ECI) for Design-Bid-Build was used by 17% of responding agencies • Transportation agencies indicated the following significant challenges in order of priority: – Funding – Utility Challenges – Aging Workforce and Retirement of Key Individuals in the Organization – Environmental Challenges – Staging Complexity – Right-of-Way Issues – Lack of Knowledge Transfer

project Delivery Methods research results 91 No. State/Publisher Title of the Guidance Document Date of Publication Project Development Process/Project Life Cycle 1. Caltrans Caltrans Project Management Handbook 5th Edition October 2007 1. Project Initiation Document 2. Permits & Environmental Studies 3. PS&E Construction 4. Right of Way 2. TxDOT Project Development Process Manual July 2014 1. Planning and Programming 2. Preliminary Design 3. Environmental 4. Right of Way and Utilities 5. The preparation of PS&E 6. Letting 3. Washington State DOT Guidebook for Design-Build Highway Project Development June 20, 2004 1. Project identification as design-build candidate 2. Project attribute assessment 3. Team formulation 4. Project scope definition 5. Data gathering 6. Final decision to use design-build contracting 7. Request for proposal preparation 8. Selection of design-builder 9. Administration of contract 4. Nevada DOT Project Management Guidelines 2nd Edition Working Draft 2010 Possible delivery methods include the following: 1. Design-Bid-Build 2. Construction Manager/General Contractor (CMGC) 3. Design-Build (DB) 4. Design-Build-Operate-Maintain (DBOM) 5. Design-Build-Finance-Operate (DBFO) 6. Build-Own-Operate 7. Outsourced Service Contract 8. Asset Management 9. Concession 10. Availability Concession 11. Transportation Facility Agreement (TFA) 5. New Jersey DOT Project Customization Guideline August 2015 1. Problem Screening (PS) 2. Concept Development (CD) 3. Preliminary Engineering (PE) 4. Final Design (FD) 5. Construction (CON) 6. Florida DOT Project September Critical topics include the following: Management Handbook 26, 2014 1. Planning 2. Project Development & Environmental 3. Design 4. Right of Way (ROW) 5. Construction 6. Design-Build, Maintenance 7. Local Agency Program (continued on next page) Table 11. Project delivery processes for 12 state DOTs.

92 applying risk analysis, Value engineering, and Other Innovative Solutions for project Delivery – New or Advanced Technical Challenges – Building Consensus with Multiple Stakeholders – Project Phasing Challenges • The responding transportation agencies indicated that most project expenditures were for pavement and structures rehabilitation, followed by capacity and safety improvements. • Responding transportation agencies are delivering an average of approximately 180 projects per year, an increase from 137 in 2010. The largest agencies deliver 800 or more projects per year. • The clear majority of respondents indicated that the number of contracts awarded annually over the past 5 years has either been static or has increased. Only 20% of respondents saw the volume of contracts decrease over the past 5 years. • For survey respondents, the average dollar amount of construction contracts awarded annually is between $750 million and $1.5 billion. A small percentage indicated construction contract awards of $2 billion or more, with the remaining agencies generally awarding construction contract total values between $250 million and $750 million annually. No. State/Publisher Title of the Guidance Document Date of Publication Project Development Process/Project Life Cycle 7. Georgia DOT Project Management Handbook 2012 Critical topics include the following: 1. Concept Stage 2. Preliminary Design 3. Final Design 4. Design Guideline Exceptions/Variances 5. Construction 8. Oregon DOT Project Delivery Guide 2010 1. Program Development 2. Project Development 3. Award Construction Contract 4. Construction Management 9. Utah DOT Project Manager Guide 2013 PD methods include the following: 1. Design-Build 2. Contract Manager/General Contractor 3. Procurement Contract 10. Montana DOT Design Build Guideline April 14, 2008 Montana DOT adopts Adjusted Score Design- Build Bid Process and involves several tasks: 1. Project Identification 2. Development of the Design and Construction Criteria Package (DCCP) 3. Contract Number Assignment, Advertisement 4. Statement of Qualifications, Considerations for Request for Proposal Development 5. Guidelines for Request for Proposal 11. Colorado DOT CDOT Project Development Manual January 31, 2013 1. Phase I: Pre-Project Budget 2. Phase II: Design 3. Phase III: Construction 12. Virginia DOT Project Management Policy July 1, 2011 1. Initiation Phase 2. Development Phase 3. Delivery Phase 4. Closeout Phase Table 11. (Continued).

project Delivery Methods research results 93 • Approximately 46% of responding transportation agencies indicated that the amount of work awarded annually has stayed the same or has increased slightly. However, it was noted that the volume of awarded contracts varied for Mega Projects (single projects more than $500 million) awarded within a given state. • Transportation agencies are generally delivering projects that are less than $25 million in net capital costs. – On average, agencies may deliver two to four projects between $25 million and $50 million per year. – On average, most transportation organizations deliver one or no projects more than $50 million per year. – Similarly, for structure projects most agencies will deliver one or no structure projects more than $40 million per year. • Recently, transportation agencies indicate there has been an even split in the number of projects for various roadway types between interstates; freeways and expressways; principal arterials; and local roadways. • Approximately 60% of the responding transportation agencies indicated that most project funding is controlled by their organization. Another 30% indicated that project funding is jointly controlled by their organization. Only 10% of responding agencies indicated that they had sole control over project funding. • Respondents indicated the following as the largest challenges to project delivery in order of priority: – Funding shortfall or underfunded programs – Schedule pressures – Pre-construction scope creep – Construction scope creep – Managing competing regional transportation priorities – Project programming – Satisfying regional partner or stakeholder interests • Approximately two-thirds (66.7%) of respondents indicate that formal decision support processes were used within the organization for project delivery decision making. • In addition, the majority of responding organizations indicated that some form of project management software was used within the organization to aid in project delivery; however, 29% of those respondents indicated that such software always helped with project delivery, and 57% said it only helped sometimes. • Approximately 60% of respondents indicated that Alternative Technical Concepts (ATCs) had been used in their organization, primarily on Design-Build contracts. Some agencies noted an interest in further integrating ATCs into Design-Bid-Build contracts. – The organizations that have used ATCs indicated that 50% of the time the outcome was favorable (or positive), while 17% of the time the outcome was determined to be some- what negative. The remaining 33% of the time the outcome was indicated to be somewhat positive. – All organizations responding to the survey indicated that ATCs will continue to be explored for possible use in the future. • Approximately 78% of respondents indicated that Practical Design has been used in their organization in some form. – Roughly 43% of the organizations that have used Practical Design were neutral on the experience (neither positive nor negative). The remaining 57% were either somewhat positive or positive about experiences in applying Practical Design. – Approximately 85% of respondents indicated that Practical Design will continue to be explored for possible use in the future.

94 applying risk analysis, Value engineering, and Other Innovative Solutions for project Delivery • Agencies appear to be equally divided between those that deliver projects through a Proj- ect Management (PM) unit and those that distribute PM responsibilities amongst several functional units. • Agencies appear to be equally split between those that place responsibility for project delivery centrally versus those that distribute it to regional offices. • Most agencies have experience with Design-Build delivery methods. Some (about one-third) have experience with CMGC and P3. All of them are very familiar with Design-Bid-Build. Summary and Conclusions The research summarized above provides insight into how state DOTs are currently delivering projects. From this information, the research team has drawn the following conclusions: • DOTs use a variety of different project delivery phases and milestones. These can be categorized into four generic phases having a set of common activities: – Conceptual Design b Project Initiation b Need and Purpose b Stakeholder Outreach b Project Delivery Planning – Preliminary Design b Engineering Studies b Environmental Analysis b Options Analysis – Final Design b PS&E b Right-of-Way Acquisition b Utility Relocation – Construction b Advertise, Bid, and Award b Construction b Change Orders and Claims Management b Project Closeout • Project Management is still a developing concept for many DOTs. Applying standard project management maturity models to DOTs, it is easy to group most into Level 2 (see Figure 41). A few appear to be positioned at Level 3. One of the biggest takeaways is that project outcomes are generally not explicitly tied to project management performance at a strategic or pro- grammatic level. In other words, there is often a disconnect between the personnel deliver- ing a project and those that have defined the planned outcomes of the project. There is an opportunity to better align anticipated outcomes with project performance measures. The research team evaluated ways to better integrate value-improving techniques into the project delivery model. • The recent emergence of Practical Design, which focuses on delivering maximum overall performance using limited available funds (usually through relaxing design standards), underscores the shift in philosophy away from “design excellence” to “best value.” This is one method that signals a recognition amongst DOTs that better alignment between project performance measures and project outcomes is needed. There is an opportunity to create synergies between VE and Practical Design, which are both “value based” in their philoso- phy. The decision tools developed in the Value Management System Tool provide a method to numerically compare the value of options within the context of performance-based Prac- tical Design.

project Delivery Methods research results 95 • Virtually all DOTs have experience in delivering at least one project using an alternative form of project delivery (e.g., Design-Build, CMGC, P3). The research indicates that this trend is grow- ing, and many states now consider and utilize multiple different alternative delivery methods. Clearly, there is a need for aligning the three primary techniques in this research project (i.e., VE, RA, and CR) for use with these methods such that they maximize their effectiveness. • Colorado DOT has developed excellent materials related to the provision of guidance in selecting the most appropriate delivery method through its Project Delivery Selection Matrix. • There is an opportunity to better leverage VECPs and ATCs for all the project delivery methods. Missouri DOT has been a leader and innovator in how it applies both methods to add value to its projects. Figure 41. Project management maturity model.