Infrastructure owners are under constant pressure to deliver and maintain their assets safely and efficiently. Innovative Project Delivery methods such as Design-Build, Construction Manager/General Contractor, Progressive Design-Build, and Public-Private Partnerships can be viable project delivery options to provide the best value, accelerate delivery, and mitigate project risks compared to traditional Design-Bid-Build delivery. Selecting the right method depends not only on unique project characteristics but also on external market forces.
Project-specific goals and objectives may provide owners with clear direction in selecting the preferred Innovative Project Delivery method. However, several factors must be evaluated to determine the optimal delivery method when this is not the case.
When an owner is evaluating these factors, it can be difficult to distinguish the advantages of one Innovative Project Delivery method over another. For example, it is reasonable to assume that the overall project schedule for Construction Manager/General Contractor and Progressive Design-Build could be the same. The Federal Highway Administration has created the Contracting Alternatives Suitability Evaluator (CASE) web tool to assist with quantifying these factors. This web tool assigns values to each factor to help determine what is the most appropriate delivery method utilizing characteristics and factors for a given project.
If the optimal Innovative Project Delivery method is still uncertain after this evaluation, a more comprehensive risk assessment that identifies risks and assigns cost values to them may be used to evaluate which of the delivery methods can best manage and allocate the project risks to determine the optimal delivery method.
The risk assessment is performed to help determine the opportunities and limitations of various delivery methods and how successful it will likely be in properly addressing the project risks. An even more detailed level of risk assessment should be performed during the procurement when contractor feedback can also be considered to ensure that project risks are being properly allocated and managed.
Over the past few years, contractors are finding it increasingly difficult to accurately submit a fixed price and schedule based on a 30% design provided by the owner. Insufficient contingencies placed on risk items like geotechnical data, right-of-way acquisitions, permitting, and utility coordination have adversely affected some contractors. Other contributing factors include volatility in certain commodities (e.g. steel) and increased labor and equipment costs due to supply chain issues in the post-pandemic economy. As a result, contractors are now more selective about project pursuits and placing a higher contingency and risk premium on bids. However, these industry factors have also had an affect on risk mitigation strategies for Innovative Project Delivery.
Innovative Project Delivery methods often utilize risk pools, provisional sums, or risk reserves to help mitigate unknown project risks. Additionally, the incorporation of price adjustment mechanisms for commodities help to reduce unnecessary contingencies for fluctuations in material costs. The most notable trend in Innovative Project Delivery has been the rise of Construction Manager/General Contractor and Progressive Design-Build procurements. These Innovative Project Delivery methods provide for a collaborative design development between the owner and the contractor beyond the traditional 30% which can help contractors more accurately price their bids.
While Construction Manager/General Contractor and Progressive Design-Build can help address some of the competition and pricing concerns in the current market, they are not a panacea. A careful evaluation of specific project characteristics is critical in determining the optimal delivery method.
Read the next blog in this series: Preparing for Construction Manager/General Contractor and Progressive Design-Build