Procurement and Construction Management and Oversight What Board Members Need to Know
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Procurement and Construction Management and Oversight What Board Members Need to Know Jerry Smiley, AICP 24 July 2013
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Procurement and Construction Management and Oversight What Board Members Need to Know Jerry Smiley, AICP 24 July 2013. Major Capital Projects Alternative Contracting Approaches. Pre-Planning and Acquisition. Finance. Design. - PowerPoint PPT Presentation
Transcript of Procurement and Construction Management and Oversight What Board Members Need to Know
Procurement and Construction Management and Oversight
What Board Members Need to Know
Jerry Smiley, AICP 24 July 2013
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Major Capital Projects
Alternative Contracting Approaches
Operations MaintenancePre-Planning
and Acquisition
Finance Design Construction
RTD Union Station DART Orange Line
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Major Capital Projects
Alternative Contracting Approaches – Risk Allocation
Contractor’s Risk / Contractor’s Control
Owner’s Risk / Owner’s Control
Design-Bid-Build/CMGC
(DBB/CMGC)
Design-Build
(DB)
Design-Build-Operate-Maintain (DBOM)
Public Private Partnerships
(DBOM+F/BOT/BOO)
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$
Design-Bid-Build
Project Structure and Approach
Architect/EngineerArchitect/Engineer
General Contractor
General Contractor
PD&EPD&E PEPE Final DesignFinal Design ProcurementProcurement ConstructionConstruction$ $ $BU
DG
ET
BID
ES
TIM
ATE
BU
DG
ET
OwnerOwner
Subcontractors and Suppliers
Contractor Selected
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Design-Bid-Build
OverviewPros•Standard contracting approach•Transparent procurement process•Public acceptance•Fairest to bidders, level playing field
Cons•Slowest method•Cost not established until bids received•Design change impacts•In some cases, fosters adversarial relationships and increases probability of disputes
Owner retains greatest control, but assumes greatest risk
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$
Design-Build
Project Structure and Approach
Design-BuilderDesign-Builder
PD&EPD&E PEPE ProcurementProcurement Final DesignFinal Design
ConstructionConstruction
$ $BU
DG
ET
BID
ES
TIM
ATE
OwnerOwner
Contractor Selected
Subcontractors and Suppliers
Architect/EngineerArchitect/Engineer
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Design-Build
SummaryPros•Project costs are determined earlier•Constructability and value engineering benefits accrue to Owner •Single point responsibility •Reduced claims exposure•Tends to be the fastest method
Cons•More complex contracting approach•Competition may be limited•Requires earlier project definition•Reduces design input by Owner•Changes are more costly
Substantial risk is shifted to the contractor,contractor assumes more control
Construction Manager/General Contractor
Project Structure and Approach
ConsultantsConsultants General Contractor
General Contractor
PD&EPD&E Final Design Final Design$$
OwnerOwner
Subcontractors and Suppliers
Contractor Selected ConstructionConstruction
PEPE$8
Procurement Procurement
BU
DG
ET
BU
DG
ET
GM
P
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CMGC
OverviewProsPros•CMGC participates in developing design, budget and schedule•Design assistance reduces E&O•Allows for fast-track (non-linear) construction•Reduces uncertainties (change orders)•Owner knows costs upfront
ConsCons•No significant input by Owner in design•Complex process requiring qualified staff•CMGC’s role changes from CM to GC once construction starts•Owner does not transfer E&O risk•In some areas, relatively few true construction managers
Owner retains significant control,owner retains significant risk
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Public Private Partnerships
Project Structure and Approach
PD&EPD&E $
OwnerOwner
Subcontractors and Suppliers
Partner Selected
Construction and Testing
Construction and TestingDesignDesign$
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Procurement Procurement
ConcessionaireConcessionaire
O&M Contractors
O&M Contractors
RevenueOperationsRevenue
Operations
MaintenanceMaintenance
Design-BuilderDesign-Builder
Architect/EngineerArchitect/Engineer
BU
DG
ET
BU
DG
ET
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PPP
OverviewPros•Advance infrastructure projects years in advanceAdvance infrastructure projects years in advance•Value for money through optimal risk transfer and risk management•Accountability through performance incentives•Operational and project execution risk is transferred to the private sector
Cons•Contracts are much more complicated•Difficult to anticipate all possible contingencies that could arise in long-term contract•Re-negotiation of contracts can be high•Performance enforcement
Owner only controls what is negotiated, risk depends on skill of negotiators
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What Questions Should You Be Asking?
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Risk Allocation Principles
• Risks are unavoidable
• Risk should be allocated to maximize probability of success
• Assessing who is best able to manage risk
• Optimum risk shifting should be the goal – not maximum risk shifting
• Shifting unreasonable risk to the contractor
o Reduces competition
o Increases contingencies
o Increases project disputes
• Why are we choosing the selected procurement model?
• Would the project be able to move forward using another model?
• Is this model in the agency’s best long-term financial interest?
• Do we have the staff to properly execute this model?
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What Questions Should You Be Asking?
