current design-build practices for transportation projects a compilation of practices by the...

8/6/2019 Current Design-Build Practices for Transportation Projects a Compilation of Practices by the Transportation Design-B

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Current Design-Build Practices forTransportation Projects

A Compilation of Practices by the Transportation Design-Build Users Group

The following document is a collection of design-build procurement and contracting practices

used by various transportation agencies. This report provides basic information about the

design-build project delivery method and its relation to transportation projects. As such, this

document does not constitute legal advice and does not represent the official policy of theFederal Highway Administration (FHWA) or the United States Department of Transportation. It

is provided for informational purposes only.

The Transportation Design-Build Users Group includes representatives from: the Design-Build

Institute of Americas Owner Council, the AASHTO Joint Technical Committee on Design-Build,

and the AASHTO / FHWA / Industry Transportation Construction Management Working Group.

June 2009

The following report is a compilation of the design-build experiences of State Departments ofTransportation (DOTs) and other public agencies responsible for transportation infrastructure.The original framework for this report was a document prepared for the New York StateDepartment of Transportation by Parsons Brinckerhoff entitled "Design-Build Practice Report,"dated September 2002.

The Transportation Design-build Users Group welcomes additional input from State DOTs andother transportation agencies that have experience with the design-build procurement process.

The information provided herein is for knowledge sharing purposes only and does not constitutetechnical or policy recommendations on the part of AASHTO, FHWA or any other publicagency.


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Contents

1. Introduction................................................................................................................................ 4

1.1. Overview of Report............................................................................................................. 41.2. Background on Design-Build ............................................................................................. 41.3. Public Agency Input ........................................................................................................... 5

2. Background ................................................................................................................................ 62.1. General Design-Build Program Information ...................................................................... 62.2. Criteria Used to Identify Projects Appropriate for Design-Build..................................... 172.3. Criteria Used to Identify Projects that may be Inappropriate for Design-Build ............... 20

3. Procurement Process................................................................................................................ 213.1. Two-Phase Selection......................................................................................................... 213.2. Variations on "Best Value"............................................................................................... 233.3. Industry Review Process................................................................................................... 24

3.4. Protests Relating to Design Build Procurements.............................................................. 263.5. Pre-Proposal Meetings/Discussions/Negotiations ............................................................ 273.6. Stipends............................................................................................................................. 28

4. Development of Procurement Package .................................................................................... 295. Contract Issues......................................................................................................................... 30

5.1. "Basic Configuration / Alternative Technical Concepts" ................................................. 305.2. Escrowed Pricing Documents ........................................................................................... 315.3. Design Review Process/Release for Construction............................................................ 315.4. Cap on Liability ................................................................................................................ 325.4. Scope Validation (New) .................................................................................................... 32

6. Project Management ................................................................................................................ 33

6.1. Reduced Level of Oversight ............................................................................................. 336.2. Design Reviews ................................................................................................................ 336.3. Construction Quality Assurance ....................................................................................... 366.4. Partnering and Disputes .................................................................................................... 426.5. Agency Handling of Quality Assurance ........................................................................... 43

7. Payment.................................................................................................................................... 447.1. Contract Price.................................................................................................................... 447.2. Contingency ...................................................................................................................... 447.3. Mobilization...................................................................................................................... 457.4. Retainage........................................................................................................................... 457.5. Incentive Payments ........................................................................................................... 45

7.6. Limitation on Payment...................................................................................................... 467.7. Price Adjustments for Material Inflation (New).............................................................. 46

8. Schedule................................................................................................................................... 478.1. Establishing Completion Deadlines.................................................................................. 478.2. Early Completion Incentives, Liquidated Damages, Stipulated Damages ....................... 488.3. Required Schedule Submittals and Remedies Available for Failure to Submit Schedules................................................................................................................................................... 508.4. Schedule Float................................................................................................................... 51


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8.5. Recovery Schedule............................................................................................................ 528.6. Recommended Changes for Future Projects..................................................................... 52

9. Right of Way/Utilities.............................................................................................................. 53

9.1. Right-of-Way .................................................................................................................... 539.2. Utilities.............................................................................................................................. 5510. Risk Allocation ...................................................................................................................... 5711. Change Orders ....................................................................................................................... 6112. Warranties/Maintenance ........................................................................................................ 6213. Subcontractors, DBE, EEO, Key Personnel .......................................................................... 6314. Insurance, Bonds, Indemnities, and Limits on Liability........................................................ 64

14.1. Insurance......................................................................................................................... 6414.2. Bonds .............................................................................................................................. 6414.3. Limitations on Contractor Liability ................................................................................ 65

15. Environmental Permitting Process......................................................................................... 65

16. Value Engineering ................................................................................................................. 6617. Organization Conflict of Interest Policies.............................................................................. 6718. Organizational Change as a Result of Shifting Workloads ................................................... 6719. Further Issues Related to Design-Build ................................................................................. 68

19.1. Proposal as Contract Document...................................................................................... 6819.2. Key Personnel and Designers ......................................................................................... 6919.3. 100% Design................................................................................................................... 69

20. Legal Issues............................................................................................................................ 6920.1. Procurement Issues ......................................................................................................... 6920.2. Environmental Litigation................................................................................................ 7120.3. Contract Disputes............................................................................................................ 7520.4. Summary of Legal Issues................................................................................................ 78

21. Major Lessons Learned.......................................................................................................... 7821.1 Select the Appropriate Project .......................................................................................... 7821.2 Clearly Define the Scope of Work.................................................................................... 7921.3 Consider Risk Allocation.................................................................................................. 7921.4 Set Aside Traditional Relationships.................................................................................. 8021.5 Select the Best Design-Builder ......................................................................................... 8021.6 Select the Agencys Best Design-Build Team.................................................................. 8021.7 Consider Warranties or Operational Requirements .......................................................... 81

Appendix 1.................................................................................................................................... 83Public Agencies that have Utilized Design-Build for Transportation Projects ........................ 83

Appendix 2.................................................................................................................................... 94Transportation Agencies with Design-Build Authority............................................................ 94

Appendix 3 (New)...................................................................................................................... 100Maryland SHA Price Adjustment Clause Special Provision.................................................. 100

Appendix 4.................................................................................................................................. 105Virginia DOT Contract Provision Regarding Scope Validation (New) ................................ 105


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1. Introduction

1.1. Overview of ReportDesign build is a relatively new project delivery method that is being applied or considered bynumerous transportation agencies. As such, transportation agencies recognize the need to shareinformation regarding all aspects of the design-build delivery process. The Design-Build UsersGroup is an informal group of State, Federal and local transportation agencies who wish to sharecurrent design-build practices with other agencies.

This Current Practices Report summarizes the current design-build practices of variousparticipating transportation agencies. The original framework for the Current Practices Reportwas a September 2002 report titled: Design-Build Practice Report, which was developed for

the New York State Department of Transportation by Parsons Brinckerhoff, Quade & Douglas,Inc. The AASHTO Joint Technical Committee on Design-Build published web versions of theDesign-Build Current Practices Report in November 2003 and January 2005.

The information provided herein is for knowledge sharing purposes only and does not constitutetechnical or policy recommendations on the part of AASHTO or FHWA.

1.2. Background on Design-Build

Design-build is a project delivery method under which a project owner executes a single contractfor both architectural/engineering services and construction. The design-builder may be a singlefirm, a consortium, joint venture, or other organization. However, the fundamental element ofdesign-build delivery remains that one entity assumes primary responsibility for design andconstruction of the project.

Design-build has long been used by some project owners (including the U.S. Department ofDefense and the power industry) as a project delivery method. Starting in the late 20th century,private sector use of design-build, primarily for vertical buildings, expanded rapidly. Interest indesign-build delivery spread more gradually within the public sector, and was primarily used forvertical projects but also included horizontal transportation projects.

A number of factors have led owners to consider the design-build approach. Design-builddelivery provides owners with the benefit of a single point of responsibility for the majority ofproject development, which can streamline coordination between the design and constructionteams. It can reduce the owner's administrative burdens by eliminating the need to coordinate orarbitrate between separate design and construction entities. With the primary designer and thecontractor working as a team, scheduling considerations can be addressed up front, often leadingto more efficient implementation. Together with these efficiencies, the fact that design and


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construction activities can proceed concurrently also creates the potential for time savings and,ideally, will lower implementation costs.

Design-build can also promote innovation by utilizing the designers' and builders' separatestrengths to develop new design and construction techniques. The innovations can be included

in proposals in order to gain a competitive advantage in the selection process, or as part of theproject implementation phase in order to cut costs, speed implementation, or gain maximumbenefit from any incentive programs. Because of these factors, design-build delivery is oftenchosen for complex projects or when fast track implementation is a priority. Design-buildcontracts are frequently on a fixed-price basis, thus providing cost certainty at a relatively earlystage of project planning. This is particularly beneficial for projects facing budget limitationsand can be a key factor in obtaining project financing.

Design-build has proven to be a successful project delivery method for implementingtransportation projects. The FHWAs January 2006 Report to Congress, titled: Design-BuildEffectiveness Study documented that design-build reduces the project delivery duration, and

may produce project savings and may maintain the same level of quality as the traditionaldesign-bid-build project delivery process.

1.3. Public Agency Input

The initial respondents for the September 2002 Design-Build Practice Report included thefollowing participating agencies:

Alameda Corridor Transportation Authority (ACTA) Arizona Department of Transportation (AZ DOT) South Jersey Transportation Authority et al (Atlantic City/Brigantine Connector)

(AC/BC) Colorado Department of Transportation (CDOT) Federal Highway Administration (FHWA) Florida Department of Transportation (FDOT) Greenville County, South Carolina Naval Facilities Engineering Command (NAVFAC) Ohio Department of Transportation (Note: in 2009 Ohio DOT indicated that the

information in this report for Ohio was no longer current; however, due to personnellimitations, Ohio was not able to provide updated current practices.)

South Carolina Department of Transportation (SC DOT) Orange County Transportation Corridor Agencies (TCA) Utah Department of Transportation (UT DOT) Utah Transit Authority (UTA) Washington State Department of Transportation (WSDOT)

Additional agencies that have contributed information since the initial survey include:


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Louisiana Department of Transportation and Development (LADOTD) North Carolina Department of Transportation (NC DOT) Maryland State Highway Administration Massachusetts Highway Department (MassHighway) Virginia Department of Transportation (VDOT)

Additional input is welcomed and encouraged from other State DOTs and public transportationagencies that have experience with the design-build procurement process, including updates toexisting information. Please submit contributions to [email protected].

2. Background

2.1. General Design-Build Program Information

The following is an overview of participating transportation agencies design-build programs,

along with the date that the information was contributed or updated.

The Alameda Corridor Transportation Authority (ACTA) (Jan 2002)

ACTA is a joint powers agency formed by the Cities of Los Angeles and Long Beach to financeand develop the Alameda Corridor project, a rail/grade separation project connecting the Ports ofLos Angeles and Long Beach to rail yards and other transportation facilities in central LosAngeles. ACTA has used design-build for a single, but significant, contract as an integral part ofits plan for delivery of the Alameda Corridor. It obtained special authorization from the LosAngeles City Council to use an alternative procurement process for the design-build contract,basing selection on a lowest ultimate cost evaluation (evaluating the Authority's costs includingoperation, maintenance and right-of-way expense, as well as the design-build contract price),followed by limited negotiations. The Mid-Corridor Design-Build Project representsapproximately two-thirds of ACTA's construction budget.

ACTA's Mid-Corridor Design-Build Project includes a 10-mile, 33' deep trench, extending froma point north of State Route 91 to a location near 25th Street in Los Angeles, and includesconstruction of a rail line immediately east of the existing tracks and the trench, allowing trainsto continue through the area during the trench construction period. Improvements were alsomade to Alameda Street, with bridges constructed to carry street traffic over the trench at 29crossings, and other roadway improvements were made at several locations.


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ACTA's decision to use design-build was intertwined with its plan of finance, which included thesale of bonds secured by future fees to be paid by the railroads using the Corridor. In order tomaintain acceptable coverage ratios and keep interest expense within an acceptable range, theproject had to open for revenue service within a certain time period after issuance of the bonds.This time constraint, combined with the critical need for the project to be completed, required the

Authority to use design-build.

The Authority's overall goals in developing the Corridor were (in order): time, price certainty,quality work product, reduced impacts to adjoining properties, and sharing the benefit of jobswith adjoining communities. Use of design-build for the Mid-Corridor Project definitely helpedto meet the first two goals of time and price certainty. Design-build accelerated the project'stotal schedule by 18-20 months. The Mid-Corridor Project is currently valued at $770 million an increase of approximately 8% over the initial contract price. Some of that increase was due toshifting work from other projects into the design-build contract. There was no perceived effecton the third and fourth goals of quality work product and reduced impacts to adjoiningproperties. A job training and local hire program was included by the design-build team to meet

the fifth goal of sharing the benefit of jobs with adjoining communities. ACTA has absolutelymet its goal and considers its design-build program to be successful.

Arizona Department of Transportation (AZ DOT) (Jan 2002)

AZ DOT has used design-build for a number of different projects including freeway widening,interchange reconstruction, and changing 2- lane highways to 4-lane divided highways. Thevalues of its design-build projects range from $3.5 million to $185 million. Enabling legislationwas co-sponsored by AZ DOT, AGC, and the local consulting engineers associations.Opposition from contractors, through lobbying of elected officials, resulted in a requirement thatdesign-build projects must exceed $40 million and that design-build can be used for no more

than two projects per year.

AZ DOT met its goals of quick construction within a reduced budget. The benefits achieved byusing design-build included time reductions of approximately 30%, and cost savings of 5-6%,compared to design-bid-build.

New Jersey Department of Transportation (NJ DOT) et al (Atlantic City/Brigantine

Connector) (AC/BC) (Jan 2002)

The Atlantic City/Brigantine Connector (AC/BC) is a special one-time project that wasaccomplished through a public-private partnership, stemming from a request for proposals issuedby Atlantic City for development of the Marina district "H-tract," the former city dump. MirageResorts won a bid to develop a $750M casino resort in the area. In order to obtain access to thesite, a Mirage affiliate entered into an agreement with the NJ DOT and the South JerseyTransportation Authority whereby each party would contribute one-third of the cost of a tunnelconnecting the Atlantic City Expressway with the Marina district and Brigantine Island. Thedesign-build contract was considered a public works contract due to funding by NJ DOT and theSouth Jersey Toll Authority, and was procured using the same competitive bidding processrequired for NJ DOT contracts (i.e., award to the lowest responsive, responsible bidder).


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The Atlantic City Brigantine Connector's 2.5-mile route includes a 2,000-foot cut-and-covertunnel, 10 new bridges and 2.3 miles of new highway, with 15 ramps, 23 retaining walls,interchange modifications, drainage, landscaping, traffic signals, highway lighting, curbs,median barriers, and impact attenuators. Numerous utilities were installed or relocated duringthe project. The scope of the work also included environmental mitigation measures, a

landscaped park, and pedestrian bridges. Many local streets were widened and resurfaced, andseveral city blocks of residential housing, as well as portions of the Atlantic Energy powerfacility, were either demolished or relocated. The tunnel, which goes under US 30 and aresidential area, includes storm water pump stations, ventilation, and related electrical andmechanical systems.

The goal in using design-build was to shorten the time as much as possible, and also to obtaincost certainty. The contract was awarded to a joint venture for a bid price that was $30 millionless than the engineer's estimate. The Contract included a $28 million contingency available fora broad range of risks. This represented the limit of liability of the project developer and thepublic agencies funding the project. The contractor received 85% of the contingency funds

remaining at the end of the job.

Colorado Department of Transportation (CDOT) (Jan 2002)

CO DOT obtained legislation in 1999 authorizing it to use a best value procurement process fordesign-build contracts. Before obtaining such enabling authority, CO DOT contracted for a fewsmaller design-build projects (less than $50 million) on Interstate rehabilitation projects using alow bid selection process. CO DOT used its best value selection process for the first time in2001, awarding the $1.186 billion design-build contract for the T-REX project, a major highwayreconstruction and light rail transit project.

The T-REX project involves improvement of approximately 17 miles of Interstate 25 andInterstate 225 in the Denver metropolitan area and adds approximately 19 miles of new light railtransit line, including 13 new stations and improvements to the existing Broadway station. Theproposers were also requested to price various options including additional bridge replacementand pedestrian overpasses and bus plazas.

CO DOT was advised of concerns about design-build on the part of both contractors andconsultants during the legislative process and also the rule-making process. The concernsincluded fears that all projects would utilize design-build, that smaller contractors would nothave the opportunity to compete, that larger out-of-state contractors would take over, and thatcontractor/consultant relationships and DBE involvement would be adversely affected. Most of

the concerns were addressed through the formal rule-making process, which established taskgroups including participation from external stakeholders (contractors and consultants).Allowing those stakeholders to participate in the process and to assist in developing the ruleshelped address most of the issues raised.

In accordance with FHWA's Special Experimental Project Number 14 (SEP-14), and ColoradoCode of Regulations 2 CCR 601-15, CDOT has issued Policy Directive 504.0 and ProceduralDirective 504.1 in May 2006 allowing the usage of design-build contracting for transportation


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projects and identifying the Design-Build Manual as the "implementing strategy and procedurefor developing Design-Build Contracts." In the past 15 years, CDOT has used the design-buildproject delivery method on some projects, but the two major design-build projects recentlycompleted are TREX ($1.6 B), in the Denver Metro area, and COSMIX ($ 130 M), in Colorado

Springs.

In the absence of mega projects, CDOT is currently attempting to normalize the design-buildproject delivery method for small to medium size projects (less than $50 million). Currently,CDOT has two design-build projects in the works in Region 6, and two additional modifiedDesign-Build projects in Regions 4 and 5. Unlike Design-Build projects where the awardcriteria is generally based on "Best Value", the award criteria for modified design-build projectsis based on "low price and technically acceptable".

CDOT has had relative success and has reaped some major benefits by using design-build:Accelerated project delivery, innovation, improved quality, improved project control, better riskmanagement, single source accountability, partnering, and value based project feedback.However, more is needed especially when it comes to educating the public, the contractors andCDOT internal staff about the processes and techniques of design-build, particularly in projectgoal development, risk allocation, and the selection process. Whatever the case may be, CDOTis continuously working closely with FHWA and the contracting community in order to promoteand continually improve all aspects of design-build.

Federal Highway Administration (FHWA) (Jan 2002)

The Federal Lands Highway Division of FHWA used design-build for a roadway project inYosemite National Park, using the "two-phased" Design-Build selection process permitted underthe Federal Acquisition Reform Act of 1996. FHWA says that design-build provides thefollowing benefits:

Single point responsibility for design and construction to mitigate conflicts between thecontractor and the designer

The ability to fast-track the delivery of a completed project Potential to lower overall costs Earlier use of the completed facility Reduction in contract growth potential by shifting risk and partial control to contractor.

The Federal Lands Highway Division of FHWA has experienced very little opposition to its useof design-build, and has experienced only learning curve issues.

Florida Department of Transportation (FDOT) (April 2009)


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The Florida Department of Transportation (FDOT) obtained legislative authorization to usedesign-build a number of years ago, and also received programmatic authorization from FHWAto use design-build for federally funded projects. In starting their program, they found the mainopposition was centered around change. Contractors were reluctant to move away from low bid.Consultants disliked the idea of having to bid or negotiate for their services with a contractor

rather than the Department. The agency did a lot of talking and working through their concernsand started with a few pilot jobs. They now have an extensive program managed by theindividual districts, with over 100 design-build projects to date. Design-build is used as one ofthe tools in the toolbox to cut project delivery time, reduce/eliminate cost overruns/claims, gainefficiency in processes, and improve professionalism/quality. Design-build has allowed FDOTto cut project delivery time by 1/3, with very few claims. They believe that the products arehigher quality, and report more enjoyable working relationships with the industry.

FDOT's design-build contracts have resulted in accelerated project delivery schedules and veryfew price changes, according to a 1991 University of Florida study of the agency's pilot designbuild program which determined that costs were slightly higher in design-build, although road

user delays and business impacts due to time overruns were not taken into account. The agencybelieves that over time, they should become better at scoping jobs (clearer outcomes) and theindustry should become more comfortable with the risks, and that as a result prices should comedown.

Greenville County, South Carolina (Jan 2002)

This local agency successfully uses design-build for the implementation of its annual roadimprovement program, now in its 5th year, as well as for the construction of several publicbuildings, including a courthouse, courthouse expansion, parking garage, detention center,library, parking lot, and forensics lab renovation. The County's road program has included

paving of more than 800 roads, correction of associated drainage, improvement of intersections,installation of speed humps, repair of sidewalks, building new sidewalks, and installation ofguardrails. Also, through the road program, four bridges, six intersections, two major roadwidenings, and four minor widening projects have been developed using design-build.Greenville's decision to use design-build was based in part on a desire to minimize staffworkload so that it could continue to provide other services without staff size increases. TheCounty uses design-build to move away from money as a sole selection factor, using a form ofbest value selection by evaluating technical/quality factors, which include factors for scope andtime, within a fixed, stipulated sum price. The County lists a number of projects to be completedand negotiates with proposers regarding which projects will be performed for the stipulatedprice. The contract is awarded to the proposer who will perform the greatest amount of work for

that price.

The County has faced opposition to its use of design-build, including lawsuits brought by aretired contractor challenging the need for design-build. It has also had unsuccessful contractorsexpress concerns to elected officials regarding the selection process.

Design-build has helped the County to meet its goals. It has largely used one contractor. Theprogram has saved time by avoiding the need to develop separate procurement packages and


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select separate firms for multiple design and construction projects, since a single firmcoordinates all projects elements (design, utility coordination, right of way acquisition, andconstruction). The County also says that it has lowered costs by utilizing value engineering with100% of the savings returned to the County to be used on other projects.

LADOTD (May 2009)

The Louisiana Department of Transportation and Development has been using design-build toimplement selected projects since 2005. LADOTD has completed two projects, including anemergency project resulting from Hurricane Katrina damage. The procurement phase of anotherproject has been completed and construction is currently underway. LADOTD is using design-build to accelerate two more projects, which will include ARRA funding. Procurements for thesetwo projects are scheduled to be complete by the end of 2009.

I-10 Twin Span Bridge (2005) - LADOTD utilized design-build in order to fast trackthe $40 million emergency repair of the bridge over Lake Pontchartrain between NewOrleans and Slidell. The Twin Spans were severely damaged by Hurricane Katrina andthe primary factor in using design-build was to accelerate the project schedule in orderreopen I-10 to traffic as quickly as possible.

John James Audubon Bridge (2006) - LADOTDs next design-build project includes a2.44 mile long four-lane bridge structure and approximately 12 miles of approachesconnecting La. 1 at New Roads east of Hospital Road and U.S. 61 south of La. 966 andSt. Francisville. The project is scheduled to be complete by late 2010. Factors forchoosing a design-build approach included the price assurance of a single lump sum fixedprice contract as well as the desire to gain experience with alternative project delivery

methods. The project is budgeted for $348 million. I-12 Widening (2008) - This project involves the widening of 17.87 lane miles of I-12 to

6 lanes and includes the replacement of two bridges over the Amite River. TheLADOTD established a fixed price budget of $100 million with the proposers bidding onthe amount of lane miles which could be improved within the established budget.

I-10 Widening (2009) This project includes the widening of the I-10 from four lanes tosix lanes in both directions from the Siegen Lane Interchange to southeast of theHighland Road interchange in Baton Rouge. The RFQ for this design-build project wasissued in May 2009. Contract award is expected for December 2009 with construction tobegin in early 2010.

US90 at LA 85 Interchange (2009) This new project will replace an existing at-gradeinterchange with a grade-separated diamond interchange in Iberia Parish. The RFQ forthis design-build project was issued in May 2009. Contract award is expected forDecember 2009 with construction to begin in early 2010.


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Maryland State Highway Administration (MDSHA) (August 2008)

MDSHA has completed 20 projects and 9 projects are in the construction phase. Three futureprojects are funded and to be advertised within the next two years. Our design-build programincludes everything from intersection improvements to interchange construction to new

highways on new alignment. Values range from $1.5 million to $40 million. MDSHA is also inthe process of delivering Marylands first mega design-build project, the Intercounty Connector,at a construction value of over $1.5 billion. This project has been broken into 5 constructioncontracts; the first three contracts are valued between $400 million- $520 million individually,and the last two contracts are valued between $50 - $80 million individually. Two of thecontracts have been awarded, the third is in the procurement phase and the remaining two are inthe preliminary engineering stage.

Massachusetts Highway Department (May 2009)

The Massachusetts Highway Department is considering additional use of design-build on its

state-wide accelerated bridge construction program. After using design-build on the Route 3North project in 2001-2004, MassHighway let a six-bridge design-build contract in 2009 and isnow considering further use of design-build on the Whittier Bridge on Interstate 95 inAmesbury/Salisbury and the Pleasant Street Bridge in Grafton.

Michigan Department of Transportation (May 2009)

The Michigan DOT utilized design-build contracting in the 1990s on over 30 projects road,bridge and ITS projects. Michigan DOT chose design-build contracting for these projects in

response to an increase in funding and a need to get a significant amount of work completed in ashort time.

In 2008 Michigan DOT awarded 2 pilot design-build-finance projects. The finance componentrequired the contractor to fund the project until substantial completion. At substantialcompletion Michigan DOT would begin making small incremental payments every three months,with the balance of the contract being paid in FY 2012.

Michigan DOT is currently developing contracts for additional design-build projects in responseto the ARRA program. These projects include road, bridge and ITS projects.

Montana DOT (May 2009)

The Montana DOTs design build program began in 2004 with three pilot projects. The threepilot projects involved the design and construction of a new weigh station facility, safetyimprovements to an existing Interstate interchange, and reconstruction of approximately fivemiles of U.S. Highway 89. Montanas Legislature approved the use of design-build as a


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contracting method and drafted legislation for its use in 2007 after the pilot projects werecomplete.

Montana DOT has completed one additional design build project since the three pilot projectswere completed. In 2007, Montana DOT utilized design-build to award a contract for the design

and construction of a new bridge and roadway on MT Highway 200 over the Blackfoot River.Time savings was the critical factor in choosing design build procurement. Montana DOT iscurrently advertising a new rest area facility utilizing design build contracting and will beadvertising two additional design build projects this year, another rest area project and a majorrehabilitation of approximately 11 miles of Interstate 15.

Naval Facilities Engineering Command (NAVFAC) (Jan 2002)

NAVFAC responded to the survey providing a programmatic perspective including all the

Military Construction (MILCON) projects for which NAVFAC is the design and constructionagent. MILCON projects range in size from $750,000 to as much as $50 million or more,typically averaging around $5 million. The annual MILCON program averages approximately$1.2 billion. Projects include a broad spectrum of types of facilities, including operational,training, bachelor housing, community, utilities, and other infrastructure. Design-build hasbecome an effective acquisition tool for NAVFAC, with positive effects on acquisition andconstruction time, project costs, administrative effort, construction quality, and has improvedcontractor innovation and use of emerging technologies. NAVFAC's use of the design-buildacquisition approach has risen sharply the last several years. It currently represents 60% of theMILCON program (by number of projects), and is the agency's procurement strategy of choice.NAVFAC anticipates that design-build use will remain at that level or increase slightly for the

foreseeable future. Design-build provides both the potential for saving time and money byhaving a single contractor provide both the design and construction in a one-stop process, and thepotential to reduce claims by having a single entity responsible for coordination of plans,specifications, and submittals.

NAVFAC uses the procurement process authorized by the Federal Acquisition Reform Act of1996 (but used design-build years before that legislation was passed).

Its project funding comes from MILCON appropriations, which have a five-year life forincurring new obligations. MILCON design and construction funds are received as two separateappropriations from Congress. Appropriation law and DOD Financial Management Regulations

stipulate that only construction funds can be used on a construction contract, and a design-buildcontract is considered a construction contract. Therefore, it had to readjust how it budgeted forconstruction funds for the design-build portion of their MILCON program in order to pay for thecontractor's design cost (estimated to average approximately 4% of the estimated cost ofconstruction) with construction funds. This change took several years to accomplish. During theinterim it had to deal with a growing surplus of design funds and a corresponding burden onconstruction funds due to the unbudgeted contractor's design cost.


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Design-build helped the Navy to achieve its goals of time savings, cost savings, and innovationwhile maintaining quality and not increasing in-house labor requirements. " it is apparent thatwe have achieved dramatic time savings through design-build. Anecdotal data shows as much astwo-thirds reduction in total time on some projects."

North Carolina Department of Transportation (NC DOT) (Jan 2003)

Prior to 2003, NC DOT had legislative approval to perform three design-build projects per year.In 2002, legislation was passed to allow ten design-build projects in 2003 and 25 projects peryear for the next six years. NC DOT is currently identifying future projects and plans to usedesign-build for the number of projects allowed by the legislation each year. NC DOT currentlyhas four design-build projects under contract. These contracts range in cost from $10 million to$135 million.

The types of projects under contract are urban widening, interstate widening, and new location.

These projects involve all aspects of highway construction including grading and paving,bridges, box culverts, and retaining walls. Some of these projects require the contractor tohandle the right-of-way acquisition and utility movements. In order to make the program assuccessful as possible, NC DOT selected projects for the design-build process that were expectedto have few right-of-way and environmental permitting problems.

NC DOT initiated the design-build program to accelerate project delivery to the public. Thisprocess has allowed projects to be delivered one to two years quicker than the design-bid-buildprocess.

Contractors and consulting firms have raised some concerns about the design-build process.These concerns have been addressed through forums with the contractors and consulting firms.NC DOT has also included the industry in the development of the design-build procedures. Asstated above, NC DOT has only begun its design-build process, but it appears that the openapproach with the industry and the types of projects that have been selected have contributed tothe success thus far.

Orange County Transportation Corridor Agencies (TCA) (Jan 2002)

The San Joaquin Hills Transportation Corridor Agency and Foothill/ Eastern TransportationCorridor Agency (TCA) are joint-powers agencies formed by the County of Orange and variouscities within the County of Orange to develop the first modern toll roads authorized in California,totaling more than 68 miles of transportation facilities at an estimated cost exceeding $3 billion.TCA has used design-build for four different roadway projects:

The San Joaquin Hills Transportation Corridor, an extension of the Corona del MarFreeway (Route73) in Orange County, California, consisting of a six-lane, divided,limited-access highway of approximately 15 miles with related structures, equipment andsystems. The project was completed with only a 2.2% increase in the contract price,notwithstanding a 14-month injunction affecting the middle section of the project.


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Portions of the Foothill and Eastern Transportation Corridors (SR231, SR241 andSR261). The initial contract price for that project was $712 million and ended at $776.9million. The 9% increase was due to scope changes (8%) and changed conditions (1%).Both of these projects were funded with toll revenue bonds.

The Foothill-South Transportation Corridor, a 16-mile project that will connect theRancho Santa Margarita area with Interstate5 in San Clemente. The project was awardedprior to completion of the environmental review process and is still going through thatprocess.

The Glenwood Pacific interchange, a project that needed to be modified in order to fitwithin a $7 million budget.

TCA's initial decision to use design-build was based on funding limitations. Its primary sourceof revenue to pay for the costs of developing its network is toll revenues, and it determined inmid-1990 that it would be able to issue project revenue bonds only after it had a contract in handto design and build the project for a fixed price. The Agency's primary goals in using design-build were to obtain completion on or ahead of schedule without cost overruns. Design-build

helped the Agency to meet its goals because the San Joaquin and Eastern projects could not havebeen financed and built conventionally. It analyzed schedule growth for various design-buildand design-bid-build projects and found a significant time savings by utilizing design-build. ForSan Joaquin, although the price was higher than expected, design-build made the job financeable.For the Eastern toll road, according to the TCA, " the price obtained was probably lower thanthe cost to design and build conventionally. (The contractor left $114 million on the tablebetween the first and second bidder.)" The project also benefited from reduced interest expensedue to accelerated delivery. Portions of the projects were phased due to funds not beingavailable all at once.

TCA's design-build program has been an absolute success. Without design-build the TCA would

not have had a project. Benefits of design-build include expedited delivery plus cost certaintythrough transfer of risk and responsibility.

Utah Department of Transportation (UT DOT) (Jan 2002)

UT DOT has used design-build on very large (I-15 Reconstruction Project at $1.56 billion) andrelatively small ($1 million US 6 slide remediation) projects that were time sensitive. DOT alsohas a $300 million freeway project (the Legacy Parkway) and a $6.5 million retaining wallproject (US 189 Vivian Park in Provo Canyon) under contract

The I-15 project involved the reconstruction of approximately 17 miles of urban I-15, and

included widening the corridor from 6 lanes to twelve lanes, the complete construction of 144bridges, a new downtown interstate interchange, reconstruction of 13 freeway interchanges andthree interstate junctions, frontage road improvements, three railroad grade separations, andinstallation of an Advanced Traffic Management System throughout the metropolitan area. I-15had an initial contract price of $1.36 billion and a final contract price of $1.325 billion. (Theinitial program cost estimate was $1.53 billion; final program cost was $1.50 billion.) UT DOT'sgoals were to minimize disruption to businesses and the traveling public, provide project deliveryin a timely manner (prior to the 2002 Olympic Winter Games), minimize costs, and achieve a


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high quality highway project. One of the primary reasons for deciding to use design-build wasthe projected time savings. UT DOT's project managers estimated it would take eight years todesign-bid-build the project; with design-build the time was shortened to four years and twomonths. The highly successful I-15 project was the first time that a major, publicly funded,interstate highway reconstruction project combined all of the following: the design-build

delivery method, highway performance specifications (developed as part of the RFPpreparation), shared risk, best value selection (using an adjectival rating method), long termmaintenance (and warranty), ISO 9001 registration (required), an award fee incentive ($50million), stipends (to unsuccessful proposers), design oversight (no design submittals to UTDOT), QA/QC performed by design-builder, and expedited payment (7 days).

The Department's second major design-build project is the Legacy Parkway, a four-lane, limited-access, divided highway extending approximately 13.5 miles from I-215 at 2100 North in SaltLake City, northward to I-15 and U.S. 89 near Farmington City. This project crosses a highlysensitive wetland area and the contract includes numerous provisions to ensure that all requiredenvironmental mitigation measures are fully implemented. The contract was awarded in late

2000 and is currently the subject of an environmental injunction issued by the U.S. Court ofAppeals, Tenth Circuit.

One of the major reasons for use of design-build is to respond to the public's demand that UTDOT minimize the time span and the resulting public impact of major projects. UT DOT usesdesign-build to be more responsive to the public, to have more control over costs, to deliverprojects more quickly, and to obtain the best value for public dollars. UT DOT took thenecessary time to educate everyone in the process, including the Governor, the State legislature,contractors, consultants, State employees, the public, et al. They consider the design-buildprogram to be a success because they now have a high level of acceptance from the public."They believe that we will do what we say we will do," said Carlos Braceras, Deputy Director of

UT DOT.

UT DOT thinks that design-build project costs are lower than the cost of design-bid-buildprojects, because of the efficiency of all operations being under the control of one entity andeconomies of scale. On their two completed design-build projects there were no contractincreases for the basic work included in the contract packages.

Utah Transit Authority (UTA) (Jan 2002)

UTA has used design-build to design and construct a critical light rail project -- the UniversityLine project, which needed to be completed prior to the Olympic Winter Games of 2002 in Salt

Lake City. UTA awarded a design-build contract in 2000 for this 2.3-mile project connecting theUniversity of Utah community to the Salt Lake City central business district.

The initial contract price for the University line was $72 million. The final amount was slightlyhigher due to owner/stakeholder-directed changes for betterments and for incentive fees providedin the contract. The contract amount increased by approximately 2% due to contractor-initiatedchanges.


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The initial schedule for the project was 27 months. One proposer withdrew prior to submitting aproposal because they felt that 27 months was too aggressive. The successful proposercompleted the work in 18 months.

UTA had a tight budget with a small contingency. It is the UTA's belief that the University Line

was more expensive per mile than the previous design-bid-build rail project the UTA hadrecently completed. As a result, the perception is that the University Line cost more to developas a design-build project than it would have cost using a conventional delivery methodology.However, the University LRT project had more stringent maintenance of traffic and accessrequirements, included significantly more public/community relations work, and was working ona tighter completion schedule to finish before the Olympics Winter Games (the project could nothave been completed in time for the Olympics using the traditional, design-bid-build deliverymethod), all of which drove the cost up. Nevertheless, the project was within UTA's budget."Design-build provided additional assurances to the UTA in meeting program cost goals."(Michael Allegra, Director of Transit Development, UTA) The goals for the project were: (1) theproject was to be completed in a very short period of time (prior to the beginning of the 2002

Olympic Winter Games), (2) program costs needed to remain below $118 million, and (3) thequality of the project was to be at a level equal to the previous rail projects completed by theUTA. All of these goals were met. The project is considered a great success.

Washington State Department of Transportation (WSDOT) (Jan 2002)

WSDOT has used design-build on one pilot project utilizing a best value approach and is in theprocess of negotiating a design-build contract for the Tacoma Narrows Bridge. (WSDOT hadpreviously entered into an agreement with a firm to finance, design, build and operate the bridge,in response to a proposal submitted under WSDOT's public-private partnership law. Thedeveloper had entered into a design-build contract with a joint venture. The project is now being

restructured for the facility to be publicly financed, owned, and operated.) WSDOT's pilotproject was a $22 million grade separation. The legislative goal on the pilot project was tominimize budget and time. WSDOT "feels that the goal of minimizing total project deliverytime will be realized." Preliminary estimates show that initial cost was higher than a design-bid-build project, but cost growth to date has been lower than for a standard project. The project wasfunded out of the safety improvement program, but future large corridor projects will requirespecial funding sources.

WSDOT will likely utilize design-build for corridor level projects in the Seattle-Area (projectsranging from $200 million to $2 billion). Enabling legislation was required, and they recentlyreceived legislative authority to utilize design-build on publicly funded transportation projects.

WSDOT feels that design-build is an important tool in the delivery of their transportationprogram. The two primary benefits that WSDOT anticipates from design-build are a fasterdelivery timeline coupled with a lessened WSDOT staff requirement.

2.2. Criteria Used to Identify Projects Appropriate for

Design-Build


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The agencies participating in the September 2002 survey cited accelerated project delivery as amajor factor in the decision to use design-build. Schedule acceleration is possible due to anumber of factors, including: (a) the ability to start construction work before the design is 100%complete; (b) input by construction personnel into the design process (allowing the designer toincorporate the constructor's innovative ideas, skills, equipment, etc., into the design, thus

expediting the construction process); and (c) use of a single procurement process for selection ofboth the designer and the constructor.

Cost certainty was listed as a major factor for using design-build. Perhaps the most significantreason why design-build results in greater cost certainty is that it involves a single point ofresponsibility for both design and construction. Design-builder claims against project owners,based on design defects, are essentially eliminated. Many agencies transfer additional risks andresponsibilities to design-builders in order to further reduce the opportunity for claims andenhance cost certainty. This approach could result in a higher overall project cost since thedesign-builders will include a contingency in the proposal price to account for this risk. Thedesign-builder would be paid the full contract price even if the risk fails to materialize. This

approach is commonly used for project revenue-financed projects such as toll roads, where theneed for cost certainty is intertwined with the plan of finance and is therefore worth the potentialadditional cost.

LADOTD (May 2009)

LADOTD does not have written criteria for selecting projects appropriate for design-build. Eachproject is evaluated on a case-by-case basis to determine which procurement approach is themost advantageous. Like many other agencies, both schedule acceleration and cost certainty

have been major factors in LADOTDs decision to use design-build. Schedule acceleration wasa particularly important factor for the repair and replacement of the I-10 Twin Span since theneed to get I-10 back into service as fast as possible was a primary objective of the project. Costcertainty was the primary factor in LADOTDs decision to use design-build on the I-12Widening Project. LADOTD had a fixed budget of $100 million and used the proposedfunctional length of the roadway improvements in each proposal as part of the evaluationcriteria. Rather than awarding the contract based on a price proposal alone, the competitionamong the proposers was based on the greatest functional proposed miles of roadwayimprovements for the established fixed price, as well as the evaluation rating on technical factorsand schedule.

MDSHA (August 2008)

MDSHA looks for projects where there are opportunities for innovation; projects that havecomplex maintenance of traffic and the funding is in place so time commitments can be met.However, this is not the only criteria that is evaluated. SHA evaluates utility relocationcomplexities, and environmental sensitivity/permitting challenges. Projects do not need to meetevery criterion to be designated as design-build. SHAs goal is to maintain our design-buildprogram at its current level.


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The FHWA design-build regulations give contracting agencies wide discretion in identifying

projects that are appropriate for the design-build project delivery method. See 23 CFR 636.105.

NAVFAC (Jan 2002)

NAVFAC provided the following description of the process that it follows in deciding whetherto use design-build. NAVFAC reviews each project to formulate an acquisition plan based onthe specific circumstances of that project. It stated that its experience indicates design-build canbe a successful strategy when all or most of the following are true:

Project scope is well defined;

Project requirements for the most part can be stated as performance specifications;

Project value is sufficient to attract competition;

Project location, security requirements, or other factors will not overly restrict competition;

Little or no design is required in order to advertise the design-build contract;

Completing NEPA requirements will not significantly delay contract award;

A different acquisition method would not produce better pricing, life cycle cost, or overalltime;

There are no acceptable plans and specifications from another similar project that can be re-utilized with minimal effort;

The (internal Navy) client is on board with using this approach.

Florida DOT (2008)

Florida DOTs Design-Build Project Selection Guidelines provide a list of the types of projectsthat are suitable for design-build and examples of projects that may not be good candidates fordesign-build. Also see section 20.1 Select the Appropriate Project.

VDOT (April 2009)

VDOT has set objective criteria for selecting projects that must include one of more of thefollowing: expedited schedule, established budget, well defined scope, favorable risk analysis,prequalification of design-build firms and use of a competitive bidding process (best-value, low-

bid, and fixed-price). VDOT may include, but is not limited to, the following types of projectsfor design-build contracts:

Emergency and repair projects; Projects directly impacting public safety; Projects directly supporting economic development/enhancement; Projects using specialty or innovative designs and construction methods or

techniques;


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Projects to maximize the use of available funding (i.e. Federal, Bonds, FRANS,etc.); and

Projects deemed by VDOT to have expedited scheduling requirements.

2.3. Criteria Used to Identify Projects that may be

Inappropriate for Design-Build

This topic was not covered in the original survey, but was considered to be of interest to those

agencies that have not yet worked on a design-build project or who are unclear as to when this

project delivery method may not be advantageous.

LADOTD (May 2009)

LADOTD does not have formal criteria for identifying projects that may be inappropriate fordesign-build. A more traditional approach might be used when plans have already been morefully developed, the project is not too technically challenging and the Department is interested inreceiving the lowest initial price.

NC DOT (Mar 2003)

North Carolina DOT suggested that projects where design-build may not work well include:

projects where there are a lot of third-party constraints, such as right-of-way, utilities,etc.;

projects where there are especially sensitive environmental (including both natural andhuman) issues; and

projects that are too specialized to attract competition.

FDOT (Mar 2003)

Examples of projects that may not be candidates for design-build contracting include:

major bridge rehabilitation/repair with significant unknowns; rehabilitation of movable bridges; and


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urban construction/reconstruction with major utilities, major subsoil, right-of-way, orother major unknowns.

3. Procurement Process

Many contracting agencies use a two-phase selection process (i.e. short listing based onqualifications submitted in response to an RFQ and then a second phase consisting of thesubmission of price and technical proposals in response to an RFP). However, some contractingagencies have elected to use a single phase selection process when using the modified design-

build process. The FHWAs regulations provide guidance for determining when two-phase or asingle-phase procedures are appropriate (See 23 CFR 636.202 )The FHWAs design-buildregulations require contracting agencies to evaluate price in every design-build procurementwhere construction is a significant component of the scope of work. However, where thecontracting agency elects to release the final RFP document and award the design-build contractbefore the conclusion of the NEPA process, then the award may be based on non-price factors.Subsequent Federal-aid projects under that procurement may require a price reasonablenessdetermination . (See 23 CFR 636.109 and 636.302).

3.1. Two-Phase Selection

Responses to the 2002 original survey indicate that the majority of the responding agencies use atwo-phase selection process for procurement of design-build contracts. The first step involvespre-qualification of firms (short-listing where permitted by legislation) based on their responsesto a request for statements of qualifications or equivalent documentation. Short-listing serves toreduce industry costs in responding to requests for design-build proposals, to encourage the mostqualified design-builders to participate by increasing their chances of success, and to reduce thecost to the agency of reviewing the proposals. While there is no standard practice, manycontracting agencies typically short list three to five teams, however, some agencies havereduced the short list to two firms on large projects to minimize impacts to the industry whilemaintaining a minimum level of competition.

The second step is issuance of a request for proposals (or invitation for bids in some cases) andevaluation of technical and price proposals from the pre-qualified/short-listed teams. The secondstep may include the opportunity for the design-build teams to obtain pre-approval of alternativetechnical concepts, and may include discussions/negotiations followed by subsequent proposals(best and final offers).

The two-step process often involves one-on-one communications with proposers during the post-RFP/pre-proposal period. This allows proposers to speak freely regarding technical concepts


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that they do not want their competitors to know about. However, an agency using this processshould establish procedures to ensure that any information disclosed to one proposer is disclosedto all of them, and otherwise take precautions to avoid protest situations. A two-phase, bestvalue process may also include post-proposal discussions, allowing the agency to advise theproposer regarding areas of its proposal that require improvement.

In the 2002 survey, most of the agencies using the two-phase selection process awarded theircontracts based on a best value determination made following evaluation of initial or finalproposals. Federal law requires federal agencies that contract directly for services to follow sucha process for design-build projects. Legislation in a number of states (including Arizona,Colorado, Utah and Washington) allows transportation agencies to use such a process. Severalagencies ( NJ DOT, TCA) have awarded design-build contracts on a low-bid basis, setting a highresponsibility standard for the proposing teams, including minimum requirements for the designfirms participating in the process. On the Alameda Corridor project, ACTA selected its design-build contractor based on a lowest ultimate cost determination (taking into account the agency'sfuture costs based on the proposal submitted), and preceded by limited negotiations prior to

award, based on procurement authority contained in a city charter. The TCA selected a design-builder based on preliminary pricing, with the final price to be established upon the design-builder's completion of the preliminary design. (It did not have specific legislative authorizationto use such a process, but its procurement authority was held valid by a Superior Court decision.)Greenville County selected its design-builder based only on the quality evaluation ofqualifications/ technical proposals (including factors for scope and time), within a fixed,stipulated sum price, followed by negotiation of fees for management and design, and targetprices for individual projects based on a price breakdown submitted following selection.

The FHWA's policy recommends a two-phase selection process; however, the FHWA recognizesthat there may be situations where a single-phase selection process may be appropriate. See 23

CFR 636.201 and 636.202.

LADOTD (May 2009)

LADOTD uses a two-phase selection process similar to what is described above. The agencysrequest for proposals is known as a Scope of Services Package (SOSP). Due to the emergencynature of the I-10 Twin Span project, however, the LADOTD conducted the procurement using asingle-step process that did not include a shortlisting phase.

Depending on the project, the LADOTD communicated with proposers through face-to-facemeetings, responses to written comments or both. In each case, the rules for contact with theagency are clearly defined in the RFQ and SOSP documents in order to promote a fair, unbiasedlegally defensible procurement process.


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3.2. Variations on "Best Value"

There is no single generally accepted approach to determining best value. Many agencies adoptformulas, while some advocate use of an adjectival (descriptive) comparison.

NAVFAC (Jan 2002)

NAVFAC has tried both approaches, and provided the following thoughts on the subject:

About 7 years ago NAVFAC abandoned a point scoring system based on equating dollars toquality points because it was difficult to administer and defend (very difficult to explain the verysmall point differentials to proposers). An adjectival grading system was adopted to evaluatetechnical factors and is currently used. Technical proposals are generally evaluated in terms ofbeing exceptional/outstanding, acceptable/satisfactory, marginal/deficient but correctable, orunacceptable. Price is usually evaluated inclusive of options. The RFP always specifies therelationship between technical factors and price and it varies by project. Price and technical

factors are equal for the majority of our design-build procurements. Occasionally, technicalfactors are considered significantly more important than price. Even less often is priceconsidered significantly more important than technical factors.

Best value is determined by evaluating whether the price increase of one acceptable proposalcompared to the next lower priced acceptable proposal is commensurate with an increase in theranked technical quality of the higher-priced proposal. When the next higher price is notmatched by a commensurate increase in technical quality, the previously observed proposal is the"best value" and the contract may be awarded to that proposer.

Agencies that have used best value formulas include AZ DOT, FDOT, UT DOT (one project),

UTA (a modified adjectival rating on one project), and WSDOT. Regardless of whether aformula or adjectival approach is used, the criteria that are the basis for the evaluation will differdepending on the type of project, the agency's project goals, and other factors.

LADOTD (May 2009)

LADOTD has a legislatively created formula for determining the selected Design-Build Proposalbased upon the sum of the proposers price proposal and its score for its proposed schedule,which sum is then divided by the proposers technical score. Both the price proposal and thetechnical score are required elements of the evaluation criteria. However, the Department hasthe discretion to include the consideration of schedule in the Technical Score as a weighted

evaluation factor or to include it in the adjusted score formula,

NC DOT (Jan 2003)

NC DOT uses the best value process for project award. The value credit for the technicalproposals has ranged from 15% to 25% depending upon the type of work and cost of the project.


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Each team's bid is adjusted according to the credit awarded. Adjusted bids are then comparedand the project is awarded to the adjusted low bidder.

Design-build team members are required to be listed on the Department's prequalified list ofdesign firms and the prequalified bidder's list (for contractors). After advertisement and uponreceipt of statements of interest, the Department typically shortlists three teams per project.After the initial development of the RFP, individual meetings are held with the short-listedteams. Consideration to adjusting or revising the RFP is given based upon these meetings.Questions may be asked for clarity on innovative approaches that each team may want to keepconfidential. Changes that occur as a result of these meetings are usually related to scopeclarification or risk minimization.

MDSHA (2008)

MDSHA has used Best Value on a limited basis. Both the statements of qualifications and thetechnical proposal are evaluated based upon an adjectival rating system. The best value is

determined by a combination of the adjectival rating for the technical proposal and the price. Noformulas or equations are used as part of the evaluation process. Selection is based upon therelative importance of the technical proposal to the price proposal.

VDOT (April 2009)

VDOT may use best-value, low-bid, or fixed-price processes for project award. Under the best-value approach, VDOT typically values the technical proposals at 30% and the value of the priceproposal at 70% depending upon the scope of the project. Design-build contractors are required

to prequalified and professional services firms must meet applicable state requirements. Afteradvertisement and upon receipt of statements of qualification, the Department typically shortliststhree teams per project. After the initial development of the RFP, individual proprietarymeetings are held with the short-listed teams. These meetings focus on clarifying innovativeapproaches that Offerors have as well seeking scope clarifications. Consideration to adjusting orrevising the RFP is given based upon these meetings.

NCHRP Report 561 titled:Best-Value Procurement Methods for Highway Construction Projects provides detailedinformation on the procedures and algorithms used by various contracting agencies to determinebest-value.

3.3. Industry Review Process

Regardless of the procurement methodology used, most agencies recommend one-on-onemeetings with the short-listed firms prior to issuance of the RFP to obtain the benefit of theirthoughts on the draft documents. Industry review meetings can be particularly productive if theindustry review package includes a term sheet showing the major contractual terms and


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conditions, as well as information regarding the approach to risk allocation, in addition toproviding technical information for industry review.

The FHWA encourages contracting agencies to meet with potential proposers to assist withappropriate risk allocation during the development of the RFP document. See 23 CFR 636.115.

ACTA (Jan 2002)

Without an industry review we believe we would have received fewer proposals. We delivered acontract summary plus select concept schematics to the short-listed teams. The industry reviewresulted in some changes to risk allocation for differing site conditions, utilities, etc. -- notechnical changes."

FDOT (Jan 2002)

Florida DOT uses an industry review process to get the benefit of the proposer's ideas and

questions to help clarify the criteria.

Greenville County, SC (Jan 2002)

Greenville County stated that an industry review process results in better "buy in" by theconstruction community.

LADOTD (May 2009)

Depending on the project, the LADOTD has conducted the industry review process utilizingeither face-to-face meetings, written comments or both. The Department feels thatconfidentiality is important for effective communications since, in its experience, manyproposers are less likely to comment or ask pertinent questions in a public forum. Most of theproposer input has been in the areas of insurance, bonding and licensing requirements. While theDepartment has provided proposers the opportunity to comment on technical aspects as well, ithas not seen any significant innovations incorporated into project approach or design. Beginningdiscussion in the industry review phase does allow for contractor input and issue resolutionearlier in the projects development than under the traditional design-bid-build approach.

MDSHA (August 2008)

MDSHA has done a pre-advertisement where we provide a draft RFP to the industry for theirinformation and comment; however, MDSHA did receive any significant feedback as a result.


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Michigan DOT (May 2009)

Michigan DOT currently has pre-advertisement informational meetings and pre-bid meetings in

order to inform industry of the specifics of a design-build project. During advertisement, adesign-build team can meet with Michigan DOT in one-on-one meetings.

NAVFAC (Jan 2002)

"We have used industry reviews of draft RFPs very successfully. These forums have resulted inbetter RFPs and better industry understanding of our requirements."

WSDOT (Jan 2002)

Washington State DOT used the process and commented: "The industry review process is vitalto a successful project for WSDOT. The sharing of ideas in a public forum is a cause of concernto design-builders seeking a competitive edge."

TCA (Jan 2002)

"The industry review was necessary in order to retain bidder interest in the projects. For the SanJoaquin project, the initial approach taken in the contract was to shift virtually all risk to thecontractors. When it became apparent that industry was not willing to accept that much risk,TCA conducted one-on-one meetings with the proposers, and modified the contract documents

to retain greater risk. These meetings also served to give the proposers comfort that the projectwould proceed San Joaquin was the first start-up, revenue-financed toll road to go to themarkets. For the Eastern and Foothill-South projects, the industry review process resulted infewer changes to the documents, but was otherwise comparable to the San Joaquin process."

UT DOT (Jan 2002)

For the I-15 Project, UT DOT found out through industry reviews (continuing review of the draftRFP by the short-listed firms) that the 20-year maintenance term included in its draft RFP wasnot acceptable to the short-listed firms, and ultimately reduced the term to a 5-year option withrenewals for up to another five years. The industry review is one of the techniques often credited

with removing uncertainty (and contingency) in the minds of the proposers that led to only a3.5% spread on the price proposals.

3.4. Protests Relating to Design Build Procurements

Responses to the original survey indicated that, although several agencies have dealt withprotests relating to processing of design-build projects, there were no reports of protests to theconcept of design-build, except in Greenville, SC (see Section 2.1). A protest regarding failure


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to pre-qualify was denied for the Atlantic City/Brigantine Connector. TCA received a protest onits Foothill-South project, which was resolved without litigation. UTA denied a protest filedregarding its project from a contractor that did not submit a proposal. NAVFAC did not disclosehow many protests it has received over the course of its design-build program, but did state thatfewer protests were filed after the agency stopped trying to reduce the best value selection

process to a formula.

3.5. Pre-Proposal Meetings/Discussions/Negotiations

According to the original survey, a number of agencies hold confidential one-on-one pre-proposal meetings with the proposers during the proposal preparation period after issuance of theRFP. In some cases, these communications are limited to discussion of the acceptability (asopposed to evaluation) of technical concepts proposed by the short-listed firms for inclusion intheir proposals. In others the communications extend to general issues. Agencies that have used

a technical concepts review include ACTA, CDOT, Greenville County, and UT DOT. For theUtah I-15 project, this was another technique that was credited with leading to better pricing.

The procurement process used by many agencies offers the opportunity for one-on-onediscussions with the proposers after receipt of proposals for the purpose of advising the proposerof any deficiencies (errors, omissions, weaknesses) in its proposal. Upon conclusion of thesediscussions, the agency requests best and final offers (BAFOs), and bases the award on a reviewof the BAFOs. NAVFAC describes the process as follows: "Negotiations [discussions]strengthen the Government's ability to obtain best value. During negotiations [discussions], theGovernment identifies aspects of an offeror's proposal that it considers weak or deficient.Offerors revise their proposals based on that feedback. Negotiations [discussions] result in

revised proposals with fewer, if any, weaknesses or deficiencies."

The FHWA's policy for Federal-aid design-build projects encourages contracting agencies tohave meaningful discussions with proposers during the procurement process. However, thedesign-build regulation places limitations on such discussions to ensure a fair, unbiasedprocurement process (See 23 CFR 636 Subparts D and E).

Three of the agencies surveyed in the original 2002 survey incorporated pre-award negotiationsinto the procurement process. Since these negotiations occurred after selection, they involveddiscussions of price as well as technical issues. UTA's negotiations with the sole proposerresulted in a price reduction of approximately 20%. For ACTA, the negotiation process allowed

ACTA to obtain clarifications regarding the selected contractor's technical proposal, enabledACTA to revise the scope of work to account for agreements with third parties that were signedafter the proposal due date, and also resulted in a reduction in the contract price. The negotiationprocess for Greenville County's projects is a critical part of the process since the breakdown ofthe stipulated price is not part of the initial selection.

LADOTD (May 2009)


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LADOTD has also used confidential communications through face-to-face meetings and/orwritten comments to discuss the acceptability of technical concepts. The Department has theright to use concepts submitted by any proposer but keeps all communications confidential untilproposal evaluations are complete.

3.6. Stipends

Stipends have been used by a number of agencies and are a means of reducing the cost toindustry of participation in design-build procurement, as well as providing proposers partialcompensation for agency ownership of concepts, that may be incorporated into the project orused elsewhere by the agency. The use of stipends also tended to increase competition byallowing more firms to participate due to lower proposal preparation costs. Even if the proposals

do not produce useful ideas, the stipend encourages proposers to "stay in the game", therebyenhancing the price competition. Nevertheless, in many jurisdictions stipends are politicallycontroversial.

The FHWA's policies provide for Federal-aid participation in stipends with certain stipulations.See 23 CFR 636.112 and 636.113.

Reference stipend special provisions: Also see the NCHRP Project No. 20-7 / Task 172,

Recommended AASHTO Design-Build Procurement Guide (or theJanuary 2008 AASHTO Guide

for Design-Build Procurement) , sample special provision Number 036-STP-01 Stipend

Minnesota DOT 2001 and 037-STP-02 Stipend Maine DOT 1997.

There is no fixed formula for determining the appropriate amount of stipends, but someexamples include the following:

AZ DOT: 0.2% of bid amount CDOT: $1,000,000 ($1.186 billion project) FDOT: Varies for each project, every losing firm with responsive proposal receives a

stipend. For example, a recent $82 million project had a stipend of $100,000. LADOTD(May 2009) LADOTD considers the offering of stipends on a project by project basis,and generally does not offer a stipend on projects that are straight forward or otherwiseare not overly complex. For the John James Audubon Bridge ($348 million project), the

Department did pay a $300,000 stipend to the short-listed proposers that were notawarded the contract but that did submit a responsive proposal.

MassHighways (May 2009) Generally not (except for Route 3 North Project) MDSHA (August 2008) approximately 0.02% of the contract value. Montana DOT (May 2009): Case by case basis, have ranged from $24,000 to $120,000 NC DOT (Jan 2003): Set on a case-by-case basis, have ranged from $0 to $100,000. UT DOT I-15: $950,000 ($1.36 billion project) UT DOT Legacy Parkway: $500,000 ($300 million project)


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UT DOT I-15: Overall 15%, but with wide variations among specific project components(for example; bridges, 0%; alignment and grade 30%, and geotechnical investigations,95%)

UT DOT Legacy Parkway: 15% UTA: 30% VDOT: Overall 30%, but with variations among specific project components (for

example; bridges, 0%; alignment and grade 30%, and geotechnical investigations, 95%) WSDOT:30-40% (less in future).

A number of agencies indicated a preference for performance specifications where possible (NCDOT uses both performance and prescriptive specifications), but almost all of the agencies reliedon prescriptive specifications for significant portions of the project.

5. Contract Issues

5.1. "Basic Configuration / Alternative Technical Concepts"

A number of agencies include a basic configuration concept in the contract, for the purpose ofconstraining the design-builder's ability to deviate from a particular design and also to providefor payment to be made to the design-builder if the assumed configuration that was the basis forits price estimate proves to be impossible to build. Design-build proposers have the right toassume that the Basic Configuration and the design contained