Procurement and Construction Management and Oversight
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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.

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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


Major capital projects alternative contracting approaches

Major Capital Projects Alternative Contracting Approaches

Pre-Planning and Acquisition

Finance

Design

Construction

Operations

Maintenance

RTD Union Station

DART Orange Line


Major capital projects alternative contracting approaches risk allocation

Major Capital ProjectsAlternative Contracting Approaches – Risk Allocation

Contractor’s Risk / Contractor’sControl

Owner’s Risk / Owner’s Control


Design bid build project structure and approach

Design-Bid-BuildProject Structure and Approach

Owner

General Contractor

Architect/

Engineer

Subcontractors and Suppliers

$

$

$

$

PD&E

PE

Final Design

Procurement

Construction

ESTIMATE

BUDGET

BUDGET

BID

Contractor Selected


Design bid build overview

Design-Bid-BuildOverview

Pros

  • 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


Design build project structure and approach

Design-BuildProject Structure and Approach

Owner

Design-Builder

Architect/Engineer

Subcontractors and Suppliers

$

$

$

PD&E

PE

Procurement

Final Design

BUDGET

ESTIMATE

BID

Construction

Contractor Selected


Design build summary

Design-BuildSummary

Pros

  • 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

Construction Manager/General ContractorProject Structure and Approach

Owner

General Contractor

Consultants

Subcontractors and Suppliers

$

$

$

PD&E

Procurement

Final Design

PE

BUDGET

BUDGET

GMP

Construction

Contractor Selected

8


Cmgc overview

CMGC Overview

Pros

  • 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

    Cons

  • 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

9


Public private partnerships project structure and approach

Public Private PartnershipsProject Structure and Approach

Owner

Concessionaire

O&M Contractors

Design-Builder

Architect/Engineer

Subcontractors and Suppliers

$

$

PD&E

Procurement

Design

Construction

and Testing

Revenue

Operations

BUDGET

BUDGET

Maintenance

Partner Selected

10


Ppp overview

PPP Overview

Pros

  • Advance 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

11


Procurement and construction management and oversight what board members need to know

What Questions Should You Be Asking?


Risk allocation principles

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

    • Reduces competition

    • Increases contingencies

    • Increases project disputes


Procurement and construction management and oversight what board members need to know

What Questions Should You Be Asking?

  • 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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