Progressive Design-Build: Examining the Basics

1. Progressive Design-Build: Examining the Basics Michael C. Loulakis, Esq., DBIA President/CEO Capital Project Strategies, LLC mloulakis@cp-strategies.com September 25, 2017

2. Introduction • Project delivery studies show benefits of Design-Build Done Right: • Early contractor involvement • Highly qualified teams • Group cohesion and team integration • Most private sector owners readily understand these benefits • Qualifications dominated procurement practices • Collaborative development of design • Negotiation of ultimate project price

3. Introduction (cont’d) • Unfortunate reality – many public sector owners do not use Design-Build Done Right • Price is often dominant selection factor • Use bridging documents vs. performance requirements • Little meaningful collaboration prior to contract award

4. Introduction (cont’d) • Challenges created by these practices • Bridging documents can stifle innovation • Owners susceptible to change orders for problems in their design documents • Competitive procurements are costly and take time for all parties • Is there a way for owners to exercise substantial design control and comply with Design-Build Done Right principles?

5. Progressive Design-Build’s Core Features • Design-builder retained by owner early in project’s life • Design-builder selected primarily, if not exclusively, on qualifications • Final project cost and schedule commitment is not established as part of the selection process • Two phases of work • Preliminary services • Final design and construction, once the parties have agreed upon price and other commercial terms

6. Core Features (cont’d) • Design-builder collaborates with owner during Phase 1 to create or confirm project’s basis of design • Design-builder advances design • Decisions based on cost, schedule, operability, life cycle and other considerations • Ongoing, transparent, cost estimates to achieve budget requirements

7. Core Features (cont’d) • Formal commercial proposal for Phase 2 • “Appropriate” level of definition, often at 40-60% design completion • Dependent on amount of control owner desires to maintain over design definition and reduction of contingency • Phase 2 initiated upon acceptance of commercial proposal

8. Core Features (cont’d) • Owner right to exercise “off-ramp” • End relationship and use design to advance project • Right to have designer complete design and become designer-of-record • Early work packages for discrete work elements

9. Why Owners Choose Progressive Design-Build • Interest in contracting with design-builder very early in design process • Complex projects requiring high level of collaboration • Higher degree of cost certainty and transparency during design development • Owner wants to remain actively involved in making design decisions • Avoids time and expense of owner creating design baselines for procurement • Streamlines and simplifies procurement process • Reduced or limited need for stipends

10. Why Owners Choose Progressive Design-Build (cont’d) • Ability to use early work packages and fast track • Removes some of owner’s time pressures in reviewing and acting upon design submittals • Allows owner participation in subcontractor and supplier selection • Offers transparency into design-builder’s proposal cost • Provides collaborative way to establish “single point of responsibility” – there is no design “handover”

11. Why Owners Choose Fixed Price Design-Build • Interest in awarding contract with full competition • Opportunity for more creative technical approaches • Opportunity for multiple technical approaches • Opportunity for best value and lower prices • Restrictive procurement regulations • Prohibit progressive design-build • Preclude early involvement of subcontractors

12. Why Owners Choose Fixed Price Design-Build (cont’d) • Concerns over attributes of progressive design-build (e.g., negotiating price or exercising “off-ramp”) • Marketplace concerns with progressive design-build • Success and comfort in using fixed price design-build – procurement infrastructure already developed

13. CMAR vs. Progressive Design-Build • Benefits of CMAR • Ability of owner to have a direct contract with a designer who is independent of contractor • Easier ability to exercise “off-ramp” • Benefits of progressive design-build • Owner does not have to manage/procure designer • Slight schedule benefit • Ability to obtain performance guarantee and other benefits of design-build

14. Progressive Design-Build Procurement • Pick the right team through streamlined and simple procurement • The right team is the one that: • Will work well and collaboratively with owner • Offers best chance to meet owner’s project goals and required outcomes • Owner believes is trustworthy, fair, qualified and transparent

15. QBS and Best Value • Qualifications based selection • Solely non-price factors • Team qualifications and past performance • Innovative ideas • No price information • Best value • Both price and non-price factors • Price factors might include Phase 1 services and overall design-build fee (low weighting)

16. Other Procurement Decisions • One-step or two-step • Statutory requirements? • Deliverables required for shortlisted proposers? • Pricing information? • Proprietary meetings • Interviews • Stipends

17. Lessons Learned from Procurement of Progressive DB Projects • Process may benefit in having Phase 1 services divided into 2 or more components • Confidential meetings are extremely valuable in obtaining real insights from proposers • Owners often try to resolve too many commercial and contractual details during procurement • Process benefits from post-award discussions • Contract will essentially be subject to modifications once contingency and risk pricing are developed

18. Unique Contracting Issues • Scope of Phase 1 services, including cost modeling • Ability of design-builder to rely upon owner-furnished information • Early work packages • Design-builder self-performance • Subcontractor and vendor procurement and involvement in Phase 1 • Commercial proposal • Exercising off-ramp • Contract should reflect collaborative nature of relationship

19. What Should an Owner Do to Prepare for Implementing Progressive DB? • Assess appropriateness of process • Use experienced consultants • Understand procurement limitations • Have a strong cost estimator on team • Make early decision on subcontractor procurement and design-builder self-perform • Ensure the team is willing and able to collaborate and trust

20. Dulles Rail, Phase I • $1.6 billion contract for first phase of WMATA extension to airport • Virginia PPTA procurement process • Investment by design-builder in the preliminary engineering through unsolicited proposal • Negotiated lump sum price at completion of 30% design (preliminary engineering) after open book process • Project on line 2014 • Allowances used to overcome certain pricing issues • Interim agreements used to address ROW/utility/design issues pending federal funding

21. DC Water Headquarters • New HQ to be built over an operating pumping station • 2-phase procurement with shortlist of 3 • Design competition – iconic design that would satisfy permitting agencies, based on $55MM budget • $75,000 stipend • Skanska USA Building, with Smith Group as lead architect • Weighted criteria approach used for technical approach • Solicitation of only lead constructor and lead designer • Pricing information provided for informational purposes • Single contract with two phases • GMP proposal will be provided at 80% design

22. City of Houston, Northeast Water Purification Plant Expansion Project • 320 MGD treated water facility • Estimated cost in excess of $1B • Approximately two years of preliminary engineering expected • Completion by 2024 • Two step procurement with shortlist of 3 • Best value approach, with price proposal to include: • Design-builder’s fee and Basis of Design services • Indicative pricing • Full contract approach • Early work packages expected • Solicitation of full teams

23. Other Progressive Design-Build Projects • Substantial number of water/wastewater projects • Northern Treatment Plant, Colorado • South Florida Water Management District • Los Angeles World Airports • Port of Seattle International Arrivals Facility

24. Progressive Design-Build: Examining the Basics Michael C. Loulakis, Esq., DBIA President/CEO Capital Project Strategies, LLC mloulakis@cp-strategies.com September 25, 2017