SECTION 2 - Efficiency & Cost Effectiveness in Design

PROJECT DELIVERY OPTIONS FOR CALIFORNIA K-12 SCHOOL AND COMMUNITY COLLEGE FACILITIES

Excerpted, by permission, from The Project Delivery Handbook of the Association Of California Construction Managers

There is no single project delivery method that meets all Districts' needs.  The appropriate delivery method for a particular project in a particular District will depend on a variety of unique circumstances.  This chapter provides a description of each delivery method and advantages and disadvantages. It closes with a project delivery selection matrix that Districts may use to compare and contrast individual delivery methods with particular district needs.

The following factors may influence which method a District may choose:

1. District staff capabilities, including whether employee or contracted Construction Managers are trained and have the hours available to oversee a project
2. Time considerations
3. Complexity and Size of Project
4. Level of District control desired
5. Type and size of contractors that you want to attract
6. Budget constraints
7. Predominant trade practice in region
8. Openness to alternative methods
9. Appropriate community and business participation
10. Level of acceptable legal and financial risk

1. TRADITIONAL DESIGN-BID-BUILD

Design-Bid-Build is the traditional project delivery approach that was used for most of the 20th century to complete projects in the public sector.  The Design-Bid-Build model segregates design and construction responsibilities by awarding them to an independent private Architectural Firm and a separate private contractor.  By doing so, Design-Bid-Build separates the delivery process into three direct phases: 1) Design, 2) Bid, and 3) Construction (Build).

During the initial design phase, a public agency awards a design contract to an architect providing the best experience and quality.  The Architect is responsible for completing a final project design and providing detailed construction drawings, specifications and supporting documents.

In the bid phase, the owner would use the documentation prepared by the Architect to assemble construction bid documents.  Contractors are invited to submit competitive, lump-sum bids, and the owner awards the construction contract to the contractor submitting the lowest responsive responsible bid for a total contract price.  The project then moves into the construction phase. The owner retains responsibility for monitoring the contractor's performance by hiring inspectors of record, and usually retaining the architect to observe and administer the construction phase.
Design-Bid-Build is most frequently done using a lump sum bid contract, but guaranteed maximum price is sometimes used.  The general contractor charges for cost, overhead and profit for each change order on a contract.

Advantages of Design Bid Build

1. It is the familiar and established way of delivering a project.
2. Design documents must be thorough and complete to enable contractor bidding.
3. Public Contract Code and legal challenges have set accepted standards.
4. The A/E of record works for the owner and represents the owner.
5. It is suitable for competitive bidding with lowest initial price.

Disadvantages of Design Bid Build

1. There is no early builder involvement.
2. Conflicts can arise between architect and builder after design is complete and builder is selected.
3. Bids over budget present the most difficulty in reducing costs.
4. Loss of flexibility due to single bid format.

2. MULTI-PRIME

The Multi-Prime construction management delivery is a method that employs a construction manager serving as the District agent and providing professional advice to the District.  This delivery method significantly changes the trade contractors' relationship with the District in that they contract directly with the District or District's construction manager rather than with a General Contractor.  This allows the District to choose the firm or individual providing the construction management (scheduling, administration, and coordination) services by qualifications-based selection, rather than low bid. The District does use the low bid process for selecting the firms providing the actual, physical construction.

The Multi-Prime delivery work is bid out similar to the Design-Bid-Build method, but in individual trade bid packages for trade contractors (such as plumbers, electrical, painting, etc.), not General Contractors. Rather than subcontractors bidding to and selected by the general contractor, each package of trades is bid by the District.  The construction manager will prepare bid package summaries for all trades and coordinate all of the bid packages required to build the project.  The number of trades and bid packages can vary by project scope and size. The trade bid packages are bid pursuant to traditional public works low bid selection process.  Then the construction manager manages the contracts of each trade. The on-site construction manager performs the role of the General Contractor as on-site construction manager during construction by providing scheduling, supervision, change order negotiations, and other activities required to build the project. Construction management fees may be either hourly not-to-exceed, fixed negotiated price or a percentage of construction costs. 

The School District in a Multi-prime delivery method assumes many of the risks of a general contractor.  The School District is liable for costs resulting from trade contractor business failure.  The District is protected by surety bonds from each trade contractor. Many risks that might have been borne by the General Contractor in other project delivery methods are borne by the trade contractors. Risks that remain with the trade contractor include material price increases and trade labor availability. 

Advantages of Multi-Prime

1. More control by the District of construction phase schedule.
2. Trade contracts are procured through competitive lowest responsible bidders.
3. Trade contractor bidding process is familiar to the District.
4. Potential to re-bid over-budget trade package without delay.
5. District has more flexibility of bidding and scheduling which allows for multiple phases.
6. Construction Manager provides construction expertise to assist in the entire design, planning, permitting and construction process.
7. Avoids general contractor mark up.
8. Multiple packages provide greater opportunity for participation by local trade contractors.

Disadvantages of Multi-Prime

1. More contracts for District to manage.
2. Possibility of overlaps or gaps in the scopes of work.
3. District accepts more risk by hiring multiple trade contracts directly.
4. Contracts with separate trades make scheduling more difficult to control.
5. Total price is not known until all bids are in.
6. Lack of single guaranteed bonded price for total project.
7. Potential decrease in competition for trade contractors because of added bidding and reporting requirements.
8. Each contract package subject to litigation.

3. CONSTRUCTION MANAGEMENT AT-RISK

Construction Management At-Risk (CMAR) is a project delivery method where a construction manager is first hired under a professional services agreement on a fee basis.  This professional services agreement provides traditional construction management in the design and bidding stages.  Before construction begins, the CM changes to a General Contractor relationship by putting a fixed price and a performance and payment bond on the project. The CM is at risk for constructing the project at the contract price.  This method is similar to the Multi-Prime delivery method except the Construction Manager takes on most risks in the implementation of the project. This transfer of risk can significantly alter the relationship between the District and the Construction Manager. 
The use of Construction Manager At-Risk is optimized if the manager is available at the earliest stages of a project.  The Construction Manager At-Risk process can eliminate the failed expectations that can occur in the Design-Bid-Build process (for example, when the low bid General Contractor is unaware of needs and requirement that might not have been incorporated in the construction documents).  The CMAR in many cases comes with a strong construction knowledge that ensures that the District's desires are properly reflected on and in the construction documents.  This delivery method is subject to a variety of differing interpretations that may affect the level of risk and contract administration.

Advantages of Construction Management At-Risk

1. Construction Manager may be selected based on qualifications and personnel and later converted to "at-risk" position.
2. Fixed price based on complete design documents.
3. Trade contracts are procured through competitive lowest responsible bidders.
4. Trade contractor bidding process is familiar to the District.
5. Potential to re-bid over-budget trade package.
6. District has more flexibility of bidding and scheduling which allows for multiple phases.
7. Construction Manager provides construction expertise to assist in the entire planning, permitting, design and construction process.
8. Multiple packages provide greater opportunity for participation of local trade contractors.

Disadvantages of Construction Management At-Risk

1. Increased fees for assumption of risk.
2. Insurance and bonding responsibilities less certain.
3. No common standards for CM at Risk methodology.
4. Construction Manager relationship to District changes during process
5. Potential conflict if CM also performs work with contractors on other projects
6. Potential decrease in competition for trade contractors because of added bidding and reporting requirements.
7. More contracts for District to award.
8. Possibility of overlaps or gaps in the scopes of work.
9. Price is not known until all bids are in.
10. Not all Construction Managers bond total project.

4. DESIGN-BUILD

Design-Build is a project delivery method where there is a single contract with one entity to both design and construct the project.  It is recently re-emerging nationally and in California as an alternative to traditional Design-Bid-Build and other delivery methods.

A typical Design-Build project utilizes a two-phase procurement process.  The first phase is a prequalification process or Request for Qualifications (RFQ), typically short-listing to 3 finalists.  The second phase is the Request for Proposals (RFP), from which a best value selection process determines the firm with the proposal most advantageous to the District.

Design-Build is an integrated process.  The Architect/Engineer & General Contractor are on same team from beginning to end.  There are only two prime players, the District and the Design-Build Entity (DBE).  The DBE can take on many forms such as contractor-led, Architect/Engineer-led, or a joint venture. But typically the DBE is contractor-led. Regardless of the form the DBE takes, there is only one contract between the District and DBE.

Design-Build may be used on complicated or simple projects.  The type of control a District has over the project varies from project to project with Design-Build and can be dictated by the terms of the RFP. Please note that after the contract is signed the District has little control unless it is specifically addressed in the contract.  Design-Build requires more input by the District up front, but less management later on. 

Advantages of Design-Build

1. Teamwork is promoted because General Contractor and Architect are on the same team.
2. Earlier knowledge of construction costs guaranteed during design.
3. Design risk shifted to the DBE.
4. Single point of responsibility for District with fewer changes.
5. Only one RFQ and/or RFP required for design & construction
6. Only one contract for both design and construction.
7. DBE  may be selected on statutory best value basis rather than traditional low bid
8. More District involvement earlier in process with less involvement needed after design.
9. Potential for faster delivery system.

Disadvantages of Design Build

1. New learning curve for Districts and agencies.
2. Districts pushed for earlier decisions.
3. Different process in the front end of project.
4. New and unique statutory requirements for selecting Design-Build Entity and Subcontractors.
5. Insurance and bonding details are less understood.
6. Statutorily limited to projects with value greater than $10 million and regionally counted for Community College Districts.
7. Potential for less control by District of design and design details.
8. Political resistance among those unfamiliar with method.

5. LEASE-LEASEBACK

The Lease-Leaseback delivery method involves selecting an organization, commonly referred to as the Developer-Contractor, to develop a new building or improve buildings on property the District owns. The mechanism is for the Developer-Contractor to simultaneously execute a Site Lease of the property giving it the right to develop the project and a Facilities Lease giving it the obligation to build or design and build the project and to lease the improvements and the site back to the District, with the District owning the improvements when the leases expire. Different Districts and their Attorneys allow different approaches: for financing, if any; for selection of the Developer-Contractor; for design responsibility; for lease terms; and for method of selecting trade contractors. This flexibility is a primary attraction of Lease- Leaseback.

Preconstruction work by the Developer-Contractor up to the time of signing of leases is sometimes conducted under a Preliminary Services Agreement, although some attorneys draft leases that are signed immediately and then amended as design and pricing are developed. Some attorneys draft leases providing for pre-construction services, even design responsibility, with language that calls for an amendment to give approval for construction to proceed including setting the date of completion and the Guaranteed Maximum Price.

Advantages of Lease-Leaseback

1. A District may use lease leaseback to satisfy its need for financing the project.
2. The District has flexibility on who controls the Architect.
3. The District may participate in selecting not only the Developer-Contractor, but all of the trade contractors and suppliers.
4. Solicitation of cost saving ideas from trade contractors and suppliers, as part of their selection process, can help meet budgets.
5. Developer-Contractors can set Guaranteed Maximum price very early in a project.

Disadvantages of Lease-Leaseback

1. There have been concerns by OPSC staff and State Allocation Board members that the flexibility of the lease leaseback statutes could lead to faulty practices.
2. Questions exist regarding whether leases can be signed prior to DSA stamp out of plans.
3. Lease leaseback is new and not as well understood by the design and construction community.

6. PIGGYBACK CONTRACTS

The Piggyback delivery method has been widely used in the school construction community to acquire a variety of portable and modular buildings and other items.  Specifically, this procurement method is often used to purchase such items as modular buildings, telecommunication systems, data systems, security systems, classroom supplies, furniture, computers, and playground equipment.  However, using piggyback contracts to acquire portable and modular buildings and some associated site work has evolved over time into a school construction delivery method which represents an alternative to the formal bid process.

In practice, a school District may be able to use the pricing from a Piggyback contract held by another school District or public agency to negotiate a contract in the absence of any additional public bidding.  Of course, there are formal bid procedures and other Piggyback procedures which must be followed by the original or originating District.  However, other Districts can use this delivery method to avoid the time, expense, and market uncertainties associated with formal bidding.  Although certain advantages can be attained through the use of this process, it is important to first take a look at the enabling legislation and the relationships between the different parties involved in this process.

A Construction Manager can be used with the Piggyback contract.  This is an alternative procurement only available for certain types of buildings.  Construction fees may be either hourly not-to-exceed, fixed negotiated price or a percentage of bids. 

Advantages of Piggyback Contracts

1. Elimination of the bid process for allowable buildings results in a time savings.
2. The manufacturing process can produce significant time and cost savings over the site built approach.
3. Manufacturers typically project and anticipate materials requirements in advance.  This can serve to mitigate both shortages and price escalations.
4. Although the manufacturer's building plans must be integrated into the architect's and overall project plans, the time and cost of designing the buildings are virtually eliminated because of repetitive use structures.
5. Architectural similarity between classrooms on a given site or those at other schools is easier to achieve when modular buildings are used.

Disadvantages of Piggyback Contracts

1. Significant legal questions remain concerning the use of this mechanism for the construction or placement of buildings.  School Facility Program funding may not be available for projects procured pursuant to piggyback contracts.
2. School Districts become heavily dependent upon a single source for the success of their project.
3. Durability over time can be an issue depending upon the type of building being purchased.
4. Although a formal bid process has been conducted by the originating agency, the public may perceive the end result as a "no bid" contract.
5. The modular industry has had its share of difficulties recently with numerous insolvencies.  Many legal issues can arise regarding the legal ownership of uninstalled buildings.  Additionally, since the acquisition of the building(s) is single source, the ability to quickly identify an alternative source can be challenging.
6. Site work cannot commence until all drawings for the project are approved by DSA.  Oftentimes, poor coordination between the manufacturer and the design architect can result in project delays.
7. The timing and relationship between site contractors and vendors and the manufacturer can result in significant additional costs when delays occur.

7. DEVELOPER BUILT

Developer Built is a project delivery method whereby a school District contracts with a real estate developer to construct a new school on property initially owned by the developer.  The property and improvements will subsequently become the property of the school District.  Frequently Developer Built schools are constructed as part of new residential developments as part of a negotiated arrangement for meeting developer fee responsibilities.  This can be a win-win situation for both the developer and the District.  The school can be better sequenced with residential development and the developer can take advantage of hiring subcontractors already working for them in the area.  Developer Built schools can also be built on urban infill properties whether or not the school is part of a larger infill development project.

With Developer Built schools there is generally a single point of responsibility to the District for both the design and construction of the school.  A typical Developer Built project is a negotiated procurement as part of the school fees discussions.  The District hires the developer to design and construct the new school facility according to a set of District standards.  Plans and specifications must be approved by the Division fo the State Architect (DSA) and are subject to Field Act requirements.

In this type of procurement, the developer decides how to contract for the design and construction.  The School District may have a Construction Manager to assist them in the construction process.  The developer may use a variety of delivery models:  Design-Bid-Build, Design-Build, CM at-Risk or Multiple Prime.

Advantages of Developer Built

1. May bring construction input into design.
2. May facilitate Value Engineering.
3. Developer contribution may be greater than statutory fees.
4. Use of commercial/residential components in schools.
5. Design usually blends with surrounding community.

Disadvantages of Developer Built

1. District has less control of the project.
2. Educational Program components may be more difficult to incorporate into project.
3. District standards for materials and finishes may be more difficult to incorporate into project.

THE PROJECT DELIVERY SELECTION MATRIX

This Matrix provides a tool for comparing alternative delivery methods.  The criteria listed are those which members of the Association of California Construction Managers (ACCM) identify as the ten most common objectives of K-12 and Community College Districts.  Each of these criteria will have a greater importance depending on the project, District Board and funding.  Other criteria may be added or substituted to fit local needs.
 
The most useful method of implementing this Matrix is to first list assign a weight to each of the criteria.  Any relative numeric scale will work.  Multiple criteria can have the same weight.  The objective is to provide a weight to compare alternative delivery methods. For example, the District may determine that, because of past change order issues, that the "Minimize Change Orders and Claims" criterion is very important and weight it at 10.  The District may also determine that encouraging a variety of local trade contractors is also important but less important than minimizing change orders and weight the "Community and Political Issues" criterion as 8.  Finally, knowing early what the initial cost is may be determined as important as a range of local trade bids and also assign "Low Initial Cost" as an 8.

Next rank the 7 project delivery methods on a 1 to 10 scale based on how well they meet the criteria. The delivery methods under consideration are all ranked, their ranks multiplied by the criteria weights and the totals compared.

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