Construction Institute Seminar July 31, 2015

1. © 2014 HDR, Inc., all rights reserved.
Presented by: Dan Becker, CCM, PMP, ENV SP
2015
Managing Project Risk
Through Alternative Project
Delivery

2.  Understand how using APD can reduce some risks on developing capital projects
 Identify reasons Owners are turning to “alternative” ways to delivering their projects
 Understand the benefits of alternative project delivery (APD) over traditional
design/bid/build
 Identify the risks in utilizing alternative project delivery.
 Understand the engineer’s role in executing projects using alternative delivery
approaches
2
Learning Objectives

3.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
o Design/Build
o CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
3
Agenda

4.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
o Design/Build
o CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
4
Agenda

5.  Risk as defined by ISO 31000
o The effect of uncertainty on objectives, whether
positive or negative
 Risk management is the identification, assessment, and
prioritization of risks
After risks are identified…..
 Coordinated and economical application of resources to minimize,
monitor, and control the probability and/or impact of events
5
What is Risk Management

6. Typical Project Risks
• Differing Site Conditions
• Delays
• Revised Regulations
• Restricted site access
• Errors and Omissions
• Ambiguities in the Documents
• Miscommunication
• Work added by the Owner
• Cumulative Impact of Changes
• Delays in Owner Furnished Items
 Strikes
 Material shortages
 Labor shortages
 Interference by other trades or contractors
 Third party (utilities) interferences/delays
 Natural Disasters

7.  Assigning risk to the party that can best manage the risk
 Risk sharing when it makes sense
 Dealing with issues as they arise
 Know your (and organization’s) tolerance for various risk and risk
management approaches
 Monitor and track progress towards mitigating risks
7
Critical Elements for an Effective
Risk Management Program

8.  If risks are assigned to the “wrong” party, it can be costly
 Assess the resources available as you develop and
implement your plan.
8
Select the Appropriate Method to
Deliver the Project and Manage Risk

9.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
o Design/Build
o CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
9
Agenda

10. Changing the Paradigm
Public Owners are frustrated with
Design/Bid/Build/Claim project delivery
model
However
Public Owners and Contractors are
most familiar with Design/Bid/Build
project delivery model
10
Owners are Looking for Ways to
Manage/Reduce Risks

11.  Design/Bid/Build
 Design/Build
 CM @ Risk (aka GC/CM and CM/GC)
11
Primary Methods Used for Delivering
Projects

12.  Job Order Contracting
o Pre-Pricing items for developing construction costs
 P3 – Public Private Initiative
o Publicly or privately funded
o Usually design/build , could be operated
 IPD – Integrated Project Delivery12
Alternative Delivery Methods

13.  Project Characteristics
 Reasons to consider APD
 Know your organization
 Know your own style
13
Assess the Appropriate Delivery
Approach for your Project

14.  New, Remodel, Upgrade, or Expansion Project
 Unique Project Characteristics
o Compatibility with existing equipment and/or systems
o New Technologies
o Site Constraints
o Resource Constraints
o Operational Constraints
14
Project Characteristics

15.  Project Schedule
o Consent Decrees
o Market Conditions – first to market
o Construction Phasing
 Project Budgets/Costs
o Funding Sources
o Funding Partners
o Cash flow
15
Project Characteristics

16.  Resources to develop plans and specifications
 Does your organization need to stay involved in every step of the
design and construction
 Is your organization willing to let the contractor loose on the
development of the project
 Trust within the organization/between departments; how are
departmental disagreements resolved
 Is your procurement department adaptable
16
Know Your Organization

17. o Handling change
o APD requires a paradigm shift
• New ways of approaching a project
• APD requires working closely with the design team and contractor;
collaboration
o Challenging the status quo
• Challenge your organization’s way of doing business
• APD requires collaboration and negotiating skills
17
Know your own Style

18.  Too many claims at the end of the project
 Too many change orders
 Contract documents were not well coordinated
 Poor scheduling
 Dissatisfaction with the project outcome
o Mechanical/electrical system incompatibility
o Settling for lowest bid items vs. desired items
o Lack of cohesion with the team
“the surgery was a success, but the patient died!!!”
18
Why Owners are Looking
for a Change

19. 19

20.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
o Design/Build
o CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
20
Agenda

21.  CM@Risk (GC/CM or CM/GC)
o Selection based on qualifications and some pricing information
o Contractor brought in during the design process (Usually
around 30%)
 Design/Build
o Selection based on qualifications and price
o Single entity responsible for delivering the project; design and
construction (and operations in some instances)21
Primary Alternative Delivery Methods

23.  Collaboration between the Owner, Engineer and Contractor
 Owner maintains control of the design process
 CMR provides constructability review comments and
recommendations during the design phase
 CMR provides value engineering/analysis
recommendations during the design phase
 CMR has input into the construction phasing plan; CMR will
be responsible for implementation of that plan
23
Benefits of CM@Risk (CMAR)

24.  Shortened construction schedule
o Early award of project elements (subcontracts and/or equipment) can
reduce the overall project duration.
o Expedited submittal review process
 Reduction of claims
o Better coordination
o CM@R will work with design team to develop subcontract packages
o Construction phasing issues will be resolved early on
 Cost incentives
o Split savings at the end of the job
Benefits of CMAR

25.  Selection Criteria should focus on your requirements
 Owners can get hung up on negotiating the GMP
o Develop parameters for negotiating GMP
o GMP may be higher than going out for low bid
 Change orders will not be completely eliminated
o Differing site conditions may impact the project
o Owners may request changes
o Permitting authority changes
25
Managing Expectations for CMAR

26. CMAR Selection Criteria
Evaluation Criteria Points
Attendance at the Pre-Proposal Meeting and Site Tour 10
Firm’s Experience 100
Project Personnel 200
Approach to Executing the Project 100
Reference Checks 100
Project Financial Questionnaire 90
Interview 200
Price Proposals* 200
Total Points 1,000
* Price proposal usually includes overhead and profit. Some proposals have included
pre-construction phase services if they are well defined.

27. CMAR Bid Form
Description of Bid Item: % Fee Estimated GMP Amount
Percent Fee Amount
(% Fee x Estimated GMP) % $ 17,000,000 $ ________________
(Percent Fee Amount)
Specified General
Conditions Work $ ________________
Total Bid: $ ________________

28. CMAR Bid Form
28
Description of Bid Item: % Fee Estimated GMP Amount
Percent Fee Amount
(% Fee x Estimated GMP) % $ 17,000,000 $ ________________
(Percent Fee Amount)
Specified General
Conditions Work $ ________________
Total Bid: $ ________________

29. CMAR Bid Form
29
Description of Bid Item: % Fee Estimated GMP Amount
Percent Fee Amount
(% Fee x Estimated GMP) 7 % $ 17,000,000 $ 1,190,000.00
(Percent Fee Amount)
Specified General
Conditions Work $ 1,700,000.00
Total Bid: $ 2,890,000.00

30.  Quality management
o Owners need to monitor quality during construction (QA)
 Claims can still occur
o While a collaborative process, failing to comply with the
contract requirements can still lead to claims
30
Managing Expectations for CMAR

31.  Single source of accountability
o Contractor responsible for delivering an operating facility
o Contractor responsible for the design and construction
 Budget management
o Contractor develops a project within established budget
 Enhanced communication
o Direct communication/collaboration between the Engineer and
Contractor
o Contractor and engineer collaborate to use their creativity to reduce
costs and delivery time.
31
Benefits of Design/Build (D/B)

32.  Faster project delivery
o Construction can begin before completing the design
o Design documents may not need to be developed the same level
of detail as in the DBB method
 Quality Control
o Removes ambiguity that may arise in material and construction
specifications
o Engineer working for the builder
 Reduced design document related change orders
o Changes attributed to conflicts in the design documents
Benefits of D/B

33.  Change orders will not be completely eliminated
o Owners may request changes
o Differing site conditions may impact the project
o Permitting authority changes
 Quality management
o Owner needs to define quality standards in the RFP
o Owner needs to review design for compliance with the standards
defined in the contract documents
o Owners need to monitor quality during construction (QA)
33
Managing Expectations for D/B
Projects

34.  Selection Criteria should focus on your
requirements
 Claims can still occur
o While a collaborative process, failing to comply with
the contract requirements can still lead to claims
34
Managing Expectations for D/B
Projects

35. Selecting D/B
35
Evaluation Criteria Points
Attendance at the Pre-Proposal Meeting and Site Tour 10
Firm’s Experience 100
Project Personnel 200
Approach to Executing the Project 100
Reference Checks 100
Project Financial Questionnaire 90
Interview 200
Price Proposals* 200
Total Points 1,000
* Price proposal can include a lump sum cost for design and construction or variation

36.  Lump Sum D/B
o Many D/B projects have been awarded on both qualifications and price
with 30% design
o If the Owner wants changes during the design phase, it will need to
negotiate a change order.
 Progressive D/B
o D/B selected on qualifications and some pricing data; design effort,
overhead and profit
o After design 90% to 100% Owner and DB negotiate the construction costs
as either lump sum or GMP
36
Progressive D/B

37. Selecting D/B (Progressive)
37
Evaluation Criteria Points
Attendance at the Pre-Proposal Meeting and Site Tour 10
Firm’s Experience 100
Project Personnel 250
Approach to Executing the Project 150
Reference Checks 100
Project Financial Questionnaire 90
Interview 200
Price Proposals* 100
Total Points 1,000
* Price proposal usually includes overhead and profit. Some proposals have included
design services.

38. Selecting D/B (Progressive)
38
Evaluation Criteria Points
Attendance at the Pre-Proposal Meeting and Site Tour 10
Firm’s Experience 100
Project Personnel 250
Approach to Executing the Project 150
Reference Checks 100
Project Financial Questionnaire 90
Interview 200
Price Proposals* 100
Total Points 1,000
* Price proposal usually includes overhead and profit. Some proposals have included
design services.

39.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
• Design/Build
• CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
39
Agenda

40.  Select the best delivery method for
your organization and project
 Confirm market conditions
o Are there firms that can successfully
deliver the project with the selected
method
 Is your team ready to meet the
challenge 40
Key Elements for a Successful APD

41.  Solicitation Document
o Spell out your expectations
o Define the rolls of the parties
o Define the selection criteria (including protest
procedures)
o Develop to the appropriate level of detail for the delivery
approach and project needs;
• Quality standards
• Collaboration and coordination expectations
41
Key Elements for a Successful APD

42.  The Owner needs to line up an experienced team to
manage the project
o Owner is responsible for the management of the contracts
o Owner needs to monitor the quality of the project
 Selection Process
o Well defined selection process
o Find the team that best meets your project needs
o Find the team that you feel most comfortable working with
Key Elements for a Successful APD

43. Selection of the Management Team is critical to
the success of a project
o Check the history of the team
• Check references
• Interview the team; how do they interact with each other and the
Owner during the interview?
• Has the team worked together?
• Has this team managed a CMR or design/build project before?
• Does the Contractor have a reputation of changing out team
members during the project?
Key Elements for a Successful APD

44.  Does the team understand your project issues
 How will the team resolve issues
o How has the Design/Build team resolved issues on past projects?
o Ask for specifics
 Has the team provided pre-construction
services on other projects
44
Key Elements for a Successful APD

45.  Risk Management
 Project Delivery Option Considerations
 Project Delivery Options
• Design/Build
• CM@R
 Key Elements for Successful APD
 Engineers role in Executing APD
45
Agenda

46. Engineers have a role as owner’s PM, design engineer on the
DB team, owner’s representative during execution of the work
 Project management
 Procurement
 Design
 Design Reviews
 Value Engineering
 Construction Administration
 Construction Inspection
46
Engineer’s Role in APD

47.  Provide project definition
 Provide the project budget and schedule
 Make recommendations of the appropriate
procurement process for the project
 Define the quality standards
 Chief Collaborator
47
Engineer’s Project Management
Role in APD

48.  Provide project definition
 Recommendation of the appropriate procurement process
for the project
 Identify the key elements for selecting the APD Contractor
 Review proposals
 Make recommendations on
selection of the team.
48
Engineer’s Role During Procurement

49.  Liaison between the DB and Owner’s organization
 Coordinate review of the design documents – 30%, 60%,
and 90%
o Document reviews within the organization
o Develop list and prioritize comments to be reviewed with DB
o Review comments to the DB
 Review submittals
 Review changes
49
Role of Owner’s Engineer in D/B

50.  Develop design documents – 30%, 60%, and 90%
o Review documents with DB team
o Review documents with the Owner
o Incorporate Owner’s comments into design documents
o Develop technical packages for subcontracts
 Respond to technical/design issues during construction
 Review submittals prior to installation
 Incorporate changes as they arise into the work.
50
Role of D/B’s Engineer

51.  Develop design documents – 30%, 60%, and 90%
o Review documents with the Contractor
o Incorporate Contractor comments/ recommendations into design
documents
o Develop technical packages for subcontracts
 Develop cost estimates
o Develop estimates at 30%, 60% and 90%
o Reconcile with the Contractor
51
Role of Engineer in CMAR

52.  Respond to technical/design/quality issues during
construction
 Review submittals prior to installation
 Develop changes to the work
 Periodic inspections including reviewing the work
for substantial and final completion
52
Role of Engineer in CMAR

53.  APD can aid you in managing risks associated with
project delivery
 Successful APD occurs when;
o You and your organization buy into the selected approach
o Assign risks to the party that can best manage those risks
o You take the time to develop a complete solicitation document to
select the right contractor
o You assemble the right team, (management team and contractor) to
deliver the APD
53
Conclusion

54. For follow-up questions,
please contact me at
425.468.1514 or
dan.becker@hdrinc.com
Thank you
for joining us today!

55. QUESTIONS?