Skip to contentUnited States Department of Transportation - Federal Highway AdministrationSearch FHWAFeedback

Construction

<< Previous Contents Next >>

SEP 14: Annual Report 2009: Capital Beltway HOT Lanes Project

4 Comparison of PPTA Design/Build with Other Project Delivery Methodologies

Exhibit 8 presents a summary comparison of PPTA and the traditional D/B project delivery model, which are further described in the following subsections.

Exhibit 8 Comparison of PPTA versus Traditional Design/Build Processes
  PPTA Design/Build Traditional Design/Build
Scope Contractor develops scope, and negotiates with VDOT to finalize.

Scope is negotiated with one Concessionaire.

VDOT develops scope, and adjusts scope to include bid-stage "innovative ideas."

Multiple teams propose on the project, and offer ideas.

Schedule Concessionaire and VDOT both directly benefit from on-schedule delivery (same schedule goal).

Contractor controls schedule adjustments.

VDOT change orders can cause delay claims.

VDOT benefits from project completion; contractor benefits from the overall project cost (potential conflict).

VDOT approves all schedule adjustments.

VDOT can adjust schedule to accommodate change orders.

Budget Funding split is negotiated.

One Concessionaire group develops the price.

VDOT provides 100% funding.

Innovative ideas from multiple contractors can be included.

4.1 PPTA D/B vs. Traditional D/B

4.1.1 Scope

In a PPTA project, the project scope is developed by the contractor (Concessionaire) team, and in this case, submitted as an unsolicited proposal. For this project, the final scope and contract mechanisms for the project were negotiated between VDOT and the Concessionaire, and documented in the ARCA. Conversely, in a traditional D/B, the DOT develops the project scope, and solicits 30 percent plans, technical documents, and bid prices from a small number (usually three) of bidders. This allows the DOT to select a D/B team that demonstrates both technical competence (design quality and innovation) and overall project value (bid price). Through this process, the DOT is able to fully vet and resolve major technical aspects and receive a competitive bid price prior to contract letting.

The PPTA system also can give the contractor additional design and construction flexibility. As the owner of the project, the Concessionaire is able to negotiate flexibility in terms of plan/design production and format, as well as early construction (e.g., clearing and grubbing) and other construction at risk. In a traditional D/B, the State will typically require full submittals in conformance with normal plan production standards.

4.1.2 Schedule

In a traditional D/B contract, the Owner can select specific milestones when all or certain phases of the work will be completed. The Owner can add monetary incentives to adjust completion dates and can punish the contractor with liquidated damages. Very specific language relating to schedule deliverables in a traditional D/B contract empowers Owner to enforce contract provisions by withholding monies from progress payments. VDOT does not have the leverage to effect significant schedule changes with the ARCA because it does not have the contract with the Design-Builder and does not directly pay the Design-Builder. Additionally, the contribution structure between VDOT and CBE does not allow schedule issues to be used as leverage by VDOT. With CBE responsible for paying the Design-Builder, it is very difficult for VDOT to get specific changes to the schedule. The ARCA compels VDOT to work with CBE to get schedule changes, but VDOT does not have strong enough contract mechanisms to compel these changes. For example, milestone changes requested by VDOT must be negotiated with CBE; if CBE concurs, it will negotiate and execute a change order with the Design-Builder.

Another major difference with the ARCA is that it does not provide for the monthly approval of baseline schedule updates by VDOT. Only with the baseline schedule and a revised baseline schedule, when agreed to by CBE, does VDOT have approval authority. CBE can be caught between the Design-Builder and VDOT in schedule arguments. It is understandable that CBE will make judgments in its own best interests, which may or may not be aligned with those of VDOT. Nevertheless, CBE has the most to lose from schedule slippage, so it is incumbent on CBE more than VDOT to ensure that milestones are met.

VDOT is particularly vulnerable to self-initiated change orders, delays caused by VDOT, or claims of delay caused by VDOT in a PPTA D/B contract. For example, a TIA for a change order or delay can be submitted by Fluor-Lane based on a baseline schedule update that VDOT has had little or no influence on making correct, accurate, and fair. CBE in turn would not be interested in time delays as they push out the date of revenue generation and paying back loans made to them for the project. CBE would then expect VDOT to cover revenues lost from a later completion/start of revenue.

4.1.3 Budget

As with a traditional D/B project, VDOT provides 100 percent of the funding for a design-bid-build (D/B/B) project -- as opposed to a PPTA project, which is partially funded with private money. Because the PPTA is privately funded, the Concessionaire has an incentive to provide a project that efficiently fulfills the project purpose (generating toll revenue), while delivering the project for the lowest overall cost. This incentivizes the Concessionaire to use innovative solutions and construction techniques to reduce project costs, without degrading the quality of the construction project.

In a D/B/B project, the designer is employed by VDOT, and is typically customer- focused, flexible, and easy to work with. In a PPTA project, the designer is employed by the Concessionaire, is less likely to accept change, and is more likely to charge a premium when out-of-scope change is requested. However, VDOT is not responsible for additional construction cost resulting from plan errors and oversight, and is therefore not required to provide a detailed plan review (which is typically required for D/B/B projects). In a traditional D/B, the designer also works for the contractor and not for VDOT.

The level of effort required to provide oversight on D/B/B projects is very easy to predict because of a wealth of historical data on the subject. As discussed in the previous subsection, predicting oversight cost is the most difficult for PPTA projects.

4.2 PPTA D/B vs. Traditional D/B/B

Exhibit 9 presents a summary comparison of the PPTA and traditional D/B/B delivery models, which are further described in the following subsections.

Exhibit 9 Comparison of PPTA versus Design/Bid/Build Processes
  PPTA D/B/B
Scope Contractor develops scope, and negotiates with VDOT to finalize.

Process and contract mechanisms are developed through trial and error.

VDOT develops scope for designer, and design plans fully detail construction scope.

Tried-and-true process is used to scope designer and contractor.

Schedule Concessionaire and VDOT both directly benefit from on-schedule delivery (same schedule goal).

Contractor controls schedule adjustments.

VDOT change orders can cause delay claims.

Project construction may occur concurrently with detailed design.

Contractor has no direct stake in completion schedule. Incentives and/or disincentives are typically used.

VDOT approves schedule adjustments.

VDOT can adjust schedule to accommodate change orders.

Design plans must be completed, approved, and bid prior to construction.

Budget Funding split is negotiated.

Design changes are difficult to negotiate.

Plan build-ability is Concessionaire's responsibility.

Concessionaire group is incentivized to develop lowest-cost plan. Innovative ideas can be implemented, so long as the contractor agrees plan is constructible.

Design only needs to be developed to convey intent for field inspection

Budget for oversight and control is difficult to estimate.

VDOT provides 100% funding.

Designer is usually cooperative because VDOT is the client.

VDOT must pay for plan error/oversight changes.

Designer considers cost, but plans are generic, not tailored for the needs of one contractor. Some innovative ideas cannot implemented, unless they are clearly constructible for all bidders

Plans must be extremely clear and detailed, to help prevent claims.

Budget for project oversight and control is easily estimated, from a wealth of historical data.

+ PPTA project require a 45-day advertisement for competing proposals. For this project 120 days was provided, competing proposals were not submitted.

4.2.1 Scope

The scope for construction of a D/B/B project is similar to a traditional D/B, in that the scope is developed and defined by VDOT. In a D/B/B project, the project's scope for construction is fully detailed by the construction plans, specifications, and estimates, prior to bidding by the contractor. Although the scope adjustments are typically required during the design stage of the project to fully define the design plan, the design effort is usually less than 10 percent of the overall project cost, and adjustments can be made with relative ease. Like the D/B process, the scope of the work is defined in generalities for a PPTA project, with specific means and methods used to fulfill the scope developed by the Concessionaire team.

In most states, the DOT establishes the standard plans and specifications for D/B/B projects, and the staff is trained and experienced with this delivery system. Non-traditional delivery systems such as PPTA are still being worked out in most states, and consequently, are much more likely to result in more significant scoping issues and more difficult challenges in resolving scope disputes.

4.2.2 Schedule

Many of the differences relating to schedule between a PPTA D/B and a traditional D/B/B are the same as those in a traditional D/B contract. A traditional D/B/B provides the largest amount of control with regards to scheduling, planning, and prosecuting the work.

For VDOT to affect the sequence of work or milestones changes, it is much more difficult to do in a PPTA D/B environment. VDOT could use time extensions as a bargaining chip when negotiating change orders in a traditional D/B/B contract. Because of the financing structure of the ARCA, schedule time extensions cost CBE potential revenue, making it nearly impossible to grant the Design-Builder a time extension in lieu of money. As for re-sequencing work, the CBE must weigh its own interests and the Design-Builder can work with CBE to resist any directed work.

One beneficial nature of the PPTA D/B is that design issues/claims do not affect VDOT directly from a schedule standpoint. The Design-Builder has the freedom to select designs and means and methods to meet the schedule milestones.

In summary, the principal difference between schedules for a traditional D/B/B contract and a PPTA D/B contract is lack of control because of the additional party between VDOT and the Design-Builder.

4.2.3 Budget

As with a traditional D/B project, VDOT provides 100 percent of the funding for a D/B/B project-as opposed to a PPTA project, which is partially funded with private money. Because the PPTA is privately funded, the Concessionaire has incentive to provide a project that efficiently fulfills the project purpose (generating toll revenue), while delivering the project for the lowest overall cost. This incentivizes the Concessionaire to use innovative solutions and construction techniques to reduce project costs, without degrading the quality of the construction project.

In a D/B/B project, the designer is selected through a competitive process by VDOT. The designer reports directly to VDOT. In a PPTA project, the designer is employed by the Concessionaire. The Design/Builder interprets the standards. Depending on the language, the standards may afford flexibility that the Department may not normally utilize except in extreme conditions. The flexibility may result in a change order, adding cost outside the original project cost negotiated under the PPTA. However, VDOT is not responsible for additional construction costs resulting from plan errors and oversight, and is therefore not required to provide a detailed plan review (which is typically required for D/B/B projects).

The level of effort required to provide oversight on D/B/B projects is very easy to predict because of a wealth of historical data on the subject. As discussed in the previous subsection, predicting oversight cost is the most difficult for PPTA projects.

<< Previous Contents Next >>

Contact

Jerry Yakowenko
Office of Program Administration
202-366-1562
E-mail Jerry

 
 
Updated: 04/07/2011
 

FHWA
United States Department of Transportation - Federal Highway Administration