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|Federal Highway Administration > Publications > Public Roads > Vol. 61· No. 3 > Utah's I-15 Design-Build Project|
Utah's I-15 Design-Build Project
by Roy O. Nelson
Utah's $1.59 billion Interstate 15 design-build project provides for the reconstruction of 26 kilometers of interstate mainline and the addition of new general purpose and high-occupancy-vehicle (HOV) lanes through the Salt Lake City metropolitan area. The project also includes the construction or reconstruction of more than 130 bridges, the reconstruction of seven urban interchanges, and the reconstruction of three major junctions with other interstate routes, including I-80 and I-215. In addition, the project provides for the construction of an extensive regionwide advanced traffic management system.
In mid-1997, traffic volumes ranged from about 140,000 vehicles per day at the south end of the project to almost 200,000 vehicles per day near the north end. For most of its length, the existing highway has six-lanes. This is the largest project ever undertaken hy the state of Utah and the largest single design-build highway contract in the United States.
The executive director of the Utah Department of Transportation (UDOT) consulted the governor, the local chapter of the Associated General Contractors, and other political leaders and then, in early 1996, made the decision to use the design-build method of contracting for the project.
The decision was motivated by two factors. The first was the strong public support for completing the project as soon as possible to minimize the period of severe traffic congestion resulting from the diversion of more than half of the traffic from I-15 during the construction period. The second factor was the need to have the project completed before the 2002 Winter Olympics in Salt Lake City. It was generally accepted that use of the design-build contracting methodology was the only way to satisfy these goals.
The design-build method of contracting would also relieve UDOT of many prohlems associated with the coordination of the design and construction of dozens, if not hundreds, of individual projects in a congested urban setting. The state procurement laws were modified to clearly authorize the use of the design-build method of contracting and to permit the award of a contract to a firm that provided the "best value" proposal to the state even if another firm bid a lower initial cost.
Special Experimental Project (SEP)-14 Approval and Waiver of Federal-Aid Requirements
The project was approved by the Federal Highway Administration (FHWA) as an experimental project under SEP-14. This approval permits the use of the design-build method, which requires some deviations from normal federal-aid requirements dealing with the selection of contractors and consultants. Under the provisions of SEP-14, UDOT will be required to provide experimental project reports on their experiences with the design-build process. Several other federal approvals or waivers applied specifically to this project.
FHWA approved UDOT's proposal to award the contract to the proposer who provides the best value offer, considering other factors as well as cost. This deviation from the normal practice of awarding the contract strictly to the bidder with the lowest initial cost was approved after FHWA reviewed the preliminary Proposal Evaluation and Selection Procedures. This best value procurement process encourages innovative design and construction proposals that meet the intent of the "more cost effective" criteria of 23 U.S.C. 112(b)(1). For example, if one of the proposers submits a proposal that significantly reduces traffic disruption during the construction period or offers a shorter construction period, the value to the traveling public can be taken into consideration in the award process.
Disadvantaged Business Enterprise (DBE) Goal
The implementation of the DBE goal requirements was limited to the federally funded portion of the project. Since the amount of federal-aid funding was unknown at the time the Request for Proposals was issued and may not be finalized until after the project is completed, a decision was made to set a $20 million DBE goal based on an assumed $200 million in federal-aid funding. The $200 million figure is ohviously much less than the state hopes to receive but is prohably a realistic compromise amount. The $20 million in minimum DBE participation spread over five construction seasons is probably approaching the amount of additional work the local DBE contracting community can readily absorb in addition to the existing federal-aid program. FHWA also granted relief from the requirement that bidders must submit DBE participation information -- such as names and addresses of the DBE firms, description of the work, and dollar amount -- before UDOT awards the contract. This relieves the contractor from having to deal with very specific DBE participation details prior to completing design work on the project and also eliminates some of the obvious problems associated with having relatively small DBE firms provide quotes on work that may not be started until four years in the future. The DBE special provision used on this project requires that DBE information be submitted each year.
Because of the obvious difficulty involved in tracking the amount of subcontracted work on a design-build project of this magnitude, FHWA waived the provisions of 23 CFR 635.116 that requires that prime contractors perform at least 30 percent of the work.
Changed Conditions Clause
UDOT was permitted to modify the standardized, changed conditions clause required under the provisions of 23 CFR 635.109. Many of these clauses, such as quantity overruns, are not applicable to design-build contracts. The proposal for the project does include changed conditions clauses for differing site conditions, delays, misrepresentations, and so forth. The changed conditions clauses in the contract are reflective of UDOT's desire to assume a fair share of the contractor's risk and minimize the dollar value of risk contingencies included in the bid price.
FHWA approved UDOT's proposal to award a stipend to each of the responsive unsuccessful proposers as a means of compensating them for a portion of their proposal development costs. The intent is that the $950,000 stipends, which were originally intended to cover approximately one-half of the bidder's proposal development costs, will give UDOT the right to use concepts presented in the unsuccessful proposals. On the basis of unofficial reports, the stipend amount probably provides reimbursement for only about a third of the bidders' proposal development costs.
A multistep procurement process consisting of three major steps was used. The process was modeled after and followed very closely the new federal process for the procurement of design-build contracting services. The major steps were the Request for Qualifications (RFQ) phase, the Request for Proposals (RFP) phase, and the Request for Best and Final Offer (BAFO) phase.
Award of Contract
The UDOT executive director held a press conference in March 1997 to announce the award of the design-build contract to a team called Wasatch Constructors -- led by Kiewit Pacific, Granite Construction, and Washington Construction. The project was awarded for $1.325 billion on the basis of a best value determination. The spread between the base-price bids of the three firms was less than six percent -- an indication that the competition was very intense. The contract was formally executed early in April, and a formal ground breaking ceremony was held on April 15.
Maintenance and Warranty Related Issues
Long-term maintenance and warranties were key issues in the development of the RFP for this project.
The project is situated on unconsolidated sediments that were deposited in prehistoric Lake Bonneville. Among the many complex issues facing the contractor are primary and secondary embankment settlements ranging up to two meters in some areas. To have a reasonably smooth, defect-free pavement surface, it is critical that the embankment settlement issues be properly addressed. The need for wick drains, embankment surcharges and extensive settlement monitoring instrumentation was anticipated.
Early in the RFP development process, it was anticipated that the contract would require that the contractor be responsible for all maintenance, including snow removal, for a 20-year period. This long maintenance period would facilitate the extensive use of performance-type specifications that would give the contractor wide latitude in the selection of construction techniques and materials. Under this scenario, UDOT could largely divorce themselves from embankment settlement issues and other issues such as pavement type and thickness. The contractor would have almost sole responsibility for the consequences of the quality of the work. The contract would, in effect, require the contractor to design and construct a highway that could be easily and cheaply maintained to the standards specified in the RFP.
While the long-term maintenance provisions were very attractive to the owner, they created some significant problems for the contractors who were not accustomed to bidding for work that would be performed up to 25 years later. Other unresolved problems were associated with the development of contract provisions and the procurement of a suitable performance bond for this maintenance work. When efforts to sufficiently raise the comfort level of the proposers failed, the maintenance period was reduced to a maximum of 10 years -- an initial five-year maintenance option and five one-year renewable options covering years 6 through 10. Maintenance requirements and standards were restricted to pavement surfaces, structures, and drainage facilities and did not include any routine maintenance activities. The items of work included in the maintenance-after-construction phase of the project are eligible for federal-aid funding, and the maintenance provision included a price escalation clause based on FHWA's construction cost index.
The use of performance specifications, as opposed to traditional prescriptive specifications, encourages innovation in design and con- struction. A long contractor warranty or maintenance-after-construction period complements the use of performance specifications. Performance specifications, when coupled with long warranties, force the successful design-builder to make life-cycle-cost analyses of all design and construction options. For example, a performance specification for pavement markings might be limited to color and retroreflectivity requirements that would apply throughout the warranty period. A penalty would be assessed for any failure to comply with the requirements. It would be up to the contractor to arrive at the cheapest way to comply with the requirements. Initially, it was planned that the I-15 project would make very extensive use of performance specifications. When it was deemed necessary to reduce the long-term maintenance requirement from 20 years to 10 years, it became apparent that it was not in the public interest to rely completely on performance specifications. Many problems related to the quality of design and construction do not surface until 15 or 20 years after construction. For that reason, the specifications for I-15 project are generally a blend of performance specifications and prescriptive specification. They range from a lighting specification -- basically an illumination requirement -- that is very close to being a pure performance specification to other materials specifications that are simply the standard UDOT prescriptive specifications.
Project Oversight and Quality Issues
Some of the key features of the Quality Management Plan required by the contract are as follows:
Design Quality Management Plan
The contractor has the primary responsibility for design quality. The actual formal UDOT acceptance of the design will occur essentially at the time of acceptance of the construction for any work segment.
Construction Quality Management Plan
The plan requires that the contractor will have the overall responsibility for both the quality control (QC) and quality assurance (QA) activities. UDOT's construction role will be limited to oversight of the QA firm activities, verification sampling and testing, independent assurance sampling and testing, review of progress payments, and oversight of the contractor's construction management scheduling, document control, etc.
The RFP provides for payment of up to $50 million in award fees throughout the life of the contract. The award fees are essentially a bonus for timely performance, quality of work, complying with project management requirements, and complying with requirements for community relations and maintenance of traffic. Strict compliance with all of the specified award fee criteria will result in the contractor receiving a bonus of approximately $5 million every six months throughout the life of the contract. This $50 million fee is in addition to the contract bid price, and it is desired or expected that the successful contractor will plan on earning most of this fee to increase their profit margin. Because a very substantial portion of the award fee is directly tied to the quality of construction and to the contractor's quality assurance programs, UDOT is expecting the award fees to be a major contributor to quality.
Miscellaneous Contract and Specification Issues
Some of the other interesting contract features or requirements are:
Owner-Controlled Insurance Program (OCIP)
After many discussions with other agencies and firms experienced in large design-build projects, UDOT concluded that very large savings were possible if the state purchased and managed most of the insurance required for the project. UDOT procured the services of an insurance specialist who purchased and will manage most of the project's insurance policies and plans. OCIP is very comprehensive and even extends to the workman's compensation program, but it does not totally relieve the contractor from all insurance requirements. The contract requires the contractor to prepare a very extensive safety plan and submit it for approval early in the life of the contract. As an additional incentive for the design-build contractor to have a safe work site, the contract specifies that the contractor will receive a share of all insurance premium rebates received after completion of the project. UDOT did not request federal-aid participation in the cost of OCIP, which was the subject of a separate procurement activity.
In response to a request from the local chapter of the Associated General Contractors (AGC), UDOT originally planned to include contract provisions to require that Utah contractors receive a specified share of the contract work. However, the use of federal aid made it impossible to honor the AGC request. As a compromise, the contract specifies that approximately $100 million in construction subcontracts will be let out to bid. This will allow some of the local contractors who are not on the successful proposer's team the oppor tunity to submit bids on work elements.
UDOT is purchasing all of the right-of-way for the project; however, only a portion of the right-of-way had been purchased when the RFP was issued. For each of the approximately 100 additional needed parcels, the RFP provides a specific date when the parcel should be available to the contractor. Failure to make the right-of-way available on this specified date makes UDOT liable for any delay costs. If the contractor needs additional right-of-way to accommodate construction operations or design revisions, it will be purchased by UDOT but paid for by the contractor.
Dozens of railroad overpasses and underpasses must be constructed or reconstructed under this contract. In addition, the contractor is required to relocate several miles of railroad track and perform other work on railroad right-of-way. While UDOT has coordinated all of their preliminary activities with the railroads, it is up to the contractor to work out most of the final agreements with the railroads. As the contractor's operations will dictate the amount of railroad flagging required, the cost of the railroad flagging will be borne by the contractor. Making the contractor responsible for dealing directly with the railroad should reduce UDOT's liability for any railroad-related delays. It is also anticipated that a private company has more avenues available for expediting the approval of railroad agreements than does a government agency.
There are approximately 1,500 utility crossings in the corridor with 500 to 600 potential construction conflicts. Preliminary or master utility agreements have been executed with all of the utilities having facilities that will be potentially impacted in the corridor, The RFP includes all of the known information on the potential utility conflicts, including who will be responsible for the design and construction. Some of the utility companies will be responsible for the design and construction of their relocated facilities. In most of these instances, UDOT will provide direct reimbursement to the utility for their eligible relocation costs. In other instances, the design-build contractor will be responsible for the design and construction and will have to include the relocation costs in their bid.
Although this project has already been subjected to more value engineering reviews than any other project in UDOT's history, the project includes a standard value engineering clause, and UDOT anticipates that the contractor will be submitting numerous value engineering proposals.
Fuel Price Adjustment Clause
The project includes a fuel price adjustment clause. To simplify contract administration, the fuel price adjustment clause used in this contract is based strictly on an assumed quantity of fuel for every thousand dollars in construction costs. The fuel usage factor was developed based on the assumption that a certain percentage of the work would be grading work, a certain percentage would be paving work, a certain percentage would be structures, and so forth. The fuel price adjustment clause is triggered only if the base price of crude oil increases or decreases by more than 25 percent.
Progress payments are based on the contractor's price-loaded critical path schedule. For price comparison purposes, the contractor's bid prices were converted to present worth using a 4-percent interest rate. This process provided some discouragement to front-end loading of the contract. Progress payments will be made monthly with only two-weeks processing time.
Early Action Items
To allow the contractor to start construction work immediately upon issuance of the notice to proceed, UDOT provided 100-percent-complete designs for some critical project features that need to be finished early in the life of the project. UDOT also executed all of the railroad, right-of-way, and utility agreements for these early action items. The contractor has the right to use these designs directly or modify them within the framework of the contract.
As the primary detour or alternative route, the Salt Lake City beltway, I-215, has been restriped from three lanes in each direction to four lanes in each direction. It is currently carrying significantly more traffic than before the initiation of construction on I-15, and traffic problems and congestion are minimal. Construction on other major north-south arterials has also recently concluded, and this is also helping to alleviate congestion in the I-15 corridor.
Construction activities to date have consisted primarily of temporary pavements and ramps for the current traffic configuration, existing structure demolitions, embankment work including construction of thousands of wick drains to facilitate settlement (approximately 700,000 cubic meters of embankment have already been placed), construction of noise and retaining walls, pile driving for new structures, and the ongoing reconstruction of the 600 North interchange (which was included in this design/ build project as a 100-percent-complete set of "sealed" plans unlike the rest of the project.
Utah's I-15 reconstruction project presented UDOT with significant challenges in scheduling and construction. Traditional contracting would have taken extraordinary coordination of multiple projects and an extended delivery period for completion, jeopardizing UDOT's ability to complete the project before the Winter Olympics in 2002 and without prolonged traffic disruptions. The adoption of design-build as a contracting approach allows UDOT to meet scheduling demands and minimize disruptions to the public. It also allows UDOT to benefit from several private sector innovations and value-added features. Design-build will continue to be assessed as the project begins and additional experience is gained.
Roy O. Nelson recently retired as the field operations engineer for FHWA's Utah Division. He was the division representative to UDOT's I-15 project oversight committee, and he was a member of the Management Technical Advisor Team during the evaluation and selection process. He is a graduate of Pennsylvania State University and a licensed professional engineer.
Editor's Note: Jeffrey W. Kolb is the current field operations engineer for FHWA's Utah Division and FHWA's contact for the I-15 design-build project. He assumed this post in July 1997 upon the retirement of Roy Nelson. Kolb is a licensed professional engineer with a bachelor's degree in civil engineering from North Carolina State University and a master's degree in civil engineering from Florida State University. He provided the information pertaining to the current status of the project to update this article.
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