Kathy Facer and Bruce Bradley, FHWA Office of Real Estate Services
Janice Brown, FHWA Texas Division
Ms. Facer thanked participants for attending the peer exchange and asked that peers continue providing ideas for future peer exchanges and other outlets for States to share their experiences. Ms. Brown welcomed all and acknowledged the challenges that ROW and realty departments in State transportation agencies traditionally have faced, while noting the benefits of the workshop in providing peers with networking opportunities.
He shared information on the FHWA Surface Transportation Environment and Planning Cooperative (STEP) research program.1 The Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users established STEP is a significant source of funding for FHWA research on realty, planning, and environmental issues. To conduct a needs-driven research program and involve stakeholders in research prioritization, STEP solicits stakeholder comments via an online form during a three-month period each year, which typically occurs in the summer or early fall. Mr. Bradley informed peers that the STEP feedback period was open until December 2009 and he encouraged all event participants to submit comments via the program's website.
Gerry Solomon, FHWA Office of Real Estate Services
Jeff Zaharewicz, FHWA Office of Program Administration
In September 2008, FHWA conducted an international scan on innovative ROW and utility processes in Canada and Australia.2 The scan complemented previous research work completed in 2000 that documented design-build processes in Norway, Germany, the Netherlands, and Britain. The objectives of the 2008 scan were several, and included ways to explore and analyze alternative project delivery methods that include ROW and utilities, such as alliance contracting and integration of ROW and utilities with project development under traditional and alternative contracting with long-range planning, design, and environmental processes. The project team included representatives from the FHWA, four State DOTs, academia, and consultants.
The international scan team identified several shared themes in Canadian and Australian uses of alternative contracting methods.
Promotion of non-adversarial solutions - Both Canada and Australia placed an emphasis on consensus-building during ROW negotiations to improve professional relationships with the utility industry at all levels. For example, Australian states share results of realty appraisals with property owners to help encourage trust between parties. In addition, Australian states provide reimbursement for property owners to obtain their own appraisals.
Use of alliance contracting for project delivery- Alliance contracting is similar to design-build contracting in terms of its emphasis on collaborative decision-making. The philosophy of alliance contracting is that what is best for the project is best for the team. All team members share both risks and benefits. Unlike design-build contracting, however, alliance contracting includes the project team, with the contractor as a member of the team, as well as utilities and ROW, in defining the scope of projects. British Petroleum first developed alliance contracting as a way to better manage oil reserves in the North Sea. This approach is gaining popularity in Australia, particularly when there are uncertainties about the optimum solution for a project. Uncertainties can include unpredictable risks, a project difficult to scope or price, time pressures, and a desire for breakthroughs and innovation.
The project team identified numerous ideas that potentially could be transferred to a U.S. context. Nine of these ideas were identified as priorities:
Considerations for Alliance Contracting
Mr. Solomon and Mr. Zaharewicz noted that the international scan team had been most intrigued by the concept of alliance contracting. In Australia, the alliance contracting method has been used in addition to traditional design-build contracting. In the alliance approach, the agency uses an early contractor involvement model that focuses on assembling and integrating the best leadership, management, and project execution team based on qualifications and experience. Following a "best-for-project" approach, each team includes participants from the selected consortium or the transportation agency, depending on the expertise needed. The early contractor involvement approach means the alliance team is involved during project scoping and design. The alliance approach requires transparent communications between the parties, particularly on compensation and cost structures. Strategies to achieve this goal include establishing a fee structure for all direct project costs that uses open-book accounting, viewable by all parties, a separate corporate overhead and profit calculation, and clear gainshare-painshare arrangements.
The alliance team is responsible for coordinating with utilities early and finding optimum relocation strategies. This means that one team interacts with utilities during design and construction. The alliance team presents a unified front for dealing and negotiating with property owners. Along with its best for the project philosophy, other hallmarks of the alliance contracting method include: hand selection of team members, integration of a business focus to clearly identify the roles and responsibilities of all team members, effective engagement of ROW and utility stakeholders, emphasis on accountability and collaboration, and documentation of lessons learned and outcomes.
The following should be taken into consideration when deliberating whether to use alliance contracting:
Applicability -Alliance contracting might not be applicable for every type of project. The scan team's Australian hosts identified a set of circumstances conducive to the use of alliance contracting, such as: challenging scope and risk management issues, high likelihood of stakeholder input, aggressive time schedules, and team commitment to innovation.
High demands - The method places high demands on senior management and might not achieve the most competitive construction price. However, due to its commitment to upfront relationship-building, the method helps to decrease disputes and claims.
Project magnitude - Alliance contracting might involve higher start-up costs due to its hands-on emphasis. Therefore, a project should be of a large enough magnitude to justify the start-up costs.
Best value application - While the method might be more expensive initially and labor-intensive, it is a best value application; its use increases potential for improved constructability and better overall project quality.
Follow-Up and Next Steps
As a follow-up to the international scan, the scan team produced a project implementation plan to capture goals, benefits, and strategies to transfer the nine priority ideas to a U.S. context. The scan team is continuing to fund research and efforts related to the nine priorities. The project team has formed an Expert Task Group to promote scan findings and implementation ideas, to monitor effectiveness of these ideas, and to liaise with other like-minded industry working groups.
Current research is focused on a scan of State DOT Memoranda of Understanding (MOUs) to compare and contrast existing American MOUs with their Australian counterparts. In Queensland and New South Wales, Australia, highway agencies are exploring a multi-level MOU with major utility companies. The MOU facilitates the coordination process and optimizes the relationship between transportation agency and utility interests. The intent of the current research is to develop a template multi-level MOU that could aid alliance contracting implementation in the U.S. The team will identify States willing to pilot a multiple-level MOU, document the process, and share lessons learned.
Questions, Answers, and Comments
Question: How are financial risks managed and shared in alliance contracting?
Answer: There are processes for sharing and managing risk. For example, in Australia, a team charter arrangement was used to establish who was best situated to handle risk.
Question: Did the FHWA scan team develop different models for alliance contracting?
Answer: There are many versions of alliance contracting. The project team has not yet developed formal models.
Question: What is the difference between alliance contracting and other cooperative methods such as design-build contracting?
Answer: There are subtle differences. In alliance contracting, the potentially impacted parties are included in the project scoping discussion, before alternatives have been defined. This helps to eliminate potentially defensive relationships. In addition, alliance contracting shares benefits and risks with all stakeholders.
Question: How does the National Environmental Policy Act (NEPA) process fit into alliance contracting?
Answer: Alliance contracting could help identify situations where NEPA analysis is not necessary; for example, if utilities are eliminated from project scope.
Comment: In the U.S., incorporating utilities as equal project decision-making partners could be challenging for some areas.
Comment: In Australia, all railroads and utilities were historically public entities. The companies had roles in project decision-making because they owned the project. When utilities were privatized, the culture of collaborative decision-making continued and leadership recognized the importance of maintaining it.
Question: Did the project team collect MOU samples?
Answer: Yes, the project team has a library of documentation that is available. In addition, the team has continued its contacts with the project hosts.
Question: Did the project team identify ways to transfer the alliance contracting concept to the U.S.?
Answer: Not yet, but this is something that might be pursued in the future.
Don Toner, TxDOT
The TxDOT Turnpike ROW office3 is organizationally located in the TxDOT Turnpike Authority Division. Its primary role is to provide program management oversight and, at the same time, to coordinate the acquisition of ROW (including relocation), provide for utility relocations and adjustments, and manage surplus real property for the Turnpike projects in Texas. ROW activities include surveying and mapping of property, purchasing property, relocation assistance, and preparation of condemnation packages. There are more than one million acres of ROW on the Texas State system.
Comprehensive Development Agreements (CDAs) are agreements that TxDOT develops with one contractor to design and acquire ROW, relocate and adjust utilities, and construct, finance, and operate or maintain certain transportation facilities, including highways, turnpikes, freight or passenger rail, and public utilities. More broadly, CDAs are public-private contracting tools that allow the private sector to develop or invest in the Texas transportation system.
Texas State legislation and Federal legislation, including Chapters 223 and 227 of the Texas Transportation Code and the Uniform Act of 1970, govern CDAs. To manage the CDA process, TxDOT convened a steering committee comprised of senior executives. TxDOT also uses contractor support to help manage the CDA program, as the TxDOT ROW office has only 12 full-time employees. The Texas Transportation Commission and the TxDOT executive director also support the CDA program.
The CDA process is documented in a series of four books:
For a sample, the CDA documents for the North Tarrant Expressway are at http://www.txdot.gov/inside-txdot/projects/studies/fort-worth/north-tarrant-express/nte-cda.html#book2. Additionally, the Texas Landowner's Bill of Rights 4 is extended to CDA developers.
Risks are known and unknown issues that result in schedule or construction delays, or issues related to environmental approvals, project design, or ROW acquisition. Risk allocation is a key component of CDAs. The CDA process enables TxDOT to transfer all project risks to those parties best equipped to manage them. Transferring risks has associated costs and benefits, which TxDOT carefully weighs before determining whether a CDA is an appropriate project tool.
In a traditional design-bid-build contract, very little risk-sharing occurs between the project owner and developer. Under the CDA model, however, risk-sharing is more extensive. There are several different types of CDAs, each of which involves different patterns of risk allocation:
At completion, projects can be transferred back to TxDOT either at the end of the CDA term (up to 50 years in the concession model) or after construction (in the design-build model).
CDAs provide flexibility to developers, allowing them to design and construct projects within schedule constraints. However, TxDOT has specific requirements that do not change no matter what type of CDA is utilized. TxDOT reviews and approves all acquisition, relocation, and utility packages; approves all property owner offers and settlement opportunities; oversees property management, and manages the eminent domain effort. TxDOT also ensures compliance with all State and Federal rules and regulations.
CDA procurements involve a two-stage process and can be submitted either at TxDOT's request or as unsolicited proposals. To initiate CDA procurements, TxDOT first issues a request for detailed proposals that include project technical provisions and associated reference documents. After receiving proposals, TxDOT assesses them in a detailed evaluation. A request for a Best and Final Offer (BAFO) is issued and the best-value BAFO proposal is selected. Finally, TxDOT enters into limited negotiations with the best-value proposer and awards and executes the CDA. Throughout the evaluation process, financial information is separated from the project's technical provisions to ensure an honest appraisal. Additionally, identifying information is removed so that evaluators cannot ascertain who the developers are. This effort to issue a proposal, evaluate proposers, select, and negotiate with the successful proposer can take up to a year. Requests for proposals are available on the TxDOT website.
Current CDA Projects
TxDOT has been engaged in CDAs for eight years and is currently involved in execution of CDAs for seven projects, including: the State Highway (SH) 130 segments one through four (2002) and segments five and six (2007)5, the North Tarrant Express (2009), the Interstate 635-Lyndon B. Johnson (LBJ) Freeway (2009), and the Dallas-Fort Worth (DFW) Connector (2009).
The State Highway 130 project focuses on improving highway mobility and developing a portion of the highway as a toll road. Segments one through four are being developed under a design-build CDA model (inclusive of maintenance) while segments five and six are being developed under a concession CDA. Under the agreement, the developer is designing, constructing, operating, and maintaining the toll road for a 50-year period. The developer is financing the project; however, the agreement allows TxDOT an increasing share of toll revenues over the 50-year period.
The North Tarrant, DFW Connection, and LBJ Freeway projects, which also focus on improved highway mobility, are all occurring in North Texas (see Figure 1). These projects present challenges for ROW acquisition since all involve building over existing infrastructure. Recently, TxDOT purchased some of the necessary ROW for these projects and turned them over to the developer using various CDA models, including a design-build CDA (for the DFW Connector) and a concession CDA (for the LBJ Freeway project and phases 1 and 2W for the North Tarrant project).
Figure 1. Map of the North Tarrant, DFW Connector, and LBJ Freeway projects.
The North Tarrant project is highlighted in blue; the DFW project is highlighted in black. The LBJ Freeway project is highlighted in red.
Benefits and Lessons Learned
CDAs have helped to expedite project delivery in Texas. For example, TxDOT has built more than 90 miles of highway over the last six years. Mr. Toner estimated that these miles would have taken over 30 years to build without the use of CDAs. Additional benefits of CDAs include:
While CDAs have many benefits, they are special tools and might not be suitable for every project. For example, due to their complexity, CDAs lend themselves to large projects. Mr. Toner also reported several lessons learned from utilizing CDAs in Texas:
If developing a CDA program, involve the Attorney General's office as early in the process as possible to ensure adherence to all rules and regulations. TxDOT worked closely with the office from the very start to ensure buy-in from the Texas Transportation Commission and TxDOT administration.
Use specific terms to define participating entities. For example, the term "developer" could refer to a contractor, a constructor, or a ROW acquirer. It can be problematic to use general terms that do not sufficiently outline each entity's responsibilities and obligations.
Ensure accurate documentation of the CDA process. Tools such as flowcharts and checklists help to outline program processes and procedures to ensure proper guidance and oversight, while facilitating audits that might occur in the future. It is important to be as specific as possible in the documentation to preclude differing interpretations. TxDOT makes revisions to the CDA program books on a consistent basis to incorporate lessons learned from previous projects.
Ensure front-end ROW approvals are done correctly. To ensure the legality of all processes and avoid legal challenges to ROW activities, it is crucial that ROW approvals are completed correctly the first time.
Questions, Comments, and Answers
Question: What is the number of proposers in TxDOT's request for proposal (RFP) process?
Answer: There are few firms that manage project budgets in the billion-plus dollar range, which is the range of TxDOT's alternative contracting projects. It is challenging to ensure that there is sufficient competition for the RFPs; therefore, TxDOT works diligently on the procurement side, to ensure that there are multiple bidders.
Question: How does TxDOT handle stipends to the losing bidder?
Answer: TxDOT does have a stipend program in place. The stipend is adjusted based on project size. In the past, TxDOT has paid up to $1 million to the losing bidder to offset the cost of preparing submission documents to provide a responsive bid. However, the stipend program is only a partial payment: for one project, the losing bidder invested $2.4 million; the stipend offset less than half of the investment.
Question: Does TxDOT own the bidders' ideas once the stipend is paid?
Answer: Yes. In the past, TxDOT has been able to use excellent ideas from a losing bidder's package, so it is a win-win situation.
Question: Are utilities paid for their relocation?
Answer: There have been different scenarios based on State law. Currently, utility relocation is 50 percent compensable. This legislation was adopted in September 2005, though some projects were grandfathered into this law. When TxDOT started the CDA program, 100 percent was paid for the utility relocation. The change in State law has been challenging, since utility companies are now less inclined to move forward on our project schedule. In addition, the time and budgeting schedules of utilities do not match those of TxDOT. Early communication has become important to ensure that expectations are aligned.
Question: Do utility companies have to provide the 50 percent match upfront?
Answer: If a facility is on a public ROW then TxDOT reimburses utilities 50 percent. If the facility is on a property interest, TxDOT pays 100 percent for that facility.
Question: Does TxDOT use a formula to identify the exact stipend?
Answer: The formula is based on the project magnitude and complexity; the TxDOT Transportation Commission establishes the exact stipend. The bidder is eligible for the stipend if a responsive proposal is submitted. All eligible responsive bidders receive the same amount.
Comment: Stipends can be a sensitive issue. Contractors might be more used to taking risks than consultants.
Question: Have toll roads been operating long enough to show a return on investment?
Answer: Yes. Revenue on toll roads in central Texas has surpassed expectations. Original traffic revenue studies for the area cited concern about the community's responsiveness to a toll road. However, the saturation and responsiveness rate for the toll tags has surpassed expectations. Cash flows are ahead of projections and TxDOT is paying down its interest and loans more quickly than it had anticipated initially.
Question: When TxDOT embarked on CDA projects, how did TxDOT acquaint the developers with the CDA process?
Answer: TxDOT emphasized that better communication will lead to a quicker project. FHWA guidance and involvement was very important; TxDOT co-located with a FHWA district engineer in the office during the design and construction phases. This was a successful strategy. In addition, FHWA conducts a quarterly review of all developers' projects.
Question: How much design or acquisition does TxDOT complete before starting the CDA process?
Answer: TxDOT handles and completes the environmental process. TxDOT also progresses the project roadway design to a schematic level of sufficient detail that will allow a CDA proposer to analyze the project and determine the intent of the Department. Typically, TxDOT will determine lane assignments and much of the design criteria. If NEPA is complete, TxDOT may begin some of the ROW acquisition. Typically, we leave design, property surveys and ROW acquisition to the developer.
Comment: When MassDOT goes through the NEPA process, it is required to have completed most design elements and therefore typically has completed most of the ROW process.
Comment: It can be beneficial to incorporate more design elements and TxDOT has experimented with various systems. The initial intent of design-build was to turn the project over to the developer to buy the ROW for facilities and construct the project. Using this method, TxDOT has to be cautious about getting too far out in front of reasonable design and purchasing property on the basis of a schematic drawing.
Question: Does TxDOT use incentives in its oversight program?
Answer: TxDOT does not provide incentives in its oversight role, though incentives are allowed for acquisition. TxDOT is currently looking at ways to provide incentives to property while staying within the bounds of the Uniform Act and Texas law.
Question: Is TxDOT involved in selecting subcontractors?
Answer: No. The developers manage their own subcontractors. TxDOT does not want to take on the risk of managing subcontractors. TxDOT is only informed of subcontractors via the procurement document. After the procurement process has concluded, the developer provides TxDOT with a list of subcontractors and appraisers as part of their facilities management plan. TxDOT does review the appraisers' credentials and approves any replacements that are different from what was listed in the original procurement document.
Question: What is the intent of the TxDOT acquisition package approval?
Answer: TxDOT's intent is to close parcels as quickly as possible. We have to evaluate the developer's submission and respond quickly on all packages and settlement requests. Condemnation occurs after the eminent domain package is provided to TxDOT. Once TxDOT approves the condemnation package and ensures that all front-end actions are satisfied, TxDOT has a limited number of days to obtain possession and provide the real estate to the developer so that they can begin construction.
Question: After the condemnation package is processed, does TxDOT take back the risk that initially was transferred to the developer?
Answer: According to the TxDOT CDA process, the risk is shared but some risk does transfer back to TxDOT. As a result, TxDOT manages condemnation packages very carefully to ensure that parcels are delivered on time.
Question: Has TxDOT seen comparable eminent domain rates between traditional and design-build contracting?
Answer: Design-build rates are slightly higher. TxDOT uses an estimation tool that includes a higher condemnation rate to ensure that there is sufficient funding. Success is measured by speed, budget and condemnation rate. TxDOT strives to keep parcels from being another statistic. Developers are required to try to contact the property owner multiple times before TxDOT can approve a condemnation package. The TxDOT CDA was specifically written to minimize the condemnation rate and improve communication with property owners.
Comment: The CDA process is similar to what is done in Ohio, but it appears that TxDOT has raised the CDA process to the State level.
Answer: Yes. TxDOT is using the CDA program in various parts of the State and also seeks State and local funding. Having local support is an important part of our success.
Karen Stein, Utah DOT
The UDOT ROW Division acquires properties, manages relocations, and provides oversight for all ROW considerations for State and Federal highway projects in Utah. Instead of the ROW Division handling utilities, they are handled through supplemental agreements. The Division has 21 staff, five of whom are lead agents that provide coordination and oversight for design-build and design-bid-build programs. To help support an increasingly large ROW workload, UDOT utilizes consultant support. The ROW Division also provides oversight for field staff and employs a field design-build manager.
Due to the small size of the ROW Division, it is difficult to manage work on larger projects while being solely responsible for property acquisition. For larger projects, separate offices handle property acquisition and the ROW Division provides project management and oversight.
Use of Design-Build at UDOT
A design-build process was implemented in 1999 to meet UDOT's business needs and strategic goals. As at TxDOT, the UDOT design-build process is used as a revenue-sharing device and financing mechanism. However, UDOT is not currently using design-build for toll roads since UDOT does not have legislative tolling abilities. Table 1 below illustrates some of the projects for which UDOT might implement a design-build approach as well as the corresponding reason for using the approach.
|UDOT Project Characteristics||Reasons for Using Design-Build Approach|
|Insufficient UDOT in-house resources||Design-build can provide financing mechanisms for project|
|Could benefit from fast-tracked delivery||Stacking design and construction together, as in the design-build approach, can streamline project delivery|
|Has high need for innovation||Performance specifications in design-build can encourage the contractor to develop innovative practices|
|Occurs on an Interstate route||Design-build can help mitigate third party utility delays|
|Has known and transferable risks||Design-build allows risks to be transferred to the party best- equipped to manage them|
Figure 2. UDOT's Design-Build Process.
The project construction phase takes place concurrently with the design phase. Under design-build, ROW needed for the project is cleared with a Letter of Consent. Remaining properties are described as "hold off" zones for construction until ROW can be cleared.
After the Notice to Proceed date, UDOT negotiates with the design-builder regarding certification of subsequent parcels. These steps differ from a traditional design-bid-build process, during which construction proceeds only after all ROW is cleared. A key feature of the UDOT design-build process is a high level of cooperation between stakeholders. Cooperation is required to keep design-build projects on schedule and, at the same time, not to encroach construction on properties that have yet to be cleared.
Under design-build, UDOT typically purchases properties early on in the process and then maintains the properties until the need for demolition or salvage is identified.
To facilitate communication throughout the process, UDOT utilizes its web based electronic database system to which ROW staff, consultants, and field agents have access. The database includes a computerized diary or agent's log that documents all contacts with the property owners or displaced persons during the acquisition or relocation processes. ROW staff can view the agent's log easily to monitor the acquisition process and the status of the property negotiations.
During the ROW negotiation process, property owners can seek free legal advice from attorneys in the Office of the Property Rights Ombudsman; an office set up by the State legislature and mandated to protect private property rights. This right to access the Ombudsman is noted in a written outline of private property owners' rights that UDOT provides to property owners prior to negotiations. The Ombudsman can investigate whether UDOT has followed proper procedures to acquire property and can recommend solutions to address property owners' grievances.
UDOT Request for Proposal (RFP) Process
The RFP describes the scope of work for the project design. To develop an RFP for a design-build project, UDOT uses a multi-step process:
UDOT Design-Build History and Current Projects
UDOT first used the design-build process on Interstate 15 in order to expedite construction prior to the 2002 Winter Olympics in Salt Lake City, Utah. As part of this process, UDOT acquired all residential ROW and a consultant team acquired all non-residential ROW. The use of design-build helped to streamline project construction; UDOT had estimated an eight-year construction period for the project using a traditional design-bid-build process, however, actual construction was completed in four years under design-build.
The 12300 South project took place from fiscal years 2001 to 2004 and represented UDOT's first true use of design-build. Due to the events on September 11, 2001, as well as some air quality containment issues, UDOT wanted to complete the project as quickly as possible. Therefore, the project was shifted from design-bid-build to a design-build program due to the aggressive timeframe.
As a result of using design-build, the project was completed in three years instead of nine (the projected completion time using a design-bid-build process). UDOT reported that the use of design-build had significantly streamlined project construction while, at the same time, reducing condemnation rates (the 12300 South project involved a five percent condemnation rate). However, one disadvantage was that the project involved a high frequency of administrative settlement costs due to its ambitious schedule and cost pass-through. The project was advertised prior to full acquisition of ROW. Ultimately, more ROW was acquired than was actually necessary to meet the environmental needs of the project proposal.
UDOT is currently using design-build for a number of projects, including:
Project Overview: Initial improvements to the 11400 South Corridor encompass the area between State Street and Bangerter Highway. The construction project includes the following:
UDOT is planning to add three more design-build projects over the next year-and-a-half.
Benefits and Risks
Ms. Stein reported that there are both benefits and risks to using design-build. Use of design-build can streamline project delivery and ROW acquisitions since construction and design occur simultaneously. Additional benefits can include:
However, design-build can involve several risks, such as higher frequencies of conflict. Traditional design-bid-build projects maintain a balance between scope, schedule, and budget. Design-build projects, however, focus primarily on schedule due to the contractor's focus on earning schedule-related incentives. Scope and budget are less of a focus, which can cause budget issues. Additional risks to using the design-build process can include:
Issues and Recommendations related to Design, Appraisal, Acquisition, Relocation, and Property Management
Ms. Stein described some common issues that occur throughout the design-build project lifecycle, and recommended some tips for handling these issues.
Design errors cause most project schedule delays. To streamline the design process, it is important to do the following:
Appraisal and Valuation Issues
monitored by the project owner to ensure that the RFP and policies are followed. For example, do not allow the design-builder to use Right of Entry unless other means to acquire have been exhausted. The Design Builder must be motivated to seek a settlement by good faith negotiations. A Right of Entry agreement provides only temporary occupancy. We encourage the Design Builder to encourage the owner to allow occupancy and entry using a document the Department has developed (the Right of Occupancy Agreement) which allows the occupancy with payment based upon the approved appraisal. Ensure that the contractor does not encroach on properties without authorization.
Property Management Issues
Questions, Answers, and Comments
Question: What is the UDOT ROW Division's involvement in the public participation process?
Answer: The ROW Division obtains public input through the environmental process. Using a design-build model, ROW is involved more often and earlier. For example, ROW might create community groups that encourage people to discuss project issues. Public involvement is built into the contractor and design-build team incentives. There is a survey conducted during and after the design-build project is constructed to assess whether it sufficiently met the community's need. The contractor is scored on this and the bonus award is in part based on these scores. We had a project example where a contractor agree to reconstruct a better quality fence then the project required under the project's technical specifications—as a way to obtain community buy-in to the project. The bonus would allow the contractor to recapture what they expended—in this case, the expenditure for the fence—to encourage community goodwill. Design-build incentives can help promote implementation of an effective public involvement plan.
Question: Is the Utah Ombudsman involved in the scope of transportation projects?
Answer: The Ombudsman is involved only in reaction to complaints in an advisory role. The Ombudsman usually focuses on local government projects. UDOT has found that the Ombudsman provides the most help to property owners on identifying what is compensable and is able to focus their attention on facts rather then on their emotions. The office is also able to steer property owners toward mediation and the office facilitates subsequent mediation or arbitration hearings.
Question: Are there penalties if the design-builder does not adhere to the time schedule?
Answer: Yes. There are also incentives for earlier project completion. Additionally, there are monetary penalties if the contractor does not return its appraisal within a certain time period; however, this is not always enforced.
Question: Do design-builders use their own attorneys to run titles?
Answer: UDOT offers a list of pre-qualified title companies that they can use, but they are not required to use them.
Fred Tharp, Washington DOT
WSDOT is responsible for managing over 18,000 State highway lane-miles and is currently in the process of a major, 25-year capital construction program estimated at providing more than $15 billion in projects.
To expedite project delivery, WSDOT has legislative authority to utilize several types of alternative contracting methods, including design-build, design-bid-build, and construction management general contracting (CMGC) with special approval. Each approach has different components. For example, under a design-bid-build process, contractors take on little risk and WSDOT accepts all of the risk. Design-bid-build is conducive for projects that are relatively simple. The CMGC process involves hiring a contractor during the design process that assists the project owner with construction management. Under this process, more risks are shared between the agency and the contractor and the final project cost is unknown until after execution of the contract. This process is suitable for more complex projects. The design-bid-build process is suitable for projects that are very complex with multiple unknowns. While price and schedule are fixed constraints, final design is unknown.
Overview of Alliance Contracting Approach
WSDOT identified alliance contracting as an alternative approach to design-build, design-bid-build, and CMGC. Under the alliance contracting approach, the contractor or a consortium of contractors coordinate design and construction. Payment is contingent on adherence to strict performance measures that can include an accelerated construction schedule and project completion deadlines.
WSDOT initially developed an alliance contracting approach to address legislative constraints placed on its use of design-build. Alliance contracting was designed to provide a single contract for both design and construction while meeting minimum criteria regarding scope of service, evaluation of technical information, project costs, and resolution procedures. Alliance contracting is suitable for extremely complex projects with variable unknowns, solutions, costs, and risks.
WSDOT was prepared to deliver a project using an alliance contracting approach (the State Route (SR) 519 project described below). However, the State legislature did not ultimately support use of this approach and, as a result, the agency currently has limited experience with utilizing alliance contracting.
SR 519 ("South Atlantic Street") Project
WSDOT identified alliance contracting as a good approach for phase two of the SR-519 intermodal access project in Seattle.9 The project involves addressing safety issues related to surface-level rail crossings as well as improving access to the city's waterfront and two major downtown professional sports arenas (see Figure 3). The project involves multiple stakeholders, components, and risks, including Seattle ownership of portions of the project, insufficient budget, and potential utility conflicts (due to the presence of old underground utilities).
Figure 3. Aerial view of SR-519 project site in downtown Seattle.
WSDOT identified the alliance contracting approach as a way to consolidate project design and construction while addressing the project's complex components. Using this approach, WSDOT set the project budget but the contractor had responsibility for selecting an appropriate design. Additional general components of this approach included:
The specific components of the alliance contracting approach proposed for the SR-519 project are described below:
To select the contractor, WSDOT developed several criteria for the Request for Quotation (RFQ) and RFP documents, including all information related to the project team (e.g. key personnel and organizational structure) and fee structure (e.g. contractor costs and overhead as well as other pricing considerations). RFP responses were also expected to include a project management plan to identify and address risks, a QA/QC process, and other documents that included traffic management, safety management, and environmental compliance plans. WSDOT also intended to conduct interviews with bidders in addition to reviewing the RFQ and RFP documents.
Project Cost and Pricing Structure
To determine the cost of project components, WSDOT implemented a contract pricing structure (see Figure 4). The project's budget (i.e., target price) was a fixed constraint. Components of the target price—including cost to construct and design, incentives, and project-specific overhead—were set by the contractor. The pricing structure essentially allowed the contractor to identify the percentage of incentives and risks that would comprise the target price.
Figure 4. WSDOT contract pricing structure showing target price and components.
Soliciting Feedback on the Alliance Contracting Process
To solicit industry feedback and receptiveness to reducing all engineering and design to a single RFP, WSDOT presented the alliance contracting process to industry trade groups, including the American Council of Engineering Companies and the Associated General Contractors of America, during a series of monthly meetings.
Feedback from these industry groups noted that WSDOT should keep the alliance contracting pre-qualification process simple so as not to unduly stress bidders' resources in responding. Industry trade groups also emphasized the importance of transparent communication between WSDOT and bidders. Finally, the groups recommended that WSDOT set the target price while allowing the design builder to establish various components of the price, including: risk allocation, incentive distribution, and design/construction costs. WSDOT revised the enhanced design-build process on the basis of industry feedback, specifically incorporating the recommendation regarding target pricing, as previously described.
Outcomes and Current Project Status
While WSDOT was able to develop an RFP to select a contractor and designer for the SR-519 project, the agency could not move forward to implement the RFP due to difficulty establishing upper-management buy-in to the approach. As a result, the original alliance contracting approach was converted to a traditional design-build approach.
After issuance of the project RFP under a design-build template, WSDOT received five Statements of Qualification (SOQs), which were ultimately short-listed to three potential candidates. All of the SOQ proposals received were over budget and, as a result, WSDOT subsequently moved into a BAFO process. The agency revised project scope, adjusted risk exposure, and added $10 million to the project budget. Ultimately, WSDOT awarded the contract to the best value proposal. The winning bid provided the second lowest price, but it also reduced impact to the professional sports arenas adjacent to the project site. Currently, the project is anticipated to be completed on schedule although total project costs are still unknown.
Success Factors and Lessons Learned
WSDOT reported the following lessons learned and success factors from its experience developing an alliance contracting approach:
Questions, Answers, and Comments
Question: How did WSDOT ensure equitability for bidders while also obtaining a design-builder that met the agency's specific needs and criteria?
Answer: WSDOT provided clear criteria that design-build candidates had to meet and it also scored candidate designers on priority elements.
Question: Did WSDOT intend to select the contractor and then allow the contractor to select the
Answer: WSDOT's design-build legislation instructed WSDOT to enter into a single contract for both contracting and design. However, alliance contracting was viewed as an opportunity to make changes as the process moved forward. This is different than a traditional design-build process. It was important that WSDOT screen for contractors with whom it could develop a relationship conducive to change.
Question: Was it difficult to develop a target price?
Answer: No. The target price was WSDOT's budget for the project, which was set by the legislature.
Question: What interplay was envisioned between WSDOT and the utilities, if WSDOT had moved forward to implement the SR-519 project?
Answer: One of the performance criteria envisioned was the development of rail grade separation that would not impact utilities. WSDOT also met with utilities to discuss elements of the project.
Question: How far along did WSDOT get in terms of identifying utilities for the SR-519 project?
Answer: WSDOT had identified those utilities that were documented. However, some utilities had been in place for over 100 years and they had no associated documentation. WSDOT discovered an undocumented sewer line near one of the sports arenas in the project area. When WSDOT developed the alliance contracting RFP, it included a qualification that contractors would be responsible for all side sewer lines in the project region.
MoDOT has the seventh largest highway system in the U.S. with more than 33,000 road miles. Moreover, it also has 10,000 bridges, including 53 major river bridges, which is the most in the nation. Funding is a major challenge for the department and MoDOT has identified an annual funding gap of $1 billion.
The Missouri State legislature authorized the use of design-build for three projects, including Interstate 64 (approved in October 2005), Interstate 29/35 (approved in 2005), and the Safe & Sound Bridge Improvement Program (approved in September 2008 to improve more than 800 of the State's lowest-rated bridges).10
Overview of kcICON Project
Interstate 29/35 leads into downtown Kansas City, Missouri, and is a heavily used, congested corridor spanning two counties and cities. The Kansas City Interstate Connections (kcICON) project involves reconstructing, upgrading, and widening parts of the 4.7-mile long corridor as well as constructing a landmark bridge, the Christopher S. Bond Bridge, to replace the 50-year-old Paseo Bridge over the Missouri River.11 The project is scheduled to be completed in October 2011 and the total budget is $245 million.
MoDOT initially estimated that over $300 million would be required to complete the kcICON project; however, the entire funding amount was not available. MoDOT identified design-build as a useful approach to help leverage existing funding sources, meet the $245 million budget, and streamline construction timelines. MoDOT's design-build process for the kcICON involved several general steps: 1) pre-qualification of design-build teams; 2) issuance of an RFP; 3) a contractor team selected on best value basis; 4) MoDOT's development of conceptual design; and 5) contractor completion of design.
MoDOT accelerated ROW activities to coincide with the RFP process and coordinate with mediation and condemnation activities. The number of parcels estimated for ROW changed as the project design evolved. Initially, in July 2006, 35 parcels were identified for ROW acquisition at a cost of $18 million. By November 2007, 24 parcels were identified at a cost of $5.5 million.
To coordinate surveying for ROW activities, MoDOT also found it important to establish the existing ROW corridor prior to setting new ROW limits and to conduct a survey upfront to offset future problems. Additional ROW activities for the project included:
MoDOT encountered several challenges in using a design-build process for the kcICON project. For example, it was difficult to coordinate given a diverse group of stakeholders, build relationships with the design-build team and the impacted community, and establish the footprint for a partially designed project. Furthermore, it was difficult to address the impacts of hazardous materials in relation to the ROW corridor. This was a sensitive issue and many property owners expressed their concerns. Business owners in the project corridor also voiced their concerns about road closures, believing that closures would negatively impact their businesses.
Addressing property and business owners' concerns involved close coordination between the design-build team and MoDOT staff. MoDOT worked very closely to build trust and relationships with property and business owners in the corridor and achieve their buy-in to the project. For example, the agency developed a series of Meet and Greets to help build local relationships and buy-in to the project. An attempt was made to meet with every property owner throughout the corridor. Mr. Hartmann noted that he met with several owners multiple times before finalizing the ROW work plan.
Creative solutions were used to deal with some ROW acquisition challenges. For example, MoDOT acquired a parcel that was not marketable during the course of project construction due to its proximity to the project site. The Agency specified in the RFP that the design-build contractor could use the parcel as a staging area during the contract. MoDOT intends to sell the parcel after the contract is complete.
In addition, MoDOT formed a Community Advisory Group (CAG) to address community relations and ensure that the KcICON Bridge would meet public expectations. The CAG, which acts as a sounding board for MoDOT and a liaison between the agency and the public, is comprised of 12 members identified by local leaders. CAG meets quarterly and provides input on local priorities for the bridge.
MoDOT reported several success factors in its use of a design-build approach for the kcICON project:
Questions, Answers, and Comments
Question: Did MoDOT plan to build a bridge next to the existing Paseo Bridge and then tear down the older structure?
Answer: It was the responsibility of the design-build contractors, through the RFP process, to propose their project alternatives for MoDOT to evaluate. MoDOT provided the design-build contractors with constraints regarding project location and funding, but left the proposal process of construction and design up to the contractor for evaluation and scoring prior to selection.
Question: How does MoDOT address management issues with other States (i.e., Kansas, Nebraska, and Illinois) that share management responsibilities for the Missouri River bridges?
Answer: MoDOT works closely with the responsible agencies in each State to decide which agency should take the lead. Generally the lead role, and associated responsibilities, alternate with each respective river crossing.
Question: In obtaining ROW for the new bridge, did the adjacent railroad companies lose their track alignments?
Answer: No. It was challenging to work with the five different railroad company stakeholders. Nevertheless, MoDOT was able to develop agreements with all of the companies.
Question: Did MoDOT have environmental documents to work with?
Answer: MoDOT, in association with our engineering consultant during the procurement phase, had completed about 30% design plans and 100% ROW plans. This same consultant cooperatively completed the environmental document. MoDOT's commitment to the design-build contractor was that it would provide the contractor with the ROW corridor and environmental statement, but the contractor would be responsible for conformance to the NEPA Record of Decision.
Question: Did the project bidders include traffic management plans in their proposals?
Answer: Yes. Scoring was, in part, allocated on the basis of bidders' traffic management plans.
Question: Did MoDOT have to make coordination with utilities part of the legal process within the State?
Question: How much coordination did MoDOT undertake with utilities prior to its award of the contract?
Answer: It was MoDOT's responsibility to deal with early utility relocations; however, the design-build contractor had to deal with presence of several utilities whereby the construction dictated relocation, and corridor-wide fiber optic cables. The design-build team was responsible for the coordination of utility relocation work after the early utility relocation.
4 The Texas Landowner's Bill of Rights is available at https://www.texasattorneygeneral.gov/agency/landowners.shtml
10 More information on the Safe & Sound Bridge Improvement Program is available at http://www.modot.org/stlouis/SafeandSound/SafeandSound.htm