Audio: https://connectdot.connectsolutions.com/pun3vbyzt4jo/
>> OPERATOR: Ladies and gentlemen, thank you for standing by, welcome to the Value Capture Strategies: Innovative Finance and Project Bundling at this time all parties are in listen only mode. We'll conduct questions and answers. If you require assistance, press star zero. I will turn it over in Jen Shelby.
>> JEN SHELBY: I would like to welcome everybody to Value Capture Strategies: Innovative Finance and Project Bundling. My name is Jen Shelby and will be moderating today's webinar. Our webinar will run until 3:00 p.m. eastern time. We are recording the event today. That recording and slide will be posted to the FHWA Website. The speaker’s presentation slides will be available for download toward the end of the webinar, if you're interested in development credit hours or credits for attending today's webinar, we'll provide information at the end how to obtain confirmation of your attendance.
I will now give you a quick orientation to the webinar room. In the top left corner of the screen, you will find the audio calling information if you prefer to listen to the webinar by phone instead of through your computer speakers. In the lower left corner is a chat window you can use to submit questions or comments during the webinar.
We will field questions at the end of each presentation. We will also have time for additional Q&A at the end of the webinar. If we don't have time to address all of the questions submitted, we will post written responses along with the webinar recording to the FHWA value capture Website. If you decide to use your phone to listen to today's event, you will also be able to ask questions by phone. We will remind you about that at the appropriate time. Over wise you can type your question in the chat window. To view closed captioning during today's event, click on the CC icon in the bar along the top of the page, and select show captions from the dropdown menu.
Before we begin, I would like to ask the audience to fill out the poll question. There we go. You should now see it on the screen. These are simply to help us under your affiliation and level of knowledge about the topics that we will discuss today. We'll give you just a moment to complete those. Looks like we have a fair amount of variety in our audience today, some Federal, some state DOT, one or two from tribal government, MPOs, label government, transit agency and a few from other agencies.
A few of you seem to be very knowledgeable, but a lot of you are eager to learn with some degree of knowledge. Maybe you have heard a little bit. Maybe you don't have much. This is a great place to be. We have some excellent presentations today to help you with this topic.
It looks like there is one question. Do you want to either ask that, or put that in the chat, and try and answer your questions.
All right. With that, while you're answering the polls, I'll introduce myself. I'm Jen Shelby, an economist at the Volpe national transportation center in Cambridge community. I support financial grants administration, research and monitoring at Volpe Center, and teaching in academia, and urban settings.
All right. So, with that, thanks for entering your answers in the poll. And let me introduce you to your first presenter, Thay Bishop. She's senior program analyst. Nearly 20 years at Federal Highways, she provided technical assistance and led capacity building efforts in innovative finance. Prior to joining FHWA she was the Director of Corporate Finance and Treasurer for the Metropolitan Atlanta Rapid Transit Authority. I'll turn it over to you, Thay.
>> THAY BISHOP: Thank you, Jen. Welcome to the value capture 2023 webinar series. My presentation will cover, I'll talk about the key important elements of the infrastructure projects, what you should know about Transportation Grants Funding from Bipartisan Infrastructure Law (BIL)2022-2026. I'll provide you the list of the competitive grants that might be of interest to you. We can talk a little bit about the Federal-aid Innovative Finance Programs Applicable to Project Bundling, and then we will discuss the case for innovation.Enjoy Federal fund provides from Bipartisan Infrastructure Law (BIL)2022-2026 but prepare for 2027 and beyond.
Remember when deliver an infrastructure project, you need three things.
First: Source of Fund or Revenues to repaid financing. Funding refers to how the infrastructure is actually paid for Revenue: Where does the funding come from to repay financing? You can bundle multi funding sources to pay for the project. If bundle multi-Federal fund programs, make sure Federal fund should be no more than 80% of the project cost.
Second is the financing option, Financing can be paid as you go or borrowing. It refers to the supply of capital, such as debt and equity, which is used to pay for the upfront investment costs of an infrastructure project. You can bundle multi-innovative finance options for the project upfront payment. If bundle multi-Federal loan programs, make sure Federal loan amount should be no more than 80% of the project cost
Note: Financing can’t create revenue . . . but . . . Federal Innovative Finance can lower borrowing costs, meaning more money can go towards construction and lower project cost.
Last, you borrow the money, you have the upfront money, now you hire a contractor to get the project complete.you pay contactor to get the project completion. Today we focus on how to bundle transportation and related projects to save time, cost, attract bidder. You can take an extra step to save time costs and attract bidders. You can save more money by bundling multiple projects in a single contract. That is the focus of today's webinar. And you can use any procurement techniques that will depend on your state enabling legislation allows. Project Bundling Contract can be used with any project deliver such as DBB, CMGC, DB, or P3s
The Bipartisan Infrastructure Law Federal funding available through two funding mechanisms. 69 percent of Bipartisan Infrastructure Law, or 446 billion of the BIL funding will be distributed via formulas to states, some of which locals are eligible to receive. You need to stay in touch with your state DOT. Reach out to them, and then the remaining 31 percent, or 196 billion, is available directly to the community through the discretionary grant.You should have registered with GRANT.GOV to stay update with USDOT-wide Notices of Funding Opportunities (NOFOs) as they become available.
The local can access the transportation funding to three different ways. Comparatively through a Federal grant program. You can apply Federal funding directly, on your own, or with the legible partner as a team. Bipartisan Infrastructure Law encourages you to do that. The second is Suballocations based on population from state departments of transportation, i.e., Surface Transportation Block Grant Program. Third, the Federal formulas like transit formulas. You should follow the state process, and insert your priority into their planning, so that way you can have a chance to get funding.
Check out this list of competitive funding opportunities for local governments. I embedded link to the webpage for Grant information, matching requirements, eligible projects, and eligible entities.
Additional list of the Competitive Infrastructure Funding Opportunities for Local Governments with embedded link to the webpage for Grant information, eligible projects, and eligible entities
So, what kind of innovative finance technique can be used with the project bundling?
Key to the effective use of innovative finance is the ability to recognize what techniques are suitable to what types of projects so you can maximize the flexibility and maximize the resources. The pyramid represents the typical Federal-aid candidate Projects. This is applicable to Project Bundling.
The base of the pyramid represents the majority of highway projects that continue to rely primarily upon grant-based funding because they do not generate revenues but can benefit from innovative finance tools that enhance flexibility and maximize resources. Various Federal funds management techniques can help to move these projects to construction more quickly.
For the projects with long design life such as the off-system bridges is about 50-year design life and the national one, probably about 75 years. They can be prime candidates for GARVEE-style debt instruments, in which future Federal highway apportionments are used to pay debt service and other debt related costs. SIBs are another option to borrow if your state have established SIBs. You can also repay the SIB loans with future Federal fund.
The mid-section of the pyramid less than 5 or 6 percent represents those projects that can partially finance with project-related revenues but may also require some form of public credit assistance to be financially viable. State Infrastructure Banks can offer various types of assistance in the form of low-interest loans, loan guarantees, and other credit enhancements to state, regional, and local projects. SIB loans can be repaid with future Federal fund. State loans of Federal appointment funds direct to the project known as Section 129 loans, are another possibility. And the TIFIA Federal credit program. FYI, the Section 129 Loans and TIFIA require repayment of the loan with the project dedicate funding sources. The value capture strategy can help repay that loan.
The top of the pyramid reflects the very small number of projects that may be able to secure private capital financing without any governmental assistance. These relatively few projects may be developed on high-volume corridors where the revenues from user fees are sufficient to cover capital and operating costs. However, you still can be able to use some type of assistant to attract the bidder, like a private activity bond, and if using a P3, the private equity, would be another option as well.
So, what is a project bundling innovation that I keep referring to? Project bundling defines as a two or more projects award as a single contract. Typically used for the preservation, rehabilitation, or replacement of several projects. In some cases, the contract may include option years. Can be Roads, Bridges, Traffic Signalization, Lightning, Safety (skid treatment), culverts, etc. Can be used any project delivery techniques that your state allows: D-B-B, D-B, CM/GC, P3s. May covers a single county, multiple counties, multiple district(s), and/or States. The key benefits include faster delivery of transportation benefits, while saving time, money, and overall efforts through leveraging economies of scale. And it is similar in our personal life on buying bulks.
This is the list of the project example on the different types of bundling, and I embedded the link, download the presentation, and click to the link that will take you to a project case study where you will learn the scope of work, ownerships, funding & financing, project procurement method, as well as type of saving. For example, the City of Oakwood, GA, used Multi-Cities Pavement Bundling to create a larger program by partnering with other small municipalities to bundle road projects, increasing material quantities to attract a higher number of contractors to compete for the work, lower costs, and expand methods of treatment. Cost was $713,000; Project Delivery was Design-Bid-Build (DBB) contract, low bid; Funding from State – Local Maintenance & Improvement Grant Program formula based plus a 30-percent match; State/Local – Special Purpose Local Option Sales Tax; and City Oakwood General Fund. Another example is Nebraska DOT County Bridge Match Program. The County Bridge Match Program dedicates up to $40 million through June 2023 to promote innovation and to accelerate the reduction of county-owned bridges in poor condition. Counties are responsible for all coordination. County makes decision on Project Delivery such as DBB, CM/GC, & DB. Funding is 100% State-Funded: Up to 55% of the Project or $150,000.
These projects are just a bigger scale of the project bundling undertaken by the state.
So, why the need for innovation? The Case for Innovations. Enjoy funding available from Bipartisan Infrastructure Law and prepare for perfect storm in 2027. We will be heading to the perfect Storm in 2027. Despite record levels of investment in surface transportation infrastructure from Bipartisan Infrastructure Law of 2021, funding is not still keeping pace with demands for improvements to maintain the vitality of the nation’s transportation system. We have 4.3 million miles of public roads. Only a million mile are eligible for Federal-aid funding. Federal fund can only pay for capital not operation and maintenance. So, significant funding of still needed at all levels of government.Federal Highway Trust Fund delayed insolvency to 2027. State & Local – Infrastructure aging and deteriorating and are mostly unwilling to raise taxes. User Fees: Transit Fares cover 35 – 40% of operating costs. At best 42 percent of operating costs. So, 60 percent still has to come from some source of fundings to subsidize for operating, that's why transit is often using a value capture strategy. Highway – Offers most potential on leveraging access to private capital but require significant transition period before big impact on revenue (meanwhile the market is inflating). Innovative Finance is about several decades old & Bridge/Project Bundling Tools useful but need to understand the implementation of each tool and all implications. Has not institutionalized yet. We hope they institutionalize in couple years. Significant funding will be needed for emerging technology, connected, and automated vehicles, electric vehicle, those will require a smart infrastructure. So, you will need significant funding source, that's why we're continuing to help looking for a new funding sources to supplement traditional funding. Value Capture is untapped sustainable revenue sources can be used in rural, suburban, and urban setting.
Here is the heart of the problem. The major funding source of Federal-aid system is from Highway Trust Fund and is unsustainable; The Committee for a Responsible Federal Budget (CRFB) and the Congressional Budget Office (CBO) projected $190-$215 BILLION Short fall in 2027-2031 The perfect storm we're going to be having after 2027. Since 2008, these revenues have been insufficient to cover spending out of the trust fund. Congress has relied on nearly $155 billion of general revenue transfers to close this gap and keep the trust fund solvent. The Bipartisan Infrastructure Law transferred $118 billion from general revenue to highway trust fund, delaying insolvency from 2022 to 2027. Beyond 2027 through FY 2031, the fund will face a cumulative shortfall will be 195- $215 billion – larger than was projected before the law was enacted. Value Capture can help you to advance critical and priority projects off the ground while waiting for Congress to figure out how to fund for the transportation system.
That's why we keep reminding you that we are heading to a perfect storm in 2027. So, we need to prepare for the perfect storm and enjoy a Bipartisan Infrastructure Law funding providing for 2022-2026. This is conclusion of my presentation So, with that, I'll turn it over to Jen.
>> JEN SHELBY: Thanks for that great presentation. I'll now move directly to the next presentation before we take any questions. I would like to introduce our next presenter. Ken Atkins with the Federal Highway Administration. He specializes in project leadership and strategic planning, project bundling and bridge bundling. Ken, go ahead with your presentation.
>> KENNETH ATKINS: Okay. Thank you. Can you hear me, okay?
>> JEN SHELBY: Everything sound great.
>> THAY BISHOP: Thank you. I wanted to thank Thay for inviting me and I've been working on project bundling for a few years. If it wasn't for Thay, I wouldn't be here, the reason I am here, I said Thay, can I work on bridge bundling. I wanted to be on it, that's what got me with Federal Highways as a personal story. We had a program that we had bundled and had done so well, it was really one of the worst programs in the southeast, if not the nation, and it turned out arguably to one of the best programs in the nation. We did that using several different things as Thay mentioned, one was bridge bundling, one was project bundling, one was value cap our, but it was so successful, we were giving this same presentation very similarly, to EDC was kicking off, Victor Mendez, and he was over project management with the University of Florida doing a study for EDC as well, we gave this not knowing your audience. They always say know your audience. We didn't know who was there. We feel it changed our entire program and put thousands of people to work in one of the most depressed counties in the nation. The most depressed County in the nation, more foreclosures than any other County.
For presenting this concept and how much it has taken our project out of failure and made it one of the most successful in the nation. And Thay was working on bridge bundling because of the most sufficient bridges in the U.S., ever since now, I've been working with her on project bundling as well.
She really asked, how do you actually do bundle at more LPA level, which is where I worked for four different LPAs. I grew up and started and worked my way to the top thankfully. Where we put this at the end of the day is four things. And Thay explained what project bundling is. And then we give some specific case studies on innovation that has gone from a failed program, and a program that was not as successful as they wanted and turn it into an award-winning program, and number three, if you did decide to do something like that, we highly encourage you consider what would be available to you, what resources could you provide.
The whole point behind bundling we didn't want to set something up and encourage people to do something and not have the technical to follow it up. If you do take on something like this, you want to come alongside and give you the tools that you need to help you be as successful as you can possibly be. And you'll be successful with or without it. If we make it look a little easier, that's what we're here for. And the last section is Q&A period. Feel free to put something in the chat or if you have questions, this is open discussion. This is our typical disclaimer that we give and really, Thay and I talked about this slide. She gave a brief introduction of project bundling. This dials it down a little deeper, but what is probably bundling? What we would say, it is not really what we think it is. It really depends on one thing. What it depends on more than anything in my opinion is not what we think, it is what your goals are for your program. What is your vision? I used to teach this in the military, we perish for lack of vision. As an owner, what is your vision, and what are you trying to accomplish and then how could you go about this vision and make it happen. And what we found is one of the biggest tools that there is, which is underutilized in my opinion is project bundling like Thay said, this differences definition, where a single contractor award deliverers multiple presentation rehabilitation. And it goes into what it can do for you, use contracting which is the engine that make this run more efficiently. You can use certain ones, but certain ones make you perform better. What you're doing is looking at what your goals are. And we're bundling to build better faster cheaper and smarter. That's what project bundling is about. With the money Thay mentioned coming out of the Bill, doing things in a way that we have done things. We cannot keep up with the infrastructure as it is. We got to do things differently. We know bundling does that and does it very efficiently.
That takes me to the next slide here which is how it came about. I started working with her and her team which was basically bridge bundling. The locals came forward and wanted an initiative to help with the four bridges across the U.S. or so many of them. Having worked for the County, that's what kept me up at night was which bridge could collapse at night. Not politic, not having 12 departments, it was which bridge could go down overnight that I'm responsible. So. What came out of that is bridge bundling initiative. I was briefing this and doing strategic planning with headquarters. It was not just about bridges it was projects as well. I worked for years, with ARA, Diane DeAngelo, did really well and others, to cop up with resources. One is the project bundling guidebook to get started. When we I did this, we had no guidebook. It was hard to go to the commission and sell something that you have no data on. This takes care of. It gave you data and case studies and how to start doing this.
This is another one, the Website we have is all information you can use. A lot of experts. We brought industry in, one of the industries we brought on, one of our presenters, we brought industry champions, helped us develop this, and these are weights and things that can be part of your presentation that you can use, this is available to you to do probably bundling. It is not that's not been tested it certainly is tested and we have millions of case studies to help you be successful if you decide to take that on.
But the initial idea came from a project I was fortunate to work on. What it said, if you look across the U.S., only 1 percent of the U.S. state highways. Use LPA based strategic bundle. What does strategic bundling mean? What it doesn't mean we take work and bundle it. What it means we look at the problem we're trying to solve. What is the problem with the organization we're trying to solve and strategically, how can we go about delivering that in the most efficient way. That's where we are looking at things differently. What we're talking about during this presentation, is not so much bundling and that's part of it, but how can you strategically bundle.
My partner and I, we set out working on a program to try to twin agencies to do strategic bundling using alternative contracting methods, because we knew we could take the worst program in the U.S. and convert it to probably the fastest if not the fastest it has ever been run, according to public works and we're on to something, but what we did, we looked at strategic way, how could you look at bundling. These are some of the issues that you look at, reducing project back log, like Thay mentioned you have a tremendous amount of roadways we're responsible, and bridges we are responsible. We have inventory, capital improvement project, how can we bring success and bring other departments within our organization in. If you have Housing Authority or transit authority, where you got a building maintenance or building authority which we had at Osceola, how can we strategically put together a bundling program, or delivery program to include initiatives to rapidly build these programs to get them off your inventory. These are things we looked at. Reducing the back log, bringing success to other agencies, using innovation and risk reduction. To have innovation we have to do things differently than we've ever done it before. And what it really creates it creates above everything, if you do can correctly it creates an economic stimulus, because we know construction puts people to work probably as efficient or better than any other industry
So, if you get construction out on the ground, we have trade, realtor, there's a lot of different trades involved, and not to mention contractors, subcontractor, engineers, sub consultants it does provide economic stimulus for that County or DOT agency that put this together.
So, it is more looking at it from a big picture, so, I got called about 11 years ago, to Osceola County, Florida, which you can see on the map is where Disney world is located. It falls between Osceola and orange County. The entrance is in Osceola County, which is one of the highest travel road in the U.S. as far as tourists.
Long story short a got a call from the County administrator. He said three administrators have been fired trying to deliver the million-dollar program. He was going to be the force to get this program out. I was working in Alaska doing bundling with them. At the largest port, Dutch Harbor, where The Deadliest Catch was filmed. We had been successful bundling and using alternative delivery methods and taking the program from a failed program to extremely successful program. He called me and said, will you come in and work on this program. He said, well, Mike, you're going to have to do things differently than you have done before because the three administrations have not succeeded. If we do what they're doing, we'll get what they got. Very good engineers, great designer, great planners, and they all failed.
That takes us to what was the problem we were trying to face. The problem was, it was a billion-dollar program they passed using impact fees, this is part of value capture, they used value capture to use impact fee revenue to pay the bond on the loans they had borrowed so they can build the construction in advance. Part of value capture, we borrowed the money using U.S. bond and paid it back from the revenue from impact fees which allow us to bring the projects forward. If you look where they are were, they were 18 projects behind schedule. In seven years, they had gotten behind, 2 million dollars over budget and the last project they built was 20 million dollars over budget and a $20 million project.
On top of that. $1 million, they miscalculated something, a 100-million-dollar error. How can you take a program like this and actually turn it and be successful and no other agency in the past, really 14 years, have been able to be successful and that's what we're talking about today.
So, that goes into what did we achieve. The first thing we did was we looked strategically like no one had ever done. We looked at what we have to put together to do this. We put together three EDC initiatives and four total initiatives. We put probably bundling, bridge bundling, value capture, and we also used alternative contracting methods which is EDC1 and EDC2. Having never done any of these methods. What this shows is the result. So, we took a program, you can see here that had been failed, and was really 200 percent over budget and seven years behind schedule, really 14 years behind schedule. Up with of the most political programs in the U.S. at that time. Because it is the second fastest growing County in the nation and most depressed County in the nation, had the most foreclosures and we turned into one of the most successful programs through bundling. If we took that method and said if it worked for us, it could work for others. If we strategically bundle, then others can strategically bundle. That led us to the next one like we talked about in the agenda at Pueblo of Acoma. Sky City. They come every year and they travel to Sky City which is one of the oldest inhabited indigenous areas in the U.S. continuously inhabited.
So, it takes to you the case study. We used Osceola County case study and went to Acoma and said would you be willing to bundle and use value capture. They said absolutely. We have a staff of two. An engineer and someone at front desk and assistant to the engineer. We're getting political pushback because we can't get the probably filed and can't deliver on the capital improvement program. We're five to seven years behind that. And 150 FEMA projects behind as well. They are five years behind schedule.
So, with that, we looked at setting up what could you bundle. Remember Thay talked about what could be included. And what I would say my grandfather always said, there's an exception to every rule, right? That's what I would say about bundling, really depend what problem you're trying to solve. These are the types of projects, we took the majority of the CIP program and we bundled it, right? Not similar project, things of that nature, but they were horizontal project, they were roadway, bridge, earthen walls, building parking lots, et cetera.
So, it was horizontal work but was not that similar in nature. But we went ahead and bundled it anyway, why? Because that's the problem we were trying to solve. It was so successful, they ended up building all nine probablies in less than nine months with the CIP, that's with design as well. They went from building a job every one to five years, to building one to nine jobs every 12 months, that's including design.
So, they were so successful they went ahead, and I did a second program. We call it the first programmatic use of probably bundling on tribal land. It was the first we know of using the EDC projects. To deliver the majority of capital programs, that's critical. This is what they picked for the second round build a transportation facility, build but parks and that gives a list of what they were. Second round they did another 15 million in FEMA. The first 13 million was so successful, they have more government fund that was effort given by any organization by FEMA because they were so efficient. Why would you throw 150 programs in the bundle that has nothing to do with the other programs, the reason you do it you gain so much efficiency by bundling and bring it under one contract so bring together a bunch of smart SMEs in the industry and solve this problem and get to them faster than ever been done before. This is the second round that they've been currently working on that's going well. They have a transportation complex, a veteran’s highway you saw on the picture sheer, which they had not been able to construct because of the money, they have baseball field, they wanted class A ball field for the children, you can see they were just dirt.
So, with that, the Pawnee Nation heard about the program, and they called us and said would you be willing to set up the same thing for us, we said absolutely. But the difference is, we want to do both vertical and horizontal. We don't want to do horizontal, we want to build programs and other things. Bundling really doesn't care what you bundle, just the question does it meet the problem you're trying to solve. What they are trying to solve, they could not get the work out half enough and they couldn't get the work out to meet the deadlines for the grant they had, and they were in the process of losing the money because they couldn't get their work started or completed.
This is the second one. They were also the first tribe in the nation to get a Disney grant as well and they were in danger of losing that first grant in the nation given to a tribe.
With that, as you can see, they did 13 different programs. They did a green bridge which we'll talk about. They did light improvement the campgrounds. A worship facility. They demo’ d one and did a roof on another building. They did a very important Morris road project. The first project was, they came to us with that project. And we said that's not enough in order to get efficiencies, so we recommend that you bundle and that's what I did. This is another one they won, or in the process of winning award. They bundled this Green River Bridge. It was supposed to be important torn out. Because it being a bundle we got enough smart people in the room to figure out how to save the bridge and rehabilitate it. It was rehabilitated and on schedule and bake an icon how you restore bridges versus tearing it out. The really powerful part of bundling, put it in other projects you become much more efficient, and your designers can think in different ways because they have builders with them as they were doing the design.
They were able to break down. The first day they signed the contract with the contractor they broke down which is unheard of. We say that, how often is an organization able to break ground the first day they bring the contract on board. Fairly often if you use bundling and you use it correctly. They have been successful and won award across the U.S. for in bundling program.
What Thay and I talked about, this is how we want to go about it. How do we go about it? First thing recruit champion, that's what we're doing today. The presenters are champions in different areas one innovative financing, and alternative delivery, and champions in the local counties in the state and Counties that you bring in. And recruit experts, SMEs, bring them in. And that's the beauty of bundling, you make the projects larger to attract mortality in and tackle these problems that have not been solved before. What we also do, we bring alternative contracts methods, value capture like we talked about. We know if we do project bundling directly in general with case studies, we get a 30 percent efficiency. We found even 50 percent and, in some cases, if you look at Acoma, 100 first bundling, it's really powerful what you do when you bring the programs together. And we build partnerships with the different stakeholders, that's how we rapidly reduce sufficient infrastructure. In our case, we were able to build a billion dollars’ worth of work. We can turn out 18 projects over 18 months in Osceola County. Acoma turned out 12 projects every 12 months and Pawnee can do 12 to 15 projects every 12 months. In the production are close and a lot of similarities. This is part of our guidebook. These are the resources we talked about. We have the Website, the guidebook. We have webinars Sim la to what we're doing here, which I'll show you some of them and this last one is really important. This is one Thay had me adds she's right. We'll help with technical assistance. And when we decide to implement, we provide technical assistance to help you get set up correctly. These are examples of what we've done, how to peer exchange in Montana. Was very successful, had tribes in the Counties. And we did another one in BIA, and we did a presentation, and we did several trainings on bundling was very successful. Dan DeAngelo put these together. And here's an agenda we did for Caltrans in California for their DOT, and this is a two-day agenda to help them get set up for success and show them how to bundle and help them provide technical support that's required for bundling and the last thing we do as far as day two, this is something that was put together through project bundling and ARA, they have done implementation plans. Not only do we help you set up but do a strategic plan, how do you implement something like this to solve a problem you are trying to solve. The reason, most organizations fail because they failed to execute in a timely manner. Second reap they fail is they don't have an implementation plan.
So, we knocked both of those out at the same time to help make them successful. And then in closing, this is my information. This is my last week with Federal Highway. After ten years, but I put my contact number here as well. If there's ever anything I can help with or you can help with, you have the Federal Highway number and also my personal number.
So, with that I will turn it back over, I think to Corey.
>> JEN SHELBY: Before we head over to Corey, we'll pause and take questions, I think I saw one come through the chat pod
First one here can you speak to how innovative and project bundling can help increase DBE goal achievement either Thay or Ken, do you have an answer for that one?
>> KENNETH ATKINS: That's a great question, I'll start with you, Thay and them I'll finish on that one. There you are.
>> THAY BISHOP: Any Federal fund requirement, you have to meet the DBE requirement. So, every single project I list on my presentation, that if you get to the Website, the project Website we're talking about how they promote the DBE, or the process to increase the DBE participation.
>> KENNETH ATKINS: Also, Thay, we have criticisms in some cases if you bundle you might not be able to employee the locals or DBEs. Actually, what we found, as long as it is planned out in our program, we've been very successful, versus these three case studies, for instance, they were able to put a tremendous amount of locals to work. Osceola, the commission's biggest concern they wanted 30 percent locals to build, design and anything to do with suppliers, et cetera, and we ended up with 90 percent local participation through bundling. The way we did that, we broke packages up into small work packages and did fairs, like job fairs to find out what the Federal contractors DBE subs were able to construct and that's how we broke the work packages out. Because we have so much work to bundle in a package like that. We're able to break the package in a smaller DBE component to compete and bond. Just the Osceola one we got 90 percent and on the Pueblo of Acoma, they were concerned about hiring tribal members. They were successful hiring tribal members. And not only did they hire them. Two of them went to work for one of the contractors that came in. It was very successful, and Pawnee as well. Not only thought to as a challenge and goal, you want to base it on what your goals, it is easy enough to break the bundle off to where we hit those goals, and feed them and put more locals to work, because you're putting more work out. If we put a tremendous amount of work out at the same time, we have the ability to hire many more locals than DBEs that we would ever if we did one project every five to seven years. If we're doing nine programs every nine months, woo we are able to employee a lot of locals and DBEs. That's why it became the biggest system loss per capita, even higher than DOT per the size and unit, if that makes sense. It's a really good question.
>> JEN SHELBY: We have another question how are environmental review and NEPA requirement addressed in a bundling program?
>> KENNETH ATKINS: I'll answer the first one, one of the things we do in a bundle, we look at where each probably is, and these are real cases. So, for instance, if you look at Pueblo of Acoma, there were problems that had NEPA clearance, and some did not have clearance. We bundled it knowing some had it and some did not. We did the schedule to where we had NEPA clearance and could wait on the once that did not have it and schedule them, so we did not have the contractor shut down. That's one thing you make it much easier. You don't have to worry about stopping the project. We always try to have work where they could go next, that's how we were successful with that. As they were working through the NEPA challenges they were still building work, once the NEPA was available, we were ready to go to construction. That makes it a much, much easier process, and having to do it on board, it doesn't weigh NEPA, they were allowed to provide construct act reviews and stuff like that. One of the options we chose on Osceola was not even constructible. So, that's one thing having the contractor in the bundle can tell you, that alternative would never be constructed if you even chose it. So, we chose a different alternative which helped save millions of dollars.
Very good question, handled strategically, look at deadlines and mast ever schedule, it shows what all of those deadlines are, where exactly we are in the NEPA process as well as other permits. So, great question.
>> JEN SHELBY: Have you seen benefits or increased competitiveness of probably bundling for discretionary grant funding?
>> KENNETH ATKINS: Thay, why don't you start with that, and I'll add to it.
>> THAY BISHOP: Well, actually, I’m not involved in grant reviewing process, but I will going to have to look into it, but certainly with the project bundling can help to meet some of the threshold requirement for the grant project. Also, most of the project bundling are Federal and state competitive grant funds. The states are established a process to increase DBE participations.
>> KENNETH ATKINS: And I can tell you in this case up here, Pueblo of Acoma, they applied for an aid grant and set them up better, because they had programs, that's one benefit when awe ply for grants. When you bundle things, what you try to do is try to put some easy ones with hard one, right? When you bundle a capital program, you get easy wins and get out of construction quickly, that's what we call shovel ready along with complicated ones that may take longer, it helps with grants because we have problems that are not only shovel ready but we have projects that we can start as soon as the grant is awarded and we're able to hit all of those grant deadlines, like the Disney one. The only reason they were able to hit the Disney grant, is that they bundled. It gives you more power making deadlines because it makes construction much more efficient. It does set you up for a strong application, given that you have several projects, and you already have a contractor on board that's able to build those programs. Great question.
>> THAY BISHOP: I also want to add, Nebraska DOT, the county bridge matching program, the state allocated about 40 million to match the County to bundle the bridges in poor condition, and basically the state provide the grant up to $150,000 project bundle. So, the Nebraska DOT only deals with the leading County apply for those matches funds.
>> JEN SHELBY: Thanks for that, Thay. In the interest of time, I'm going to move forward to the next speaker, we'll come back to question-and-answer time a little bit later.
Next, we'll here from Becky Curtis. Becky is Director of bureau bridges and structures with the Michigan Department of Transportation and chief bridge engineer. Becky represents MDOT on the committee of bridges and structures technical committee, T8 removable bridges and T18 for bridge management and evaluation and rehabilitation. She's a licensed engineer in the state of Michigan. With that, if you have any challenges hearing her, remember that Michigan is under a big old storm warning right now. So, we're going to try and smooth it out as much as we can. If there are any technical glitches, that is most likely why.
So, with that, I will hand it over to Becky.
>> REBECCA CURTIS: All right. Thank you. So, today, I'm going to talk a little bit, just give you a background how Michigan tell gates between trunkline and local agency bridges, I'll provide program background for our local bridge bundling program, describe a little detail on the funding, how we selected candidate, how we coordinated the projects and into delivery.
So, first, Michigan is a state where we have both trunkline and local owners. And so, in section, and asset management of those local bridges, are the responsibility of those owner, although, of course, Michigan does have an oversight over national bridge inspection program.
These slide here are from our transportation asset management council. We report to the legislature on both road and bridge condition annually, and it kind of paints the picture of the issue. So, while the trunkline bridge, there's about 4500 of them. Carry most of the traffic and also is the significant share of duck area. Our local bridges, there's more of them. There's about 60 about 6,000, and those bridges, are smaller, but in more communities and more locations. And, unfortunately, there are significant amount of them which are in severe condition.
So, you probably know good, fair, boar, but because of the condition of the local agency bridges, our transportation asset management council had already included the term severe. These are bridges rated three or less and NBI, and they are bridges where they may be one inspection away from partial or foreclosure. They may require plumbing repairs to keep only, and they most likely have load postings in order to maintain the structure as long as possible, even in the deteriorated state.
In Michigan, we do share 25 percent of our Federal aid with local agencies that also applies to our bridge fund, and we have a local agency bridge program which has state funding to go along with the 25 percent share of the Federal aid bridge fund of the office. These projects competitively across the state based on regions, and it had previously been about 50 million dollar a year with increase in bridge funding, that's going up. It still has not been enough to put a dent in the back log of very poor condition structures. It's been able to maintain condition, but it has not been able to put a dent in the back log. That's where this idea of bridge bundling program came in. And so having oversight of the inspection program and seeing the condition of the local agency bridges and also being involved with the transportation asset management council. MDOT identified this issue as a local system, as a critical need for transportation in our state, and so before b five years ago, we started looking to this concept of bridge bundle program we did a feasibility study that confirmed the condition which we kind of already knew, and also identified it wasn't an extending funding source available for these local owners, in order to address all of the back log of bridge needs.
Additionally, we started to see an increasing number of bridge closures, and postings, so you can see down there in that chart, the number of critical bridges has increased. It's a statewide problem. You can see the little dots of either serious and critical or load posted and restricted local bridges. This impacts communities, it can impact emergency response, it can impact the soft of doing business as people have to recruit. It can impact the agricultural industry as you lose access and has to do detours. It is really an important issue for our state, mobility, and economy.
And so, we identified and opportunity with additional funding that came in, that was dedicated toward rural bridges, and we decided to dedicate that funding toward doing a pilot, and so that's phase 1, our bridge bundling pilot. We were also lucky enough to get a 2020AID grant for $1 million toward the design phase of this, and another aid grant has been submitted by one of the partnership local counties who had a bridge for the construction phase.
The other item that we did, to help a local agency participate in this pilot, is that MDOT utilized the toll credits that we have, in order to sort of defer the local match that might otherwise have been required. And so, you know, that doesn't stretch your Federal dollars any farther. If your grant was 20 million dollar, it's 20 million dollars. But it does ask the local agency partners of this pilot to come up with their funding.
So, how did we select the bridges? Well, since this was a pilot, and we were hoping to demonstrate the success as quickly as possible in case other funding was identified, we wanted to do repairs that would be quick, on the scale of bridges, right? So that led us to super structure replacement. We also wanted to make sure the condition, that the goals which were serious and critical or posted bridge, it needed to be a rural location. That was the requirement of the HIP fund we were using. We needed to make sure plans and data were available in the substructure unit, because we wanted to make sure when replacing the super structure on these bridges that the substructure was going to, one, meet the load of that super structure, and two, be able to carry that be able to carry that bridge well into the future. You don't have the whole life cycle of the bridge be similar. And finally, we wanted to ensure that the local agency was willing to participate in this pilot.
The part everybody loves, you can imagine, they have a bridge they've been hoping to replace finally get replaced. There were a couple that had plans under way to replace it on their own, so they did decline. For the most part we had great partnership with the local agencies that participated in the pilot.
Here's a little bit of the scale of the speed under which we operated. These bridges had not had any design started on them when the funding was identified to be used for this. And so, we had to move quickly. We did the screening of what the preliminary bridges might be in December of 2019. We had to procure our consultant team. Luckily, we already started that as part of the program setup. So, we were able to desk a task order under way to work with the consultants. In early 2020, they performed the final screaming and scoping of the bridges between May to July, and we narrowed it down to 20 bridges to advance into the final pilot. And with the hope that if any bridges ended up being screened out, from that point they would be considered for future bundles.
We ended up with 19 bridges, because one of the bridges of the 20 ended up needing to be a bridge replacement, is the schedule wasn't going to work so we ended up having that be a standalone additional project that let this November, actually. And to help with the coordination, we're doing a program where it is locally owned, but MDOT administered, and was the first of its kind in our state. Because typically they have run these programs on their own. So, we created a public outreach. You can go to the site, Michigan.gov/bridge bundling and see information on the bridge that is where a part of the fundal, and as we stepped through the construction phase, we provided updates as far as how far along the construction of each bridge was.
So, coordination was very important. Like I said, this was MDOT delivering brims that are owned by our local agency partners, and one of the steps that we, we created a local agency champion, so, that would be one individual, or more, if they wanted, from each local agency, and we developed a charter which we outlined what we felt their responsibilities for this program would be, and some of the highlight the of those included we needed to make sure they had that project data that we needed in order to ensure the structure was not critical and able to handle the loads of the super structure. We needed the local agency to issue a permit to MDOT and our contractor that we would end up hiring in order to do the construction work. Since the local agency had the closest ties to the public, we asked them to lead the local public information and stakeholder engagement if it was needed. We identified that this is going to be replacing the bridge. If you had any out of scope or betterment in your roadway approach, that the local agency was going have to be responsible for those betterments. And we also ask that they work to develop and implement a plan for future life cycle maintenance of the bridge. As I mentioned transportation asset council, the 100 percent of the roadways have to have asset management plans. And just in this documentation, we ask they include the bring in the asset management plan and clarify the future NBIS in sections would be the responsibility of the owner, but while the bridge is under construction, MDOT and our consultants the M BIS inspection.
For delivery we ended up with design build that was the quickest method to deliver this prom and get the pilot out the door in order to demonstrate success in the hope of getting future bundle phases. We had 14 local agencies to coordinate with for those 19 brims. The design build project was awarded in 2021, March 2021. The designs were completed February 2022. And 19 bridges were open to traffic in November of 2022. So, we awarded in March, and all 19 bridges were open to traffic in November of last year. The design builder came with alternate technical concept, and they proposed these press brake form tub girders, they are hot tip galvanized so the coating is actually 50year life compared to 35 years on a conventional paint system before it needs relocated. So, the local agencies are going to get a Long-lasting super structure. And one of the benefits of this, the contractor felt this would support quick construction, using the super structure type. So, all of the structures had 60-to-90-day full closures. That's the length the bridges were allowed to be closed. Only 60 or 90 days. So, some of the goals that we had for our pilot we wanted to reduce the number of serious and critical bridges. I think that was a success. We had 19 super structure replacements in 60- or 90-day closures. 18 of those, 18 were serious or critical and one was poor. We wanted to develop the Michigan bundle pilot into a scalable and repeatable program. I think I mentioned that was a success, too. Our governor put into our budget bill, allocation of additional money so we can do it phase 2 of our bundle program and build upon the lessons that we learn from this pilot. We were able to utilize innovations including the strategic partnership between MDOT, Michigan municipal league and County Road Association and individual bridge owners.
A couple of the innovations, like I mentioned, the press brake steel tub girders used by the design builder and also the this was the first time ever, right, having an MDOT owned MDOT led delivery program for local agency owned bridges with multiple agencies. We had a project ombudsman to help with communication. We had project consultants involved and of course we had the design build team involved.
So, the things that we still have in progress, asset management plan force each bridge are still being developed. It is helpful that the super structure sites are the same so we believe that we'll be able to have sort of a template for each owner, and the benefit cost analysis, the bridges were all open to traffic in November, if you're familiar with November in Michigan, the weather doesn't always come rate, we have a couple items such as permanent lane markings that needed to wait until warmer temperatures, so we anticipate wrapping up for real in May, that's when we'll be able to finalize the benefit cost analysis when the project can be closed out.
As I mentioned, we were given funding, dedicated funding for a phase 2 of the bridge bundle program using CRRSAA funding, which is 100 percent Federal aid, but it must be obligated by September 2024. So, once again, we are starting with a very short time frame in order to appropriately spend this money and get the most efficient use of it. And so, bridge bundling is really helpful into to do that.
The funding came with direction on how they wanted the candidate selection to go, and the first priority was close bridge, the second priority was posted bridge, and the third priority was prioritized by the Regional Bridge Council. The Regional Bridge Council are local owners that select the bridges in that local bridge program that I mentioned at the beginning of my presentation.
And so, to do that, we screened the inventory, and we came up with preliminary prioritization, and, of course, the closed bridges, and posted bridges, and to share that with those regional bridge council, they provided input during the first half of 2022. And, using their input, some of the bridges were moved out. Others were moved in. There were a couple bridges that had been closed for a significant period of time and the bridge council did not think it was a good use of our taxpayer dollars to replace. Some were completely rye moved from the program and others where there is local buy in were going to be bridge removals.
We developed bridge bundle recommendations based on the information and feedback we got from the design builder in the pilot. We came up with methods how we are going to split up the bridges that can be used with this funding. And now, here we are in working on putting those bundles together, getting the preliminary design plans put together, and letting the contracts.
One other item that we created for coordination for the second phase is the delivery advisory team. From the beginning of the program to now, we've been really experiencing some extreme inflationary pressures, and the cost of, you know, the estimates have changed from when we originally selected the bridges. Since this was MDOT run program with local agency owned bridges we wanted to make sure we had local agency representation and determine how woo were going to keep the program fiscally constrained. We created an advisory team that was made of local agencies that department have bridge notification phase 2 but they had experience in the statewide collection of bridges because they were involved in the Regional Bridge Councils. They reviewed phase 2 goals as evaluated the regional bundles we developed, and they helped prioritize those. Some of the recommendations that came in if there was a funding crunch they want to by or advertise having a minimum of one bridge per agency. They wanted to sort by local agency bridge program scores and there were a couple other considerations. For example, we had one bridge who had ER funding available.
So, we ended up with ten bundles for this project. We have three removal bundles. One in the north and superior region, upper peninsula, and northern part of the lower peninsula, one bundle in the lower part, the lower peninsula, and the final bundle for any of the removals that had to be delayed because of permitting issues.
We have four replacement bundles, and we have three standalone replacement bridge, and we have a slot for PE only. These are the bridges that we are trying to get ready in case we have savings so we would look over placement if funding became available. If not, they have the PE ready to be potentially applied for in the local bridge program or included in a future bundle if one came available.
In total, this t is 59 bridges, so, we're upscaling from the 19 we did in the pilot and we're working on now 59 with anticipated construction happening between 2023 and 2026.
So, based on the pilot, we did adjust our strategy a bit. We have our bundled organized geographically and risk based. We're doing design bid build for permanent removal bundles because those designs were easy, so we were able to get them out the door without being a risk to our obligation deadlines. We are doing design builds for the regional replacement bundle and a standalone design bid build for the unique projects, and we did try to sort them by the bridge scope, the size and complexity. So that the bundles would be attractive to contractors and hopefully get us as fast as possible.
So, we had again, we needed to coordinate with our local agency partners. And so, we are asking our local champions to do, is, once again, to share with the local preferences, the permanent public engagement, et cetera, for developing bundle week need to worry about environmental permit, constraints and study, coordination with other nearby probably, how the construction staging, and detour requirements are going to be. We needed to have approaches to increase DBE and small business participation and planning preconstruction and post construction meeting to detail inspections as buildings, load ratings, routine inspections, and responsibilities with the agency owners. Those are all lessons learned from the pilot.
So, the goals of the second phase are improved local bridge system safety and object gate that fund big September 30, 2024. We want to continue to collaborate communicate and coordinate with the local agency partners as well as consultants and contractors that end up winning the bids for this program. We want to make sure we identify opportunities for DBE involvement, and we want to build upon the success of the pilot to demonstrate bundling is a potential solution to address bridge condition challenges in our states.
That's all I have if anyone has any questions.
>> JEN SHELBY: I don't see questions in the chat. Can the operator remind us how to ask a question via phone?
>> OPERATOR: Absolutely. If you want to ask a question on the phone lines press 1 and zero on the telephone keypad. You can withdraw your question by repeating 1 zero command, and if using a speaker phone pick up the phone before pressing the numbers. To ask a question by phone press 10 at this time.
>> JEN SHELBY: Looks like we have one question. What pre-qualification codes are needed to work on bridges in Michigan.
>> REBECCA CURTIS: We do have requalification depending on the work that's done. That does vary, I would encourage you to go to our Website. Michigan.gov/MDOT. And we do have lot of different areas for you to if you're on the consulting side, how to become a pre-qualified consultant, or on the contracting side, how to become pre-qualified for the different construction issue.
>> JEN SHELBY: Can you describe the agency details in the government structure? Does it streamline the process in selecting bridges and phasing?
>> REBECCA CURTIS: Sure. For the governance structure, MDOT, myself and I have a senior project manager who is dedicated, and then, of course, we pull in subject matter experts from our innovative contracts or what not. We have two project manager consultant teams, so PMCs. And they do most of the day-to-day activities. So, they are doing a lot of the work that typically a local agency bridge owner would do they're working on getting permits, on the hydraulic side, you know, they are leading through our reviews and everything like that. So, they are doing the early preliminary engineering. Both from what you would give a consultant, and also, quite frankly, a lot of the work that a local agency opener would otherwise be doing if they were delivering that themselves. And so, then that's where we have kind of, we have the local bridge champion, those local bridge champions involved in every step of the process when we do the design bid build books, for instance, our local champions have the option to review those books and make sure that any of their needs are met within that.
So, then we will turn the project over, you know, through the competitive bid process to the design builder, and our PMCs, as well as MDOT staff help in all of the review and oversight of the design and that process and we also have a third consulting team for overseeing the construction phase, so, that way we have the independence that Federal Highway requires between the design and construction oversight.
As far as streamlining the process for selecting the bridge, there's a little bit of we manage the data. Obviously from our inspection program, so, we do have a lot of data, and the up with though, it really needs to have that local agency input, so, what we've learned from the pilot, and what we did from the last one is the best way to approach that is working with our County road association, Michigan municipal league, and presenting them what we see in our data and having them help us roach out especially when we were talking about 59 bridges is a lot of bridges, right? And we've evaluated for additional pilots, additional bundles. Working with the agencies, they are able to help us make contact with the right person in each of the local agencies, ensure that, hey, we think this is a bridge replacement, do you agree? And we've got great feedback. And sometimes it is, no, I know what this looks like, and this is just a deck replacement with a few repairs, so, definitely needs to be communication between us at the state agency and the local owners who has more than just the inspection report of knowledge on that bridge and that location.
>> JEN SHELBY: Thanks for that the, Becky. In the interest of time, I'm going to move along to give Corey time to share. Ease delivery manager with Kiewit. Has done road and bridge contracts, she's been in the area 20 years where he worked delivering transportation projects for state DOTs and municipals throughout the U.S., he's involved with many industry organizations in the transportation sector to further understanding and implementation of innovative project delivery methods to ensure probabilities built better, faster, and smarter. Corey, I'm turning it over you to.
>> COREY BIDDLE thank you. I would like to start by thanking everybody for taking the time to join the webinar today. Pretty exciting receiving funding needed for years but also how the industry is involving in project delivery, owners getting a lot more innovative these days and how they plan to bring programs from a concept or need all of the way through to closeout. As the projects in the world generally have become more complex, it has created a need to approach these probablies in a more collaborative way than we've seen in the past. Add that to the need to deliver these projects in a Bert and faster way and one that still provides the owner with more certainty related to cost, the bend fits of collaborative approach as they start to become more and more apparent.
That's what we're going to talk about for the next 15 minutes or so. These innovative delivery methods. I'm sure most of us on this call are familiar with some of these alternative delivery models like design building we brought up multiple times on this call alone.
A little background we'll run through them briefly, as we go through them alley, he draws distinction between the models in terms if procurement and project delivery timeline as well as how they provide a cost certainty to the owner.
This is baseline discussion with a bid build. On one side we have traditional design bid build, I'm sure everyone is aware design is progressed to 100 percent before the contractor is involved at all. Let alone going to construction bid. This is secured by the contract. Generally, an approach design activity is environmental. Those are funded and throughout that process the estimate of construction cost is develop in funding and their financing needs are determined to make to secure those loans.
The approach that pretty much everyone is accustomed to. As we know could be fraught with its own set of issues, not to cover actual construction of cost estimates. We've seen this time and time again where a project is put out to bid and all of the estimates come in way over the anticipated engineer's estimate which the budget is generally derived from. And these estimates can be oftentimes years old. What we have seen simply escalating a budget or past budget by random factor has not proven to be very successful. It's been okay at times but not very consistent. In the time it takes to advance a design from preliminary studies to final design there's often a lot of variables that can change the cost of probably dramatically from labor cost requirements and ultimately who owns that risk. Generally, you do, you as the project owner and when you own that risk what does that equate to during construction? You guessed it, change office. Nemesis of cost control nobody likes.
Another aspect to consider with bid build is the length of time it takes to go from planning to construction and delivery, relative to some of the more innovative alternative delivery model thanks linear approach can prove to be very time consuming and people' see why in just a second.
The design build is a delivery model characterized from the contract between the owner and team devised by the owner and contractor, typically around the 30 percent design mark. Designed to get the contractor on board sooner in the project development. You can alleviate some cost and escalation risk created by a lengthy project delivery timeline and also allow us to show some of that project related risk to the contractor. The flipside shedding that risk you end up paying for that risk in procurement whether or not that risk event is actually realized. This has been a great delivery model for a lot of owners and probably, and has time and place, many success stories using design build with great satisfaction. And there's design build teams Becky spoke to one of them. But there's also likely equally as many stories of things falling apart, excessive change order on design build products as well which with drive costs over what you had originally budgeted, performance of the project just in general, can result in low margins to the design build team, litigation, that can last years and years and years. You can go on and on with some of the issues that we have seen with design build.
While each of these models can be used successfully on certain projects, there still remains a lot of other projects or groups of projects in the case of bundling, unique variables where flexible collaborative approach of delivery is desired where cost certainty is a must and excel rated delivery is necessary. This is called a goal driven approach to delivery where it takes a whole team to determine how to attain these goals and how to reach these goals. This is where the next two models come in, construction manager, general contractor and progressive design build come into play. And both of these models the whole team is formed early on in the probably development cycle, often as early as 10 to 15 percent design, just enough to advance and smart NEPA and get funding allocated to it.
Looking at C and M/GC contractor it looks to build where contractor and designer are under separate contract. Styles there's no design contract, but the owner may use their own internal staff and cape abilities. Key difference being the contractor, CM is brought in at that 15 percent design. They are generally selected using qualifications to get the project design estimated. There may be a budget determined already for the project. But the key advantage to the approach the design presses. And they work together to offer innovative ways to reduce costs and realize goals that the opener and probably may have.
As the design progresses through the 30, 60, 90 design phase an estimate is being created by the contractor at these phases and this eventually end up being the guaranteed maximum price for the project or what the owner is actually going to pay for it.
One of the main reasons that a probably goes over budget is how risk is managed and, in this approach, risk is continually being evaluated by the contractor, designer and own and every risk event is actually recorded in the risk matrix priced and put into essentially a force, where you as opener are only paying for a risk event if it is triggered. If that risk doesn't happen, then you're not paying for it. Importantly, it's in your budget. So, you always have that feeling in your working collaboratively to stay underneath that feeling.
Approaching costs in this manner, alleviates that change order risk on the project, as the entire team is working, like I said, collaboratively, to identify those potential risks to the project.
And progressive design build works very similarly, another slide here on it.
It works or behaves very similarly but it is only under one contract, so you have a design build, designer, and builder together, but it follows that same progressive buildup to the final GMP in both of the models they have that phase 1 pre-construction services where you're doing the engineering, estimating, and that moves into that phase 2 construction period.
When comparing all of these models against each other in terms of speed to market, and by that that’s the slide here. By that, I mean howl it takes to get the probably out to construction, as well as closing that project out, where it is it done and open to the public.
You can see in this graphic here, and this is actually based on FHWA study done on the average time it takes to go to construction, is up to 60 percent faster using a CM/GC or PDP model and using traditional design bid build model and you can see the overall production and probably delivery time is pretty significant when you compare them all against each other.
So, the next thing I want to look at is cost certainty. In this day and able, cost certainty is one of the most important elements to any project. You see here is the graphic of how this pricing process worked to provide that cost certainty. When you look at the center of the graphic there with that little circle is, and it generally shows how this process works. You have your design element, and you have your estimating element, your cost schedule development. And that's shown in the little gray boxes there. Remember typical tasking for each of these is shown in there. All of these elements that are in there, they repeat themselves at that 30, 60, 90 percent phase and all to build that ultimate price. Each of these milestones, the estimate is created, we call it OPPC or opinion of probably construction cost, and it's an iterative process that repeats itself to each of those milestones, leading to the GMP of guaranteed maximum prize. The GMP can be developed, submitted, negotiated between the owner and contractor, up to 100 percent design, but sometimes you will start those conversations and settle on that GMP as early as 65, 70 percent design.
If an owner or contractor cannot come to terms on the GMP, you often get a question about what happens with that. The owner will have an option to exercise an off ramp where you basic Li terminate the contract and the owner can put it out to traditional design bid build that they want.
It doesn't happen that often in my history. Probably less than 1 percent of the time that that happens. And when it does happen, it generally is due to budgetary shortfall.
One of the ones I have not brought up yet in these two early contractor involvement models is the use of an ICE or independent cost estimator. It's a very important role in these models. The ICE will actually be pouring their own cost estimate and pricing the design concurrently to provide a check on the estimates that the contractor is developing. And what we usually see is that the project design what we usually see, as the project design develops and team is working together, that Delta that you might see at the beginning between the ICE and the contractor will start reducing as you start working closer and closer to the GMP submission and that essentially reduces the risk of there ever being an occurrence of an offramp.
Several of these are in bundle. That's what we're here to talk about today.
What we're talking about we were talking about them today. When you consider bundling on your projects together in also considering what delivery mod toll use when you go to procurement. All of these models have time and place based on type of project, what your goals are, different constraint us may have and be faced with, but we've seen some of the most successful bundled programs have been delivered using delivery models like GDC as well as design development to fit your available funding.
Speaking of these funding speaking of funding these models as well, it allows for a lot of flexibility how you secure that funding, understanding the cost implications early on in the project development cycle and everything the transparency how those costs are built up, allows you to have more certainty in both the delivery schedule as well as budget. And the last take away right now, and it's an important one, I think it was brought up early on, is that of your legislative authority, because some of these models like CNGC and progressive design build, are relatively new to the transportation industry and not every state has the authority to use those delivery methods, so it is important to check locally and see what kind of sledge legislative authority you may or may not have.
With that, I'll open it up to any questions.
>> OPERATOR: Again, on the phone lines tis 1 zero to ask a question, again, 1 zero.
>> JEN SHELBY: Thank you so much. And at this time, we'll open it up. You can go ahead and ask the question about the presentation you just heard or any of the preparations today go ahead and enter that in the chat or dial in as the operator has instructed.
>> OPERATOR: Currently no questions on the phone lines.
>> KENNETH ATKINS: I have one, can you hear me? This is Ken Atkins. What do you think from a perspective of leaders in industry, that's why you have the champion, what do you think is the biggest to owner about doing bundling, if you were to combine an alternative delivery with it as well? What do you think they get out of it? I liked your presentation by the way.
>> COREY BIDDLE thank you. Are you asking what would they get out testify by using one of the other ACMs?
>> KENNETH ATKINS: What do you think owners bundling and bringing in industry early. Where openers have benefitted from that. First you said low bid where they are not brought in until the very end.
>> COREY BIDDLE there's a time and place for every delivery method like I said, you might want to chime in why they selected bid build on certain bundles and design build on others. As the programs increase in complexity, or you have more constraints to deal with, it you’re going to have more success in delivery, when you have the whole team together. I know you and I have talked about this in the past also, but really having that whole team together, as early on as you possibly can, or allowed to have, it really helps with obtaining those goals and identifying what those goals are. Which project us can include in the bundle, ensuring that you're staying within the budget that you have to work with. Yeah, I hope that answers the question a little bit better.
>> KENNETH ATKINS: No. It sure does. Thank you for that. That makes sense. Bringing them early reduces your risk and also, you're increasing your risk by bringing one in early, but you're saying you actually reduce the risk to the are owner, and the project.
>> JEN SHELBY: Becky, do you have anything to add to that?
>> REBECCA CURTIS: No, I don't.
>> JEN SHELBY: Okay, no worst. Okay. At this time, I am not seeing any other questions. Thank you, all, for participating. Go ahead and drop in any other questions if those are coming up for you. Like there's one more question, in the CMGC model, what is the CMGC, is the owner involved in selecting subcontractors, or is that solely up to your team, what value is placed on utilizing local or DBA contractors.
>> COREY BIDDLE generally up to the contractor in selecting the sub consultant, then they would be directly contacted with the frame on that one. And we're going to want to be able to manage that risk as much as we can. But, when it comes to local or DBE contractors being utilized on the project, one of the things that I really appreciate about the progressive design build and GMDC methods, is when it comes to determining what the goal is for the project. Because, oftentimes, if you're just simply given a 15, 20 percent goal, I mean, we see it all of the time, where a lot of projects it is easy to hit that goal or exceed that goal, but a lot of times you may not have the work source availability, or the companies might not be there that have the ability to actually devote that much time to the project as much as you need and in these collaborative models you, you can work with the owner to come up with realistic goals that are achievable. .
>> JEN SHELBY: One last call for questions.
>> OPERATOR: And it is 1 zero on the phone lines.
>> JEN SHELBY: Thank you so have.
>> OPERATOR: Welcome. Currently no questions in queue
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