Using Alternative Delivery Methodsto Increase Competiveness on Tunnel Projects

Steven R. Kramer, PE, FASCEsvkm@cowi.com

August 14, 2017

Presentation Outline

1. Alternative Project Delivery Methods

2. Owner's Needs on Major Capital Projects / Current Trends in Tunneling

3. Comparison of Cost Drivers

4. Case Studies in Delivery of Tunnel Projects

5. Bidding Strategies for Increasing Competitiveness

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Types of Project Delivery Alternatives

▪ Design-Bid-Build

▪ CM At Risk

▪ Progressive Design-Build

▪ Design-Build Competitive

▪ Design-Build-Operate

▪ DBOF/P3 Concession

Design-BidBuild PrivatizationCMAR DBFO/P3Progressive DB Design-Build DBO

Public-Private-Partnership (PPP)

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Overview Alternative Delivery Methods

› CM At Risk (CMAR): constructor selected based on qualifications shortly after the designer selection. Provides pre-construction services. Between 50-60% design development, CMAR provides price & schedule proposal.

› Progressive Design-Build: involves the design-build team during the earliest stages of the owner’s project development. Promotes collaboration between owner, designer and contractor.

› Design-Build Lump Sum: risk and responsibility for providing both design and construction with one entity under one contract with the Owner.

› Design-Build-Operate: form of project financing, wherein a private entity receives a concession from the public sector to finance, design, construct, own, and operate a facility.

› DBFOM / P3 / Concession: contractual arrangement between a public agency and the private sector. Through this agreement, the skills and assets of each sector shared in delivering facility for the use of the general public.

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Collaborative Delivery Methods

Provides Owners Solutions Addressing:

› Project Delivery Risk Allocation

› Schedule Constraints

› Knowledge of Project Cost

› Performance Assurance

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Alternative Delivery Project Structures

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Collaborative Project Delivery Integrates Design, Long Lead Item Procurement and Construction Activities

Det

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ConstructionBidPrelim.Plans

Feasibility Studies

Detail Drawings &Specifications

Construction

Feasibility Studies

Des

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Perf

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Req

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10 – 30%

Bidor GMP

TimeSaved

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Alternative Delivery Methods

› What are the Benefits:

› Single entity responsible for design, construction, technology integration and overall project delivery performance

› Shorter schedule and less schedule risk (reduced interfaces)

› Early cost certainty (less potential cost growth)

› Efficient administration for Owner

› Fewer potential disputes and change orders

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Additional Collaborative/Alternative Delivery Methods

› CM At Risk (CMAR)

› Progressive Design-Build

› Design-Build Lump Sum

› Design-Build-Operate

› DBFOM / P3 / Concession

› Contract Packaging

› CMGC

› Modified Fix Fee Plus Cost Reimbursable

› Early Contractor Involvement

› Pre-qualification of Contractor

› Advance Purchase of TBM

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› Competitive Bidding Atmosphere

› Delivered On-Time and On-Budget

› Safety Culture

› Understand Owner Policy and Procedures

› Willingness to Partner and Resolve Issues

› Provide People with Right Experience & Right Equipment

› Be Proactive Before Problems Arise

› Understands Public Outreach and How to Respond to Public

Owner's Needs on Major Capital Projects

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Current Trends in Tunneling & Procurement

• Contract documents tailored to industry standards• Differing Site Conditions (DSC), Geotechnical

Baseline Reports (GBR), Dispute Review Boards (DRB)

Contractor’s Expectations

• Generally small, close-knit community• Good understanding of project risks & contract

savvy • Frequently team on large projects

Nature of Tunneling Contractors

• International contractors now bidding & winning North America projects

• Movement away from conventional delivery for very large projects

• Relationship changing between owners and consulting engineers with alternative delivery

Current Atmosphere for Bidding in North America

• Start early to gain interest• Create forums to foster relationships• Identify opportunities for M/WBE Firms• Identify contract packages

Pro-Active Approach

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Comparison of Cost Drivers

General Construction Cost Drivers

Tunnel Cost Drivers

Materials

Labor

Equipment

Design Quality

Business Climate / Market

Contract Method

Environment / Location

Indirects / Insurance

Inflation

Differing Site Conditions

Design Development & Unforeseen Design Changes

Linear Nature of the Work

Scope Changes & Transfer

Shaft Construction

Bonding & Limitations

Limited Contractor Pool

Specialized Labor

Ownership of Risk

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Case Studies in Tunneling & Procurement

Pentagon Renovation Program – Water Intake Tunnel

Implementing Target Price to Incentivize Team

Port of Miami Tunnel

Using Novel Contingency Approach for High-Risk Tunnel

Hong Kong Highways Dept. / Tuen Mun-ChekLap Kok Link

Procuring the World’s Largest TBM

Portland CSO Program

Alliance Contract to Create a Partnership

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Port of Miami Tunnel, Miami, FL

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✓ World’s busiest port for cruise ship dockings

✓ Largest container port in Florida (10th largest worldwide)

✓ $12 Billion economic impact

✓ 16,000 vehicles/day to and from Port

✓ 28% truck traffic

✓ 5,500 trucks & buses travel to/from POM through downtown streets

Facts on Port of Miami Tunnel

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Deal with FDOT

› Financial close: October 15, 2009

› 55-months for construction

› Project cost: $1.062 Billion (Bank Debt, TIFIA Loans, Concessionaire

› Description: 30-year Design, Build, Finance, Operation & Maintenance (DBOFM) Concession

› Operate until October 15, 2044

› DB Contractor/Designer: Bouygues/Jacobs

› Owner's Rep: WSP (PB)

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› Owner: Florida DOT

› Twin tunnels each 4,200 ft long, 39 ft ID between Watson and Dodge Islands

› Fill, Plastic Sandy Silt / Silty Sand, Limestone

› Closed Face EPBM/Water Control Process

› One-pass Precast Concrete Segmental Lining

Port of Miami Tunnel

Sand With Inclusion of Interbedded Zones of Sandstone

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Port of Miami Tunnel

Success Factors

› Risk Allocation Tools Used

› GBR

› DRB

› Risk Sharing

› Defined Contingency

› $180 million contingency

› Contractor responsible for initial $10 million of overruns for unexpected geotechnical conditions

› Owner responsible for next $150 million

› Contractor responsible for final $20 million

› Over $180 million either party can terminate

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Tuen Mun—Chek Lap Kok Link, China

Overview

› Iconic project as a direct road connection between Tuen Mun, Hong Kong international airport and for routes south to developing industrial zones

› $6B project includes dual two lane (+ slow lane) roads of 6 miles long using 57.7 ft and 46 ft Slurry TBM’s under the seabed with a water head of 70psi

› Geology of mainly Alluvium and decomposed granite

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Contract Type & Special Conditions

› Standard DB contract with revaluation for quantity and change of conditions (Contractor: Bouygues, Designer: Arup, Owner's Rep: AECOM)

› Early milestone payments to cover TBM

› Slurry type TBM specified in the tender. Ground conditions specified in general terms for the TBM capability but no GBR supplied

› Proposer estimated rate for different ground conditions so the payment could be adjusted if required without a formal claims process

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DB Delivery Method

› Late change from bridge link to tunnel due to environmental issues and to maintain schedule

› Bored Tunnel increased construction risk due to the 70psi water pressure

› General Consultants opinion that only a special slurry TBM would be suitable and reduce risk

› Heavily specified TBM and method & support services, eliminated lower cost alternative such as EPB TBM

› Provided a technical “level playing field”

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Pentagon Renovation Program – Water Intake Tunnel

MANAGING COSTS USING FEE AT RISK

› 8 ft diameter intake tunnel

› Complex soft ground beneath the water table

› Integrated team using DB

› Cost reimbursable contract with award fee structure

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Pentagon Renovation Program – Water Intake Tunnel

SITE CONSTRAINTS DURING DESIGN & CONSTRUCTION› Installing the intake through a complex

geology beneath the water table› Crossing beneath neighboring structures

and roadways› Coordination of the work with multiple

outside agencies including local, state and federal groups

› Fast track design and construction using the design/build process

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Pentagon Renovation Program – Water Intake Tunnel

CONTRACTUAL APPROACH › Design – Build Cost Plus Incentive/Award Fee Contract› 10% Award Fee Pool based on Performance (award fee

only profit)› Performance criteria: quality, safety, cost control &

management› Negotiated Target Cost› Changes to Target Cost

› Increases due to cost overruns do not result in adjustment

› Government caused changes result in adjustment› Differing site conditions w/o substantial impact result in

adjustment to target but not award fee› Differing site conditions w/ substantial impact result in

adjustment to target and award fee

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Portland CSO Program

› 6 miles of 22 ft diam. CSO tunnel

(East Side Tunnel)

› 9 – 84 inch microtunnel connector drives (one at 3,055 ft)

› 7 shafts 49 to 60 ft diameter, up to 165 ft deep

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Portland CSO Program

CHALLENGES

› Urban construction

› Complex geology

› New technology

› Sensitive urban public

SOLUTION

› Alliance Contract – modified fixed fee / cost reimbursable

› Contractor selected at 50% design stage

› Single voice public liaison

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Portland CSO Program

WHY AN ALLIANCE CONTRACT (NOT DESIGN-BUILD)?

› City controls the design

› City retained opportunity to use conventional bid

› History – poor cost control with guaranteed maximum price underground projects

WHAT WENT RIGHT?

› On time, on budget

› Strong partnership between Owner / Designer / Contractor

› Good public relations

› Most issues solved before construction began

› Rapid resolution of field issues

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Portland CSO Program

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Bidding Strategies for Increasing Competiveness

› Progressive design build

› Modified fixed fee plus cost reimbursable

› Fee at risk approaches

› Risk mitigation techniques with shared contingency

› Best value formulas

› Advance purchase of TBM

› Pre-qualification approaches

› Contract packaging

› CMGC (construction manager general contractor)

› CM at risk

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Where Innovative Strategies Implemented

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North America

A. CSO Program Portland, OR (Modified Fixed Fee)

B. LA County MTA – Purple Line Ext., CA (DB)

C. Atlanta Raw Water Tunnel, GA (CMAR)

D. ATL Plane Train Tunnel Expansion, GA (Progressive DB)

E. Port of Miami, FL (Shared Contingency)

F. Toronto Transit (Pre-Purchase TBM)

G. DC Water CSO Program, DC (Pre-Qual & DB)

H. Pentagon Intake – Outfall Tunnel, Arlington, VA (Fee at Risk)

I. FDOT – Midtown Tunnel, VA (P3)

J. CBBT – Parallel Thimble Shoal Tunnel, VA (Pre-Qual & DB)

K. Narragansett Bay (Shared Savings)

Benefits of Using Alternative Bid Strategies

Approach Successfully Implemented

Used at agencies

US Application

Produced Cost

SavingsImproved Schedule

Reduced Claims

Increased Competitive-

ness

Modified Fixed Fee plus Cost Reimbursable ✓ ✓ ✓ ✓ ✓ ✓ ✓

Fee at Risk ✓ -- ✓ ✓ ✓ ✓ ✓

Risk Mitigation with Shared Contingency ✓ ✓ ✓ ✓ ✓ ✓ ✓

Pre-qualification ✓ ✓ ✓ -- -- ✓ ✓

Advanced Purchase of Equipment ✓ ✓ ✓ ? ✓ ? ✓

Share Risk Register with Contractors ✓ ✓ ✓ ✓ ✓ ✓ ✓

Early Contractor Buy-In ✓ ✓ ✓ ✓ ✓ ✓ ✓

Identification of Contractor Means and Methods ✓ ✓ ✓ ✓ ✓ ✓ ✓

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Using Early Contractor Involvement

EARLY CONTRACTOR BUY-IN

› Contractor has his “head in the job” before construction begins

› Takes advantage of contractor experience and insight into the design

› Fosters synergy and teamwork between owner/designer/contractor

Benefit: Develops realistic schedule and accurate pre-construction cost estimate

RISK SHARING

› Contractor(s) included in risk register development and mitigation measures at design stage

Benefit: Reduce disputes for unforeseen condition

EARLY CONTRACTOR INVOLVEMENT / INCORPORATE CONTRACTOR MEANS & METHODS

› Design is open to the strengths of the potential contractors

Benefit: Focused, efficient design. Avoids designer guessing contractor’s means & methods

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Project Success

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