6 Alternative Construction Project Delivery Methods

Six Alternative Construction Project Delivery Methods NOW AVAILABLE TO PUBLIC SECTOR OWNERS

By Bo Calbert McCarthy Southwest Region President

mccarthy.com [email protected]

THE WAY PUBLIC WORKS PROJECTS CAN BE BUILT AND FINANCED IS CHANGING.

Traditionally, the three stages — planning, design, and construction — have been independent and sequential. Builders bid on jobs based on designs already set in stone, and owners selected the lowest-bidder to bring the project to life.

But revised procurement laws adopted over the last few years have opened up new delivery methods for public projects like:

SCHOOLS

WATER/WASTEWATER TREATMENT PLANTS

ROADS

HIGHWAYS

CORRECTIONS FACILITIES

… the new, alternative delivery methods include new benefits, such as:

•  Solutions for project financing

•  Cost guarantees earlier in the project

•  Efficiencies through collaboration between planners, designers and builders

•  Reduced financial risk

•  Building without needing to secure traditional financing

•  Building without using tax dollars at all

As a general contractor, one of the most critical roles McCarthy assumes is working together with our project owners to review all options when planning for the design and construction of new projects.

Here are alternative options FOR DELIVERY OF PUBLIC WORKS AND OTHER

CONSTRUCTION PROJECTS

ONE Design-Build-Finance

The hiring of a single builder that acts as a stand-alone designer, builder and financial lender.

Design-Build-Finance gives municipal institutions a viable financing alternative without the huge capital investment typically associated with plant construction.


Design-Build-Finance is the most preferred project delivery option for an owner who doesn’t qualify for traditional bond financing.


A common adopter: A municipal institution that operates a water/wastewater treatment plant.

Design-Build: owner hires a builder that acts as the designer and the builder, with financing coming from a third party. Includes performance guarantees that help secure traditional funding.

Design-Build-Operate: owner hires a builder that acts as the designer, builder and the ongoing operator of the plant/project, with financing coming from a third party. Includes pricing and performance guarantees that help attract traditional financing.

TWO VARIATIONS:


Potential downsides to Design-Build-Finance, Design-Build, and Design-Build-Operate: Can result in difficulties for the owner to align the bridging documents and the design-builder proposal documents to best meet end-user needs.


TWO Public-Private Partnership (the toll-road model)

Also known as P3, this is the method where a public-sector authority, say a state’s department of transportation, partners with a private party that assumes substantial financial, technical and operational risk of the project.

In some cases, like in a toll road, tax money is not used to build it, but rather the users of the facility pay to use it, leaving the public-sector party without the need to incur any borrowing.


Therefore, P3 is an “off-balance sheet” method of financing the delivery of new or refurbished public-sector assets.


Of all the delivery methods available today, P3 has the most potential to solve more problems and deal with the challenges associated with complex public projects. The challenge with P3s is that users often don’t like paying tolls and elected officials tend to avoid what can be seen as contrived financing.

THREE Job Order Contracting (JOC)

Downsized public entities sometimes no longer have the manpower or resources to complete the kind of public infrastructure maintenance and repair work they once tackled in-house.

THREE Job Order Contracting (JOC)

Job Order Contracting offers public owners an efficient way to outsource these types of projects that include work of a recurring nature, with indefinite delivery times, types and quantities of work.

FOUR Integrated Project Delivery (IPD)

Integrated Project Delivery calls for significant collaboration early on in the project between the three major stakeholders — owner, designer and builder — where most value is created through the planning of efficiencies.

ONE OF THE NEWEST DELIVERY METHODS AVAILABLE TODAY…

IPD eliminates volumes of waste and promotes productivity by allowing for data sharing directly between the design and construction team.

FOUR Integrated Project Delivery (IPD)

Potential downside: there can be murky legal conundrums involved with intellectual property, ownership of collaboration software files, and issues surrounding team conflict on projects utilizing this delivery method.

FIVE Design-Assist

Where design professionals work along-side construction contractors on the job site, to collaborate on the best solutions to meet all the owner’s needs.

The cooperation in the field between designers and builders streamlines the construction process and provides cost certainty earlier in the project.

FIVE Design-Assist

SIX Construction Management-at-Risk (CM-at-Risk)

With the CM-at-Risk model, the builder (the CM-at-Risk firm) is hired before the design phase is completed, and works with the separately hired design firm to provide constructive solutions that may be more cost effective, provide a better delivery schedule, and provide for the best long-term maintenance and operability of the facility.

SIX Construction Management-at-Risk (CM-at-Risk)

The builder provides cost-estimating that matches the design and construction to the project budget.

Traditionally, builders bid on jobs based on designs already set in stone, and public owners selected the lowest responsive bidder, not the most qualified builder.

CONCLUSION:

The construction industry is providing public owners with flexible alternative delivery methods.

CONCLUSION

BUT TODAY

CONCLUSION

There is no “one size fits all” prescription when it comes to construction delivery. Each project is unique and often has a complex set of circumstances to consider before selecting a delivery method.

It takes a lot of training, insight and experience to get it right.

Owners should not be averse to opening up a dialogue with contractors and learning from their varied experiences — good and bad — with the wide array of delivery options.

We work with owners to explore available delivery methods and identify the best options for each unique project. We also work together with all parties in mastering the complexities involved in each delivery method.

CONTACT McCARTHY TODAY.

Would you like to talk about alternative delivery methods that might be right for your project?

A presentation by Robert “Bo” Calbert, President of McCarthy’s Southwest Region, based in Phoenix. Bo can be reached at [email protected]

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6 Alternative Construction Project Delivery Methods