Project Delivery Options in the California Construction Market

Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 PROJECT DELIVERY OPTIONS in the CALIFORNIA CONSTRUCTION MARKET Presentation for Construction Specifications Institute, Fresno Chapter By Rick Barton, LEED AP

Overview • During this Presentation we’ll… • Review goals towards project success • Review why various delivery methods exist • Explore various delivery methods Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010

Goals for Project Success Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010

Delivery Methods Overview Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 Lease-Leaseback Agency Construction Management

Traditional Design-Bid-Build Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • Detailed plans and specifications prepared in advance of bidding • Contractor bids on completed construction documents • Price-based contractor selection • Publicly funded projects governed by Public Contract Code • Most successfully used with Agency CM for large/complex projects • Application • Traditional public sector delivery • Prescriptive scope requirements • Widely understood methodology

Traditional Design-Bid-Build Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits • Clear-cut division of responsibility and accountability • Public sector comfortable with process/methodology • Well defined and detailed design • Lower cost at bid day • Owner controls change order contingency • Drawbacks • Minimal to no control over contractor or subcontractor selection • Difficult to gain time through fast-tracking or phasing • Contractor has no incentive to contain change order costs • Potential for adversarial relationships due to conflicting goals

CM-Multiple Prime Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • CM fulfills GC role – Agency relationship • Scope is segregated into prime packages • Owner holds contracts with prime contractors • Application • Common in K-12 education projects • Clear trade segregation • High concentration of one (or few) trade(s) • Sparse or hostile GC market

CM-Multiple Prime Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits: • CM is an advocate for the Owner • Reduced contractor fees • Affords fast tracking of design and construction • Continuous on-site supervision for Owner • Drawbacks: • Owner assumes more risk • Typically low bid contractor selection • More administration for multiple packages

CM At-Risk Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • CM/GC early involvement • CM/GC typically holds subcontracts • Guaranteed Maximum Price (GMP) established at bidding • GMP typically includes change order contingency • Often open book • Application • Popular private sector delivery • Public sector application dependent on legislation - K-12 - UC - CSU - AOC

CM At-Risk Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits: • CM at Risk selection typically qualifications-based • Provides cost containment • Reduces Owner’s risk exposure • Owner-CM/GC-Designer collaboration potential • Shared savings potential • Drawbacks: • Could result in overall increased construction cost • Owner could experience loss of advocacy once GMP is established • Requires a GC with strong in-house conceptual estimating and management skills and experience in CM at Risk approach

Lease-Leaseback Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • Similar to a builder-developer delivery • Owner leases property for $1/year – Builder-developer delivers project & leases back the improvements • Quasi-private work • Application • K-12 - Ed Code Section 17406 • CCD – Ed Code Section 81335 • Fee generating facilities – Gov Code 5956

Lease-Leaseback Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits: • Increased control over subcontractor selection • Flexible project financing options • Flexible delivery options • Cost containment through establishing a GMP • Reduces Owner’s financial risk exposure • Shared savings potential • Drawbacks: • New delivery – not widely understood by the industry • Highly flexible LLB statutes could lead to faulty contractual practices • More time required to develop and negotiate the LLB contracts

Design-Build Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • Owner contracts with a single entity for design and construction • Project requirements defined through design criteria & outline specifications • Owner may develop bridging documents through schematic design phase • Application • Private sector – no restrictions • Public sector - Redevelopment Agencies - Counties - Through LLB • Straight forward scope - Parking structures - Storage facilities

Design-Build Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits • Single point of responsibility and accountability • Owner shielded from most disputes between architect and contractor • Accommodates accelerated project delivery • Early establishment of fixed cost and limited potential for change orders • Promotes non-adversarial team environment • Heavy contractor involvement and freedom to recommend construction efficiencies and innovations • Drawbacks • Success is contingent upon Owner’s ability to clearly define design criteria • Owner may have less control over the end result

Program Management Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Characteristics • Program manager acts as extension of Owner’s staff • Typically used in carrying out multi-project capital programs • PM establishes program-wide budgets, schedules, standards, etc. • PM assists Owner in hiring consultants – typically in a prequalified resource pool • Individual projects are delivered in a variety of ways • Application • Multi-project capital programs

Program Management Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits • Provides needed assistance to Owners with limited staff, expertise or time • Provides specialized management tools, systems and skills to enable sound decisions early • Can set design standards to achieve consistency • Can coordinate and accelerate project delivery • Owner can realize economies of scale through combining smaller projects • Lessons learned from one project more easily transfer to subsequent projects • Drawbacks • Perception of additional cost of PM fees; although, must be compared to maintaining owner staff positions

Integrated Project Delivery (Lean) • Characteristics • Joint Owner-Architect-Contractor agreement • Shared risk-reward • Modeled after Toyota mfg processes • Early subcontractor involvement • Decentralized decision making • Heavy use of technology – BIM • Maximize prefabrication • Application • Emerging private sector delivery • Current bidding laws limit public sector application Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010

Integrated Project Delivery (Lean) Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 • Benefits • Highly collaborative • Shared risk-reward creates performance incentives • Innovation encouraged • Drawbacks • New delivery – Not well understood • Interdependent lines of responsibility • Limited public sector application M/E/P Building Envelope Interior/ Finishes Structure Cluster Leaders Vertical Transp Site Improvements Landscape Material Handling

Project Delivery Options in the California Construction Market CSI Fresno Chapter - February 16, 2010 Q&A