Contracting and Project Delivery Options

Steven R. Kramer, PE, FASCE Senior Vice President COWI North America

1 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Presentation Outline

1. Trends, Cost Drivers & Owner Needs 2. Types of Delivery Methods 3. Delivery Methods for US Tunnel Projects 4. Design Bid Build Projects 5. Alternative Delivery Projects 6. Concluding Thoughts

2 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Trends in Delivery of Tunnel Projects Nature of Tunneling Contractors Generally small, close-knit community Good understanding of project risks and contract savvy Frequently team on large projects

Current Atmosphere for Bidding in North America International contractors bidding and winning increasing share of North America projects Movement away from conventional delivery for large projects Relationship changing between owners and consulting engineers with alternative delivery

Contractor Expectations Contract documents tailored to industry standards Differing Site Conditions (DSC), Geotechnical Baseline Reports (GBR), Dispute Review Boards (DRB)

3 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Comparison of Cost Drivers General Construction Tunnel Cost Drivers Cost Drivers

Materials Differing Site Conditions Labor Design Development & Equipment Unforeseen Design Changes Design Quality Linear Nature of the Work Business Climate / Market Scope Changes & Transfer Contract Method Shaft Construction Environment / Location Bonding & Limitations Indirects / Insurance Limited Contractor Pool Inflation Specialized Labor 4 SEPTEMBER 9, 2019 Ownership of Risk CONTRACTING AND PROJECT DELIVERY OPTIONS Owner's Needs on Major Capital Projects

› 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 › Unwritten – Prefers people and companies that they know & trust

5 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Major Types of Delivery Methods for Public Infrastructure Projects

6 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Overview Major Delivery Methods › Design -Bid-Build: sequential linear process – design, procurement and construction

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

› 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. Skills and assets of each sector shared in delivering facility for the use of the general public.

7 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Collaborative Project Delivery Integrates Design, Long Lead Item Procurement and Construction Activities

Feasibility Prelim. Construction Studies Plans Bid and Detail Specifications Drawings

Detail Drawings & Bid Specifications Time Feasibility or Saved Studies GMP Reqmt’s Construction Performance Design Criteria Design 10 – 30%

8 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Delivery Method for Recent US Tunnel Projects Design-Bid-Build City of Columbus OARS Design-Bid-Build (2 Contracts), Citizens Energy Deep Rock Tunnel Columbus, OH Design-Build Connector Design-Bid-Build WSDOT Alaskan Way Viaduct Indianapolis, IN NEORSD Dugway Storage Tunnel; Replacement Tunnel, Seattle, WA NEORSD Euclid Creek Tunnel , OH

Design-Bid-Build NYCT 2nd Ave Subway; NYCT East Side Access, , NY Design-Build SFMTA Central Subway, San Francisco, CA

Design-Build DC Water Blue Plains Tunnel; DC Water Anacostia River Tunnel; DC Water First Street Tunnel, Design-Build Washington, DC SNWA Meade Intake and Tunnel, Las Vegas, NV Design-Build CBBTD Parallel Thimble Tunnel, Cape Charles, VA Design-Build P3 LAMTA LA Metro Purple Line; VDOT Midtown Tunnel, (DBFOM) LAMTA LA Metro Regional Connector, Portsmouth, VA Los Angeles, CA Hampton Roads Bridge Tunnel Expansion, Norfolk, VA

SEPTEMBER 9, 2019 9 P3 CONTRACTING AND PROJECT DELIVERY OPTIONS FDOT Port of Miami Tunnel, (Availability Payment) Miami, FL Design-Bid-Build

› Previously, DBB preferred method delivery › Still popular with many water/wastewater agencies

NYC Transit / Northeast OH Regional Sewer NYC Transit / Second Ave. Subway: 2 miles, 22 District / Euclid Creek Tunnel: Indianapolis, IN / diam. transit tunnel - $4.5B 3.4 mi., 24 ft. diam. East Side Access: ww tunnel - $199M Deep Rock Tunnel 11 mi., 22 ft. diam. Connector, Phase 1: transit tunnel - 8 miles, 20 ft. diam. $10.8B ww tunnel - $179M

10 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Why owners continue to use Design-Bid-Build

More ability to Greater Larger ability to More familiar Desire to influence / understanding transfer risk to with T's & C's specify / use control the of costs prior to contractor new technology design bid based on completed designs

11 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Why owners specify Alternative Delivery

› Single entity responsible for design, construction, technology integration and project delivery › Shorter schedule and less schedule risk › Efficient administration › Dissatisfaction with adversarial nature of design-bid-build › Fewer potential disputes and change orders

12 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS › “Design-Bid-Build is no longer our preferred delivery method. Design- Build has become a main part of how we deliver our underground projects.” Senior Manager at Public Agency

SEPTEMBER 9, 2019 13 CONTRACTING AND PROJECT DELIVERY OPTIONS Design Build Market Share Continues to Grow

2013-2017 2018-2021 2% 2% 19% 27% 39% 44%

35% 32%

Design Build CMGC/CMAR Design-Build CMGC/CMAR Design Bid Build Other Design Bid Build Other

Source: Design Build Utilization, June 2018, FMI & DBIA

14 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Alternative Delivery Project Structures

15 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Typical Procurement Process for Alternative Delivery Compared to Traditional Delivery

Alternative Traditional Delivery Delivery Step 1: RFQ Quals & Shortlist Quals & Shorlist

Step 2: RFP Technical Solution & Price Technical Solution & for Design & Construction Possibly Price for Design

ATC’s Owner Meetings Step 3: Interview Sometimes Typical Process

16 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS CM at Risk

› Constructor selected based on qualification shortly after designer selection › At 50% stage of development, CMAR provides price and schedule based on Owner defined scope

City of Atlanta / Water Supply-Quarry – Chattahoochee Tunnel: 24,000 ft. long, 13 ft. diam. tunnel - $330M

17 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Progressive Design-Build

› Owner involves DB team during early stages of development › DB team provides a lump sum price to owner at 50% design or when sufficient design for providing a lump sum price

City of Atlanta / Plane Train Extension at Hartsfield Airport – 700 ft. extension from existing baggage claim to area past SKYTrain station – Estimated cost $100M

18 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Design-Build Lump Sum

› Risk and responsibility for design and construction with one entity

DC Water / Clean Rivers Program: Chesapeake Bay Bridge Tunnel District / Parallel Thimble Shoal Tunnel: 15 miles of 23 ft. diam. sewers - $2.6B 5,700 ft. long, 42 ft. diam - $756M

19 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS DC Clean Rivers Projects

› Federal Consent decree to relieve discharge of waste into Potomac and Anacostia Rivers › 15 miles of 23 foot diameter storage tunnels and 53 outfalls, shafts and other near surface structures › $2.6 billion construction budget › Project to be completed by 2025

20 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS DC Clean Rivers Projects

Project Delivery Strategy › Alternative Early Contractor Involvement (ECI) including Design-Build (DB), Construction Manager at Risk (CMAR), Cost Reimbursement Fixed Fee (CRFF), Public Private Partnership (PPP) › Allows for contractor “buys-in” to the design solution to obtain the best quality and value with single-source accountability › Shorter project schedule than DBB with more reliability and predictability › Collaborative atmosphere that promotes equitable risk sharing and management › Alternative options are not well proven especially in wastewater tunnel projects › Owner relinquishes some control over value, quality, function and other objectives

21 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS DC Clean Rivers Projects Selected Contract Packaging and Project Delivery Systems: › DB process used for all deep tunnel project components (BPT, ART, NBT & NBBT) › DBB process used for all near-surface project components › A total of 16 contracts: › 4 deep tunnel contracts › 7 surface diversion structure contracts › 2 overflow structure contracts › 2 pumping station contracts › 1 demolition/site preparation contract

22 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS P3 Projects

› Contractual arrangement between public agency and private sector › Shared delivery of a service or facility for use by general public › Private entity receives a concession from the public sector to finance, design, construct, own and operate a facility

23 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Recent P3 Tunnel Projects

Virginia Dept. of Transportation / Elizabeth River Crossing (parallel Midtown Tunnel): Florida Dept. of Transportation / Two-Lane 3,700 ft. immersed tube tunnel - $2.1B. 58-year public partnership with VDOT Port of Miami Tunnel: Twin 4,200 ft. long, 39 ft. diam tunnels - $1B. Availability payments to concessionaire for a 30-year period until 2044. 24 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS Port of Miami Tunnel, Miami, FL

25 SEPTEMBER 10, 2018 CONTRACTING AND PROJECT DELIVERY OPTIONS Deal with FDOT

› Financial close: October 15, 2009 › 55-months for construction › Project cost: $1.062 Billion ( 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)

26 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS 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

SEPTEMBER 9, 2019

27 CONTRACTING AND PROJECT DELIVERY OPTIONS Upcoming Tunnel Projects and Delivery Method Project Client Delivery Estimated Project Method Cost RiverRenew CSO Tunnel Alexandria Renew Enterprises DB $345M - 19 ft. Diam., 11,500 ft. Alexandria, VA Pawtucket CSO Tunnel Narragansett Bay Commission DB $245M - 30 ft. Diam., 11,600 ft. Providence, RI Bay Park Conveyance New York State Dept. of DB $350M - Microtunneling, Environmental Conservation Sliplining & Pump Station Nassau County, NY Flushing Bay CSO New York City DEP DBB TBD - 18 ft. Diam., 13,000 ft. New York, NY BART to San Jose Santa Clara Valley DB $1B+ Expansion Transportation Authority - 58 ft. Diam., 22,700 ft. San Jose, CA Redundancy Water Tunnel Massachusetts Water DB (?) TBD - 10 ft. Diam.,23,000 ft. Resources Authority, Boston, MA

SEPTEMBER 9, 2019

28 CONTRACTING AND PROJECT DELIVERY OPTIONS Concluding Thoughts

Owners using full With APD, risks of Use of APD Conventional Designers and range of delivery delivery shifting significantly delivery still contractors options for tunnel to designers and increased for heavily used for adapting their projects contractors. tunnel projects in water and approaches to Costs of these risks being added past 10 years wastewater new delivery to bid prices especially for tunnels options transportation projects.

29 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS THANK YOU!

30 SEPTEMBER 9, 2019 CONTRACTING AND PROJECT DELIVERY OPTIONS