January 2012 TRANSIT COOPERATIVE RESEARCH PROGRAM Sponsored by the Federal Transit Administration Responsible Senior Program Officer: Gwen Chisholm Smith Legal Research Digest 39 COMPETITION REQUIREMENTS OF THE DESIGN/BUILD, CONSTRUCTION MANAGER AT RISK, AND PUBLIC-PRIVATE PARTNERSHIP CONTRACTS— SEVEN CASE STUDIES This report was prepared under TCRP Project J-5, “Legal Aspects of Transit and Intermodal Transportation Programs,” for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Anthony D. Songer, Ph.D., Boise State University; Michael J. Garvin, Ph.D., P.E., Virginia Polytechnic Institute and State University; and Michael C. Loulakis, Esq., Capital Project Strategies, LLC. James B. McDaniel, TRB Counsel for Legal Research Projects, was the principal investigator and content editor. The Problem and Its Solution Application The nation’s 6,000 plus transit agencies need to have In the recent past, the primary practice of procurement of- access to a program that can provide authoritatively ficials for major transportation construction projects has researched, specific, limited-scope studies of legal is- been to follow the design-bid-build methodology. How- sues and problems having national significance and ever, increasingly this method is being criticized as restric- application to their business. Some transit programs tive of public owner flexibility in aligning the procurement involve legal problems and issues that are not shared process to achieve the best value for locally funded proj- with other modes; as, for example, compliance with ects. In response to this problem, states and local govern- transit-equipment and operations guidelines, FTA fi- ments are engaging in procurement methods that place nancing initiatives, private-sector programs, and labor more financial risks and liability on the contractor in the or environmental standards relating to transit opera- preconstruction planning process, construction manage- tions. Also, much of the information that is needed by ment, and operational aspects of construction projects. transit attorneys to address legal concerns is scattered Government procurement officers are, however, and fragmented. Consequently, it would be helpful to more and more resorting to alternative delivery meth- the transit lawyer to have well-resourced and well- ods as a means to greater efficiency while ensuring documented reports on specific legal topics available good outcomes and value in products. This report ex- to the transit legal community. plores the use of varying systems, including design- The Legal Research Digests (LRDs) are developed build, construction management at risk, and a variety to assist transit attorneys in dealing with the myriad of of options considered public-private partnerships, initiatives and problems associated with transit start- through the examination of seven separate construc- up and operations, as well as with day-to-day legal tion projects in various parts of the United States. This work. The LRDs address such issues as eminent do- examination of the seven selected projects shows how main, civil rights, constitutional rights, contracting, particular, and often unique, problems were met in environmental concerns, labor, procurement, risk each project by utilizing a wide variety of procure- management, security, tort liability, and zoning. The ment and delivery methods. The results were success- transit legal research, when conducted through the ful to varying degrees; however, the intent of this re- TRB’s legal studies process, either collects primary port is not to suggest the use of one type of delivery data that generally are not available elsewhere or per- method over another, but to demonstrate the wide va- forms analysis of existing literature. riety of systems and procurement methods that may be available, especially as states and localities broad- en their legislative authority to enter into contracts and private-public agreements. TRANSPORTATION RESEARCH BOARD OF THE NATIONAL ACADEMIES CONTENTS (cont’d) CONTENTS I. The Regulatory and Statutory Framework for Alternative VI. Largo Extension of Blue Line Project, 25 Project Delivery, 3 Project Overview, 25 Introduction, 3 Procurement, 25 Design-Build, 3 Key Contract Provisions, 27 Construction Management, 7 Project Performance, 29 Public-Private Partnerships, 8 VII. Portland Southern Corridor—Portland Mall Segment, 29 Summary, 9 Project Overview, 29 II. BART Extension to San Francisco International Airport, 9 Procurement, 30 Project Overview, 9 Key Contract Provisions, 32 Procurement, 9 Project Performance, 33 Key Contract Provisions, 10 VIII. The River Line (Southern New Jersey Light Rail Transit Project Performance, 12 System), 33 III. Dallas Area Rapid Transit Green Line Project, 12 Project Overview, 33 Project Overview, 12 Procurement, 34 Procurement, 13 Key Contract Provisions, 35 Key Contract Provisions, 16 Project Performance, 36 Project Performance, 17 IX. Comparative Analysis and Discussion, 36 IV. Dulles Corridor Metrorail Project, 17 General Overview, 36 Project Overview, 17 Procurement Processes, 39 Procurement, 17 Indeterminate Pricing, 40 Key Contract Provisions, 19 Contract Provisions, 41 Project Performance, 20 Legal Issues and Disputes, 41 Dispute Resolution, 42 V. AirTrain JFK System, 20 Project Overview, 20 X. Conclusion and Key Findings, 42 Procurement, 21 References, 44 Key Contract Provisions, 23 Appendix A: Design-Build Legislation, 46 Project Performance, 24 Appendix B: Construction Management Legislation, 49 Appendix C: PPP Legislation, 51 Acronyms, 53 3 COMPETITION REQUIREMENTS OF THE DESIGN/BUILD, CONSTRUCTION MANAGER AT RISK, AND PUBLIC-PRIVATE PARTNERSHIP CONTRACTS—SEVEN CASE STUDIES By Anthony D. Songer, Ph.D., Boise State University; Michael J. Garvin, Ph.D., P.E., Virginia Polytechnic Institute and State University; and Michael C. Loulakis, Esq., Capital Project Strategies, LLC I. THE REGULATORY AND STATUTORY uation of Project Delivery Methods.2 The examination of FRAMEWORK FOR ALTERNATIVE PROJECT the seven projects that are included in this digest dem- DELIVERY onstrates how the private contractors and the govern- ment agencies involved in each project were successful, to varying degrees, in utilizing a wide variety of pro- Introduction curement and delivery methods, to meet the problems In the post–World War II era, the delivery mecha- encountered in each situation. nisms that drove the nation's early infrastructure de- This section provides a broad discussion of the pro- velopment lay dormant as the country's method of pro- curement issues associated with alternative project de- curing infrastructure evolved to rely upon a single livery on DB, CMAR, and PPP projects. It will consider system, design-bid-build (DBB).1 Over roughly the last historical issues associated with these delivery systems 20 years, however, many public owners have rediscov- and examine some of the approaches states have taken ered the potential value of other delivery systems such to implement these programs. as design-build (DB), construction-manager-at-risk (CMAR), and a variety of options that are considered Design-Build public-private partnerships (PPP), such as design-build- operate-maintain (DBOM) and build-operate-transfer Historical Review (BOT). Arguments for these choices include opportuni- While the origins of the DB method of project deliv- ties to leverage private-sector expertise and capital, to ery are traced back to ancient Mesopotamia, the process predict operational funding requirements, and to real- was thought to be virtually abandoned by modern de- ize life-cycle cost reductions through the integration of signers and constructors.3 For years, the design and delivery activities and private-sector efficiencies that construction industry in North America functioned un- are honed in competitive markets. der the traditional method, DBB. However, with the Many within the engineering, procurement, and con- advent of the post–World War II building boom in struction community in the United States have recog- North America, construction owners sought alterna- nized the limitations of a strategy designed to support a tives to the fragmented responsibilities, cost issues, and single delivery method, and shifts are underway across limited flexibility of DBB. This was particularly the all infrastructure sectors. Those searching for real solu- case during the inflationary periods of the 1970s, where tions to their infrastructure problems have employed a both public- and private-sector owners found the DBB variety of means to fulfill the demand for vital infra- process to provide less than satisfactory results because structure services. Still, public-sector experience in the of extended project delays and a growing “cottage” in- use of such delivery systems remains immature, and dustry of construction claims litigation. By the late public agencies are generally unprepared to execute 1980s and early 1990s, another trend emerged—both workable arrangements with the private sector. Despite private-sector firms and public agencies began restruc- the recent resurgence of alternative project delivery turing their organizations to reduce or eliminate staff methods, many within the construction industry con- not directly associated with their core goals. All of this tinue to misunderstand the characteristics and implica- led to procurement policies that not only helped intro- tions of each system. The intent of this digest is not to duce