The single most important factor for ensuring the success of the collaboration process is the careful selection of the individuals involved. This is perhaps even more critical in construction management-at-risk project delivery than in other design-build delivery methods due to the nature of the contracting arrangements.
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What is a contingency? The definition of contingency is one of the following: A future event or circumstance that is possible but cannot be predicted with certainty A provision for an unforeseen event or circumstance In the case of an owner’s budget for a collaborative-delivery project, the purpose of a contingency is to incorporate an additional allotment of funds within the final approved budget that can be used when and if the scope of a project changes with an associated cost increase in the delivered project. If an owner’s team directs its project delivery firm to increase its scope of work, the contingency allows the owner’s team to proceed with the project and not have to receive additional internal authorizations for spending.
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If you’ve ever attended one of the WDBC education sessions, you’ll recall that instructor Mark Alpert likes to immediately inform you that there are some key terms he is going to be persistent in getting you to remember: GMP, RTFC, off-ramp, and a few others. The reason he is so persistent is that without a good contract in place, and understanding what the terms in the document mean, the project is definitely going to encounter unforeseen issues. But we also learn in these sessions that there are often numerous misunderstandings about how to approach the contracting process and the dynamics that occur, potentially leading to the “off-ramp.” When an organization attempts to “retrofit” their existing contracts or doesn’t know where to locate a good template or model, the problems begin.
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In 2014, the town of Berthoud, located on the Front Range of Colorado, north of Denver along the I-25 corridor, was faced with development requests from a combination of residential, commercial, and light industrial users. This request coincided with the implementation of stringent nutrient regulations by the State of Colorado for new wastewater treatment facilities. With the planned development of the eastern area of the community, particularly a major complex serving the trucking industry, a new east-side treatment facility would be necessary to sustain the planned growth of the city to the east of the existing service area. As a result, Berthoud officials made the decision to build a new wastewater treatment plant under an expedited schedule to accommodate the growth on the eastern part of the town.
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Primarily due to efficiencies with schedules and the overall work process for both utility owners and municipalities during the past five years, the use of design-build and CMAR delivery for water and wastewater projects has increased. As the WDBC’s recent research report revealed, the use of collaborative delivery methods is continuing to gain significant momentum in the water sector because of the education process. The other good news is that WDBC’s research data shows that external impediments – such as legislative and regulatory requirements – are decreasing and progress continues within the states on that specific challenge.
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The intent of this article is to further an owner’s understanding of the commonly used pricing approaches for either design-build or CMAR delivery methods. For additional information on these topics, please review the appropriate sections in the Water and Wastewater Design-Build Handbook (5th edition. When discussing design-build projects, there are potentially two forms of final project pricing and compensation: guaranteed maximum price (GMP) or fixed price (FP). Owners and practitioners should be clear in their respective understanding of what each approach leads to in performance of services and responsibility for cost documentation.
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“OK, so what’s this going to cost?” That’s the multi-million-dollar question we all want to know when starting out on any progressive design-build venture. It’s followed closely by “When will we know?” With the proper team in place, cost certainty can be achieved early in the progressive design-build process.
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For any business or organization (public or private) to be successful, risks must be proactively evaluated and addressed with mitigation plans. Risks, by their very nature, can sometimes produce undesirable consequences. This is especially true in construction where slim margins dictate risk identification and mitigation plans are used to protect those slim margins and enable businesses to be profitable. In public organizations, the public’s money needs to be responsibly spent and part of that responsibility is properly managing and allocating risks.
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Owners considering collaborative delivery frequently reach out to experienced owners and practitioners to gain information about best practices. This sharing of knowledge contributes to an increased probability of success and helps get a project started on the right track. While questions and input are wide and varied, I always start with the basics of collaborative delivery and what is most important for a successful project based on my experience.
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A savvy design-builder once said you should avoid giving a price for a project with an undefined scope of work. The critical success factors that all design-builders consider are a well-defined scope of work, manageable schedule, fair allocation of risks, and strong collaborative relationship between the owners and the design-build team.
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