Managing Alternative Project Delivery Contracts and Resolving Claims

By JOHN LIVENGOOD, ESQ., AIA – Associate Vice President

An owner's aversion to claims, their urgent need to complete overdue projects and the increased competition for government funding have accelerated federal, state and local government's use of non-traditional construction delivery systems in an effort to reduce costs and speed results. Alternative Project Delivery (APD) systems offer the owner potential savings in both time and money as compared to conventional Design-Bid-Build ("DBB") projects. However, APD systems pose their own challenges with new contract forms, different owner-consultant-contractor relationships and varying levels of familiarity with these new approaches.

The traditional DBB contracting system has emerged through an overriding desire to achieve the lowest possible project cost and maximum design control in an open bidding environment. At the same time, the construction industry has evolved through increased specialization and a corresponding increase in parties and contractual interfaces. While DBB provides the owner maximum control, it also means more owner risk, bloated construction budgets and delayed completion. The advent and increased use of APD systems is intended to overcome these problems. But there are many forms of APD, each with subtle and not so subtle differences. ARCADIS has the experience and expertise to implement on behalf of the owner several APD systems including the following:

• Design-Build (D-B)
• Design-Build with Bridging Documents (D-B Bridging)
• Design Build Operate Maintain (DBOM)
• Construction Management Multi-Prime (CMMP)
• Integrated Project Delivery (IPD)
• Public-Private Partnership (PPP)

ARCADIS’ Experience with APD

ARCADIS has experience with all forms of APD. We have assisted owners with identifying appropriate delivery systems based on the client’s available staff, funding options, time constraints and state laws. As a part of this process, we also provide an evaluation of the benefits and responsibilities for each system to enable the owner to make an informed delivery system choice.

Throughout our 30 years of experience as a firm, we have developed a keen sense as to what positive traits relate to each APD system and how we can maximize these benefits to the owner. The following are three case studies that highlight some of ARCADIS’ key projects that involve APD and the lessons learned from each.

City of Hartford, Conn. – Design-Build

When the City of Hartford needed help in organizing and managing the first design-build school in the state, they turned to ARCADIS as the owner’s representative to manage the design-build process. Guided by only 20 pages of conceptual drawings, ARCADIS worked with the city and the design-builder to expand that 20-page concept into complete construction documents for the 60,000 sq. ft. elementary school. The building, constructed on a contaminated site requiring extensive remediation, needed to reflect the local character of the existing brick material and provide a modern school complete with the latest in technology and organization to reflect its magnet school educational philosophy. ARCADIS, acting as the city’s representative, managed the project on behalf of the owner including the challenge of the differing site-conditions changes, and assured a timely completion at a price lower than that of traditional DBB. The LEED®-certified structure has served as a model for design-build in the state for school projects.

The benefits to the owner included:

• Single point of responsibility
• Earlier completion
• Better cost control
• Transfer of design completion responsibility
• Reduced change order risk

Poway Unified School District, Calif. – Multi-Prime

Construction Management Multi-Prime (CMMP) is an APD method where the owner chooses to unbundle larger contracts into smaller trade contracts and with the agency Construction Manager (CM) overseeing multiple prime contractors working independently for the owner. The objectives of this method are to eliminate markups that add cost, access qualified specialty firms and speed up delivery time. Multi-prime projects are often undertaken for quasi-political reasons, state mandate requirements, or to increase local participation and development of disadvantaged businesses. At the same time, the multi-prime delivery system places more responsibility on the owner and its agency CM since coordination is handled by the owner and its consultants rather than by the general contractor or development entity.

ARCADIS assisted the Poway Unified School District in managing the implementation of its $524 million program to renovate, update and construct 24 schools in a jurisdiction where there was severe enrollment overcrowding. ARCADIS’ initial efforts were to assist in the establishment of a Proposition U bonding program to fund the renovations and development of cost and cash-flow projections. Once funding was secured, ARCADIS worked with the owner to develop a programmatic and design scope to speed up design development. While design proceeded under ARCADIS’ oversight, ARCADIS developed a process where bids were solicited on each of the multi-prime contracts from three identified local bidders and a best value evaluation system was implemented. Time consuming prequalification and solicitations were eliminated within the requirements of state law and negotiations were held with the lowest of the bidders on each contract.

As design proceeded, delays in state approvals of the designs became an issue. Under ARCADIS guidance, the program switched to a different state permitted procurement system (Lease-Leaseback) that included an expanded ARCADIS role in value engineering, constructability reviews and the development of Guaranteed Maximum Prices for individual multi-prime contracts. This change accelerated the overall delivery of the work.

Management responsibilities during construction were especially complicated, as many of the schools had to remain open and functioning during the school year. While as much work as possible was scheduled for summer breaks, ARCADIS had to coordinate and maintain overall schedule control of the multi-primes to assure prompt construction, and most importantly, student safety.

Benefits to the owners under this delivery system included:

• Opportunities for local contractors
• Control of inflationary cost growth
• Claims avoidance
• Governing board management
• Safety for students and workers

Stuarts Draft Wastewater Treatment Plant, Va. – Public Private Partnership (PPP)

PPP is a relatively recent APD method that provides a collaborative system for the owner, designer, developer and contractor to participate in the entire development process. Typically authorized by state legislation, PPP enables the engagement of a developer that will respond to the owner’s needs while establishing private investment opportunities. This involves the identification of the required land for purchase, working with the owner to develop a detailed program, and engaging with the designer to complete construction.

On the Stuarts Draft Wastewater Treatment Plant in southern Virginia, ARCADIS was retained as the owner’s consultant to develop, implement and manage the PPP program. Strict time constraints required ARCADIS to establish the criteria for the selection of the PPP developer and assist the owner’s eventual selection on an accelerated basis, all within the limitations of the state enabling provisions. At 65 percent design completion, a Guaranteed Maximum Price (GMP) was negotiated. Performance and time incentives were included.

ARCADIS worked as the principal liaison throughout the process including the development of the program as well as the conceptual, detailed and final design. ARCADIS remained as the owner’s representative overseeing construction, providing inspection, managing the schedule, negotiating changes and assisting in commissioning.

The advantages of the owner in using a PPP included:

• Better design control;
• Reduced owner risk;
• Reduced owner cost; and
• Reduced project duration.

With a properly defined program and the necessary management and contractual documents, PPP can be a very successful delivery system. In exchange for the general benefits, the owner generally gives up design control, but retains control over design conceptualization and planning.

APD and ARCADIS Resolution of Claims

If an owner has undertaken an ADP project without the benefit of necessary program or construction management expertise, there is the potential that claims and disputes will arise even though the owner’s risk has presumably been “reduced”. ARCADIS’ Construction Claims Services (CCS) group has the necessary expertise to assist owners in identifying, minimizing and resolving claims that may develop from APD systems. ARCADIS claims experts will meet with owners and other project participants to review the intended allocation of risks, the responsibilities under the contract of the parties to analyze the claims, and identify the cause and the responsibility for those claims. ARCADIS’ expert schedule delay staff will identify causes of delay and the impact of the claimed events on the schedule. ARCADIS will then work with the owner to craft a resolution strategy that will fairly and quickly resolve the claims at the lowest overall cost. This process often starts with negotiations based on a preliminary analysis. Depending on the claimed amount and technical issues, detailed analyses could include the development of expert reports, mediations, arbitrations or court proceedings. ARCADIS has extensive experience in all these resolution methods which are all aimed at minimizing the cost and time to the owner.

Lessons Learned

No single APD method is appropriate for all projects and situations. All require an experienced consultant to identify, plan and implement the selected method for owner’s to truly reap the benefits. ARCADIS is that consultant. The chosen APD should carefully match the project’s specific goals as well as the owner’s preference for risk allocation. Prior to selecting a delivery method, an owner should consider several elements:

• Type of project and its complexity
• Project schedules and owner commitments
• State and municipal legislation regarding APD
• Contract development
• Project controls systems
• Community and media relations
• Shared savings to ensure timely completion
• Early involvement of an experienced CM (a CMa consultant helps “level the playing field” when an owner is dealing with an APD contractor)

APD methods may provide distinct advantages to an owner such as:

• A single point of responsibility for design and construction
• Saving time by overlapping the design and construction processes where appropriate
• Reduction of administrative time and effort
• Selection of a quality designer and construction contractor on a “best value” basis
• Control of costs by including fixed fees and incentives for successful completion
• Ability to include land acquisition, financing, design, construction, operation and/or maintenance in the scope of services

With the assistance of a qualified program and construction management firm with claims expertise, such as ARCADIS, an owner can achieve its project objectives through the prudent use of APD. However, there is no guarantee that claims will not arise from a project utilizing an APD method. Owners can turn to a construction claims expert, such as ARCADIS, to assist with the resolution of disputes that arise from these projects.

For questions or additional information, please contact John Livengood at john.livengood@arcadis-us.com.



ABOUT THE AUTHOR

John Livengood, Esq., AIA, is Associate Vice President for ARCADIS. He is a registered architect with more than 34 years of experience in architectural design, project management, design analysis and document preparation. Mr. Livengood is also an attorney experienced in construction litigation, government contracts, claims analysis, international contracts and arbitration. As an expert witness, Mr. Livengood has testified in court proceedings before boards of contract appeals and in arbitrations on scheduling issues, damages and causation issues. He can be reached at John.Livengood@arcadis-us.com.