A year and a half ago, the Osceola County Public Works Division in Florida converted much of its road-construction program — 11 projects in all — from design-bid-build to construction-management-at-risk (CMAR).
Driven by direction from the county's commissioners, it was a bold move that required the department to completely reorganize, eliminating about 35 positions in the process. Many were design engineers whose lost expertise is being outsourced while the remaining engineers oversee various aspects — construction, plans production, stormwater, permitting, surveying, right-of-way acquisition, traffic engineering — of the fast-tracked projects. It also requires ongoing dialogue with local contractors wary of losing business to competitors hand-picked by the county's construction management firm, the regional Florida office of Balfour Beatty Construction.
But it was the only way that Public Works Administrator Ken Atkins and County Manager Michael Frelinger felt the county could satisfy an extremely aggressive local ordinance. With nearly 18 project segments behind schedule, construction on nine to 11 of them had to begin in 2009 to get the program back on track. It's the greatest number of road projects nationwide to be delivered using construction-management-at-risk. In total, $700 million worth of design and construction is scheduled to be completed within 10 years, and infrastructure managers throughout Florida are watching closely.
“While construction-management- “ at-risk is rather unconventional to use for road projects, we felt it was the most efficient way to handle the backlog that had developed over the past few years as development boomed,” says Principal Project Manager Gregg Hostetler, PE. Since the county had used the project delivery method to design and build a new courthouse, emergency operations center, and training facility for the Houston Astros, the county attorney tweaked the contract language for those “vertical” projects to accommodate requirements specific to roadway construction.
The department would've considered design-build, but working out the legal details for a program delivery method the county hadn't used would've postponed start-up by half a year. So construction-management-at-risk it was.
FROM THE ABSTRACT TO THE ACTUAL
Under standard construction management, the owner advertises for and retains the designer and construction manager directly, so both work together from the outset to identify and resolve potential problems before they burden the budget and schedule.
At-risk management goes a step further, with the construction manager taking full responsibility for advertising for, vetting, interviewing, hiring, and supervising all subcontractors. The firm guarantees the project cost, absorbing cost overruns and returning savings at mutually negotiated refund levels. Schedules are also guaranteed based on the firm's experience and the research its estimators conduct before making a commitment.
Like design-build, construction managers are chosen based on requests for qualifications and experience, not on cost components to do the work. After reviewing requests for proposals, the department usually shortlists several firms to make formal presentations. Once selected, the firm prepares budget estimates through the design phase based on costs for similar projects and statistics on labor and materials costs.
Because they both allow construction to begin before design plans are fully completed and right of way is purchased, design-build and construction-management-at-risk are excellent for fast-tracking a project.
But there's one essential difference: Design-build is a turn-key solution that eliminates the owner from the team once the owner chooses the design-build team and provides project parameters. From then on, the designer and builder determine how to meet those goals without input from the owner.
At-risk management allows owner, designer, and builder to collaborate during preconstruction and construction. The construction manager acts as general contractor, coordinating all of the work to ensure the project is completed within a certain time frame and budget. Unlike design-build and design-bid-build, any savings resulting from efficient completion reverts to the owner in accordance with the contract.
By working with design engineers during the planning phase, the manager sequences construction so utility service lines are relocated in a manner and within a time frame that works for all parties. Similarly, the manager identifies which right-of-way acquisitions are likely to occur most quickly and prioritizes acquisition and construction schedules to focus on those areas first.
“This system produced a much more efficient schedule than we would've had using conventional project delivery,” says HDR Engineering Project Manager Ed Colon, PE, one of several consultants retained to help manage the program. “By allowing us to segment construction based on right-of-way acquisition, we can start clearing land and begin basic construction as soon as an area is acquired instead of waiting for acquisitions for the whole project. We save by being able to go to bid while still in design, and eliminate time spent procuring construction contracts.”
Similarly, permitting discussions with the South Florida Water Management District and U.S. Army Corps of Engineers began during the conceptual design phase, not when plans were 60% to 90% complete. Overall, Hostetler estimates the process cuts design time by half, and shaves nearly a year off construction.
After a project is advertised and bid, the construction manager spends 30 to 60 days going through plans with the subcontractors and establishing a budget, then provides the owner with a guaranteed maximum price. At this point, the owner may elect to proceed or revisit options to meet a certain budget. Fees are based on established percentages of total project cost. The owner's not at risk because the firm legally holds all subcontractor contracts.
In Osceola County, approximately seven projects that are in design will be under construction by the end of the year. Four of the original 11 proposed construction starts are on hold because of Florida's overall economic decline.
“We're starting to see the fruits of all the time and energy and frustration that went into this process,” says Principal Project Manager Jason Boulnois, PE, who oversees the construction end of projects with Balfour Beatty while Hostetler oversees design aspects. “Under the old system, we would've broken ground on only two or three projects by now.”
Hostetler adds: “We've also developed relationships with our local utilities that we never would've been able to develop in the past.”
Balfour Beatty advertised 36 different bid packages on the first and largest project — a $50 million effort to widen 7.5 miles of two-lane road into four lanes plus 4-foot bicycle lanes, an 8-foot multiuse path on one side and a 6-foot sidewalk on the other, and a 46-foot depressed median with grassed shoulders — before awarding one that will save $1 million on construction. Construction began in July 2008 and is scheduled to be completed in early summer 2011.
“We're getting 90% local participation in some cases,” says Boulnois. “Our goal is to get the money back into the community.” Department employees are present when bids are opened, and all information is available to bidders as before. Once subcontractors got over their initial confusion over where to look — on Balfour Beatty's Web site rather than the county's — for requests for proposals and formal bids, their concern that the process would eliminate transparency dissipated. At-risk management uses open-book accounting, so results become public after the construction manager confirms that the project's scope is complete and the county has accepted the guaranteed maximum price proposal.
Even so, Boulnois warns that the biggest obstacle is resistance to change.
“Get the local contracting community involved as early as possible,” he advises. “Local contractors thought this process was going to cut them out, but they're learning that it does the opposite.”
SAVINGS VS. DESIGN-BID-BUILD
Balfour Beatty estimates that change orders add 15% to 16% to the total cost of a design-bid-build project. The Florida DOT expects overruns to equal 10% of construction costs on a typical design-bid-build project.
For Osceola County, Balfour Beatty's fee is 6% of construction costs. Of that, 1% is for handling all the preconstruction activities that enable the project to begin construction when plans are only 30% to 60% complete.
Because the program is new, no one was quite sure what to expect in terms of return on investment. Each of the 11 projects has a separate budget that includes the 6% management fee. So far, virtually all project phases have come in under budget even with the 6% factored in.
— Johnston is editor in chief of PUBLIC WORKS; Vargas (firstname.lastname@example.org) is a certified construction manager and senior project manager for Bal-four Beatty Construction (www.balfourbeattyus.com).
Source: Construction Management Association of America, 2008