"The owner takes no liability or responsibility for design," said Vinton Garbesi, Tren Urbano’s contract manager for Río Piedras Station. "But it has the right to over-rule design submittals in regard to overall project safety (particularly to third parties), project programme, and conformance to long-term operational performance and design criteria. Tren Urbano, as the client, prepared the design criteria and Category I drawings. Category II drawings are used by the design-build team to develop its bid designs once the contract is awarded. Changes are reviewed by the Tren Urbano design team and either conditionally accepted, modified according to client concerns, or rejected for reasons that contravene the client’s overall project responsibility.
"The contractor and his design team are encouraged to be innovative but concerns for the overall project must remain the focus. The contractor provides his own technical provisions, such as concrete strengths, etc., and he undertakes his own quality control and certification of the works. A team of field engineers working for Tren Urbano provides an overview of the works as constructed."
Through various changes and additions, including the addition of the open-cut University of Puerto Rico Station on the KKZ/CMA Río Piedras contract, the overall cost of Phase 1 has increased to $1.7bn. This includes an increase of $84m from what the FTA described in its progress report as an unrealistically low 9% project management fee to a more realistic 11.6% of the budget. $28m of this is an extension of Parsons Brinckerhoff‘s involvement in the Seimans operating JV to undertake the role of integrating the system-wide installations with the civil work packages.
Several additional points of the design-build method are highlighted by the Puerto Rico experience, particularly in terms of the higher risk element in underground excavation.
There is the problem of a suggested honorarium to the bid losers. Design-build proposals are expensive to prepare. Being paid an honorarium, however, is viewed as a cheap way of capitalising on the expertise of others if discussed and perhaps included in the winning bid proposal. This aspect increases the need for a balanced and impartial evaluation process. Both unsuccessful bidders on the Río Piedras contract contested the bid result through the courts but Tren Urbano was exonerated in its evaluation conduct and procedures.
Another area of concern is the role of the owner’s design teams. If the design-build contractor is fully responsible for design liability, it must be free to take action on that basis. The problem for the owner’s representatives is the influence of the contractor on his own design engineer. The time saving advantage of the design-build method is the fast track approach but this increases significantly the onus on the contractor’s design engineer to demand time to complete the design of various works adequately and not be pressurised by construction programme concerns.
In rail transit projects there is the difficulty of superimposing the system wide M&E contractor’s responsibilities on the different works of the different civil construction packages. This integration must be carried out by either the M&E contract’s designer, as in the case of Puerto Rico, or by the client, or by an overall construction/project/programme manager. It is difficult, if not impossible, to include this responsibility in the design-build construction packages as currently being experienced on the Frankfurt-Cologne high-speed railway line contracts in Germany (May ’99, p33)
Concerns were raised by the FTA during T&T International’s interview with Edward Thomas, the FTA’s associate administrator for research, demonstration and innovation.
"The US military has received criticism lately for its single point of procurement policy but research indicates that the policy saves some 23% on time, which implies a 6-13% savings in cost. In the traditional design-bid-build procurement, the client retains liability for the design and any changes before, during or after bid stage result in delays, claims and cost increases. Incentives to finish early will contribute to potential design-build time and cost savings."
The larger the design-build package, the larger the potential time and money savings but also the more expensive the bid and the greater the risk. "The honorarium could alleviate the bid cost debate," said Thomas, "but the amount needs consideration." In response to questions about risk, Thomas replied that the 100% bonding or contract insurance required by contractors was prohibitive for large projects. "The number of potential bidders for these larger contracts will be smaller and the joint ventures will have to be larger, but to maintain competition, the contracts must be viable. One method of ensuring this would be to reduce the bonding to about 25%," he said.
Regarding construction risk, Thomas suggested that contracting bids were still too low and any problems could easily push the contract into negative territory. "Best value engineering will help address this problem," he continued, "but evaluation of bids should also include an analysis of the companies’ financial status, not just engineering, and the bid’s bottom line price." Budgets by owners and their design teams are also too low, in his opinion.
"Budget contingencies should be increased from the current 6-10% maximum to more like 30%. Controls on managing that contingency would then be required and liquidated damages for time overruns would have to be $50-75 000/day rather than the current $15 000/day." (On the high-speed rail contracts in Germany, a penalty of $38.5m will be imposed on any of the three consortia completing the $4.3bn line should they miss the due date.)
As to the higher risks involved with underground works, Thomas suggested that the level of pre-bid design of such structures should be increased from 30% to more like 60-80%. "Planning is some 10-15% of the 30% baseline design," he said, "and perhaps more emphasis should be placed on the difficult aspects of the project and the contingencies rather than on the percentage of baseline design."
The success or failure of a project relies significantly on efficient cash flow. Thomas stated that owners must recognise their responsibility to the contractor to make payments on time and without unreasonable withholdings: "The FTA and other funding sources must also accept their responsibilities for project cost overruns if these are caused by delayed appropriation of funds or even cancellation of promised funding part way through a project realisation programme. A reserve fund has been established in the Department of Transport to make loans available to owners at well below market interest rates to bridge cashflow restrictions, and San Juan is one of the bank’s first successful applicants.
"We have just started on our road to discovery and development of better public works procurement practices. There is still much to know and experience before we arrive," he concluded.
