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2005 AASHTO Value Engineering Conference
Using VE in Design Build
Presented by:
Jerry R. Blanding
Innovative Contracting Engineer
FHWA – NRC
July 21, 2005
Sheraton Gunter Hotel
San Antonio, TX
Using VE in Design Build
I. Regulatory Definitions
II. DB Final Rule – History & Application
III. VE & DB A Federal Perspective
IV. Additional Resources
Value Analysis/ Value Engineering
23 CFR § 627.3 Definitions
Value engineering. The systematic application of recognized techniques by a multi-disciplined team to identify the function of a product or service, establish a worth for that function, generate alternatives through the use of creative thinking, and provide the needed functions to accomplish the original purpose of the project, reliably, and at the lowest life-cycle cost without sacrificing safety, necessary quality, and environmental attributes of the project.
Why is Design-Build different from Design Bid Build?
Design-Build23 USC 112 (b)(1)Competitively Bid(Low bid)Construction Contracts
23 USC 112(b)(2)Qualifications basedSelection, Engineering /Design Services
23 CFR Part 636 - Design Build
Design-bid-build means the traditional project delivery method where design and construction are sequential steps in the project development process.
Design-build contract means an agreement that provides for design and construction of improvements by a contractor or private developer. The term encompasses design-build-maintain, design-build-operate, design-build-finance and other contracts that include services in addition to design and construction. Franchise and concession agreements are included in the term if they provide for the franchisee or concessionaire to develop the project which is the subject of the agreement.
Value Analysis/ Value Engineering
Design Build Final Rule:
23 CFR § 627.5 (e)
In the case of a Federal-aid design-build
project … the (State) shall fulfill the …requirement by
performing a value engineering analysis
prior to the release of the Request for Proposals
document.
Using VE in Design Build – Florida DOT Example
All projects with an estimated cost of $20 million or more shall have
a minimum of one VE study conducted during project development.
The estimated cost shall includes all costs associated with the
project including but not limited to:• Design• Right of Way• Construction• Administrative Cost.
Using VE in Design Build – Florida DOT example
The VE study shall be conducted during one of the following phases of project development:
• Initial Concepts• Comparison of Alternatives• Final Design
For Design Build Projects, the VE study shall be conducted prior to the release of the Request for Proposal (RFP) Document.
The greatest potential for improvement is during the Initial Concepts or Comparison of Alternatives review period.
Design Build:
Where We Are And How We Got Here
A Brief Look Back
TRB Task Force A2T51 - Innovative Contracting
January 1988 - 23 representatives of the highway industry participated
Mission of TRB Task Force A2T51• Compile information on contracting practices• Assess how current practices affect quality,
progress and cost• Suggest measures for improving contracting
practices and promoting quality in constructionDecember 1991 - TRB Circular #386 – Innovative
Contracting Practices
Special Experimental Project No. 14Innovative Contracting
Initiated 2/13/90Objective - Evaluate project specific contracting practices
which• Maintain product quality• Reduce life cycle cost
Practices proposed for evaluation• Cost-plus-time Bidding• Lane Rental• Warranty Procedures• Design-Build
TEA-21 Design-Build Legislation Section 1307
FHWA implemented the Final Rule in January 2003.
After the final rule, states can use design-build without HQ approval for “Qualified Projects”• ITS projects > $ 5 million• Other projects > $50 million
SEP-14 will continue for smaller projects unless Congress approves language in the reauthorization bill eliminating this threshold.
In 2005 FHWA will complete the required ‘Report to Congress’ on the effectiveness of design build.
Existing SEP-14 Design-Build Contracts vs. “Qualified Projects”
35
29
55
33
34
30
44
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
> $ 50 M$20 - 50 M$ 10 - 20 M$ 5 - 10 M$ 2 - 5 M$ 1 - 2 M$ 0 - 1 M
17%
83%
December 2002 FHWA SEP-14 datahttp://www.fhwa.dot.gov/programadmin/contracts/sep14a.htm
Advantages of Design-Build
1. Single Point of Responsibility
2. Quality / Innovation
3. Potential Time or Cost Savings
4. Improved Risk Management
5. Earlier Knowledge of Firm Costs
6. Lower Incidence of Claims
7. Reduced Project Administration
Critical Characteristics for Public Sector Design-Build Projects Design-Build SelectorGeorgia Institute of Technology / University of Coloradohttp://www.colorado.edu/engineering/civil/Design-Build/DBS/
Poor DB Projects Don’t Have:• Well Defined Scope • Shared Understanding of Scope• Owner’s Construction
Sophistication• Adequate Owner Staffing• Established Budget• Established Completion Date
Suitability
NEPA, and major ROW and utility issues must be clear
Should have a “Strong design component”
Reasons for selection should not be:• Obligation of funds• Compensate for inadequate agency
resources
NEPA - RFP Release: Where Does VE Fit?
NEPA ConstructionFinal Design
Design-bid-buildDesign-bid-build
Design-buildDesign-build
NEPA
Design-Builder’s Design and Construction
ROD, FONSI, CEPS&E
RFQ RFP
Draft RFP
Owner PE
FHWA Perspective on Using VE in Design Build
• VE is a mandate for NHS projects $25 million and over
• VE must be performed prior to release of the RFP• Multiple VE’s may be appropriate for major
projects• VE studies are performed to add value to a project,
not simply to reduce costs.• All valid suggestions should be included in the study
report. Management must determine what impact the VE suggestions may have on the environmental or public hearing agreements.
FHWA Perspective on Using VE in Design Build
• VE should be performed on NEPA alternatives or on selected RFP requirements.
• FHWA has not objected as long as VE is done prior to release of RFP at a reasonable point with the coordination of the Division Office.
Innovative Contracting Best Practices Web Site
Utah State Universityhttp://www.ic.usu.edu
Practical information on warranties, A+B, lane rental and design-build contracting• What is it?• Why should you use this?• Criteria for project selection?• Who is currently using it? • Example provisions
Additional Resources on SEP-14 Design-Build Projects
FHWA HIPA-30 web page• http://www.fhwa.dot.gov/infrastructure/
progadmin/contracts/d_build.htm
WSDOT Design-Build Process for Highway Projects• http://www.wsdot.wa.gov/designbuild/db/
dbguidebook.htm
THE END – QUESTIONS?
Jerry R. Blanding
Innovative Contracting Engineer
FHWA – NRC Baltimore
410-962-2253