By Blair Lavoie
What’s so great about construction management at risk (CMAR)? The story of Fremont, OH — and a description of four key CMAR benefits — sheds light on the alternative delivery method.
Substantial reductions in state and federal funding for public infrastructure projects is the new reality facing municipalities and utilities across the country. At the same time, aging infrastructure continues to be a key topic for municipal leaders and remains a critical concern for communities and residents. In fact, according to a 2016 survey from MWH Global, now part of Stantec, 35 percent of Americans think that their community’s current water infrastructure will last less than five years. With the need for updates and rebuilds to major infrastructure projects, many communities and utilities are looking for new options to help with funding and building.
The construction management at risk (CMAR) delivery method has become a go-to choice for large-scale infrastructure projects thanks to start-to-finish collaboration between the agency/owner, the design firm, and the CMAR firm. Using this efficient and cost-effective method, the CMAR firm serves as a consultant during the design phase, then acts as the general contractor during the construction phase.
The Challenge: City Of Fremont, OH
The city of Fremont, located in rural northwest Ohio, turned to the CMAR approach when it faced aging water infrastructure along with financial constraints and federal compliance requirements. The Sandusky River, which travels through the heart of the city before emptying into Lake Erie, has important recreation and economic value to the community and is a spawning area for Lake Erie walleye game fish. It’s also the source for Fremont’s drinking water and the destination for its treated wastewater and combined sewer overflow (CSO) discharges.
Fremont relied on an aging and increasingly ineffective wastewater and stormwater collection system with many sections originally constructed more than 100 years ago. The city-owned wastewater treatment plant, the Water Pollution Control Center (WPCC), was constructed in 1949, with the last significant upgrade in 1988. This combined sewer system conveys dry weather flow to the WPCC at approximately 6 MGD. The plant was sized to effectively process the dry weather flow, but during heavy rain or snowmelt the combined raw sewage and stormwater volume far exceeded the collection system and plant capacities, causing a regular overflow of this discharge into the Sandusky River. This occurred 70 times in 2013 alone.
Pollutants from these CSO discharges can include bacteria and other pathogens, organic loading, solids, floatable debris, and nutrients. Yearly summer algae blooms in Lake Erie fed by farm runoff and nutrients released from the aging wastewater collection and treatment systems were identified as a significant environmental threat.
Under the Clean Water Act, the U.S. EPA issued a policy in 1994 requiring municipalities to make improvements to reduce or eliminate this type of CSO-related pollution. The implementation and enforcement of this policy was furthered by the National Pollutant Discharge Elimination System (NPDES) permit program administered by state environmental agencies, including the Ohio EPA.
After years of sidestepping compliance, in 2012, Fremont was required to take action by state and federal agencies imposing NPDES discharge permit requirements that the liquids treatment phase of the WPCC be rebuilt by the end of 2015 and other costly long-term control plan improvements to the collection system be completed by 2028. Because no long-term asset management plan for water and sewer systems had previously been developed, Fremont faced a number of hurdles.
For Fremont’s leaders, paying for the project was a significant challenge. The diminished presence of manufacturing companies — a previous driver of the local economy — had negatively impacted Fremont’s income tax base, which once helped subsidize water and sewer operations. State allocations for infrastructure projects had also been reduced substantially. To further complicate funding, Fremont’s construction of a new reservoir to store water taken from the Sandusky River went tens of millions of dollars over the initial project budget by the time it was completed in 2012.
This situation required Fremont to implement a plan for substantial yearly increases in water and sewer rates for local residents, who have a median household income 30 percent below the state average. An Ohio EPA Sewer and Water Rate Survey showed a 20 percent increase in Fremont’s annual residential water rates from 2010 to 2011 and a nearly 30 percent hike in sewer rates over the same period.
Expansion and enhancement of the WPCC became the focus for a newly elected city administration and city council. The project would become the largest public project ever undertaken by the city.
The Solution: Fremont Turns To CMAR
With just a couple of years to meet regulatory requirements and significant budget concerns, Fremont established project parameters for the WPCC:
The CMAR delivery method was identified as the best approach to meet the city’s desired parameters. As compared to the more traditional design-bid-build delivery method, CMAR relies on close collaboration between the agency/owner, design firm, and construction firm, resulting in well-managed or reduced costs and timely project completion.
The CMAR method has become a go-to choice for large-scale infrastructure projects. In fact, within the last 10 years, 54 percent of all major water and wastewater project agency/owners are trying an alternative delivery method like CMAR. According to a survey by R.W. Beck, 96 percent of owners would select an alternative delivery method again.
Since 2011, most public authorities in Ohio, including municipal corporations, townships, school districts, and counties, are permitted to use the CMAR method for planning and constructing public works projects. Under state law, the CMAR contractor is selected in accordance with a competitive and open process based on the value they can bring to all phases of a project. The process is initiated with a broadly distributed request for qualifications (RFQ) and the application of a scoring process in reviewing proposals received from responding companies.
Key Benefits Of CMAR
As a result of the selection process, Fremont chose Colorado-based MWH Constructors (MWHC) as the CMAR contractor for the WPCC project. The benefits, which helped meet the overall project parameters, were:
Clarifier at Fremont’s Water Pollution Control Center
Fremont’s project success was largely due to a willingness among local officials to engage in the design and planning of the project and the development of a close working relationship with the design firm and MWHC. A few examples of how this was accomplished, including best practices and key learnings from the WPCC project, include the following:
“Open Book” Collaboration
The CMAR method fosters transparency with the procurement process and with cost expenditures. Communication is facilitated by the “open book” nature of the parties’ relationship, whereby information concerning the costs, risks, and available design and material alternatives associated with the project are jointly known and managed by the parties throughout the project. Because the agency/owner, design firm, and CMAR contractor work in informed collaboration, the costs of project components are clearly determined and known by all parties. If the cost of a project component seems likely to increase, the CMAR contractor is in a better position to explain the reasons for the expenditure and offer alternatives that will meet the wants or needs of the agency/owner while minimizing a charge to the contingency built into the guaranteed maximum price (GMP).
CMAR contractor proposals should include firm costs for preconstruction services and the administration of the construction phase of the project under a CMAR contract form that is being used for the project. There will also be a contingency amount and a contractor’s fee typically expressed in percentages of the final construction costs. From this, the proposals will then include a projected overall project cost. Several states have forms that are required to be used so the information is presented in a uniform manner for the objective evaluation and ranking of proposals.
The procurement plan is an essential tool in the preconstruction phase, serving as a central source for managing project costs and reducing uncertainty in eventual negotiation of the GMP amendment(s). A well-developed plan will have a number of bid packages for the procurement of labor and materials. These packages are provided to subcontractor firms that have been prequalified by the CMAR contractor. It is a best practice, required under the law in several states, that if the CMAR contractor wishes to self-perform any work it must compete in the bidding process.
Significant savings can be met when the CMAR firm participates in value engineering workshops, creates updated schedules and cost estimates, conducts constructability reviews, prepares all front-end bidding documents, and maintains regular communication with the entire project team. In the case of Fremont’s WPCC project, this type of collaboration led to savings of $5.5 million during the design phase and more than $500,000 in the construction phase.
For example, one of the initial tasks for MWHC leaders was to use 30 percent of the design documents and create a projection of additional necessary work and project components to provide a construction cost estimate. From this work, it was determined that the project was going to be substantially more expensive than the $57 million project cost estimate. In response, further value engineering sessions with the agency/owner and design firm were conducted to adjust the design to lower the cost incurred at 60 percent and 90 percent of project design. This process yielded the cost savings noted above.
Another cost savings opportunity is the agency/owner’s insistence that the CMAR contractor employ a quality control/quality assurance program (QC/QA) that requires input from the complete project team throughout the project. This allows a reduction in the scope of the design firm’s construction phase services. Rather than the normal construction phase services, Fremont and the design firm developed a scope of work that supplemented the MWHC QC/QA program, while allowing the design firm to meet its legal responsibilities. Also, once construction commences, the CMAR contractor is constantly involved in the oversight of the subcontract companies, helping to manage costs and solve problems as they arise. For the city of Fremont, this collaborative approach produced a further savings of $1 million.
As with any project, a variety of factors influences the effectiveness of the CMAR method, including size, scope, timeliness, and the number of phases in a given project. As municipalities and utilities continue to face increasing pressure to address largescale infrastructure projects, including upgrades, new builds, and renovations, CMAR has the potential to provide major benefits to budgets, schedules, and the local economy.
About The Author
Blair M. Lavoie is president of MWH Constructors, a subsidiary of MWH Global, now part of Stantec. With full responsibility for global operations, he is currently the principal-in-charge on more than $2 billion (USD) of construction management at risk (CMAR), designbuild, and CM-as-agent projects in the U.S. Lavoie brings nearly 30 years of engineering and construction experience on a broad range of municipal, industrial, and federal projects. Prior to becoming president, he led the municipal division of MWH Constructors as the director of U.S. operations.