From The Editor | May 25, 2016

How To Pursue Your Next Capital Project

Peter Chawaga - editor

By Peter Chawaga

It’s hard to know which avenue is best for approaching a new capital project. Depending on the specifics, municipalities may fear that contractors are taking advantage of them during the bidding process. Construction companies may be constrained by the agreement, leaving them unable to do their best work within the budget. Taxpayers have heard enough about bid-rigging and inside jobs to be skeptical of almost any approach.

But it appears that a new method is on the horizon to take out the guesswork.

The Water Research Foundation (WRF) will contribute between $125,000 and $150,000 towards the creation of a digital tool providing utilities with guidance on the best project delivery methods for their drinking water and wastewater capital improvement projects. Users will be able to compare their upcoming projects with a database of similar ones, analyzing the results of various delivery methods.

Formally termed the “Project Delivery Performance Evaluation and Decision Support Tool for Water and Wastewater Capital Projects,” the goal is to create the first-ever quantitative comparison between design-build, design-bid-build, and construction manager at risk (CMAR) project delivery methods.

The WRF is a not-for-profit research cooperative with about 950 utility, manufacturer, and consultant subscribers. It sponsors between 25 and 40 such projects a year.

“There is a plethora of information on project delivery method best practices, contract language, education and outreach, case studies, etc.,” said Rob Renner, CEO of the WRF. “However, a quantitative evaluation of performance metrics and a data-driven decision support tool is a research gap for the water and wastewater industry.”

Design-build refers to a project in which the design and construction are contracted to a single group. In a design-bid-build arrangement, the utility hires one group to design a capital project, then solicits bids from others to carry out the construction.  CMAR is a delivery method in which a group agrees to complete a capital project within a guaranteed maximum price, based on the project’s specification.

Each of those delivery methods has its downsides. In design-build arrangements, the contractor may be incentivized to complete the project quickly and at as little expense as possible, potentially to the detriment of the project itself; design-bid-build projects tend to receive bids that exceed a utility’s project budgets; and because the guaranteed maximum price is determined before designing begins, CMAR contracts don’t have the cost advantage of competitive bidding. 

Like anything else, it’s about choosing the arrangement that’s best for a given project. Up to this point, data analysis has played a smaller role in the decision-making than it should.

“Water and wastewater capital project delivery methods can be selected in a variety of ways and are at times dictated by factors such as purchasing requirements and restrictions, state regulations, scheduling constraints, engineering input, direction from city council members, boards, entity leaders, and other methods,” said Renner. “There really isn’t a one-size-fits-all approach for project delivery method selection at this time. The purpose of this project is to compile criteria into a data-driven support tool that can serve as a starting point for utility owners to begin evaluating their options in a systematic way.”

The tool is still in the early going. The WRF will release a request for proposal in June and the project team will be selected later this year. It will likely be available for use in 2018.

“The project team will collect capital project data to conduct the performance evaluation and develop the decision support tool,” said Renner. “The quantitative comparison between the three delivery methods will use project metrics such as cost, cost growth, and quality to develop a statistical analysis between the three delivery methods.”