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

jerry.blanding@fhwa.dot.gov