CHAPTER 3

State of the Practice

This chapter reviews current practices used by state DOTs to conduct open-book negotiations to collect the state of the practice on the policies, procedures, and methods used by DOTs to conduct open-book negotiations on CM/GC and PDB projects. A web-based survey was distributed to the alternative project delivery contacts at the 50 state DOTs and the District of Columbia. The survey results presented in this chapter are based on 42 state DOT respondents (see Figure 6). Additionally, a content analysis of the documents obtained from the survey is included to support the findings. The chapter begins by summarizing individual DOT use of CM/GC and PDB and then presents the motivations for applying open-book negotiations in their alternative project delivery programs. Next, the chapter covers the mechanics of individual DOT open-book estimating and negotiating, including the development of risk-based contingencies. Lastly, the chapter reviews DOT practices for employing an ICE during the open-book negotiation process.

It is important to note that since 29 of the 42 respondents are authorized to use CM/GC and/or PDB and thus use open-book negotiations, adding the numbers shown in the subsequent figures to see whether they are all equal is futile. For example, some DOTs have implemented CM/GC or PDB without specific enabling legislation. Therefore, they will answer “no” to having authority but will indicate the number of projects they have awarded. Similarly, some DOTs do not use open-book negotiation procedures. Additionally, many of the questions asked respondents to “check all that apply,” allowing them to provide multiple answers to a single question. Finally, PDB is a newly emerging variant of the DB project delivery method. Although the sample size of PDB respondents is small, it should not detract from the meaningful trends that can be inferred. Importantly, the findings regarding open-book negotiations in CM/GC are applicable to PDB, possibly encompassing all relevant aspects.

The one apparent trend is that each state customizes the procedures it uses to conduct GMP negotiations to reflect its individual policies, constraints, and preferences. Thus, the synthesis will focus on those effective practices for which the survey results, content analysis, and literature review intersect and support the findings. Appendix A contains the complete survey and the individual DOT responses. The following sections report and discuss the details of the survey findings. Figures 8 through 22 present the responses to the survey questions as bar graphs.

3.1 Overview of DOT CM/GC and PDB Experience

The initial section of the survey sought to benchmark the responding DOTs’ experience with CM/GC and PDB. Hence, the following questions explore authorization and actual usage of the two delivery methods. No attempt is made to measure the relative effectiveness of the two methods or to gather project performance data. The survey results are grouped into logical categories rather

than reported sequentially to provide a better focus on the output. A short summary of the findings is provided at the end of each group of questions.

Question #5: Is your agency authorized to use either CM/GC or PDB to deliver transportation projects?

Responses: Twenty-nine (29) of 42 respondents were authorized to use CM/GC or PDB.

Question #6: Is your agency authorized by state statute to use either CM/GC or PDB?

Responses: Ten (10) responding DOTs were authorized to use CM/GC, 4 were authorized to use PDB, and 15 were authorized to use both.

Question #7: Has your agency implemented CM/GC or PDB?

Responses: Thirteen (13) responding DOTs had implemented CM/GC only, 3 implemented PDB only, and 8 have implemented both. The total number of DOTs that have tried CM/GC or PDB is less than the number of authorized DOTs.

Question #16: For which of the following types of construction projects do you use an open-book approach for negotiating?

Responses: Eight (8) responding DOTs use an open-book approach for CM/GC only, 3 use an open-book approach for PDB only, and 14 use an open-book approach for both.

Question #17: For which of the following types of construction projects are you required to include some form of competitive pricing to award?

Responses: Six (6) responding DOTs are required to include competitive pricing for CM/GC, 2 responding DOTs are required to include competitive pricing for PDB, and 6 responding DOTs are required to include competitive pricing for both CM/GC and PDB.

Summary

The responses show that while a responding DOT may have the authorization to use CM/GC or PDB, it does not automatically imply that the responding DOT will actually implement it. Additionally, open-book negotiation of the GMP is not critical for an owner to align. Some

responding DOTs do not use the procedure on their CM/GC and PDB projects, apparently preferring to handle establishing a GMP for construction through their normal negotiating practices. The responses to Question #17 tend to support qualifications-based selection (QBS) because only 14 of 29 DOT respondents are required to include an element of competitive pricing in their award process. Obviously, if a state’s statute requires a sealed price proposal, such as Georgia and Maryland, then QBS is not a viable option. Although the survey did not cover the amount of weight according to price, both the literature (Gransberg and Molenaar 2019; Shang and Migliaccio 2020) and content analysis (GDOT 2023) found that the price was weighted in a manner that did not give it a significant influence on the award decision.

Figure 7 is intended to furnish a visual synopsis of CM/GC and PDB experience across the United States. Of the 29 responding DOTs that reported using CM/GC and/or PDB, only 8 DOTs (California, Colorado, Delaware, Maryland, Michigan, Minnesota, New Hampshire, and Utah) had what might be described as a mature CM/GC program, with more than six projects awarded. At the time of this writing, none of the responding DOTs’ PDB programs could be described as mature. The remaining details of this section of the survey are provided in the following section.

3.1.1 CM/GC Experience

Question #8: Number of CM/GC projects awarded?

Responses: Twelve (12) responding DOTs had awarded five or less CM/GC projects, of which 7 had only awarded one. Nine (9) responding DOTs had awarded six or more CM/GC projects.

Question #10: What is the approximate number of successfully negotiated CM/GC work packages or mini-contracts your agency has awarded?

Responses: The responses to this question were dropped because it was obvious by their wide variation that the respondents did not understand the intent of the question.

Question #12: Number of CM/GC projects completed?

Responses: Thirteen (13) responding DOTs had completed five or less CM/GC projects, of which 3 had only completed one. Four (4) responding DOTs had completed six or more CM/GC projects. (Note: Some responding DOTs had awarded six or more projects but completed less than five, so comparing 12 awarded to 13 completed is not appropriate).

Question #14: Number of CM/GC projects planned?

Responses: Nine (9) responding DOTs planned five or less future CM/GC projects, of which 3 planned only one. Two (2) responding DOTs planned six or more future CM/GC projects.

Summary

CM/GC is actively used by 21 responding DOTs in the sample population. California, Colorado, Michigan, Minnesota, and Utah all reported awarding 10 or more CM/GC projects. It appears that CM/GC is well accepted by responding DOTs because those who reported that they completed CM/GC projects also indicated that they intended to use CM/GC in future projects.

3.1.2 PDB Experience

Question #9: Number of PDB projects awarded?

Responses: Eleven (11) responding DOTs had awarded five or less PDB projects, of which 6 had only awarded one. No responding DOTs had awarded six or more PDB projects.

Question #11: What is the approximate number of successfully negotiated PDB work packages or mini-contracts your agency has awarded?

Responses: The responses to this question were dropped because it was obvious by their wide variation that the respondents did not understand the intent of the question.

Question #13: Number of PDB projects completed?

Responses: Only one responding DOT (Utah) reported completing a PDB project, specifically two projects.

Question #15: Number of PDB projects planned?

Responses: Thirteen (13) responding DOTs planned five or less future PDB projects, of which 8 planned only one. Only 1 responding DOT planned six or more future PDB projects.

Summary

PDB is emerging as a variation of DB for DOTs. Gransberg (2023) found that a number of DOTs have implemented PDB without specific enabling legislation. The DBIA (2017) maintains that it is not a separate method but rather merely a variation of DB. Interestingly, both the Alabama and Kansas DOTs used PDB for their first DB projects, which lends credence to the DBIA’s position. Additionally, states such as Illinois and Nebraska, which were only recently authorized to implement alternative delivery methods, included PDB in their enabling legislation.

3.1.3 Open-Book Procedures

The next section of the survey sought to understand state DOTs’ motivations for and the specifics of using the open-book negotiation process. The output is displayed graphically to better visualize the collective trends associated with each question. Most questions involved a matrix of possible choices, and respondents were asked to check all choices that applied to their agency. Additionally, each matrix question was followed by a text box question in which respondents could amplify their answers. Each matrix included a choice of “other,” which was generally detailed in the text box.

Question #18: Please check all of the reasons your agency would use for choosing to negotiate the construction cost.

Question #19: Please provide any additional comments on your agency’s motivations for selecting to negotiate rather than fix the construction cost prior to awarding the construction or DB contract.

ARDOT: “Construction complexity is the driver.”

Colorado DOT: “Collaboration on the preconstruction mitigates errors and omission changes during construction, resulting in a more accurate representation of the scope. Which provides an opportunity for a higher initial cost but a lower final cost.”

Illinois DOT (IDOT): “More flexibility with delivery options, with scopes and comfort levels.”

MnDOT: “The motivation is typically tied to budget/cost certainty and risk. Some projects have risks, both threats and opportunities that are difficult to define and properly allocate

without collaborating with industry partners before establishing a price. Some projects have budget/fiscal constraints that make negotiating costs based on informed decision-making highly beneficial to the project’s success.”

ODOT: “Risk sharing and new technologies are the main reason Ohio DOT is pursuing PDB on small pilot projects.”

Summary

The need to share and jointly assign responsibility for specific risks is the primary motivation for using a project delivery method that permits the construction contract amount to be negotiated. Similarly, a desire to leverage the benefits of early contractor involvement in the design process through the evaluation of technical alternatives is also highly ranked. When one considers the ranking of “means and methods drive design,” “complex utility coordination issues,” and “complex maintenance of traffic,” the desire to accrue the benefit of contractor design involvement is further reinforced. Both the need to share risk and gain the contractor’s constructability input are confirmed in the literature (Alleman and Tran 2020; Dongo 2020).

The “desire for enhanced collaboration” and “desire for enhanced cost certainty” were ranked fourth and fifth, respectively. The “desire for enhanced schedule certainty” ranked ninth. Hence, it appears that the responding DOTs view the open-book process as a means to increase project certainty through collaboration during the GMP development process. Again, this fact is confirmed in both the literature (Barutha et al. 2021) and content analysis [Florida DOT (FDOT) 2021, GDOT 2023].

Question #20: On CM/GC and PDB projects, which of the following elements of the contract amount are negotiated? (Check all that apply).

Question #21: Please provide any additional comments on your agency’s approach to determining what items will be negotiated after awarding the CM/GC or PDB contract.

CDOT: “We often challenge means and methods to ensure we are only including essential scope and not scope of convenience.”

MnDOT: “My agency does not use PDB so my answers to question 20 apply to CM/GC only. And my answers represent what MnDOT currently does, not what could be done. For instance, MnDOT defines in the CM/GC RFP a fair/reasonable construction services fee, represented as a markup, for profit and home office overhead. MnDOT doesn’t have to do that, but we’ve found that defining this markup has minimized contractor gamesmanship that we’ve found to be counterproductive to reaching agreement on a fair and reasonable price.”

UDOT: “Everything is negotiable but quantities and home office overhead are objective enough to not require negotiation.”

Washington State DOT (WSDOT): “Other than commercial terms, mostly anything could be negotiated if it has a significant bearing on the cost.”

Summary

Once again, risk tops the list, with contingencies ranked fourth. The elements of markups profit, general conditions, and home office overhead are the lowest ranked. This result may be due to DOTs such as MnDOT fixing these elements in the solicitation and those DOTs that must include competitive pricing in their award, thus requiring the proposers to include the markups in the preconstruction and construction services fees that are part of the price proposal. Conversely, 15 respondents negotiate those fees after the contract is awarded.

Question #22: How does your agency set the preconstruction services fee?

Question #23: Please provide any additional comments on your agency’s approach to determining the preconstruction services fee.

ARDOT: “Use a 1% to 3% of construction estimate as a goal for fee.”

CDOT: “This is based on an analysis that takes into account size of the scope, level of project development and a level of effort described in the RFP.”

DelDOT: “0.5–1.0% of total construction estimate.”

GDOT: “Based on number of hours and scope we provide, the CM firm provides lump sum fee.”

Kentucky Transportation Cabinet: “We feel like it’s important for the preconstruction phase to be paid as cost-plus so that we have the opportunity to work through things with the design-build team without the adversarial relationship that would come from a fixed price.”

Maine DOT (MaineDOT): “Preconstruction services are paid at actual rates plus overhead and profit.”

Michigan DOT (MDOT): “Contractor staff providing preconstruction services are paid an agency specified lump sum. Designer staff with audited overhead rates are paid actual cost plus fixed fee based on negotiated number of hours.”

ODOT: “Designer is based on FAR rates and actual hours, and the builder is based on actual hours with standard DBB allowable markups for labor.”

TDOT: “Agency-specified Not to Exceed (NTE) amount paid on negotiated rates for actual level of effort.”

UDOT: “Preconstruction effort is negotiated similar to a professional services contract.”

Vermont DOT (VTrans): “Hourly rates for the different services being provided by the contractor.”

VDOT: “The preconstruction services are broken in Phase 1A (lump sum) and Phase 2 (negotiated fee). [Note the VDOT uses a two phase PDB approach with two off-ramps. The Phase 1A is a proof of concept design and cost estimate. In this phase VDOT refines the PDB scope and makes a decision if sufficient funding is available. Hence, the two different preconstruction fees.]”

WSDOT: “Hourly rates and level of effort is required as part of the proposal from all shortlisted firms but not evaluated as part of their score. It is ultimately used for negotiations prior to award.”

Summary

The preconstruction services fee applies to the contractor’s effort during the design process. Therefore, it is not surprising that most of the respondents treat it in much the same manner as the design fee, negotiating hourly rates and level of effort after the contract is awarded. The literature shows that the value of early contractor involvement is accrued during the preconstruction phase (West and Schierholz 2011; Alleman and Tran 2020). As a result, a current school of thought maintains that the contractor should not be put in a position of needing to minimize its preconstruction efforts to avoid losing money. The comments from the Kentucky Transportation Cabinet and TDOT are examples of that notion. Conversely, past research on CM/GC has found that construction contractors do not perceive preconstruction services as a profit center (Rowley 2011) and often propose preconstruction fees without profit (Touran et al. 2011). Thus, a gap exists in the body of knowledge that would benefit from future research to compare the performance of the two methods to set preconstruction fees.

Question #24: How does your agency set the construction services fee?

Question #25: Please provide any additional comments on your agency’s approach to determining the construction services fee.

CDOT: “When this was included in the evaluation of the RFP, we set a floor for the percentage, and the proposers were gaming the percentage which made negotiation of cost after the fact difficult.”

Maryland State Highway Administration (MSHA): “In our single PDB the construction services were Lump Sum at the time of bid. On our CM/GC, it is negotiated and can be either accepted or rejected.”

MDOT: “Construction services fee is reviewed at each milestone to determine if the independent cost estimate needs to be revised. Final price is a negotiated lump sum for the total contract, including direct costs.”

ODOT: “Profit and Overhead as Direct Costs are part of a competitive bidding element used during project award.”

UDOT: “G&A is audited while profit and overhead are negotiated based on general conditions and project complexity.”

WSDOT: “Either negotiated lump sum or proposer specified percentage.”

Question #26: Does your agency use a project cost model for the open-book GMP negotiations and who develops that model?

Question #27: Please provide any additional comments on your agency’s approach to cost modeling in open-book negotiations.

DelDOT: “Work collaboratively among the ICE, owner, and contractor to develop the model.”

IDOT: “Each party will have cost estimating. DOT will have ICE on board as well.”

TDOT: “Contractors are allowed to utilize the model of choice with concurrence from the ICE and Department, cost model must be fit into the Department’s standard for final GMP negotiations and construction award.”

UDOT: “This is done collaboratively between the owner, ICE and general contractor.”

WSDOT: “The cost model is submitted by the Progressive Design-Builder and reviewed by ICE. Ultimately, both PDB and ICE agree with the proposed model prior to start of estimating.”

Question #28: How does your agency establish the amount of profit in a CM/GC or PDB project?

Question #29: Please provide any additional comments on your agency’s approach to determining profit in open-book negotiations.

ARDOT: “Should be Fair Market Value, typically in 12–13% range.”

MDOT: “A percentage is discussed and negotiated at each milestone. At final negotiation, the ICE provides the owner with a recommended profit based on all elements of the cost model (risk, contingency, etc.). Final negotiations are based lump sum for total project cost.”

MnDOT: “MnDOT specifies a markup for profit in the CM/GC RFP. This markup applies to the negotiated construction price, which for MnDOT CM/GC contracts typically consists of standard MnDOT bid items paid for based on unit prices and quantities established by the project team (designer, contractor, MnDOT) during the project’s design development. This markup for profit should not be confused with margin or a guaranteed profit.”

ODOT: “Overhead and profit are competitively bid at a range between 8% to 16%.”

Rhode Island DOT: “Profit is rolled into construction services fee.”

WSDOT: “This is the only competed cost item in the RFP between the shortlisted teams. However, if the selected team’s percentage is too high, WSDOT has the ability to negotiate or move to the second highest proposer prior to award.”

Summary

The construction services fee has the potential to make reaching an agreed-upon GMP difficult (Gransberg and Molenaar 2019; Shang and Migliaccio 2020) because of the differing expectations for what represents a fair and reasonable profit. Figure 11 illustrates that a preference for negotiating the construction services fee exists. This fact requires the DOT’s and contractor’s expectations

to be aligned through enhanced collaboration. The ICE can often play a key role in reaching alignment on this key component of the open-book process (Gransberg et al. 2022a). No clear trend exists in the responses to this question. The specifics for establishing the construction services fee will be determined individually at the DOT’s discretion and other factors.

3.1.4 Design Cost and Contingency Development

This section looks at how design costs and contingencies are approached by the respondents to the survey. These are costs to the agency unrelated to the direct cost of construction but are negotiated in most open-book systems.

Question #30: How does your agency handle the establishment of design costs in a PDB project?

Question #31: Please provide any additional comments on your agency’s approach to determining the PDB design fee.

California DOT (Caltrans): “We must use in-house design on CMGC by legislative mandate.”

MDOT: “Actual cost plus fixed fee, based on audited overhead and rates on file with the owner. Hours are negotiated.”

ODOT: “Set aside budget with Opinion of Probable Costs at three different stages.”

WSDOT: “Assuming this is referring to final design after preliminary design is complete. The DB provides their lump sum price with breakdown of rates and level of effort. WSDOT reviews and negotiates the final design costs as part of the Construction package. WSDOT has the option to go with negotiated rates as well and reimbursed for actual level of effort.”

Question #32: How does your agency handle the establishment of contingencies in a CM/GC or PDB project?

Question #33: If you chose other in the previous question, please explain how your agency handles the establishment of contingencies in a CM/GC or PDB project below.

DelDOT: “For standard unit of measure pay items, we pay actual quantities, so a separate contingency to cover any overruns is established and held by the owner. For other types of risks, we develop a risk register with risks, costs, triggers, and mitigation measures that is included in the contract. The contractor gets paid only if the risks are triggered.”

MSHA: “As a policy we do not have project specific contingencies.”

MDOT: “Contract price includes a GMP and additional unit price items outside of the GMP that are anticipated. Additional contingency items may be negotiated during preconstruction that are added after contract award via change order. Final contract price includes GMP, plus unit-price items based on final quantities, plus any contingency items added via change order.”

MnDOT: “Contractor includes contingency in their bid for risks allocated to them. MnDOT and contractor discuss these risks and the contractor provides assessments, including cost, of these risks during the project’s pre-construction phase. Risks that are allocated to MnDOT are part of an owner-controlled contingency that is carried outside the contractor’s bid.

North Carolina DOT: “We use the risk register to establish costs.”

UDOT: “The total lump sum amount is built up from distinct negotiated items.”

WSDOT: “Contingencies are evaluated both for GMP and Lump Sum. In GMP, contingencies are controlled by Design-Builder but savings are shared.”

Question #34: Does your agency use a risk-based approach to establish contingencies?

Question #35: Please provide any additional comments on your agency’s approach to the establishment of contingencies in a CM/GC or PDB project.

Caltrans: “Separately negotiated agency and contractor contingencies: contractor contingency in the project agreed price (not GMP) and agency contingency outside the project agreed price.”

DelDOT: “We develop a risk register with risks, costs, triggers, and mitigation measures that is included in the contract. The contractor gets paid only if the risks are triggered.”

Summary

The responding DOTs that use PDB treat design costs in the same manner as their DBB design contracts. Caltrans is an exception in that it is prohibited from outsourcing design services, making it an example of how CM/GC can be implemented using in-house design assets.

For the majority of the respondents (15 of 21), contingencies are established using the expected value of the risk method, with input values for likelihood and impact to be established using professional judgment. Only one responding DOT (MnDOT) reported using the Monte Carlo simulation method with input values based on past projects. Three respondents indicated that they did not set contingencies based on risk. The respondents also showed a clear preference for the agency controlling the entire contingency. Nine responding DOTs account for the contingency as part of the GMP and negotiate separate contractor and agency contingency amounts.

3.1.5 ICE

The final section of the survey explored the approaches to employing an ICE, if one was retained. According to WSDOT (2023), the purpose of an ICE is “to independently estimate design and construction costs at various design milestones to validate the [Progressive] Design-Builder’s cost estimates and risk contingencies during the course of the agreement.” ARDOT (2023) states that “the purpose of the ICE is to provide another perspective to the CMGC Contractor’s estimate that helps ensure a fair and reasonable price for construction. There is a subtle difference between “validating” and “providing another perspective.” According to the literature, “validating” requires the ICE to prepare its estimate based on the CM/GC and/or PDB contractor’s means, methods, and sequence of work (Gransberg et al. 2022a). However, this constraint is not present in the ARDOT approach. In fact, ARDOT assigns the ICE to lead the “Initial Approach to Cost” meeting. Thus, these two DOTs define a spectrum across which the ICE can be employed, from strictly validating each OPCC to being collaboratively involved in the estimating process.

Question 36: Is your agency required to prepare a “state’s estimate” in addition to estimates that are prepared by design consultants and other external sources?

Question 37: If the answer to the above question is yes, are you authorized to use the ICE’s estimate as the “state’s estimate”?

Question 38: Does your agency employ an ICE?

Question 39: Please check all of the activities covered by the ICE’s contract below.

Question 40: Please provide any additional comments on your agency’s approach to employing an ICE in CM/GC and PDB projects.

Caltrans: “The ICE occasionally solicits quotes for some critical elements of the work to independently validate the cost.”

UDOT: “The ICE plays a critical role in the successful negotiation of the construction price.”

Question 41: How are ICE services retained contractually?

Question 42: If you chose other in the previous question, please describe.

Responses: There were no “other” responses, but there was one comment.

MSHA: “On-call/as-needed ICE contract is being considered for future contracts.”

Question 43: Does your agency have a mandated percentage variation of the proposed GMP from the ICE or state’s estimate that must be met to award the construction?

Responses: Twelve (12) responding DOTs answered yes and 14 answered no.

Question 44: If yes, what is the percentage?

Responses: Nine (9) responding DOTs use 10% as the allowable variation, 2 use 5%, and 1 uses 2%.

Question 45: If an impasse is reached regarding the GMP, does your agency’s CM/GC and/or PDB contracts provide for an “off-ramp” as defined in the introduction to this survey and if so, has your agency ever exercised it?

WSDOT: “WSDOT has not yet exercised an off ramp. However, the off-ramp may be exercised in cases where Contractor’s estimate exceeds a certain range from ICE’s estimate or if the agency did not have the necessary funding.”

Question 49: Which of the following were “trigger points” for exercising the off-ramp in your CM/GC and PDB contracts?

Summary

Figure 17 shows that 20 responding DOTs are required to produce a “state’s estimate” separately from estimates provided by design consultants and other external sources. Nine of those responding DOTs are allowed to use the ICE’s estimate as the state’s estimate. The others presumably have an in-house cost engineering group performing that duty. MnDOT is an example of that arrangement. The responses also show that the majority of the respondents (23 of 25) employ an ICE as a matter of policy. The two responding DOTs that do not can implement CM/GC and PDB successfully without the need for an ICE.

With the exception of two items, the striking aspect of Figure 18 is that all the possible tasks that can be assigned to the ICE are found in multiple DOTs. The top four tasks are related to estimating, which is not surprising given that estimating is the core business of an ICE. The next group, from “producing ICE deliverables” to “conforming quantities of work,” is all related to collaborative aspects for which the ICE is able to contribute to the decisions made by the DOT during the preconstruction phase.

One should note that 15 responding DOTs ask the ICE to validate the GMP, whereas 13 require the ICE to prepare a competing bid to the contractor’s OPCC. When the contractor and ICE are put in a competition, it could arguably have a negative impact on the collaboration, which could ultimately make it more difficult to reach a mutually agreed-upon GMP. Answering this question and whether a difference in project performance exists in CM/GC and/or PDB projects with and without an ICE is recommended for future research.

The majority of the responding DOTs that use an ICE (25 of 31) will either contract for it on a project-by-project basis or use an on-call ICE for multiple projects. Three DOTs include ICE services in either a general engineering consultant (GEC) contract or a program management contract (PMC), while two DOTs use in-house resources. The three non-ICE options seem to be contrary to the purpose of an ICE. ARDOT (2023) describes it as a consultant with “considerable experience producing production-based, contractor-style estimates using contractor-style estimating software.”

The issue of exercising an off-ramp when an agreement on a fair and reasonable GMP has not been attained is of great interest to DOTs that are new to open-book negotiations. Figure 21 shows that implementing off-ramps is a rare occurrence. In the two instances reported in the survey responses, the off-ramp was used because the scope of the project had grown to exceed

the available funding. Neither DOT involved gave reason to believe that the contractor’s OPCCs were inflated. In fact, in the next chapter, several case examples will be presented in which the open-book process helped the owner to better understand the current costs of the proposed scope of work and triggered it to seek additional funding rather than canceling the project via an off-ramp. Figure 22 shows that the two most common trigger points are the “contractor’s price exceeds available funding” (14 of 21 responding DOTs) and the “inability to agree on pricing” (14 of 21 responding DOTs).

3.2 Findings from the Survey Analysis

The following are findings related to the survey:

• The desire to share and jointly assign responsibility for specific risks is the primary motivation for implementing open-book negotiations in CM/GC and PDB projects.
• Responding DOTs view the open-book process as a means to enhance project cost and schedule certainty through collaboration during the GMP development process. The MnDOT respondent expressed the following sentiment: “Some projects have risks, both threats and opportunities, that are difficult to define and properly allocate without collaborating with industry partners before establishing a price.”
• A variety of methods are used to establish the design, preconstruction services, and construction services fees. Each responding DOT has its own preferences, which range from specifying a fixed percentage or lump sum in the solicitation to asking the competitors to propose these fees during procurement to negotiating the fees after the contract is awarded.
• Responding DOTs tend to use professional judgment as the basis for establishing risk-based contingencies and to hold those contingencies outside the GMP.
• Most DOTs choose to retain an ICE; nevertheless, a wide range of approaches are available for the role the ICE plays in open-book negotiations.
• Off-ramps are generally included in CM/GC and PDB contracts but are rarely used.

3.2.1 CM/GC and PDB Solicitation Document and DOT Manual Content Analysis

Experience has shown that a difference between what is reported by survey respondents and what is actually implemented in the procurement documents used to actually execute CM/GC and PDB projects is possible. Therefore, a content analysis of solicitation documents and DOT policy and procedure manuals was conducted.

Table 4 provides a synopsis of the documents reviewed in the content analysis. Two categories of documents were sampled: DOT guidelines for implementing CM/GC and PDB programs and solicitations for CM/GC and PDB projects. Documents from a total of 27 states were reviewed. As expected, the majority of the documents were for CM/GC projects. Both Illinois and Indiana produced draft PDB guidelines in anticipation of future PDB projects. Since the focus of the synthesis is on the open-book process, the content analysis was limited to topics such as GMP components, procedures for developing OPCCs, and the decision to use an off-ramp. Specifically, the same questions in the survey were used to permit a side-by-side comparison.

Figure 23 shows the crux of the content analysis, which is portrayed by the matrix of negotiable elements in Question #20 of the survey. It compares the results of the CM/GC solicitation content to the survey. It is important to note that the solicitation [i.e., request for qualifications (RFQ)/RFP)] contains specific instructions to competing proposers from the DOT and forms the basis of the subsequent contractual terms. The literature maintains that it is important for

Table 4. Content analysis coverage.

the owner to describe the details of the process for arriving at a GMP in the solicitation (Schierholz and Gransberg 2013; DBIA 2017; Alleman and Tran 2020; Gransberg et al. 2022b).

While the survey trend is roughly carried over into the content analysis, all the items in the content analysis, with the exception of the schedule and construction services fees, were found in less than 50% of the solicitations. One can infer that CM/GC solicitations do not provide the details on the open-book GMP process that the literature maintains, which is essential to creating the required alignment of the DOT’s and contractor’s expectations and facilitating a collaborative environment in which to negotiate. Since each DOT has its own unique formula for exactly what is contained in the GMP, it appears more guidance is needed to provide the details of the GMP and the open-book process in CM/GC solicitations.

The PDB solicitation content analysis contained only four RFPs and no trends to report. The CM/GC guidelines were similarly spotty (only one or two observations of the terms of interest) regarding how open-book negotiations were to be conducted and how elements of the GMP would be computed. Three exceptions were present. First, 11 responding DOTs required the CM/GC contractor to provide the GMP cost model. Secondly, 9 of 11 guides specified that separate agency and contractor contingencies would be negotiated, with the contractor’s contingency being included in the GMP. Finally, nine guides indicated that contingencies for risk would be quantified based on professional judgment, while three relied on a single qualitative assessment of the value of risk.

3.3 Findings from the Content Analysis

The content analysis demonstrated that open-book procedures need to be institutionalized through specific agency guidelines. Those procedures then need to be promulgated into CM/GC and PDB solicitations. This need points to another need for future research to produce an open-book negotiation guide that can be used as the basis for DOT policy decisions, procedural variations, and contractual provisions in solicitations. Lopez del Puerto et al. (2016) found that aligning expectations for identifying and quantifying risk in DB projects was a valuable tool in avoiding claims. The same can be said for aligning expectations for the open-book negotiating process. The solution is the DOT provides a detailed description in the contract for how it will build up the GMP and conduct risk assessment and its approach to open-book negotiations.