NCHRP Web-Only Document 434

Defining Contractual Risk Profiles to Increase Competition on Alternative Project Delivery Methods

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COOPERATIVE RESEARCH PROGRAMS

CRP PROGRAM STAFF FOR NCHRP WEB-ONLY DOCUMENT 434

Monique R. Evans, Director, Cooperative Research Programs

Waseem Dekelbab, Deputy Director, Cooperative Research Programs, and Manager, National Cooperative Highway Research Program

David M. Jared, Senior Program Officer

Dajaih Bias-Johnson, Senior Program Assistant

Natalie Barnes, Director of Publications

Brendan Foht, Senior Editor

Jennifer Correro, Assistant Editor

NCHRP PROJECT 23-22 PANEL
Field of Administration – Area of Agency Administration

Carmen Swanwick, Utah Department of Transportation, Salt Lake City, UT (Chair)

Sam Beydoun, Washington, DC

Debra R. Brisk, DRB Consulting, LLC, Buffalo, MN

Lisa Choplin, Whitman, Requardt and Associates, LLP, Baltimore, MD

Jay J. Hietpas, Minnesota Department of Transportation, St. Paul, MN

Mohab Hussein, New Jersey Department of Transportation, Ewing Township, NJ

Suril Shah, Virginia Department of Transportation, Richmond, VA

Matthew Corrigan, FHWA Liaison

AUTHOR ACKNOWLEDGMENTS

This research was performed under NCHRP Project 23-22 by HKA Global, LLC. The Co-Principal Investigators were:

• Sidney Scott III, P.E. of HKA Global,
• Michael Garvin, Ph.D., P.E., of Virginia Tech, and
• Daniel Tran Ph.D., P.E., of the University of Kansas serve as Co-Principal Investigators.

Other members of the research team include the following:

• Linda Konrath of HKA Global
• Pratik Malpure of Virginia Tech
• Steven DeWitt, P.E. of Transportation Infrastructure Solutions PLLC
• Douglas Gransberg, Ph.D., P.E., DBIA of Gransberg and Associates, Inc.
• Michael Loulakis, Esq., FDBIA of Capital Project Strategies, LLC
• Dan Dawood, P.E. of The Transtec Group

The research team extends its gratitude and appreciation to the many DOT representatives who gave their time to participate in the survey and interviews.

Table of Contents

Summary

Project Background and Objectives

Research Approach

Key Findings

Research Products

1 Background

1.1 Introduction

1.2 Research Objectives

1.3 Research Approach

1.4 Structure of this Report and Final Deliverables

2 Literature Review

2.1 Reports and Guidance Documents

2.2 Procurement and Contract Documents

3 Survey and Interview Results

3.1 Key Risks on APD Projects

3.2 Risk Allocation by APD

3.3 Risk Identification and Assessment by DOTs

3.4 Practices Implemented by DOTs to Promote Alignment of Risk Perceptions

3.5 Factors Influencing Pursuit of APD Projects by Developers, Contractors, and Designers

4 Methodology Components

4.1 General Overview

4.2 Fixed Price DB Projects

4.3 Progressive APDs

5 Feedback on Proposed Methodology Components

5.1 Introduction

5.2 Owner Outreach: Observations and Findings

5.3 Industry Outreach: Observations and Findings

6 Conclusions and Suggested Research

6.1 Key Findings

6.2 Guidebook

6.3 Suggested Future Research

List of References

Appendix A: APD Manuals and Contracts

Appendix B: Survey Questionnaires

Appendix C: Interview Questionnaires

Appendix D: Raw Survey Results

Appendix E: Interview Summaries

Appendix F: Glossary of Processes/Tools

Appendix G: Example Contract Provisions

Appendix H: Focus Group Notes

List of Tables

Glossary of APD Methods

Table 2.1: Risks Impacting Transportation Cost Estimates

Table 2.2: Surety Perspectives on Contractual Provisions

Table 2.3: Predominant Risk Allocation in Sample of US P3 Highway and Transit Projects

Table 2.4: Typical Project Risks and Allocation Strategies

Table 3.1: DOT/Owner and Industry Responses to Top 5 Risks in DB (Fixed Price)

Table 3.2: DOT/Owner and Industry Responses to Top 5 Risks in CM/GC or PDB

Table 3.3: DOT/Owner and Industry Responses to Top 5 Risks in P3s

Table 4.1: Stage 0,1: Project Initiation, Planning, and Development - Processes/Tools

Table 4.2: Stage 2: Procurement - Processes/Tools

Table 4.3: Stage 3, Execution - Processes/Tools and Documents

Table 4.4: Industry Bid Assessment Practices

Table 4.5: Common Strategies for Managing and Communicating Risk on DB Projects

Table 4.6: Summary of Additional Methodology Processes/Tools for Progressive APDs

Table 5.1: Owner Representatives

Table 5.2: Practices and Tools

Table 5.3: Example DOT Risk Allocation Strategies

Table 5.4: Factors Considered as part of the Pursuit Decision

List of Figures

Figure 3.1: Comparison of DOT/Owner and Industry Responses for Top 5 Risks for DB (Fixed Price)

Figure 3.2: Comparison of DOT/Owner and Industry Responses for Top 5 Risks for CM/GC or PDB

Figure 3.3: Comparison of DOT/Owner and Industry Responses for Top 5 Risks for P3s

Figure 3.4: Heat Map for the Top 5 Risks Identified by DOT and Industry Respondents (% Difference)

Figure 3.5: Heat Map of Alignment of Risk Allocation in DB Projects

Figure 3.6: Heat Map of Alignment of Risk Allocation in CM/GC or PDB Projects

Figure 3.7: Heat Map of Alignment of Risk Allocation in P3 Projects

Figure 3.8: Practices to Align Risk Perceptions in Procurement & Contracting

Figure 3.9: DOT/Owner Responses about Practices Implemented for Post-Award Risk Management

Figure 3.10: Heat Map of Industry Responses about Factors Influencing APD Project Pursuits

Figure 4.1: Methodology Components for Fixed Price APDs

Figure 4.2: Estimate Accuracy vs. Degree of Project Definition

Figure 4.3: Example Quantitative Risk-Based Cost Estimating Output

Figure 4.4: Typical Estimate Components

Figure 4.5: Potential Tools by Stage for Progressive APD Projects