During a recent education and discussion session with a state regulatory agency, the following questions pertaining to the differences in design-build and CMAR delivery were addressed. Currently, most State SRF and DWRF programs require completion and approval of design prior to construction as well as a competitive bidding process.
1. There are three basic design-build delivery methods in the WDBC Handbook: progressive design-build (PDB), fixed-price design-build (FPDB), and construction management at-risk (CMAR). Is it correct to assume that a project that utilizes PDB and CMAR concurrently could not occur?
Response: This is a correct assumption - both CMAR and PDB, while philosophically and functionally similar, are two different delivery models (please refer to the WDBC Handbook for greater details on the differences).
2. Is the proper way to include construction management as part of a municipal or wastewater construction project to use the construction management at-risk (CMAR) delivery method?
Response: Not necessarily, because the circumstances in which it is used depend on the definition of construction management within the CMAR delivery model. The emphasis is procurement of the CMAR on primarily qualifications (where price component can be a factor); contracting with the CMAR firm early in the design process for constructability and value engineering, and optimizing the design to accommodate a more efficient construction process. Depending on a state’s legislative rules, a CMAR firm can both subcontract work and self-perform work. The agency or municipality can emphasize its desires based upon limiting the amount a CMAR can self-perform, or even mandate that a certain percentage of the work be self-performed. This approach allows for competitive pricing for all packages, and there are a number of ways to approach the delivery method.
3. Is it true that the construction manager (CM) and project designer must be two separate entities – while the CM is usually a general contractor?
Response: Yes, this is a correct statement. the CMAR firm and the designer are separate. Having said this, some states (e.g., Texas) allow the same entity to be both CMAR and designer; however, both contracts must be procured under a competitive process (either best value or guaranteed maximum price).
4. Does the CM provide input to the designer during the design process and then manage the construction and delivery of the finished project?
Response: Yes…also see above with respect to the CMAR’s ability to actually the perform work.
5. In CMAR, construction personnel (e,g., the general contractor) are integrated into the design process early to resolve potential constructability, schedule, and other issues prior to construction (also see the other responses).
6. With CMAR there are two possible scenarios: 1. Using guaranteed maximum price (GMP), which can be defined prior to construction; and the CM/GC will act as the GC during construction; and 2. The project can go out for bid and the CM/GC can either bid on the project or subcontract the construction work.
Response: Essentially, yes! The GMP can be converted to a lump sum. And, the CMAR (or CM/GC as referred to in some states) can break the project up into work packages as described in item #2 above.
7. In the progressive-design build (PDB) method, is it possible to start construction after the design has been completed and approved?
Response: Yes, and within a state regulatory process, we typically see the following actions occuring:
- The selected PDB firm submits preliminary design documents for initial review, comment, and outline of phasing
- The agency reviews and provides concurrence with approach
- The selected PDB firm submits final design packages in phases
- And, as the agency approves the various packages, the PDB project is permitted to begin construction on the approved phases, depending on the authorization and preview of the reviewing agency
8. If the Agency knows early in the project development phase that it will go out for bid, how does that decision change the CMAR delivery method (besides there being no need for a GMP)?
Response: Assuming that the entire project is procured as a single project, then the project becomes a DBB. If individual packages are procured, that approach, if under the CMAR, is consistent with the intent of CMAR, subject to the self-perform criteria.
9. It appears that the general contractor is usually the CM. Can the CM be an entity other than a GC? If so, please give examples.
Response: Because of bonding, licensing and insurability, states require that the CMAR carry the appropriate levels consistent with GC applications. However, the CMAR can be any entity that meets these requirements, whether of not it is a “traditional GC”. Examples can be found in the WDBC Handbook.
10. How is the method adapted when the CM is a design engineering firm?
Response: Agencies must comply with licensing requirements. Most WDBC member companies are capable of providing both design and construction, and are licensed to do both. Most “traditional design firms” do not carry the appropriate licensing to perform CMAR services, and most “traditional general contractors” are not licensed to provide design services.
11. WDBC’s Handbook discusses the RFP process for CMAR. If the CM is a design engineering firm, can the municipality choose the firm based on a prior working relationship or should the RFP process be followed for every project?
Response: The RFP should be crafted to incorporate specific project drivers and owner desires as part of the selection criteria. So while a boilerplate and repeatable approach is desired for efficiency, the desired qualifications, weighting and selection criteria should be project specific. This would be the case for both CMAR and PDB.
WDBC member Parsons recently held a groundbreaking ceremony to kick off construction of a brackish groundwater desalination project for the San Antonio (Texas) Water System (SAWS). Event participants included SAWS trustees and San Antonio Mayor Julián Castro as well as other state and local dignitaries.
In 2013, Parsons—along with a joint venture partner—was selected by SAWS to serve as the construction manager at-risk for this critical program. The scope of work includes 13 raw water production wells, raw and finished water conveyance, residual conveyance, three deep injection wells, a reverse osmosis membrane water treatment plant, a 7.5‑MGD finished water storage reservoir, chemical treatment systems, supervisory and data acquisition controls, and a new administration building that incorporates the first phase of the desalination plant and public access facilities.
“As a member of the joint venture team providing construction management at-risk services for San Antonio Water System’s brackish groundwater desalination program, Parsons is honored to have participated in last week’s ceremony, which marked an important step forward for the project,” said Garry Higdem, Parsons Group President.
“We look forward to assisting our customer in their efforts to both advance their sustainable water supply strategy and meet the community’s future water needs,” added Virginia Grebbien, Parsons Group President.
“It is becoming more and more common for cities to look at brackish water. El Paso is already doing it, (and there are) several cities that are looking at it,” said SAWS Director of Engineering Ashok Kaji. “This is the technology that is relatively simple to do and certainly it is going to grow exponentially in the future because of the scarcity of water.”
Construction has begun and completion of the first phase is slated for 2016—with two additional phases to follow. When completed, SAWS’ plant will be the largest inland desalination plant in the United States.
City leaders in Annapolis, Maryland broke ground recently on a $35 million water treatment plant project, the largest construction project in the city’s history. The design-build project will update the City's aging water infrastructure with a new state-of-the-art facility.
“I am so impressed with this facility and applaud the fact it showcases environmental efficiencies, increased cost savings, and improved reliability,” Mayor Michael Pantelides said. “I want to thank Public Works Director David Jarrell for producing a successful team consisting of staff, the design builder, and owner representatives, all working together to create a new state-of-the-art facility responsible for producing and delivering more than 1.5 billion gallons of water each year to our residents and businesses.”
In March 2013, the city awarded a contract for the design and construction of the new water treatment plant to WDBC members CDM Smith and Haskell (which have collaborated to form a joint venture), to be located adjacent to the existing plant.
Design-Build is a collaborative delivery process for construction projects. One firm, or team of firms, is contracted to perform all phases of the project, including site survey and investigation, design, permitting, bonding, construction management, and construction. Unlike traditional design, low bid, and construction, one design-build firm provides the client with a single point of accountability, allowing for construction-related input at every stage of the design, further reducing time and construction costs, and results in a design that enables the use of construction best practices.
In 2009, a comprehensive facility assessment indicated that the existing treatment plant was at the end of its useful life. The assessment noted that the plant has many critical pieces of equipment for which repair parts are unobtainable, and portions of the plant lacked redundancy. Based on a 50 year life cycle cost analysis, the City concluded that the most cost effective and risk minimizing option was to construct a new facility. The new plant is expected to be fully operational in early 2016.
“We are eager to start the construction phase of this project,” Public Works Director David Jarrell said. “After nearly six years of assessing the old plant, awarding the design-build contract, and designing the new plant, we are ready to start the 20-months of construction. We look forward to opening and operating the new state-of-art plant in 2016.”
In 1912, Annapolis was one of the first water systems in the United States to add a filtration system. At the time, the Maryland State Board of Health reported that Annapolis' water was far superior to that of Maryland’s largest city. In 1939, Annapolis drilled its first drinking water well and began mixing that with water from the reservoir.
In 1985, during water distribution repairs, the city discovered some wooden water pipes that were used to carry water to residents. It is estimated these pipes pre-date the Civil War. The filtration building was built in 1929 and this building is the main portion of the city's water treatment system still in use today.
Those attending Monday’s ground-breaking included: Annapolis Mayor Michael Pantelides, Annapolis Alderpersons, Maryland State Senator John Astle, Maryland Department of the Environment Secretary Robert M. Summers, former Mayor’s Ellen Moyer and Joshua J. Cohen, Project Executive for the Design-Builder CDM Smith/Haskell Joint Venture Peter Kinsley, Heery/Atkins/HDR Owner’s Representative Team, Annapolis Department of Public Works Director David Jarrell, Annapolis Water Treatment Superintendent James FitzGerald, Water/Sewer Program Manager Thora Burkhardt, Project Manager Lily Openshaw, project team members, and other elected and invited guests.
The most successful design-build (DB) and construction management at-risk (CMAR) projects begin with a well planned procurement process that is based on the owners's objectives, expectations and clearly-identified priorities. Individually or together, these attributes can affect the duration and complexity of the procurement process, as well as its cost. For a successful procurement process, an owner must have knowledge of state and local regulations and must provide a clear statement of the project's requirements, as well as a draft contract that includes terms, selection criteria and schedule. Clearly conveying this information in a transparent process minimizes unnecessary expenditures of time and resources for both the owner and potential design-build or CMAR firms.
Here are some overarching guidelines to facilitate a successful design-build or CMAR procurement.
- Determine which project-delivery method to use - fixed-price or progressive design-build, or CMAR - and whether project requirements will be performance-based, prescriptive, or a combination.
- Seek the advice of other owners who have conducted design-build or CMAR procurements, in addition to obtaining appropriate legal and financial guidance.
- Determine whether, and to what extent, the design-build or CMAR firm will be allowed to self-perform (often the result of state laws that reflect the balance of influence among owners, general contractors, and subcontractors).
- Complete, and make available to respondents, any work related to permitting, environmental impacts, and site geotechnical investigations.
- Clearly describe the scope of services, project requirements (including desired LEED certification level, if applicable), and desired level of owner involvement and control.
- Issue a draft contract early in the procurement process to gain insight from prospective respondents. Present the schedule, selection criteria and process, and communication protocols to be used in the procurement process.
- Assemble, and include in procurement documents as appropriate, a reasonable draft contract that equitably addresses and allocates risks to the party best suited to control or absorb them.
- If shared savings between the owners and delivery firm(s) will be allowed, include appropriate provisions in the contract. Keep the contract language clear and format uncomplicated - avoiding unnecessary complexity that can reduce participation, create delays, or increase costs.
Design-build projects are all about teamwork. In the most successful projects, the designer, the builder, and owner collaborate seamlessly for the duration of the effort. They work together as a single team based on trust, with a single goal: to deliver a quality product on time and on budget. Establishing this relationship of trust begins with a well structured procurement process and clear communications between the parties.
With the volume of investment required to maintain and replace our nation's aging water infrastructure on the rise, Owners are searching for project delivery models that offer improved outcomes and increased delivery speed while also promoting cost efficiency. This has led to an increased focus on collaborative delivery models in which construction personnel are integrated into the design and construction process early, and the contractor is selected based on qualifications, cost, and other non-price factors.
What is Construction Management at-Risk?
Construction Management at-Risk is a collaborative delivery method in which the project design is the responsibility of an engineering firm retained by the owner. Construction is the responsibility of a separate contractor, also retained by the owner, who also performs pre-construction services during design development. The engineering firm and contractor typically work together during design development to address issues (such as constructability, scheduling and value engineering) and to mitigate risk during construction.
CMAR v. Design-Bid-Build
CMAR is contractually similar to design-bid-build (DBB) delivery in two regards, though there are significant differences. In both DBB and CMAR delivery, design is the responsibility of an engineering firm and construction is the responsibility of a separate contractor. Unlike DBB, however, the contractor in a CMAR delivery can function as the owner’s construction manager during design, as well as general contractor during construction. Moreover, in a CMAR procurement process, the construction manager/general contractor (CM/GC) is typically selected based on qualifications—rather than price, which is the standard criterion for selecting a builder in DBB procurement. In both DBB and CMAR delivery, the owner retains significant design risk. Unlike DBB delivery, however, the CM/GC is involved in the design process, which increases budget certainty and decreases design risk associated with constructability considerations.
The decision to use CMAR should be made—and the GC/CM selected and integrated into the project team—as early as possible, but no later than when the design is 30% complete. In the early stages of design development, the use of CMAR delivery can contribute invaluable input to the site work, site layout, constructability, and general arrangements regarding structure and process. Much beyond the 30% design level, opportunities for major constructability impacts may be reduced or lost. Because it is relatively new, owners’ lack of familiarity with CMAR project delivery—as well as legislative restrictions in states where it has not yet been approved—has limited its use to date.
CMAR Distinguishing Features
Construction Management at-Risk projects are characterized by:
- Two independent contracts: design and construction.
- A two-phase construction contract: 1) Preconstruction services during design; and 2) construction.
- CM/GC selected early—when design is no more than 30% complete, with selection based primarily on qualifications, and the option to consider a fee proposal.
- CM/GC provides guaranteed maximum price (GMP) and schedule when design is approximately 60% (or more) complete. Owner may choose to reject GMP offer and proceed with DBB.
- CM/GC becomes actively involved in review of design process once selected.
- Owner is both buyer and project integrator.
- CM/GC responsible only for following the design detail; not for overall plant performance. Risk for plant performance is determined between the owner and the designer. The CM/GC provides input for constructability improvement purposes, not for design, structural, or process effectiveness.
Data from surveys conducted by the Water Design-Build Council has demonstrated that the use of CMAR delivery enables owners to achieve quality projects by employing innovative practices that result in timely schedules and cost-effective methods. Given the many benefits and positive experiences reported, it is expected that the use of CMAR delivery will continue to increase.
Jim Bays of WDBC Member CH2M Hill provides details of the firm's collaboration with the Arizona Bureau of Reclamation and the City of Goodyear, Arizona to implement an innovative approach in treatment wetlands.
The City of Goodyear had been looking for a cost-effective alternative to sewer discharge for reverse osmosis (RO) concentrate disposal. Like many cities in the central valley of Arizona, Goodyear is diversifying its water supply, and constructed a large RO facility to create potable water from brackish groundwater supplies. However, with RO treatment comes the challenge of RO concentrate disposal, which has increased the salt and hydraulic load at the nearby water reclamation facility. A solution was needed to treat this brackish concentrate.
In response, CH2M HILL, Reclamation, and the City of Goodyear developed the Goodyear Pilot Wetlands project, which imagines a process of wetland treatment to remove metals and nitrogen from the concentrate, and then to blend the treated concentrate with treated reclaimed water for discharge into natural riparian wetlands and eventually to the Gila River. A pilot-scale demonstration project was developed, comprised of four vegetated treatment “trains.” Trains 1 and 2 are comprised of peat and green waste-based organic media substrates, Train 3 is comprised of a mixed organic compost substrate, and Train 4 uses a peat substrate. This configuration maximizes anaerobic treatment of the concentrate.
Project partners included the City of Goodyear, which provided concentrate and an area to construct the pilot wetlands at the Bullard Water Campus, and the City of Phoenix, which provided laboratory analysis of water, soil, and plant composition.
In developing this treatment train, the team wanted to find out what could grow in this brackish environment with extreme temperatures and organic soil types. Twelve plant species were installed, all native salt-tolerant plants, adapted by evolution to life in arid settings. Three species were found to thrive: saltgrass, Olney’s bulrush, and narrow-leaved cattail. Another species – yerba mansa – also grew well but only when shaded. Among differing soil textures, fine-grained peat media provided the most success in helping these species to establish and grow quickly.
Monitoring of the concentrate levels in the pilot wetlands demonstrated consistent reductions of nitrate by green-waste and compost-amended wetlands. Selenium, arsenic, and chromium also showed a similar trend, with these three contaminants shown to attain state surface water quality standards.
Overall, the project findings illustrate that an RO concentrate wetland treatment system can effectively reduce nitrate and metal contaminants to state standards, reduce concentrate volume seasonally through evapotranspiration by approximately 50 percent, and yield a blended product water equal to or better than ambient Gila River water quality.
Other benefits relative to other methods of RO concentrate disposal include lower energy use and reduced carbon footprint, lower life-cycle costs, greater use for reclaimed water, and finally, restoration of natural riparian and marsh ecosystems. The approach modeled by the Goodyear Pilot Wetlands presents another option for concentrate reuse, management and disposal for inland communities discharging to evaporation ponds or brackish waters, or coastal communities discharging to estuarine or marine waters. With the successes seen in the Goodyear demonstration treatment wetlands, site planning is now underway for full-scale implementation in Arizona’s central valley.
This blog was republished with permission from CH2M Hill. View the original post, and more like it, on CH2M Hill's blog.
Jim Bays is a recognized leader in the assessment and analysis of aquatic and biological resources and ecosystems. With more than 32 years of experience in the fields of wetland ecology, limnology, wildlife and terrestrial ecology, aquatic biology, and aerial photographic interpretation, his specializations include the planning, design, and assessment of constructed and natural treatment wetlands. Jim has performed comprehensive studies on the water quality and aquatic ecology of a wide range of wetlands, lakes, reservoirs, and estuaries throughout the United States.
Public-private partnerships (PPPs) are a bit like snowflakes – no two are alike. In fact, for municipalities looking at alternative forms of funding for capital projects, there are a multitude of options that can make any arrangement a custom fit for the particular situation.
“There are many PPP models that can be used to create the right type of partnership between a public entity and the private sector,” said Bruce Allender, Chief Operating Officer at infraManagement Group (iMG), a wholly owned subsidiary of WDBC member company Black & Veatch that focuses on PPPs for energy, water and wastewater utilities. “It is this range of flexibility and the ability to provide funding that can make PPPs very appealing.”
It is important to understand the various types of PPP arrangements, and how each can provide a benefit to the public entity while offering a better level of service to their customers.
For instance, a common type of PPP is a design-build (DB) arrangement. This occurs when the private partner provides both the design and construction of a project to the public entity. According to Allender, this type of partnership can reduce time, save money, provide stronger guarantees and transfers additional project risk to the private sector for delivery of the project. It also reduces conflict by having a single entity responsible to the public owner for the design and construction. The public entity owns the assets and has the responsibility for the operation and maintenance.
DB is also known in some portions of the infrastructure industry as EPC (engineering, procurement, construction). Risk is better managed in DB/EPC because of a thorough understanding of technologies, local subcontractors, partners, equipment, labor pool and permitting processes, among others.
Since funding for any project is one of the largest hurdles, financing can be added to the basic DB package to create a design-build-finance (DBF) model. In this arrangement, Allender said, the private entity is responsible for providing the funding or making the necessary financial arrangements for the project. This can provide further benefits to the public entity, and transfers the responsibility of funding to the private entity. Where funding is required, both the public and private entities work together to ensure there is a solid financial plan in place for the project.
A public entity can transfer the risk of operations and maintenance (O&M) to the private sector through a design-build-finance-operate-maintain (DBFOM) arrangement. In this scenario, the DBFOM contractor retains responsibility for operations and maintenance of the physical plant or system.
“By combining all phases into a single approach, the continuity of the private sector is maintained, and it should provide a lower life cycle cost for the project,” Allender said. “Private sector financing of public projects can be supported by user fees generated during the operations phase once the project is completed.”
He noted that in these custom-fit PPP arrangements, the DBFOM model becomes a truly complete package – all under a single contract.
“As each of these components are added to the design-build model, this drives the transfer of risk from the public entity to the private sector, which can be one of the key benefits to the public entity if they lack the resources to deliver the project,” Allender stated.
He pointed out that another major benefit of these models is the acceleration and speed toward completion of the project, which will save costs.
According to the National Council for Public-Private Partnerships (NCPPP), PPPs are a contractual arrangement whereby the resources, risks and rewards of both the public agency and private company are combined to provide greater efficiency, better access to capital, and improved compliance with a range of government regulations. There are scores of combinations of the various components in the life cycle of a facility that can be put together and negotiated in a deal.
“Public officials cannot wade through all these combinations in a vacuum,” Allender said. “They should turn to experts who have experience with these types of transactions, and must engage the public to get their buy-in.”
He said that aside from the type of PPP arrangement, other keys to making a public-private relationship work include:
- Involvement of the key stakeholders in the PPP arrangement decision-making process;
- Strong public input with multiple public hearings;
- Continual and clear communication with all stakeholders;
- A PPP champion within the public entity;
- A solid educational effort that engages different sectors of the public;
- A clear understanding of the benefits to the public in a PPP arrangement;
- Securing early buy-in at all levels and from all parties.
“More municipalities in the water and wastewater arena are finding that PPPs have many distinct benefits,” Allender said. “These arrangements provide not only project delivery benefits but other environment, financial and community benefits.”
This article has been republished with permission by Black & Veatch. To view the original article, visit Black & Veatch's Solutions Magazine.
By Linda Hanifin Bonner, Ph.D., CAE,
Executive Manager, Water Design-Build Council
Concerns regarding the vital and strategic importance of safe drinking water within the United States – both locally and across the country - were underscored at a May 14th panel discussion on “The Value of Water.” Held at the national “Newseum” in Washington, D.C., this program also related the significant role water has with our economy as well as being a critical national security issue.
Keynote speaker Ben Grumbles (U.S Water Alliance Executive Director—and forum organizer) emphasized not only the value of clean water to the nation and the world, but also the increasingly urgent need to rebuild America’s aging water infrastructure.
Attendees representing the front lines of municipal water authorities in the ongoing challenges to ensure that a water reliable infrastructure exists heard from prominent individuals that included George Hawkins of D.C. Water and Tony Parrot of Cincinnati Water Works. Other panel members echoing the myriad of issues that cities and towns encounter with their water infrastructure needs included representatives from the US EPA and American and Veolia water companies (private sector purveyors). Their comments echoed a familiar theme -- making water a more visible and valuable commodity relates to the ability of cities and authorities to obtain the financing needed to replace aging treatment plants and pipelines that bring water to homes and business.
This fundamental question presented to the panelists, and in fact for all attendees (as well as those participating through a webinar) --“How do we raise the importance of the water infrastructure from being invisible to invaluable?”, regrettably remained unanswered.
However, the water industry is not alone in its concerns about how the public values it water resources, and recognizing the need to take action to change this paradigm. Another prominent organization engaged in a parallel pursuit has made serious resources available to answer this question. In April 2013, The Johns Hopkins University in Baltimore, MD, launched a new endeavor – The Institute for Water.  Its mission is to help local and regional authorities discover the best ways to manage their water so that supplies will be less in question. Put simply, they primarily want people to think about what water means to them.
Kellogg Schwab, the Institute’s director states: “We all take water for granted – think nothing of paying $100 a month for a cable or cell phone, but rebel against $50 for our water bill.” He also emphasized this important message, “what we’ve come to realize is that human behavior is key to making water solutions sustainable.” The JHU Institute for Water is taking a global perspective and is reaching out across the engineering, research and medical community to answer this question.
So what type of action does the water industry need to take to support the JHU Water Institute in achieving this common goal? What initiatives do we as industry professionals need to pursue to make people value their water and its infrastructure? Will a serious water outage such as the one that nearly occurred last summer in suburban Prince George's county, on the outskirts of Washington, DC – where thousands of residents, businesses and industry were in grave danger of being without water for a serious period of time - become the catalyst? It didn’t appear to work last year.
It is also evident that this dialogue cannot become invisible. We need to identify approaches to get the public, communities, businesses, and of course our elected and appointed public officials sufficiently worried – and even angry – so that they value their water resources. What is the stimulus that will make them view water infrastructure as valuable – and not invisible – and eventually take meaningful, and sustained action to bring our country’s water and wastewater infrastructure into the 21st century? It's time for you to weigh in with your suggestions. We need to hear from you. Send your suggestions to WDBC at firstname.lastname@example.org.
NOTE: The Newseum’s “Value of Water” panel discussion occurred simultaneously with an unrelated program on Capitol Hill – sponsored by the ASCE and Engineering News Record – that focused on how to finance U.S. roads, bridges and other vital parts of the country’s transportation infrastructure. Taken together, these programs are an indication of the magnitude – the breadth and depth – of our country’s “infrastructure debt.”
 Dr. Hanifin Bonner, a graduate of The Johns Hopkins University, has dedicated her professional career to developing pragmatic and business oriented approaches to issues affecting policies, programs and projects in the water and wastewater industry.
 The Water Design-Build Council is a non-profit education organization whose mission is education in the development and rehabilitation of the water and wastewater infrastructure through the use of design-build delivery methods.
 The Johns Hopkins Magazine, Vol. 66, No. 2 Summer 2014
 Kellogg Schwab is also a professor of environmental health sciences at the Bloomberg School of Public Health and of environmental engineering at the Whiting School of Engineering.
By Joseph A. Lauria, P.E., BCEE, ARCADIS Senior Vice President and National Design-Build Lead
Engineer's right, Contractor's wrong. Simple as that, right? Not at all, and it never has been. In recognition of the idea that traditional design-bid-build is NOT always the best plan, the water industry is now embracing collaborative delivery approaches to an increasingly greater extent. As that continues to happen, the designation of "alternative project delivery" will fade from our engineering lexicon – as it should. In fact, what's considered "alternative" today is quickly becoming just one of a range delivery solutions that, taken on a project's merits, may be applicable. Project delivery solutions exist on a continuum, and if there's one thing for certain, it's that there is no one-size-fits-all.
Consider just some of the benefits of a collaborative approach to project delivery:
- The best ideas for a project may be leveraged, whether they come from a project owner, a construction professional and/or an engineer.
- Energy may be devoted to developing creative solutions in a variety of areas, including technical challenge, schedule and budget.
- Project risk may be more equitably distributed.
- Overall schedule may be advanced.
And the benefits of advancing project completion are not just measured in time or earlier availability of completed work. In one recent example for a major southern California agency, an early finish by several months saved hundreds of thousands of dollars in so-called "soft costs" by allowing the agency's staff of project managers & engineers, resident engineers, inspectors, clerks and administrators to come off a design-build project and be re-deployed elsewhere without adding staff for other projects, simply because the work delivered collaboratively was "done".
As the water industry continues to employ collaborative delivery solutions, we'll quickly learn just where on the continuum is the best fit and best practice for project type and agency level of acceptance. This will require careful listening by all involved -- engineers, constructors, owners and boards -- to assure that high-value solutions continue to be delivered to the public whose needs are served by our work.
As has been noted by other writers and our own Environmental Protection Agency, water is a critical input for all that we do. As stewards of public infrastructure, we can do nothing less than deliver technically excellent solutions at the highest possible value, all the time. To do that most effectively, collaborative delivery solutions must always be on the table.
The U.S. House and Senate are poised to act on water resources legislation that establishes a five-year Water Infrastructure Finance and Innovation Act (WIFIA) pilot program, much along the lines that organizations such as WDBC and AWWA have advocated (but with two serious limitations described below). The House will likely pass the bill on Tuesday, May 20, and the Senate will take action soon afterward.
As agreed to by House and Senate conferees -- who met over a period of six months to reconcile differing House and Senate versions -- the bill establishes WIFIA as a low-interest loan program administered by EPA, with a parallel program administered by the Corps of Engineers for flood control projects. The EPA program:
- Will support water and wastewater-related infrastructure projects, including pipe replacement or rehabilitation, construction or rehabilitation of treatment plants, desalination projects, groundwater replenishment projects, energy efficiency improvements, and others.
- Is aimed at larger projects, in which eligible projects must cost at least $20 million ($5 million for communities serving no more than 25,000 people).
- Provides loan guarantees and direct loans at long-term Treasury rates. Projects must be deemed creditworthy, with loans repayable from a dedicated revenue source within 35 years of substantial project completion.
- Gives states the “right of first refusal” to fund any project. No project can be funded by WIFIA if within 60 days, the state indicates an intention to support the project and the state enters a support agreement within 180 days at rates and terms no less favorable than WIFIA. These deadlines are measured from the date of EPA’s notice to the state that it has received a WIFIA application. EPA must give such notice within 30 days of receiving a WIFIA application.
- Limits WIFIA support of a project to 49% of the project’s costs, with an overall limitation of 80% for all federal assistance in any project (with an exception for certain federally funded projects in Indian tribal communities), and provides that tax-exempt debt cannot be used to pay the non-federal share of project costs. However, in any year the EPA Administrator can use up to 25% of appropriated funds in projects exceeding the 49% limitation.
- Reserves 15% of appropriated funds each year for projects in communities with a population of no greater than 25,000. By June 1 of each year, any such reserved funds that have not been obligated shall be available for projects in communities of any size.
- Authorizes $20 million in the first year, which should support at least $200 million in loan guarantees or low-interest loans. The authorization level rises to $50 million in year five, which should support up to $1.65 billion in assistance, according the Office of Management and Budget. Appropriated funds achieve this significant leverage because they only have to cover the risk of WIFIA project defaults, and the history of default in water projects is only 0.04%, according to AWWA research.
Several water industry associations, including AWWA, the Water Environment Federation, and WDBC believe that WIFIA will prove to be a useful addition to the infrastructure finance toolbox. At the same time, we are very aware of the need to remove the serious limitations noted above, so that WIFIA can fund up to 100% of eligible project costs and any non-federal share can be paid with tax-exempt debt.