US Army Corps of EngineersBUILDING STRONG®
Early Contractor Involvement: HPO’s Key to Success
Luis A. Ruiz, P.E.Chief, Geotechnical BranchJacksonville District
SAME Post Meeting
Jacksonville, FL
28 August 2013
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Agenda
Background ECI Contracts Basics HPO Projects Solicitation Design phase Contract administration Lessons learned Wrap-Up
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A Priority of Two Administrations
“Now, even as we continue our recovery efforts, we're also focusing on preparing for future threats so that there is never another disaster like Katrina. The largest civil works project in American history is underway to build a fortified levee system. And as I — just as I pledged as a candidate, we're going to finish this system by next year so that this city is protected against a 100-year storm.”
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President Barack ObamaXavier University, New OrleansAugust 29, 2010
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Best PracticesSystem Program Management
Acquisition Strategy Design Build / Cost Plus Contracts Best Value Source Selection Early Contractor Involvement (ECI) Program Management Support Contract
Construction Materials Government Furnished Borrow Supply Contracts for Sheet Piles & Borrow
Improved Techniques Value Engineering – systems study complete Pile Load Tests – in advance of contract award Press Pile, Spiral welded piles Deep soil mixing, sand blanket and wick drains
Earned Value Management System (EVMS)
Leverage National & Regional Resources
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ECI Contracting A Fixed Price Incentive contract IAW FAR 16.403
A project delivery method where the Corps engages the services of a general contractor to provide “preconstruction services” concurrent with design effort
The contract includes the Government’s ability to exercise an option for the construction
Provides for successive target price adjustments as the design matures, with the objective of managing the final construction cost to optimum.
Contract includes terms and conditions to allocate risk among the parties
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What it ain’t… Design Contract
Government retains design responsibility either through in-house or with a separate AE contract.
Preconstruction services are not “Brooks Act” services. Non-competitive acquisition
Contract is procured IAW FAR 15 and application of FAR 16.403.
Price and non-price factors are evaluated. Design-Build Contract
Two separate entities (designer & construction manager/general contractor)
Both report to the owner (Government).
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Phase Traditional Acquisition(D-B-B)
Early Contractor Involvement(ECI, also I-D-B-B)
Design Completed prior to advertisement of construction contract
Preconstruction Services – construction contractor provides input on design constructability, VE, means & methods, construction phasing, etc
Award Complete designs are used to advertise and award construction contract
Construction option - awarded when major design decisions are complete and price negotiated (designs may be <100%)
Construction NTP and construction begins after award of contract
Construction can begin prior to final designs being completed
Acquisition Strategies Comparison
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Relative Project Delivery TimelinesP&D
FundingConstruction
FundingDesign Construction
Design Construction
Design Construction
Time
ECI ProjectDelivery
Design Bid Build ProjectDelivery
Design-BuildProjectDelivery
Total duration equal or less than ECI, but cannot commence design/construction until construction funding is received.
CM selection and design begins with P&D funds.
PY -1 PY
ECI delivery advantage depends upon timing of design and construction funds.
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ECI Contract Fixed-price Incentive (successive targets) contract (FAR
clauses 16.403-2 and 52.216-17)
RFP will provide SOW for preconstruction services (Base) Concept engineering solution with typical sections for proposal
preparation for construction initial target pricing (Option) Ceiling price Evaluation criteria, based on best value tradeoffs, including price
Negotiated Procurement Award of preconstruction services (Base) as a Firm Fixed Price Exercise of Construction (Option) as a Firm Price Incentive
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Contract Schedule
ITEM NO. SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT
0001BASE
Preconstruction Services FFP
1 Lump Sum
$____________ $____________
0002OPTION
Construction PhaseFPI
Initial Target Cost Initial Target Profit
1 Lump Sum
$____________$____________
NTE $____________NTE $____________
An example of ECI Solicitation Line Items are shown below. This is remitted with the proposal.
Additional line items may be added for long lead items if required.
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When to Use ECI Urgency - very tight mandated schedules
Funding - funding stream is available
Complex “one of a kind” project, with no standard design
Size - large enough to attract experienced firms
Uncertainty – risk in delaying award while requirements are being developed
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When to Use ECI - Other Challenging site, or other unique aspects that
would benefit with a Contractor’s input during design phase
It would be advisable to have a collaborative effort during design and construction between Designer, Builder, Owner, User to ensure Project success
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New Orleans ECI Projects
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LPV 14530,800 FT T-Wall
LPV 14636,600 FT T-Wall
LPV 14843,100 FT T-Wall
LPV 11127,720 FT DSM
Seabrook GateIHNC
West Closure Complex (PRO)
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New Orleans East Largest Deep Soil Mixing Project in the World
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New Orleans East Levee
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Old
Levee
New Levee
Bayou Sauvage National Wildlife
Refuge
~1 Football FieldOver 1 Superdome of Clay
(4.9 mil cy) Required
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Raise and Strengthen Levees / Floodwalls
Orleans Metro
Higher Floodwalls and Levees
New T-wall
OldI-wall
New Orleans East
St. Bernard Parish
New 32-foot T-wall
Old Levee Elevation
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23 M
iles L
ong
(2 m
iles c
onst
ruct
ed p
er
month
)
50 Eiffel Towers of
Steel
St. Bernard FloodwallMRGO
MRGO
Central Wetlands
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Top of Floodwall: EL +32’
Top of Stabilization Slab: EL +17.5’
Top of Base Slab: EL +21’
100-YEAR STILL WATER ELEVATION*: EL +18’
500-YEAR STILL WATER ELEVATION*:EL +22.5’
St. Bernard Floodwall, near the IHNC Tie-In(not to scale)
HURRICANE KATRINA’S STILL WATER ELEVATION* AT THIS LOCATION: EL +18’
*Still water elevation does not include waves
Katrina storm surge elevationswere much higher elsewhere
along the Gulf Coast.
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Designed for a 100-year Surge
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Seabrook Floodgate Complex
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Seabrook Floodgate Complex
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CONSTRUCTION COFFERDAM ALLOWED TO ACHIEVE HYLA BY 01 JUNE 2011
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West Closure Complex
The WCC removed 26 miles of levees and floodwalls from the first line of defense
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West Closure Complex
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Solicitation Award Preconstruction Services early in design phase (15 – 30%) Pricing schedule includes:
Preconstruction services Initial Target Cost: option Initial Target Profit: option
Selection of Contractor – ECI Specific Evaluation Factors Experience with preconstruction services Local market knowledge Plan to involve major subcontractors Oral interviews
Sufficient design information for contractors to adequately provide an Initial Target Cost
SOW section defining preconstruction services and expectations ECI specific clauses
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Solicitation – Scope of Work Preconstruction services and expectations
Cost estimating (live market conditions) Design consultation Constructability reviews Subcontractor input Value engineering – cost control Bid package development Design and construction scheduling Construction phasing Risk management
Project orientation and partnering Construction/design integration – design liaison
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Solicitation – Scope of Work Escape clause – Govt. not obligated to exercise option:
Poor preconstruction participation Excessive team turnover and lack of commitment Lack of Congressional authorization/appropriation Can’t negotiate within funds available
Competitive subcontractor pricing – Govt. attends subcontractor bid openings
Defines production point for use in FAR 52.216-17 (100% design)
Addresses payment processes
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Solicitation - ClausesSuccessive Target Pricing Midway Target Price scheduled when all major design
decisions have been made Midway Target Price includes:
+ Midway Target Cost (MTC, Based on 35-90% Design)+ Midway Target Profit (MTP, 1.5% - 3% of MTC) Midway Target Price < Ceiling Price
Midway Target Price recognizes significant scope changes
If Midway Target Price is under ceiling, the contracting officer may elect to exercise the construction option
Addresses similar details for final Firm Target Cost and Profit at 100% design
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Solicitation - Clauses Adequate Accounting System: Self certification
that accounting system is in compliance with FAR 16.403-2(c)(1)
Earned Value Management System (EVMS) Certification► Offeror’s accounting capable of supporting EVMS► EVMS - Size dependent:
• Under $20M: not applicable• $20M to $50M: offeror self-certifies compliance• Over $50M: offeror self-certifies and is audited
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Solicitation - Clauses
FAR 52.216-17, Incentive Price Revision – Successive Targets Defines ceiling price (ECC) Outlines alternative if firm fixed price agreement is not reached:
► Profit adjustment formula (% negotiated)► Profit increases if final price is lower than Initial Target Cost► Profit decreases if final price is higher than Initial Target Cost► Final price determined after completion of work, using profit from profit
formula Failure to agree is not subject to Disputes clause Incentive
► Profit can go up as CM controls/cuts costs between the Midway and Firm Target Prices.
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Example: Profit Adjustment FormulaScenario: Example
Paragraph (d)(3) blanks are negotiated at the Midway Target Pricing with the following values: Increase/Decrease Profit by 5%, Range of FTP is 2% - 6%
Initial Trgt Cost (ITC): $17,000,000 Firm Trgt Cost (FTC) : $16,000,000
Initial Trgt Profit (ITP): $800,000 Firm Trgt Profit (FTP): * $850,000
Initial Trgt Price: $18,140,000 Firm Trgt Price: $17,170,000
Ceiling Price: + $18,300,000 Ceiling Price: ** $18,300,000
+ The ceiling price was inserted in the solicitation [paragraph (a), blank no. 2] as $18,300,000.
* The Firm Target Profit is calculated based on the following: FTP = ITP – (5%) [FTC-ITC] - or – FTP = 800,000 – (5%) [$16M-$17M] = $850,000.
** Under this scenario, the project scope did not change between the initial target pricing and the Midway Target Pricing. Therefore, no change to the ceiling price was warranted and the FTC is lower than the ITC and the Contractor’s profit increased. You should notice that the Construction Reserve amount (2% of the FTC) has been lowered to $320,000.
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Design Phase Jointly develop bid packages & design schedule: design
team, CM, Corps & User Design estimates shared until negotiation point reached
(IGE still close hold) Exercise construction option at optimum stage of design
(project dependent) Establish Final Target Price @ 100% design - settle as
FFP w/incentives Tie payment during design to design milestones Control designer bright ideas after construction option is
exercised
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Validation Phase (HPO Only)
Construction of access roads► Necessary for Project Access & Pile Load tests
Construction of Working Platforms► Set-up of Contractor’s staging areas
Perform Pile Load Tests► Support completion of Final Designs► Establishment of No-Work Zones► Allowed Pre-Ordering Steel H-Piles
Test Sections► Complete DSM Mix Designs
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Managing Cost & Pricing Data After Construction Award
Cost and Pricing data were required for the firm target proposal only.
Otherwise, consent packages and Vouchers gave the Government a good look at the Contractor’s actual pricing without a further requirement for cost and pricing data.
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ECI Contracting Benefits Model allowed to arrive at well documented fair and
reasonable costs ECI contract vehicle allowed the Government to make
common sense changes to the contracts prior to fixing the price
► Facilitated both price increases/decreases► Encompassed the Non-Federal sponsor concerns► Eliminated the need for modifications
Streamlined the administrative process for both the Government and the Contractor and saved costs for both parties
Allowed for additional resources as necessary to maintain the contract completion dates
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Lessons Learned Approach ECI with different mindset – more
open way of doing business on all sides Better education of entire team of what ECI
means (particularly customer) Staff big and staff early (Voucher Validators,
Scheduler, Cost Estimators) Coordination - SOW for A-E and ECI contractor Collocation of Team Members Facilitate interaction between designers and
contractor Review risk analysis at each major milestone
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Lessons Learned (cont.) Establish control of late sponsor comments by
emphasizing schedule and bid packages Clearly define process for notifying PDT of
design changes, amendments and modifications Allocate resources according to design schedule
(more Civils early, more Mechanicals later) Allow more time for joint estimates or different
approach to joint estimates Improve sub-contractors involvement in pre-
construction phase Good risk decisions made w/ contractor input
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HQUSACE PolicyLegal Sufficiency Requirements
1. Why FFP contract not suitable2. Use FAR 52.216-17, Incentive Price Revision – Successive Target
clause3. Ensure the contractor has an adequate accounting system4. Ensuring adequate price competition and fair and reasonable
pricing (include cost realism)5. Negotiating the ceiling price – Recommend offerors to propose6. Level of design at award of preconstruction services7. Scope of preconstruction services8. Structure of the contract and predominance9. Funding the construction management contract (P&D vs Constr.)
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ECI Results
HPO ContractInitial Target
PriceInitial Ceiling
PriceFinal
Negotiated Price
Difference
LPV 111.01Archer, Western, Alberici $294,894,736 $411,600,000 $342,275,251 $69,324,749LPV 145Chalmette Levee Constructors $357,245,988 $488,000,000 $237,128,127 $250,871,873LPV 146St. Bernard Levee Partners $280,484,886 $452,000,000 $272,294,417 $179,705,583LPV 148.02Cajun Construction $300,000,000 $380,000,000 $349,999,235 $41,582,109 IHNC-01 SeabrookAlberici Constructors
$154,000,000
$181,450,000 $164,511,456 $16,938,544
Sub-Totals >>>$1,462,857,13
0 $1,924,850,000 $1,366,427,142 $558,422,858
Savings to the Government: 29%
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The Delivery Team
Committed to ensuring that New Orleans could handle a 100-year storm surge by 1 June 2011.
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