Transcript Early Contractor Involvement – How this Acquisition

Early Contractor Involvement:
HPO’s Key to Success
Luis A. Ruiz, P.E.
Chief, Geotechnical Branch
Jacksonville District
SAME Post Meeting
Jacksonville, FL
28 August 2013
US Army Corps of Engineers
BUILDING STRONG®
Agenda
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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 Obama
Xavier University, New Orleans
August 29, 2010
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Best Practices
System Program Management
 Acquisition Strategy
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Design Build / Cost Plus Contracts
Best Value Source Selection
Early Contractor Involvement (ECI)
Program Management Support Contract
 Construction Materials
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Government Furnished Borrow
Supply Contracts for Sheet Piles & Borrow
 Improved Techniques
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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
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Government retains design responsibility either
through in-house or with a separate AE contract.
Preconstruction services are not “Brooks Act”
services.
 Non-competitive acquisition
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Contract is procured IAW FAR 15 and application of
FAR 16.403.
Price and non-price factors are evaluated.
 Design-Build Contract
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Two separate entities (designer & construction
manager/general contractor)
Both report to the owner (Government).
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Acquisition Strategies
Comparison
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
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Relative Project Delivery Timelines
Construction
Funding
P&D
Funding
Design
Design Bid
Build Project
Delivery
Construction
ECI
Project
Delivery
Construction
Design
ECI delivery advantage
depends upon timing of
design and construction
funds.
CM selection and
design begins with
P&D funds.
Design
Construction
Design-Build
Project
Delivery
Total duration equal or less than
ECI, but cannot commence
design/construction until
construction funding is received.
PY -1
PY
Time
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ECI Contract
 Fixed-price Incentive (successive targets) contract (FAR
clauses 16.403-2 and 52.216-17)
 RFP will provide
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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
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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
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.
ITEM NO.
SUPPLIES/SERVICES
QUANTITY
UNIT
UNIT PRICE
$____________
$____________
$____________
$____________
NTE $____________
NTE $____________
0001
BASE
Preconstruction
Services
FFP
1
Lump
Sum
0002
OPTION
Construction Phase
FPI
1
Lump
Sum
Initial Target Cost
Initial Target Profit
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AMOUNT
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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
Seabrook Gate
IHNC
LPV 111
27,720 FT DSM
LPV 145
30,800 FT T-Wall
LPV 146
36,600 FT T-Wall
LPV 148
43,100 FT T-Wall
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
Bayou Sauvage
National Wildlife
Refuge
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Raise and Strengthen Levees / Floodwalls
Higher Floodwalls and Levees
New T-wall
Orleans Metro
St. Bernard Parish
Old
I-wall
New 32-foot T-wall
Old
Levee Elevation
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New Orleans
EastSTRONG®
St. Bernard Floodwall
Central
Wetlands
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Katrina storm surge elevations
were much higher elsewhere
along the Gulf Coast.
Top of Floodwall: EL +32’
Top of
Base Slab:
EL +21’
500-YEAR STILL
WATER ELEVATION*:
EL +22.5’
100-YEAR
STILL WATER
ELEVATION*:
EL +18’
HURRICANE KATRINA’S
STILL WATER ELEVATION*
AT THIS LOCATION: EL +18’
Designed for a 100-year Surge
Top of
Stabilization
Slab: EL +17.5’
St. Bernard Floodwall, near the IHNC Tie-In
(not to scale)
*Still water elevation does not include waves
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Seabrook Floodgate Complex
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Seabrook Floodgate Complex
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:
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Preconstruction services
Initial Target Cost: option
Initial Target Profit: option
 Selection of Contractor – ECI Specific Evaluation Factors
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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
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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:
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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 - Clauses
Successive 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:
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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
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Profit can go up as CM controls/cuts costs between the Midway and
Firm Target Prices.
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Example: Profit Adjustment Formula
Scenario:
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
Initial Trgt Profit (ITP):
$800,000
Firm Trgt Cost (FTC) :
Firm Trgt Profit (FTP): *
Initial Trgt Price:
$18,140,000
Firm Trgt Price:
Ceiling Price: +
$18,300,000
Ceiling Price:
+ The ceiling price was inserted in the solicitation
[paragraph (a), blank no. 2] as $18,300,000.
$16,000,000
$850,000
$17,170,000
** $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
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Necessary for Project Access & Pile Load tests
 Construction of Working Platforms
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Set-up of Contractor’s staging areas
 Perform Pile Load Tests
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Support completion of Final Designs
Establishment of No-Work Zones
Allowed Pre-Ordering Steel H-Piles
 Test Sections
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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
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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 preconstruction phase
 Good risk decisions made w/ contractor input
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HQUSACE Policy
Legal Sufficiency Requirements
1. Why FFP contract not suitable
2. Use FAR 52.216-17, Incentive Price Revision – Successive Target
clause
3. Ensure the contractor has an adequate accounting system
4. Ensuring adequate price competition and fair and reasonable
pricing (include cost realism)
5. Negotiating the ceiling price – Recommend offerors to propose
6. Level of design at award of preconstruction services
7. Scope of preconstruction services
8. Structure of the contract and predominance
9. Funding the construction management contract (P&D vs Constr.)
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ECI Results
Initial
Target Price
Initial
Ceiling Price
$294,894,736
$411,600,000
$342,275,251
$69,324,749
$357,245,988
$488,000,000
$237,128,127
$250,871,873
$280,484,886
$452,000,000
$272,294,417
$179,705,583
$300,000,000
$380,000,000
$349,999,235
$41,582,109
$154,000,000
$181,450,000
$164,511,456
$16,938,544
Sub-Totals >>> $1,462,857,130
$1,924,850,000
$1,366,427,142
$558,422,858
HPO Contract
LPV 111.01
Archer, Western, Alberici
LPV 145
Chalmette Levee Constructors
LPV 146
St. Bernard Levee Partners
LPV 148.02
Cajun Construction
IHNC-01 Seabrook
Alberici Constructors
Final
Negotiated
Price
Savings to the Government:
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Difference
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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