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CPARB review of Highway 18 project complete

CPARB review of Highway 18 project complete — Earlier this year, the Legislature tasked the Capital Projects Advisory Review Board (CPARB) with reviewing procurement decisions surrounding four large WSDOT projects. The first review – involving Highway 18 – is complete. In its report to the Transportation Committees of the Legislature, the CPARB work group concluded, “CPARB recommends WSDOT continue with the use of the Design-Build delivery method for the SR 18 – Widening – Issaquah/Hobart Rd to Raging River – Phase 1 (L1000199) project.”  See the full report here.

Notably, the work group made several recommendations regarding costs and alternative delivery methods, as legislators had expressed concerns about recent bids coming in well over engineer’s estimate on some mega projects. Those recommendations are:

CPARB Recommendations for Use of Alternative Delivery Methods

CPARB makes the following recommendations to improve WSDOT’s selection and use of project delivery methods:

Design-Build Delivery under RCW 47.20

WSDOT could consider reaching out to the greater construction contracting community, including stakeholders, subcontractors, and small businesses to obtain feedback on the impact of the risk allocation in each project. In DB projects, WSDOT could consider allowing finalists to provide input to WSDOT during one-on-one meetings regarding pricing and possible escalation in costs since the development of the CEVP. Suggestions on how such communications could occur include:

o A request from WSDOT for proposers to identify any portion of the project requirements that unnecessarily increase the cost of the project and suggestions to mitigate the problem.

 o A question from WSDOT to proposers to identify any specific issues with escalation that may impact the project cost.

 o A question from WSDOT early in the RFP process to proposers regarding whether the published cost range for the project is reasonable.

o Early communication to the industry and possible modification of the RFP documents to reflect escalation or other changes in the project that may impact cost after the development of the CEVP.

  • WSDOT could examine its current CEVP (cost estimating) practices and determine whether there are other areas that could be improved on the estimating process.
  • Review justification to award memos to adjust future estimates.
  • Conduct the CEVP in a timely manner and as close to the advertisement for the project as possible.
  • Include consideration of the delivery method as part of the CEVP.
  • WSDOT could foster robust communication with the construction industry early in the project development regarding potential issues with supply chain, escalation, or other price-based issues so that these risks can be included in the CEVP process.
  • WSDOT could consider the use of a budgeting technique that establishes a fixed upper limit for the project budget and treats the scope of the work as a variable, much like an “accordion”. Suggestions to utilize this technique include:

o WSDOT identifies project requirements that are fixed and must not be changed and the project requirements that could potentially be varied. WSDOT could then use the one-on-one meetings to modify the scope to come within the budget.

WSDOT could identify a base scope and then identify alternates with optional scope. Proposers would put together a package to maximize the scope under the budget.

o For this technique to be successful, WSDOT would base the selection, in part, on the best overall scope within the fixed budget.

WSDOT could conduct candid discussions to review the risk and commercial terms such as bonds and warranties with the proposers during the RFP process and modify the terms to make the assignment of risk more attractive, less expensive, and more efficient.

WSDOT could examine national trends on risk transfer in large DB projects and review risk with the industry including the following:

o Splitting projects into manageable projects

o Eliminating inequitable risk transfer

o Options for insurance packages

o Difficulties with the inability of contractors to bond large projects.

o Discuss issues with the inability of contractors to bond large projects.

  • Discussions within WSDOT should be specific to each project and could be broader to include the industry.
  • Consider adding a question in the checklist that asks whether the agency has sufficient budget to use the delivery method.
  • If project costs start to outweigh the benefits or allocated budget, WSDOT could be more willing to stop and re-think the viability of the project. WSDOT could include adherence to the budget as part of the process of evaluating the delivery method.
  • WSDOT consider splitting mega projects into smaller projects to increase competition and reduce risk to the parties proposing on the projects. Construction companies will have difficulty obtaining the required statutory bond for more than $500 million. When projects are very large, designbuilders and contractors will include additional cost as a continency to reflect the increased risk for the project.

CPARB is examining the use of other delivery methods by WSDOT and will provide recommendations with its final report, which will also include reviews of these projects: SR 9/March Road to 2nd Street Vicinity; SR 526 Corridor Improvements; and US 395 North Spokane Corridor.

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