Overview

1. Developing Effective A&E Slating, Selection & Fee Negotiation Skills forFederally-Funded Transportation ProjectsMay 2012 David Hyder, P.E., High Point MPODiane Wilson, Capitol MPOMyra Immings, FTA TRO-04

2. Overview Introduction: “Houston, we have a problem . . . ” Problem Statement -- developed w/ Stakeholder Input Scoping -- differentiating project from A&E scope Slating Process Selection Process Independent Cost Estimation (ICE) A&E Fee Negotiation Preview of Follow-on Topics for later sessions

3. Definitions • A&E: • architect and/or engineering firms, including but not limited to, designers, environmental specialists and site investigation consultants; term may refer to any tier of contractor/sub-contractor • Scoping: • determination of parameters of an action; term may apply to either project or A&E contract • Slating: • “short-listing” and prioritizing prospective A&E firms whose written statements of qualifications appear to fit well with identified skills, experience, level of personnel and availability required to perform the project scope

4. Definitions • Independent Cost Estimate (ICE): • the cost estimate for either project or A&E contract developed by the contracting agency without input from any prospectively slated/selected A&E • Selection: • process through which slated firms are interviewed and negotiated-with culminating in offer and acceptance of an A&E contract

5. Significant Considerations When Determining Whether to Use an A&E or to Perform Design Work In-House • Does the contracting agency have In-House skills available to perform the work? • Does the contracting agency have the A&E contracting skills available to supervise A&E design (including planning and NEPA documentation, etc. as indicated in A&E Scope)? • While the A&E is contracted by an agency, the A&E is not an extension of the contracting agency’s staffin some specific respects: • A&E does not enjoy direct liaison with State and Federal agencies • Doctrine of Constructive Change • Authority-Responsibility Dichotomy

6. Skills Required for Effective A&E Contracting are Different From the Skills Required to Perform Design In-House Performing Design Contracting Design A&E Scoping & Project Scoping A&E Slating A&E Selection Independent Cost Estimation A&E Fee Negotiation Quality Assurance Plan A&E Contract Administration Change Order Administration Interagency Consultation Evaluation of Deliverables Validation for Payment Close-out After-action Reporting • Project Scoping • Project Design Scheduling • Project Construction Scheduling • Design and Construction Cost Estimating • Project Design Team Selection • Quality Control Plan • Design Performance • Interagency Coordination • After-action Reporting

7. Contracting Agency Capacity • An agency cannot contract effectively for performance of services and deliverables it has not the professional capacity In-House to evaluate • Litmus test: If the agency has the professional capacity (experience) to accomplish the design In-House, it very likely has the skill to evaluate the performance of an A&E doing that same work • Interagency Partners may be available to a limited extent to assist in scope development and evaluation of deliverables; this should be verified prior to entering into A&E contracting • Metropolitan Planning Organization staff • State Department of Transportation staff • Federal Partner agencies (FHWA, FTA, EPA) staff • It may be necessary to contract a second A&E firm to write an A&E project scope and/or evaluate deliverables • Any firm preparing a scope is ineligible to perform the work delineated by that scope

8. Contracting Agency’s Role • A&E Scoping – • describes what/when the A&E is to perform and deliverables • A&AE Slating and Selection • Independent Cost Estimation – time and $$$ • A&E Contract Negotiation • Quality Assurance Plan • Contract Administration and Close-out • After-action documentation: A&E’s “report card” • Agency Performance or Supervision of A&E Performance of: • Project Problem Statement Development • Project Purpose and Need Statement Development • Interagency Coordination • Public Involvement Activities

9. Scoping • Differentiate Project Scope from A&E Contract Scope • Project scope sets the extents of the study, design or construction to be accomplished (e.g. construct an intermodal facility or greenway) • A&E contract scope sets the parameters of the A&E level of effort, personnel participation and deliverables including performance schedule; refers to project scope as context (fixed-price vehicle) • Elements of an A&E Scope: • project scope (context), • types of skills and levels of expertise required, • description of ancillary tasks, • time for performance, and • description of deliverables

10. A&E Scope vs. Project Scope Architect-Engineer Scope Project Scope Building program for: a structure (facility/building) a bridge a commuter or light rail line a bus rapid transit guideway a greenway a road an interchange • Feasibility Study • Permitting • Design • PS&E documentation • FTA New Starts documentation • Preliminary FFGA input • Site Investigation (ESA) • NEPA Documentation • CE, EA, EIS (w/draft findings) • Public Involvement

11. Scoping Exercise: Using a given simplified project scope, compose a brief, cogent A&E contract scope (10 minutes) Simplified Project Scope: (Hyder)

12. Slating and Selection Process • Two-Step Process • Slating entails a panel of qualified professionals “short-listing” eligible candidates based upon their submittals of statements of qualification including: • detailed descriptions of successful projects and • education/experience of in-house forces as well as • education/experience of lower-tier prospective sub-contractor resources • Selection is based upon interview with “slated” A&Es followed by successful fee negotiations • Brooks Act PL 92-582 (1972)-- added Title IX to Federal Property and Administrative Services Act of 1949 requiring A&E services to be based upon qualification rather than price Reference: Federal Acquisition Regulation Part 36

13. Slating Checklist • Review Federal and State Requirements • conform to the more stringent or identify funding limitations based upon conformity • Review problem statement and project scope • ascertain A&E skills required • Develop the A&E Scope • Determine weighted selection criteria • Issue Request for Qualification (RFQ) • based upon technical qualification, experience, interest and availability to perform the design services demanded by the project scope

14. Slating Checklist • Review Responsive and Responsible statements of qualifications submittals • Check performance history with former project sponsors • Consider current agency Disadvantaged Business Enterprise (DBE) goals • Weigh geographic equity in light of advantage of local A&Es • Evaluate selection history • “spread the wealth” or “take the high ground” • Create a prioritized short list (slate) of A&Es to interview

15. Types of Skills to Consider While Slating • Types of Skills and Related Factors: • Ability to perform the specific type of design sought • Writing/Editing Skills • Ability to effectively identify, analyze and document potential adverse impacts on the physical and social environment • Familiarity with environmental laws and regulations of cognizant agencies • Ability to work cooperatively with specifically-identified internal and external (interagency) partners and/or the public • Ability to perform to schedule (including potential change orders) • Flexibility (value according to assessment of likelihood of change) • Depth of organization (redundancy capacity)

16. Types of Skills to Consider While Slating Prioritize and Weight Relative Value of Skills in order to best evaluate needs Note that these are essentially the same skills to consider when deciding to contract rather than perform design In-House

17. Slating Exercise • In small groups: • Review the Statements of Qualifications provided in light of the A&E Scope (school solution) provided • Consider the skills and conditions most desirable in the A&E for this project • Determine a prioritized slate of three firms to refer for selection screening interviews (10-15 minutes)

18. Selection Screening Interviews What to look for during screening interviews: A&E’s comprehension of the project scope A&E’s comprehension of the A&E scope A&E’s capability to perform skill sets needed depth of organization adequacy of lower-tier sub-contractors evaluate degree of “puff” in statement of qualifications Potential/demonstrated compatibility with array of partners Appropriate degree of flexibility in A&E’s extended organization Availability in terms of commitments to other project endeavors

19. Mock Selection Interview • Based upon the Statement of Qualifications submitted by the slated firm, together with a provided scenario: • interview the principal and his support team to ascertain that firm’s readiness and capacity to exhibit the skills required to perform to the given A&E scope • A&E Team will be provided with a synopsis of factors relevant to its ability to perform • Contracting Agency Team will be provided with the weighted criteria for evaluation of the A&E firm (15-20 minutes)

20. Independent Cost Estimation (ICE) • Estimate developed without input from a prospective A&E • Estimate based upon contracting agency’s I-H professional expertise, experience and/or that agency’s historical records for successful procurements of A&E services • Inexperienced contracting agencies may: • Hire a third party A&E to develop the ICE • Consult with colleagues who have developed expertise in similar procurements • Rely upon R. L. Means Cost Estimation Guides or other published resources

21. What Kinds of Costs are in an ICE? • Indirect Costs • Allowable Field Office and Home Office Overheads • Allowability based upon calculation performed by federal agency which funds most $$$ • Direct and Costs for Labor and Deliverables • Level of Effort (hours) • Hard deliverables: printing, models, renderings, model runs/output • Level of effort (LOE) • Estimate of labor hours attributable to staff X hourly rates • Principal, expert, journeyman, apprentice, clerical, administrative • Two interrelated types of costs require estimation: • Monetary costs: consideration for task completion • Temporal costs: consideration for time/schedule requirements • Both require contingency reserves based upon risk assessment

22. Level of Effort (LOE) Estimation • LOE Estimates for different types of work in terms of hours allocated for specific worker for: • Executive Meetings • Internal Meetings • Interagency Meetings Research • Consultation with Lower-Tier Sub-contractors • Consultation with Environmental Experts, Resource Agencies and Interest Groups • Consultation with the Public/Public Involvement Activities • Field Investigation • Travel • Rework pursuant to refining drafts per review comments

23. ICE Considers Both Cost and Price Cost,Price and Fee are Different Cost: Aggregation of negotiated nan-hours X negotiated hourly rates + allowable travel costs +allowable materials costs Price: Cost + + allowable direct and indirect overheads + negotiated profit A&E Fee: Initially-contracted price + renegotiated contingencies brought about through additive change orders – renegotiated price elements determined by deductive change orders Actual Expense to Public: A&E fee plus expenditures for salaries of interagency partners at MPO, DOT, FHWA, FTA

24. A&E Fee Negotiations Fee negotiations begin with the firm ranked first during the selection Process Base negotiations on the separate ICEs each party brings to the negotiation table Realize that the same entity is not necessarily valued the same by both sides—explore what each task is worth to each party (orange analogy)

25. A&E Fee Negotiations • Usually most significant discussions surround: • understanding of the scopes, • interaction between the A&E and the contracting agency, • who will be accomplishing tasks and how many hours tasks will require (rather than hourly rates, overhead rates and profit factors) • Negotiate change order costs as part of the initial negotiation • Experienced A&E firms who submit on projects known to be federally-funded usually understand cost allowability and allocability rules, but it is good to confirm during negotiations

26. Mock A&E Fee Negotiation • A&E team will be provided with: • an ICE representing its initial position • information on those areas which are “soft” (most negotiable), • a principal-authorized lower limit for an acceptable fee • Contracting agency team will be provided with: • an ICE representing the agency’s initial evaluation of cost and price, • an indication of the agency’s posture with respect to change order negotiation • indication of the full amount available for obligation to an A&E fee for the project (20-25 minutes)

27. After-Action ReportingWas the A&E “All Hat and No Cattle”? • Would your agency hire this A&E again to do similar work to that scoped in this contract? • If not, would your agency hire this A&E to do other types of design work? • What were the A&E’s strengths and weaknesses that impacted the quality of the design work? • Did your agency’s slating and selection process succeed or fail in evaluating the right skill-set required for the work? • Was A&E performance better or worse than anticipated? • In what respect: • On Time (including performance according to negotiated Change Orders)? • Competent Deliverables? • Appropriate Compatibility with In-House Project Manager and Interagency Staffs?

28. Preview of Next Topics • Interagency Consultation • A&E Contract Administration • Validation of invoices for payment & Prompt Payment Act • Progress payments • Retainage • Evaluation of Incentive Fees/Fee Structures • Renegotiation/Change Order Negotiation • Terminations for Convenience and Default • Authority/Responsibility Dichotomy • Quality Assurance and Quality Control for A&E Contracts • Using lessons learned in future A&E contracting

29. References • Federal Acquisition Regulation, Part 36 • FTA Circular 4220.1F Third Party Contracting • Brooks Act PL 92-586 (1972) • Herb Cohen: • You Can Negotiate Anything • Negotiating the Game • Herbcohenonline.com • sales@powernegotiations.com

30. Questions??? david.hyder@highpointnc.gov diane.wilson@campo-nc.us myra.immings@dot.gov