Application of the Design-Build Process to NAVFAC Environmental Restoration Projects

1. Application of the Design-Build Process to NAVFAC Environmental Restoration Projects Karnig Ohannessian, PE RPM, Marine Corps Team, BRAC Operations, NFECSW SDIEGO Abid Loan, PE Engineering Manager, Tetra Tech FW, Inc. Santa Ana, California Contributors (NFECSW SDIEGO): James Sheetz, PE, BLTL Laurie Patton, Contract Specialist Keith Elliot, Remedial Project Manager

2. Introduction • Design/Build (DB) well established in private sector and military construction projects • Limited application to environmental projects • We are going to: • Review DB process fundamentals for projects in the non-environmental sector • Describe factors affecting DB for environmental projects • Review proper management techniques • Review Operating Industries, Inc. landfill for lessons useful to NAVFAC projects • Review special considerations for Installation Restoration (IR) programs • Review contracting requirements • Review other environmental DB projects within NAVFAC

3. Fundamentals of DB Process • Application of DB concept in the Non-Environmental Sector • DB concept well known in non-environmental sector • California Assembly Bill 1402 requires school board to evaluate relative merits of both DB and Design-Bid-Build (DBB) • DB saved 20 months on $2.4B Alameda Corridor project in Southern California • Study by Construction Industry Institute of 1,000 projects indicated DB projects submitted by owners showed better performance in cost, schedule, change/rework, and practice use • Other publications document success for both owners and contractors

4. Fundamentals of DB Process Performance Summary for Cost, Schedule, and Safety

5. Fundamentals of DB Process Performance Summary for Change, Rework, and Practice Use

6. Fundamentals of DB Process “It’s very critical to have everyone on site and essentially in the same office. There’s just no substitute for being able to walk down the hall and grab the right guy by the collar and make him address what’s on your mind.” Design Build Magazine, December 2003

7. Factors Affecting DB for Environmental Projects • Regulatory, mandated legal agreements • Most important factor in limiting effectiveness of DB process • Legal agreements often very specific • Limits flexibility needed for DB project delivery • Conflicts of interest • Traditional approach in defense environmental restoration has been separate design and construction contractors • Intent of separate contractors is to avoid scope growth • DB process requires single contractor or team to be responsible for all aspects of project

8. Factors Affecting DB for Environmental Projects • Contractor capabilities • Environmental firms can offer wide range of services • DB process can be limited to contractors/teams with DB capabilities and experience • Contractual requirements • Contract terms should be structured to facilitate the DB process

9. Management Techniques • DB is not for the timid or risk-averse manager • DB is referred to as both “easier” and “harder” (Design Build Magazine, December 2003) • To capitalize on the benefits of cost and time savings of DB requires an aggressive and proactive management approach

10. Obtain up-front buy-in from stakeholders and regulators to implement DB process Establish clear lines of communications between regulators and other stakeholders Determine the level of detail necessary to start construction and reduce the number of design deliverables Team building Clearly define roles and responsibilities Keep track of key issues and their timely resolution Streamline the field change approval process Structure contract terms and conditions to facilitate implementation of the DB process Management Techniques

11. Environmental DB Projects • Operating Industries, Inc. • Background • 190-acre Class I hazardous waste landfill CERCLA site • Located in densely populated metropolitan Los Angeles • Received 300 to 500 million gallons of liquid waste and 38 million cubic yards of refuse • EPA reached legal agreements with 4,000 responsible parties for site cleanup

12. Environmental DB Projects • Operating Industries, Inc. • Contract Award • In July 1996, an Engineering, Procurement, Construction (EPC) type contract was awarded to Tetra Tech FW, Inc. for site cleanup • Contract provisions based on cost plus fixed-fee as well as incentive-fee for various milestones • Client acceptance of work based on successful demonstration of “mechanical completion” of all constructed systems

13. Environmental DB Projects • Operating Industries, Inc. • Scope of Work • Install cover, landfill gas extraction, conveyance and treatment; and storm water management systems • Project costs $100 M to include approximately 400 wells, 10 miles of drainage, 23 miles of piping, two thermal oxidizers, and 6 M cubic yards of soil handling • With client and regulatory approval, TtFW develops plans for using an aggressive DB approach for project execution

14. Environmental DB Projects • Operating Industries, Inc. • DB Approach • Establish a regular Technical Exchange meeting process with regulators to expedite resolution of issues and approval process • Streamline design submittal process by dividing overall design into five "site area" packages • Obtain regulatory buy-in to start construction at 60 percent design completion level for each area • Assure compliance with Consent Decree at each step

15. Environmental DB Projects • Operating Industries, Inc. • DB Implementation Results • Saved nearly a year off the total project schedule • Significant cost savings • Mechanical completion requirements shifted responsibility of obtaining agency acceptance to the Contractor • Greatly reduced client management effort and related costs • Amount of “rework” very minimal • Excellent Safety record

16. Special Considerations for Installation Restoration Projects • At what point in the CERCLA remedial response process is a DB acquisition strategy feasible for Installation Restoration projects? • DB is not recommended • When there is no way to articulate a performance • When full design documentation is available

17. Special Considerations for Installation Restoration Projects • Risk management decision-making under uncertainty

18. NFECSW DB Study • DB Survey • Conducted as an Intern project and MBA degree project by Laurie Patton and Keith Elliot • Research on barriers to acquisition using DB process for environmental projects • Selected respondents with experience with the federal installation restoration program • Survey results • Most perceived significant barriers to application of DB process to fixed price environmental projects • Barriers were perceived as mindset and policy • Most respondents positive that barriers could be overcome and use of fixed price DB contracts has potential for success

19. Perceived Benefits Shorter duration Lower costs Improved resource utilization Increased flexibility in services to clients Improved quality Better value for government Streamlines contracting process Avoids contractor transitions between phases Reduces regulatory delays Fosters project team culture between government and contractors Perceived Barriers Resistance to change Need for training in D/B process Concern about unknown costs Concern about small business participation Need for involved client Need for reliable contractor NFECSW DB Study

20. NFECSW DB Study • Conclusions: • No legal or regulatory barriers identified to using DB process for environmental restoration contracting • No inherent organizational barriers identified • Management challenge: human resistance to change • Recommendations: • Attain command buy-in through change management • Develop templates for scopes of work for DB fixed-price environmental projects • Develop projects involving partnering of large and small businesses on environmental DB projects to demonstrate role of small business

21. Contracting Requirements • Performance based • Track cost, production rate, mechanical completion • Pay based on progress, not cost incurred • More ability to incorporate incentives and achieve better cost containment, e.g., cost-based or schedule-based milestones • Flexibility to select contract structure, e.g., fixed-price, cost-reimbursable, etc.

22. Measurement and Payment

23. Environmental DB Projects • Camp Pendleton Wastewater Treatment • Major environmental DB project for NAVFAC Southwest Division • Combination fixed price/indefinite quantity design, build, operate, and maintain (DBOM) • Largest environmental DB project for SWDIV • Total estimated project $260M over ten-year period • Two step selection process

24. Environmental DB Projects • Camp Pendleton Wastewater Treatment (cont) • Phase 1 will select up to five firms/teams based on • Past performance • Support of small business • Experience • Technical approach • Phase 2 will select winner based on • Phase 1 factors • Design and engineering solutions • Price

25. Environmental DB Projects • Site 24 MCAS El Toro • BRAC Base in Southern California • FFA with EPA, DTSC, RWQCB • Site 24 is VOC source area (groundwater plume) • Settlement Agreement with local Water Districts • ROD signed June 2002 • FFA scheduling constraints necessitated bringing on the remedial action contractor before design was completed • DB approach determined to be the preferred acquisition strategy

26. Environmental DB Projects

27. Environmental DB Projects

28. Environmental DB Projects • Site 24 MCAS El Toro • Transition from current contractor to DB contractor • Definition of roles and responsibilities of the current design contractor vs. the future DB contractor • Reap the benefit of the initial design contractor’s institutional knowledge (reflected in their 30 percent design) • Assign singularity of responsibility to DB contractor • Avoid duplicating previous work, while at the same time adding value engineering to the initial design

29. Environmental DB Projects • Site 24 MCAS El Toro • Scope of Work (SOW) needed to clearly state the owner’s (Navy’s) desire to execute this project using a DB approach • Described roles and responsibilities: Design Basis and Final Design • Lump sum costs with unit pricing to address future change conditions • Estimates based on the available 30 percent design • Performance specifications: what the product should do and how it should perform • Measurement and payment • Contract award based on best value • Technical approach • (Similar previous experience) • Management and key personnel • Price

30. Environmental DB Projects • Site 24 MCAS El Toro • Higher quality: • More services and features offered than Navy anticipated • Better process offered: opportunity for schedule reduction • Tangible constructability and operational efficiencies offered • Lower cost: • DB strategy has projected cost savings compared to DBB government estimates • Construction savings • First-year operation savings • Design savings • Total cost savings (through 1st year)

31. Questions