Alternative Project Delivery - Texas Water Development Board

Description of Project Delivery Methods
various contract phases. These delay charges can be included in the competitive fixed
fee for the services of the DBO Contractor.
Benefits
A DBO project delivery has all the advantages of a DB type project delivery identified
in the prior section including:
• Single point of contractual accountability for design, construction and operation;
• Cooperative teaming effort of the Design Consultant and the Construction
Contractor can reduce project capital costs and shorten schedule;
• A collaborative design and construction effort competitively procured can foster
innovation;
• Concurrent design, permitting and construction activities can shorten project
schedule; and
• The certainty of the project cost is determined at an earlier point in the project.
The addition of the Operator to a project delivery team has the potential to create a
new dynamic in the design process. For example, if the project selection criteria for
the DBO Contractor includes life-cycle project costs, then the facility's annual
operating expense can be a more significant factor in DBO Contractor selection than
the consideration of only the installed project capital cost. With a significant
competitive incentive to minimize project operating expenses, contract Operators
have the opportunity to value engineer designs to optimize the facility's operability.
This may involve technologies that have a higher installed capital cost but will result
in significantly lower operating costs. Therefore, the overall life-cycle project costs
are reduced as compared to traditional approaches.
Some DBO contracts include shifting the long-term capital operating risk to the DBO
Contractors. The long term capital operating risk is associated with the future cost to
maintain a facility. Other terms used by utilities to describe these expenses include
extraordinary maintenance, non-routine maintenance and major capital maintenance.
When the Operator is obligated to provide cost guarantees for this long term
operating capital risk, they have an incentive to assure optimal equipment quality to
minimize maintenance expense for the term of the contract and renewals. This may
have significant cost benefit for the public.
An additional benefit is that the rates for the utility can be reduced to a formula for the
term of the contract because of the fixed cost-basis for operations. Many communities
have found it beneficial for economic growth and development to be able to predict
their utility rates long term with the added certainty of a guaranteed contract.
Areas of Concern
Public Owners must understand that to reap the benefits of guaranteed fixed
construction and fixed operating costs, they will commensurately have to relinquish,
control over project construction details, schedule, and operation. Appropriate due
diligence with respect to the competency and performance of the vendor team in
similar circumstances is critical to project success.
B1381-Sect2 R. W. Beck 2-15