ssionDBP3DBB concessionDBDBFO design-bid-build3DBB concessionDBP3DBB concessionDBFO design-bid-buildAn Overview of DBFO design-bid-buildAlternative Delivery MethodologyssionDBP3DBIntroductionDBB concessionDBFO design-bid-build3DBB concessionDBP3DBB concessionDBFO design-bid-build DBFO design-bid-buildssionDBP3DBB concessionDBDBFO design-bid-build3DBB concessionDBP3DBB concessionDBFO design-bid-build DBFO design-bid-buildssionDBP3DBB concessionDBDBFO design-bid-build3DBB concessionDBB concessionFO design-bid-build concessionDBP3DBB DBFO design-bid-build concessionDBFO design-bid-build DBFO design-bid-build-buildng DESIGN BUILD performance contracting DESIGN BUILD performance contraperformance contracting DBOOT AFPperformance contracting DBOOT AFPrformance contracting DESIGN BUILD performance contracting DESIGN BUILDtracting DBOOT AFPperformance contracting DBOOT AFPperformance c-builddesign-bid-build (Figure 1), the go-to delivery model annual capital investment program.ng DESIGN for the BUILD majority performance of the capital projects over contracting the last At the DESIGN root of this change BUILD are some performance very tough capital contra20+ years.efficiency targets set by the water industry regulator,performance contracting DBOOT AFP combined with performance a significant re-tooling contracting of the UK DBOOT AFPAlternative delivery models involve re-arranging these three Latham identifies the cause of these endemic problems asrformancepieces intocontractingnew, and different configurationsDESIGN(FigureBUILD2).performance the fragmented structure contracting of the industry and DESIGN its disjointed BUILDapproach to delivering projects. Sir John Egan’s seminaltractingFigure DBOOT 2 – Example of AFP alternative delivery model. performance contracting DBOOT AFPperformance c-buildSome background on alternativeng DESIGN BUILD performance contractingdeliveryDESIGNmodel away fromBUILDdesign-bid-buildperformancetoward designbuildpartnerships over the last 12 years.delivery for water infrastructure from the UKcontraIn reality, today’s alternative delivery models have beenperformance contracting DBOOT AFPperformance contracting DBOOT AFPrformance extremelycontractingrigorous regulatoryDESIGNenvironment, drivingBUILDtheperformance Figure 4 – Common alternative contracting delivery models DESIGN BUILDindustry to find capital efficiency savings year after year.tractingFigure DBOOT 3 – UK water industry AFPcapital investment 1981 – 2015 performance contracting DBOOT AFPperformance c-buildBy Ian Dickinson, Director Alternative Delivery, AECOM <strong>Water</strong>n the Canadian municipal wastewater market,defining alternative delivery as something that is‘alternative’ to conventional delivery practices meansFigure 1 – Traditional design-bid-build delivery model.around at least as long as design-bid-build. One of the bestcontemporary points of reference for alternative deliveryin the water sector is the boom in UK water constructionsince privatization in 1989. Over that period, the UK waterindustry has experienced an extraordinarily prolongedperiod of high capital investment (Figure 3), combined withP3DBB conDBFO design-bP3DBB conDBFO design-bThe result has been a complete shift away fromconventional design-bid-build delivery towards a variety ofalternative delivery approaches. Today, design-build andpartnering account for more than 90% of the £4+billionconstruction sector during the 1990s. Industry reformwas stimulated by the recognition that UK constructionwas not globally competitive, with projects often lateand over-budget. In his 1994 Report, Constructing theTeam (also known as The Latham Report), Sir Michael1998 report, Rethinking Construction, focused on thesolution: to adopt a partnering approach between allparties involved in construction projects, encouraging themto work together in an open, co-operative and trustingmanner. Driven by efficiency improvements demanded bythe regulator, the UK water industry has shifted its entireAlternative delivery modelsDefined by exception as everything other than traditionaldelivery, alternative delivery models in useP3DBB conDBFO design-bthroughout North America (and globally) are rich inacronyms but without rigid definitions (Figure 4).Model: Acronym: Description:P3DBB conDBFO design-bDesign-Build DB Probably the most common model. A core buildingblock of several others such as DBO and DBFO (Figure5). In a DB contract, responsibilities of designer andconstructor are combined into one contract with ang DESIGN BUILD performance contracting DESIGN BUILD performance contraperformance contracting DBOOT AFPsingle entity responsible to the client for both aspects ofproject delivery (Figure 5).performance contracting DBOOT AFPperformance contracting DBOOT AFP Design-Build- performance DBO Operation of facility contracting is added to contractors’ scope DBOOT of AFPrformance contracting DESIGN BUILD performance contracting DESIGN BUILD44 INFLUENTS Winter 2012tracting DBOOT AFPperformance contracting DBOOT AFPperformance cOperatework. Sometimes operation is short- term, servingprimarily as an extended proving period, or it may becloser to the life expectancy of the assets, incentivisinga truly life-cycle cost approach from thecontractor.
cessionDBP3DBB concessionDBP3DBB coid-build DBFO design-bid-build DBFO designcting DESIGN BUILD performance contracting DESIGN BUILD performance contP3performance contracting DBOOT AFPDBB concessionDBP3performance contracting DBOOT AFDBDesign-Build- DBFO Goes one step further by adding a private financeDBB concessionDBFO design-bid-build DBFO design-bid-buildperformance contracting DESIGN BUILD performance contracting DESIGN BUILontracting DBOOT AFPcessionDBP3performance contracting DBOOT AFPperformanDBB concessionDBP3DBB coDesign-Build-Own-Operateid-buildTransfer DBFO design-bid-build DBFO designeither freely or a stipulated amount. Contracts typicallydeveloping innovations to deliver a better project thancting DESIGN BUILDP3long-term; mayperformanceextend for 40 years or more.contracting initially imagined. DESIGN BUILD performance cont•performance contracting DBOOT AFPDBB concessionDBP3Singular responsibility — One entity held accountableConcessionfor cost, schedule and performance. contracting DBOOT AFDBB concessionDBDBFO design-bid-build DBFO design-bid-buildfee, either fixed amount or percentage of revenues.equally committed to controlling costs.performance contracting DESIGN BUILD performance contracting DESIGN BUILThese models can be categorizedontracting DBOOT AFPcessionDBP3according to the degree• Decreased administrative burden —Streamlinesof long-term operational, financial and commercial performance riskcommunication between designers and builders.contracting DBOOT AFPperformanDBB concessionDBP3DBB coid-build DBFO design-bid-build DBFO designcting DESIGN BUILD performance contractingchoosing design-build.DESIGN BUILD performance contP3Notperformance contracting DBOOT AFPDBB concessionDBP3surprisingly, generation-X engineers are more excitedand motivated toperformancework in alternative-deliverycontractingprojectDBOOT AFDBB concessionDBNote: In Canada today, the term often refers to projectsDBFO design-bid-build DBFO design-bid-buildperformance contracting DESIGN BUILD performance contracting DESIGN BUILontracting DBOOT AFPcessionDBP3performance contracting DBOOT AFPperformanDBB concessionDBP3DBB coid-build DBFO design-bid-build DBFO designscandals, vested interest lobbies and otherwise well-meaning a trend towards more alternative delivery, not only to savecting DESIGN BUILD performance contracting DESIGN BUILD performance contlegislation intended to protect non-technical clients from money,performance contracting DBOOT AFPDBB concessionbut also to meet performance needs.unscrupulous operators. However, the basic premise ofThere is no doubt that the models discussed have aperformance contracting DBOOT AFP3alternative delivery is simply to re-arrange traditionalperformance contracting DBOOT AFPDBBDBB concessionDBFO design-bid-build concessionDBP3healthy future, providing many more opportunities for thoseproject participants into different configurations, deriving engineers who enjoy performance the challenge and the contracting opportunity of DBOOT AFDBB DBFO design-bid-build concessionDBDBFO design-bid-build DBFO design-bid-buildFinance Operatecomponent to contractor’s scope of work. Eitherconstruction financing up until or shortly after completionof construction, or long-term finance, amortized overoperations period of the contract. Reasons and benefits:i) to increase amount of ‘contractor’s ‘skin in the game,’thus collateralizing warranties , and ii) to enable owner tobenefit from due diligence and performance securityrequirements imposed by lenders.DBOOT Description: Similar to DBFO approach, except developersrecover costs directly through customer charges. At end ofcontract period, contractor transfers ownership to client,Contract between a company and government agencyor owner, giving the company the right to operate a specificbusiness within owner’s jurisdiction, or for operation of aparticular (sometimes pre-existing) facility. Contractor(concessionaire) usually pays concession-granting party atransferred to the contractor (Figure 5).Figure 5 – Spectrumof alternative delivery modelssupported by the P3 Canada and /or the P3 Canada Fund,structured as ‘availability’-type DBFO contracts for whichcontract terms are becoming relatively standardized.Why is alternative delivery more efficient?Alternative delivery has had a very mixed press in NorthAmerica over the last several years. In some US States themost common alternative delivery methods are illegal dueto laws precluding designers and contractors from comingtogether as a single entity. Reasons include corruptionefficiencies, such as cost, resource, and time savings, by usingessentially the same group of construction professionals,engineers and architects, so no technical skills andcompetences are lost from the equation.Design-build, the most common alternative-deliveryperformance. One entity, the ‘design-build team,’ worksunder a single contract with the project owner to providedesign and construction services: one entity, one contract,and one unified flow of work from initial concept throughproject delivery.Although benefits of this approach are heavily disputed bythe non-cognoscenti, for believers, the attractions include:• Faster delivery — Collaborative project managementmeans work completed faster with fewer problems.• Cost savings — An integrated team geared towardefficiency and innovation.• Better quality — Design-builders meet performanceneeds, not minimum design requirements, often• Decreased administrative burden — Owners can focuson project rather than managing disparate contracts.• Reduced risk — Design-build team assumes additionalrisk.• Higher profit margin — An integrated team is fully and• Reduced litigation claims — By closing warrantygaps, owners virtually eliminate litigation claims.Benchmarking and claims studies show that from1995-2004, only 1.3% of claims against A/E firmswere made by design-build contractors.• Increased market share — More and more ownersarrangements that more closely mirror the collaborativeapproach taught in universities today.Future of alternative deliveryin the Canadian municipal water sectorWays of working, especially in government-controlledsectors, tend to evolve slowly without a stimulus todrive change. In the municipal infrastructure capitalmaintenance and renewal space today, this stimulusis the backlog of deferred capital maintenance andnew infrastructure needs, combined with severe fiscalconstraints. Increasingly, clients and owners are lookingfor ways to deliver ‘more for less,’ including more social,economic and environmental benefits. This need is drivingworking in the alternative delivery environment.iUK <strong>Water</strong> Industry Capital Investment 1981 – 2015 Source OFWAT.Future water and sewerage charges 2010-15: Final determinations.model, illustrates this quest for greater efficiency, profit andii /iiDBIA Handbookperformance contracting DESIGN BUILD performance contracting DESIGN BUILINFLUENTS Winter 2012 45ontracting DBOOT AFPperformance contracting DBOOT AFPperforman
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