Project Delivery and Contract Strategy (PDCS)

1. Project Delivery and Contract Strategy (PDCS) Project Delivery and Contract Strategy Research Team Gary Vandiver Solutia CPl Conference 2001

2. Project Delivery and Contract Strategy (PDCS) Gary Vandiver Solutia CPl Conference 2001

3. PDCS Research Team Stuart D. Anderson Texas A&M Stanley F. Berger 3M G. Wayne Burchette Eastman Chemical, Chairman James R. Greene Abbott Labs Robert P. Kehoe NASA Larry Kruse Murphy Company Ade Oyetunji Texas A&M Tim Thury GSA Gary Vandiver Solutia Paul Wicker GM Past Members Darrick D. Bowers Texas A&M David Combs John Gray Richard De Leon, Jr. UT System Jerry Kirk FPL John Phillips U.S. Steel, former Chairman Janice White UT System John Wrockloff U.S. Air Force

4. TeamMission Statement To produce a process to assist in selecting a contract delivery strategy to optimize owner's project objectives.

5. CII commissioned the PDCS Research Team to: Identify a larger set of project delivery systems and contract strategies. Develop a decision process and tool. PDCS Within industry, no existing set of delivery systems applicable to a wide range of project types.

6. PDCS The research team developed a procedure and tool to assist in selection of Project Delivery and Contract Strategy.

7. PDCS Procedure • Focuses on owner’s project objectives. • Focuses on project execution environment. • Incorporates quantitative assessment of PDCS alternatives in decision support tool.

8. Research Research conducted with: • CII members, non-members • Owners and contractors • Public agencies • Industrial and general building sectors

9. PDCS Definition • Defines roles and responsibilities of parties in a project. • Defines how owner pays for services. • Establishes framework for organization of project execution.

10. Traditional Design-Bid-Build delivery system, PDCS 01 Phase Sequence: Serial sequence of design and construction (Procurement begins with construction) Design Procure Construct Bid Project Team Relationships Primary Contractual/Functional Relationships Owner Designer Constructor PDCS – Typical Representation Compensation Approaches Designer: Firm Price Constructor: Competitive Lump Sum

11. PDCS – Purpose Develop a tool that will assist owners in selecting a project delivery method and contract strategy for their projects, based on their project objectives.

12. Objectives • Develop PDCS alternatives and selection factors for industry-wide application. • Develop procedure and analysis tool to aid PDCS selection. • Develop procedure to facilitate owner’s objectives.

13. Characteristics Identify and define: • Set of common PDCS alternatives currently used in industry • Set of factors considered in selection process • Approach for assessing factors leading to appropriate PDCS

14. Data Collection and Validation Phase I – Questionnaire data from 90 projects: • Defined PDCS alternatives and selection factors that are used in practice. • Evaluated decision analysis approaches.

15. Data Collection and Validation Phase II – Workshops involving 32 owner and contractor project managers: • Developed relative effectiveness scores that are intrinsic to spreadsheet analysis.

16. Data Collection and Validation Phase III – Validation of the Tool: • Identified 20 selection factors and 12 PDCS alternatives. • Tested and validated on 12 projects from research team member companies. Owners are using the tool to support PDCS decisions on new projects.

17. Data Collection and Validation • Result obtained was appropriate. • Procedure and tool are improvement over current practices. • Insight into selection of PDCS provided.

18. PROCESS FLOWCHART Start Review project objectives and profile Review list of Selection Factors Identify relevant factors. Go to Analysis Worksheet. Copy/paste factors into PW Table in Analysis Worksheet Compute Preference Weights Copy/paste Effectiveness Values into Aggregation Table in Analysis WS Review aggregate scores. Select top three. Refine Compensation Approaches No Default Compensation Approaches Okay? Review Default Compensation Approaches Yes Make Decision End PDCS Decision Support Tool • Review project objectives. • Identify selection factors (related to owner’s project objectives). • Assign preference rank and preference weights to selected factors to reflect priority.

19. PROCESS FLOWCHART Start Review project objectives and profile Review list of Selection Factors Identify relevant factors. Go to Analysis Worksheet. Copy/paste factors into PW Table in Analysis Worksheet Compute Preference Weights Copy/paste Effectiveness Values into Aggregation Table in Analysis WS Review aggregate scores. Select top three. Refine Compensation Approaches No Default Compensation Approaches Okay? Review Default Compensation Approaches Yes Make Decision End PDCS Decision Support Tool(continued) • Paste effectiveness values into aggregate table. • Obtain aggregate scores from spreadsheet. • Review results to make final decision. • Choose from 20 selection factors, 12 PDCS alternatives.

20. Factor Selection Factor Description Factor Action Number Factor for Comparing Statement 1 Completion within Delivery system Control cost growth original budget is facilitates control of critical to project cost growth success 7 Early completion is Delivery system Ensure shortest critical to project ensures shortest schedule success reasonable schedule 17 Project features are Delivery system Capitalize on well defined at the capitalizes on well well defined scope award of the design defined project and/or construction scope prior to award contract of design and/or construction PDCS Decision Support Tool

21. Factor Action Statement Preference Preference Normalized Rank Scores Preference Weight Control time growth 1 100 0.33 Protect confidentiality 2 80 0.27 Capitalize on familiar 3 60 0.20 project conditions Maximize owner's involvement 4 40 0.13 Efficiently coordinate project 5 20 0.07 complexity or innovation 300 PDCS Decision Support Tool Table A-1: Compute Preference Weights

22. Capitalize on Coordinate Maximize familiar project Control time Protect Factor owner's EMPTY project growth confidentiality complexity or PDCS Aggregate involvement conditions innovation Alternatives Score Preference 0.33 0.27 0.20 0.13 0.07 0.00 Weight PDCS 01 20 90 0 80 70 46.00 PDCS 02 50 90 50 90 60 66.67 PDCS 03 20 70 0 80 50 39.33 PDCS 04 20 70 0 80 40 38.67 PDCS 05 50 70 40 80 40 56.67 (Table EV-1) PDCS 06 70 70 70 40 70 66.00 Predetermined Effectiveness Values PDCS 07 90 0 100 10 100 58.00 PDCS 08 80 40 90 30 80 64.67 PDCS 09 0 100 80 100 0 56.00 PDCS 10 0 60 10 30 0 22.00 PDCS 11 100 0 100 0 90 59.33 PDCS 12 80 80 70 100 80 80.67 PDCS Decision Support Tool Table A-2: Compute Aggregate Scores

23. Benefits of the Tool • Relates PDCS to project objectives and success parameters. • Provides a decision support tool to facilitate selection of most suitable PDCS. • Expands knowledge base with well-defined, documented PDCS alternatives.

24. Benefits of the Tool • Provides rationale for selecting PDCS, based on quantification of alternatives. • Supports CII Best Practices: • Alignment • Pre-Project Planning

25. LOW LEVEL OF CHANGES LOWEST COST MAXIMIZE CONTROL SHORTEST SCHEDULE PDCSImplementation Session

26. PDCS – Implementation Session Moderator Wayne Burchette Eastman Chemical Panel Stu Anderson Texas A&M University Stan Berger 3M Company Robert P. Kehoe NASA Larry Kruse Murphy Company

27. Construction Project Improvement Conference 2001: A Construction OdysseyTrends and Perspectives Construction Industry Institute Austin, Texas