Early Contractor Involvement: HPO’s Key to Success

1. Luis A. Ruiz, P.E. Chief, Geotechnical Branch Jacksonville District SAME Post Meeting Jacksonville, FL 28 August 2013 Early Contractor Involvement: HPO’s Key to Success

2. Background ECI Contracts Basics HPO Projects Solicitation Design phase Contract administration Lessons learned Wrap-Up Agenda 1828

4. A Priority of Two Administrations “Now, even as we continue our recovery efforts, we're also focusing on preparing for future threats so that there is never another disaster like Katrina. The largest civil works project in American history is underway to build a fortified levee system. And as I — just as I pledged as a candidate, we're going to finish this system by next year so that this city is protected against a 100-year storm.” President Barack Obama Xavier University, New Orleans August 29, 2010

5. Best PracticesSystem Program Management • Acquisition Strategy • Design Build / Cost Plus Contracts • Best Value Source Selection • Early Contractor Involvement (ECI) • Program Management Support Contract • Construction Materials • Government Furnished Borrow • Supply Contracts for Sheet Piles & Borrow • Improved Techniques • Value Engineering – systems study complete • Pile Load Tests – in advance of contract award • Press Pile, Spiral welded piles • Deep soil mixing, sand blanket and wick drains • Earned Value Management System (EVMS) • Leverage National & Regional Resources

6. A Fixed Price Incentive contract IAW FAR 16.403 A project delivery method where the Corps engages the services of a general contractor to provide “preconstruction services” concurrent with design effort The contract includes the Government’s ability to exercise an option for the construction Provides for successive target price adjustments as the design matures, with the objective of managing the final construction cost to optimum. Contract includes terms and conditions to allocate risk among the parties ECI Contracting

7. Design Contract Government retains design responsibility either through in-house or with a separate AE contract. Preconstruction services are not “Brooks Act” services. Non-competitive acquisition Contract is procured IAW FAR 15 and application of FAR 16.403. Price and non-price factors are evaluated. Design-Build Contract Two separate entities (designer & construction manager/general contractor) Both report to the owner (Government). What it ain’t…

8. Acquisition Strategies Comparison

9. Relative Project Delivery Timelines Construction Funding P&D Funding Design Bid Build Project Delivery Design Construction ECI delivery advantage depends upon timing of design and construction funds. ECI Project Delivery Construction Design CM selection and design begins with P&D funds. Design-Build Project Delivery Design Construction Total duration equal or less than ECI, but cannot commence design/construction until construction funding is received. PY PY -1 Time

10. ECI Contract • Fixed-price Incentive (successive targets) contract (FAR clauses 16.403-2 and 52.216-17) • RFP will provide • SOW for preconstruction services (Base) • Concept engineering solution with typical sections for proposal preparation for construction initial target pricing (Option) • Ceiling price • Evaluation criteria, based on best value tradeoffs, including price • Negotiated Procurement • Award of preconstruction services (Base) as a Firm Fixed Price • Exercise of Construction (Option) as a Firm Price Incentive

11. Contract Schedule An example of ECI Solicitation Line Items are shown below. This is remitted with the proposal. Additional line items may be added for long lead items if required.

12. When to Use ECI • Urgency - very tight mandated schedules • Funding - funding stream is available • Complex “one of a kind” project, with no standard design • Size - large enough to attract experienced firms • Uncertainty – risk in delaying award while requirements are being developed

13. When to Use ECI - Other • Challenging site, or other unique aspects that would benefit with a Contractor’s input during design phase • It would be advisable to have a collaborative effort during design and construction between Designer, Builder, Owner, User to ensure Project success

14. New Orleans ECI Projects Seabrook Gate IHNC LPV 111 27,720 FT DSM LPV 145 30,800 FT T-Wall LPV 146 36,600 FT T-Wall LPV 148 43,100 FT T-Wall West Closure Complex (PRO)

15. New Orleans East Largest Deep Soil Mixing Project in the World

16. New Orleans East Levee Bayou Sauvage National Wildlife Refuge Old Levee New Levee Over 1 Superdome of Clay (4.9 mil cy) Required ~1 Football Field

17. Raise and Strengthen Levees / Floodwalls Higher Floodwalls and Levees New T-wall Orleans Metro St. Bernard Parish Old I-wall New 32-foot T-wall Old Levee Elevation New Orleans East

18. St. Bernard Floodwall MRGO MRGO 50 Eiffel Towers of Steel 23 Miles Long (2 miles constructed per month) Central Wetlands

19. Top of Floodwall: EL +32’ Katrina storm surge elevations were much higher elsewhere along the Gulf Coast. Top of Base Slab: EL +21’ 500-YEAR STILL WATER ELEVATION*: EL +22.5’ 100-YEAR STILL WATER ELEVATION*: EL +18’ HURRICANE KATRINA’S STILL WATER ELEVATION* AT THIS LOCATION: EL +18’ Top of Stabilization Slab: EL +17.5’ Designed for a 100-year Surge St. Bernard Floodwall, near the IHNC Tie-In (not to scale) *Still water elevation does not include waves

20. Seabrook Floodgate Complex

21. Seabrook Floodgate Complex CONSTRUCTION COFFERDAM ALLOWED TO ACHIEVE HYLA BY 01 JUNE 2011

22. West Closure Complex • The WCC removed 26 miles of levees and floodwalls from the first line of defense

23. West Closure Complex

24. Solicitation • Award Preconstruction Services early in design phase (15 – 30%) • Pricing schedule includes: • Preconstruction services • Initial Target Cost: option • Initial Target Profit: option • Selection of Contractor – ECI Specific Evaluation Factors • Experience with preconstruction services • Local market knowledge • Plan to involve major subcontractors • Oral interviews • Sufficient design information for contractors to adequately provide an Initial Target Cost • SOW section defining preconstruction services and expectations • ECI specific clauses

25. Solicitation – Scope of Work • Preconstruction services and expectations • Cost estimating (live market conditions) • Design consultation • Constructability reviews • Subcontractor input • Value engineering – cost control • Bid package development • Design and construction scheduling • Construction phasing • Risk management • Project orientation and partnering • Construction/design integration – design liaison

26. Solicitation – Scope of Work • Escape clause – Govt. not obligated to exercise option: • Poor preconstruction participation • Excessive team turnover and lack of commitment • Lack of Congressional authorization/appropriation • Can’t negotiate within funds available • Competitive subcontractor pricing – Govt. attends subcontractor bid openings • Defines production point for use in FAR 52.216-17 (100% design) • Addresses payment processes

27. Solicitation - Clauses Successive Target Pricing • Midway Target Price scheduled when all major design decisions have been made • Midway Target Price includes: + Midway Target Cost (MTC, Based on 35-90% Design) + Midway Target Profit (MTP, 1.5% - 3% of MTC) Midway Target Price < Ceiling Price • Midway Target Price recognizes significant scope changes • If Midway Target Price is under ceiling, the contracting officer may elect to exercise the construction option • Addresses similar details for final Firm Target Cost and Profit at 100% design

28. Solicitation - Clauses • Adequate Accounting System: Self certification that accounting system is in compliance with FAR 16.403-2(c)(1) • Earned Value Management System (EVMS) Certification • Offeror’s accounting capable of supporting EVMS • EVMS - Size dependent: • Under $20M: not applicable • $20M to $50M: offeror self-certifies compliance • Over $50M: offeror self-certifies and is audited

29. Solicitation - Clauses FAR 52.216-17, Incentive Price Revision – Successive Targets • Defines ceiling price (ECC) • Outlines alternative if firm fixed price agreement is not reached: • Profit adjustment formula (% negotiated) • Profit increases if final price is lower than Initial Target Cost • Profit decreases if final price is higher than Initial Target Cost • Final price determined after completion of work, using profit from profit formula • Failure to agree is not subject to Disputes clause • Incentive • Profit can go up as CM controls/cuts costs between the Midway and Firm Target Prices.

30. Example: Profit Adjustment Formula

31. Design Phase • Jointly develop bid packages & design schedule: design team, CM, Corps & User • Design estimates shared until negotiation point reached (IGE still close hold) • Exercise construction option at optimum stage of design (project dependent) • Establish Final Target Price @ 100% design - settle as FFP w/incentives • Tie payment during design to design milestones • Control designer bright ideas after construction option is exercised

32. Validation Phase (HPO Only) • Construction of access roads • Necessary for Project Access & Pile Load tests • Construction of Working Platforms • Set-up of Contractor’s staging areas • Perform Pile Load Tests • Support completion of Final Designs • Establishment of No-Work Zones • Allowed Pre-Ordering Steel H-Piles • Test Sections • Complete DSM Mix Designs

33. Managing Cost & Pricing Data After Construction Award • Cost and Pricing data were required for the firm target proposal only. • Otherwise, consent packages and Vouchers gave the Government a good look at the Contractor’s actual pricing without a further requirement for cost and pricing data.

34. ECI Contracting Benefits • Model allowed to arrive at well documented fair and reasonable costs • ECI contract vehicle allowed the Government to make common sense changes to the contracts prior to fixing the price • Facilitated both price increases/decreases • Encompassed the Non-Federal sponsor concerns • Eliminated the need for modifications • Streamlined the administrative process for both the Government and the Contractor and saved costs for both parties • Allowed for additional resources as necessary to maintain the contract completion dates

35. Lessons Learned • Approach ECI with different mindset – more open way of doing business on all sides • Better education of entire team of what ECI means (particularly customer) • Staff big and staff early (Voucher Validators, Scheduler, Cost Estimators) • Coordination - SOW for A-E and ECI contractor • Collocation of Team Members • Facilitate interaction between designers and contractor • Review risk analysis at each major milestone

36. Lessons Learned (cont.) • Establish control of late sponsor comments by emphasizing schedule and bid packages • Clearly define process for notifying PDT of design changes, amendments and modifications • Allocate resources according to design schedule (more Civilsearly, more Mechanicals later) • Allow more time for joint estimates or different approach to joint estimates • Improve sub-contractors involvement in pre-construction phase • Good risk decisions made w/ contractor input

37. HQUSACE PolicyLegal Sufficiency Requirements • Why FFP contract not suitable • Use FAR 52.216-17, Incentive Price Revision – Successive Target clause • Ensure the contractor has an adequate accounting system • Ensuring adequate price competition and fair and reasonable pricing (include cost realism) • Negotiating the ceiling price – Recommend offerors to propose • Level of design at award of preconstruction services • Scope of preconstruction services • Structure of the contract and predominance • Funding the construction management contract (P&D vs Constr.)

38. ECI Results

39. The Delivery Team Committed to ensuring that New Orleans could handle a 100-year storm surge by 1 June 2011.

42. THANKS!