Construction Market Disruptions & the Rise of Alternative Contract Delivery: 5 Key Takeaways from WASHTO 2024
In recent years, factors such as inflation, labor shortages, and supply chain issues have converged to affect the construction industry. Combined with increasing infrastructure investments nationwide, these factors have led to a reevaluation of contract delivery methods within the industry.
On July 9, RS&H had the honor of leading an educational session on this subject for transportation agencies at the WASHTO 2024 conference in Omaha, Neb. RS&H Senior Vice President and Strategic Advisor Thomas Everett moderated the session, which featured a panel of industry experts with uniquely informed perspectives on alternative contracting methods:
Let’s look at five key insights from this session that can help transportation agencies make the best use of alternative contracting methods in an evolving market.
5 Key Takeaways on Construction Market Disruptions and Alternative Contract Delivery
1. Understand and Mitigate Risk
Selecting a contracting method centers primarily on managing risk. While it can be tempting to combine beneficial elements from different contracting methods to manage risk more effectively, RS&H’s Bob Jones cautioned agencies against using a hybrid method of any kind, as it can lead to manipulation and contested results. To avoid pitfalls, agencies can leverage the FHWA’s Contracting Alternatives Suitability Evaluator (CASE) webtool in their selection process. The webtool considers project-specific risks against different contracting methods to help agencies identify the right approach. Additionally, FHWA offers collaborative opportunities through its Peer Exchange program, which allows agencies to share best practices and lessons learned with like-minded organizations. Reach out to your local FHWA office for information on coordinating or attending a peer exchange.
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After selecting a contracting method, agencies must set clear expectations and develop tight scope requirements to further mitigate risk. If an agency has selected progressive design-build (PDB) or CM/GC, they should also involve an experienced Independent Cost Estimator (ICE) early in the development process. A savvy ICE has the skills and knowledge to correctly identify production rates and cost drivers to ensure accurate estimates. They also bring expertise in negotiating costs for alternative contracting approaches. Engaging an ICE too late after making important decisions without their input could mean losing out on the mitigation benefits they offer in terms of cost, schedule, and constructability risks.
2. Innovation is Important, But Not Inherent
If a project is ripe for innovation, alternative contracting methods can help agencies optimize their design and construction methods, often benefiting all stakeholders. Collaborative methods like PDB allow the project team to suggest creative solutions in the form of Alternative Technical Concepts, which can improve the project and present savings in cost, schedule, and efficiency. To this end, agencies must be careful not to “over design” before bringing on a design-build (DB), PDB, or CM/GC team, as progressing too far before these parties come on board can result in a loss of opportunities for innovation.
But while collaboration that drives innovation is one of the primary selling points of alternative contracting methods, not every project lends itself well to innovation. Agencies should always verify that a project is suited for innovation before selecting an alternative method built around creative collaboration between the designer and contractor.
3. Establish Partnering Check-Ins
Structured collaborative partnering plays a vital role in guiding the project team and stakeholders toward a unified approach. Holding a partnering session at the beginning of an alternative delivery project is a best practice that builds trust among team members, aligns goals, sets expectations, defines risk and scope, and establishes transparency.
For optimal results, however, agencies must maintain partnering activities throughout the project to build upon the trust established at the outset. Our panelists recommend conducting regular check-ins to reinforce partnering principles and ensure team members are working in the spirit of the established partnership goals. These check-ins will also facilitate swift resolution when issues arise during the project.
4. Coordinate Early and Often with FHWA
Maintaining communication with the FHWA at every step of a federally funded project is critical. Keeping FHWA in the loop is especially important for innovative projects, as the FHWA adds another layer of expertise to verify that new approaches to design and construction will not result in unforeseen challenges down the road. As Jody Schott noted: "It's okay to have a challenge; just don't surprise anyone with it."
5. Engage the Community & Set Expectations
Alternative delivery methods allow for a high degree of community engagement that, if managed appropriately, will ensure the community's needs and preferences are addressed. Agencies must verify their project teams deliver on promises while also making clear that innovative changes could alter the final product – in other words, early renderings are subject to change. Fostering a sense of ownership and support among the community will contribute to the success of any project.