Setting a Course for Construction

By Chris Hotop, PE, NCEES, LEED AP, and John Maranowicz, QSP, CESSWI

Construction at commercial airports can involve just about every type of construction and facility: from renovations to from-the-ground-up new terminals, concession tenant improvements, IT/security system installs and integrations, baggage handling system modifications, airfields, roadways, hangars and support facilities. Project types and sizes are vast and highly variable. The stakeholders are always many, with the safety and security of the traveling public perpetually paramount.

There is nothing simple or easy about construction at an airport. Aging infrastructure is being upgraded 24/7/365 at most airports to meet travelers’ and airports’ demands. Airports, airlines, concessionaires and private aviation support enterprises are completing new projects at previously unseen levels. Such work requires design and construction professionals willing and able to consider all delivery options to successfully execute their projects.

Design-Bid-Build

Low-bid construction procurement (design-bid-build delivery) goes in and out of favor regularly. When commodity prices are down and competition is high, owners see an opportunity to capitalize on a buyer’s market. When prices are up and the architecture, engineering and construction (AEC) community is very busy, owners strive to get the most for their dollar.

Both of these scenarios carry risks. When competition is fierce, AEC firms may sacrifice quality and service to win a job. If work is plentiful, desired firms may put their B-team on the job or pass entirely. While design-bid-build may be familiar and offer a linear process, the results can include extended schedules and pricing that isn’t established until design is complete and the project has been bid. The lack of contractor input during planning and design — and the inherently adversarial relationships fostered when interests are not aligned with the owner — also can prove problematic.

So, what is an owner to do? What options are available when public dollars are being used, schedules are compressed and budgets are tight? Thankfully there are several approaches that can
be tailored to an owner’s needs and abilities. 

Design-Build

Design-build used to be considered a complicated delivery method, one in which the owner had to have a clear understanding of the concept and scope before starting. But design-build has become the preferred method for many owners, both public and private, because partners can be selected based on quality and service while still maintaining control of cost, schedule and risk. They can see the storms ahead on a project, correct course to avoid turbulence and stay on track to deliver on time.

Several selection and contracting mechanisms can be employed. In a two-step process, the owner may short-list several firms or teams based on qualifications and technical approach, and final selection is completed with a fee component; the fee can be a percentage of direct costs based on a target price with lump sum design preconstruction services, design and general conditions. A guaranteed minimum price (GMP) can be established, after 30 percent to 60 percent of design, through open-book competitive pricing of prequalified subcontractors, with known project contingencies built in. While a program manager can be hired to manage requests for proposals (RFPs), owners often deem such a move unnecessary.

Advantages are numerous. A single point of contact and responsibility for both design and construction aligns interests and ease of communication with the owner, particularly when design and construction are completed by the same entity. Early package coordination and bidding allow for fast-tracked schedules and establishment of a GMP early in the project. The build team eliminates surprises by securing early input and buy-in regarding phasing, scope, schedule and pricing.

With an integrated firm approach, value engineering and estimating occurs simultaneously during design. In an open book contract, the owner has the advantage of competitive bidding of subcontractors and bid leveling. The project price can only go down; the design-builder takes the risk for any costs over GMP. The contract can be established with a GMP and amendments throughout for various packages (demolition, civil, foundations, etc.).

This approach is what defines the progressive or component GMP design-build process. The owner is in complete control and is provided “off-ramps” throughout design and construction. Work developed at each stage can be used in others to maintain integrity of the program.

It’s easy to see why design-build can become a preferred method of project delivery. The Design Build Institute of America, along with its industry partners, has made great advancements in recent years in legislation allowing design-build; it is widely permitted for public sector projects in all but eight states.

Construction Manager at Risk

In construction manager at risk (CMAR), the owner selects an architectural engineering (A-E) team, generally in advance of the fee-based contractor, to define the project program. Selection is based on qualifications and experience. The CMAR and A-E firm work closely together to develop design, estimates and packages to meet the owner’s budget and schedule. The CMAR provides a GMP early in the process, with RFPs issued for subcontracts. The owner contracts separately with the A-E firm and contractor.

Advantages are similar to those of design-build: early contractor input, fast-tracked construction through multiple early procurement packages, and early pricing guarantees. Disadvantages include the owner managing both a design and construction contract and seeing that both parties’ interests are aligned with its own. Finger-pointing can be greatly reduced when the A-E and contractor are closely coordinated early in the process.

Public-Private Partnership

Already popular for commercial development and traditional infrastructure, the public-private partnership (P3) has recently taken flight for airports. Special purpose entities are formed — typically third-party developers of air cargo, fixed base operator (FBO), and maintenance, repair and overhaul (MRO) facilities. A recent example is redevelopment of LaGuardia Central Terminal B, involving finance, design, construction, operation and maintenance by a third-party consortium in partnership with the Port Authority of New York and New Jersey. 

P3 delivery can be attractive when public financial constraints otherwise might slow things down. A P3 special purpose entity also can handle operations and maintenance over the life of a lease, and allow the airport owner to establish more predictable fixed costs to better respond to passenger demands and airline needs. 

Ahead of Schedule

Advantages of design-build and construction manager at risk:

  • Early contractor input
  • Fast-tracked construction through early procurement packages
  • Early pricing guarantees
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