Alternative Project Delivery

High Building Costs Fuel Expanded Options

by Tony Illia

Fast-growing Southwestern states are increasingly turning to alternative delivery procurement methods to meet their construction needs. Tightened public funding and rising construction costs have prompted many owners to shun a traditional design-bid-build scenario that awards contracts a low-price basis. A bargain upfront can sometimes be more costly in the end with change orders, lawsuits and delays.

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"The low bid process creates an immediate adversarial relationship between the contractor, owner and subs," said Mark Minter, executive director of the Arizona Builders' Alliance, a Phoenix-based trade group. "It basically turns into a giant fight."

Design-build, construction management at-risk and public-private partnerships are becoming favorite alternates for getting the job done. The new Arizona Cardinals Stadium, for example, was a private-public joint-venture design-build project. The $455 million, 63,400-seat venue was partly funded from a one percent hotel tax and a 3.25 percent car rental surcharge, though legislation capped public monies for its construction.

The Cardinals, as tenant, paid $147 million of the construction costs. The stadium, however, is owned and operated by the Arizona Sports and Tourism Authority.

Hunt Construction Group of Phoenix was the project's design-build general contractor.

"Design-build created a team atmosphere where everyone worked together and shared a common goal," said Robert Aylesworth Jr., Hunt's executive vice president. "I'm not sure that this project could have gotten done any other way."

There were also design-build subcontracts for the stadium's retractable roof and rolling field. The 1.7-million-sq.-ft. stadium, despite its size and complexity, opened on Aug. 12 with no claims or cost overruns.

Design-build creates single-source responsibility for owners rather than dealing with multiple parties, said Jeff Cook, vice president of PinnacleOne, a Phoenix-based construction consultant. It also allows for more give-and-take between project participants for problem solving, scheduling, budgeting and constructability, he added.

Problems often arise from poor communication between project participants, said Wylie Bearup, the City of Phoenix's engineering and architectural director. Alternative delivery methods create open-book accounting resulting in a partnership with a two-way open dialogue, he added

"With public owners reporting an average price increase of more than 16 percent on construction project bids, they are leaving no stone unturned in their efforts to reign in costs," said Jim D'Agostino, executive vice president of program management services for PinnacleOne, a Phoenix-based construction consultant. "[They] view alternative delivery methods, especially design-build, as one strategy to achieving that end."

The Southern Nevada Water Authority recently completed its first design-build job with great success, finishing four months early and within budget. The $13.9 million pipeline project, which bypasses the Lake Mead Intake No. 1 and the Alfred Merritt Smith Water Treatment Facility, finished on June 29.
CH2M-Hill Inc., Englewood, Colo., was the design-build general contractor.

"Design-build was an easy choice to make," said Marc Jensen, SNWA's director of engineering. "You don't have any disagreements between the designer and contractor about the responsibility for design revisions."

Nevada, however, is seeking to add construction management at-risk to its procurement toolbox. The Associated General Contractors, Las Vegas chapter, is currently drafting language for the 2007 Legislature that would allow construction management at-risk on public works. "We're one of only six states in the country that doesn't currently allow construction management at-risk," said Steve Holloway, AGC Las Vegas's executive vice president.

"The public agencies are very supportive of the idea, and have participated in drafting the legislation."

Some of its participants include the Clark County School District, and Clark County Aviation and Public Works departments, among others. Their backing comes as a result of several low-bid, high-profile project miscues including the Clark County Regional Justice Center and Detention Center in downtown Las Vegas, which both opened a year late and over budget.

Construction management-at-risk, meanwhile, has yielded good results in New Mexico, which has had the procurement method in place since the early 1990s, said Dennis Roberts, director of industry relations for AGC New Mexico's Building Branch.

Construction management-at-risk allows state and municipal agencies to award projects on a best value basis instead of price alone. It also limits public liability since the construction manager agrees to work "at risk" by assuming any cost overruns beyond a negotiated guaranteed maximum price. It serves as a strong incentive for the job to stay within budget.

The University of New Mexico in Albuquerque recently used construction management at-risk for its new $4.2 million, 26,000-sq.-ft. Rudy Davalos Basketball Center, which opened in April.

Jaynes Corp. of Albuquerque, was the construction manager. The six-court practice facility is located at University and Stadium boulevards, adjacent to

"The Pit," the school's main basketball stadium.

"We're seeing more construction management at-risk in the public sector," said Roberts. "State law allows for competitive sealed proposals.

Sophisticated owners see the advantages that enable them to get the best cost upfront."

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