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Framework for Determining Agency Costs of Various Delivery Methods

Description:

Numerous studies have examined the use of various delivery methods in the transportation sector, most notably design-bid-build (DBB), design-build (DB), and construction manager/general contractor (CM/GC). However, the influence of these methods on agency resources has not been studied in depth. More specifically, there has not been a quantifiable estimate of how different delivery methods affect total project costs incurred by agencies throughout the project delivery cycle. Thus, owner agencies with limited resources may not have clarity on how to demonstrate value for money in the delivery method selection process. For the purposes of this statement, total costs incurred by an agency through the project life cycle minus direct project costs paid to the general contractor are referred to as agency costs.

Numerous studies have examined the performance implications of using various delivery methods, including the cost implications. However, cost analyses tend to focus on direct project costs only and not include the internal costs to the agency of managing the project. Other studies acknowledge that different delivery methods will require varying levels of involvement by the owner. Yet these studies tend to describe levels of involvement in generalities without quantification. Therefore, a cost analysis to include agency costs will prove useful to agencies in their delivery method decision process.

A previous case study of two nearly identical bridge replacement projects showed a difference in both direct project cost and agency cost, with one project being delivered via DBB and the other DB by Washington DOT. This case study provides a starting point, but cannot be generalized to other projects or states. A more comprehensive analysis is needed to draw firm conclusions related to agency costs.

Other projects have examined the agency costs of various facets of the project process, but not by delivery method. For example, NCHRP Report 826: Estimating Highway Preconstruction Services Costs examined agency costs related to preconstruction services, including services offered by agency staff. Such projects provide background on how to examine agency costs, and should help inform the current proposed project.

The proposed research project should address the following questions:

· How do agency costs vary under the use of different delivery methods?

· How do agency costs vary by phase of the project under different delivery methods, e.g. planning, design, pre-award, and post-award phases?

· How do total project costs (agency costs + direct project costs) vary under the use of different delivery methods?

· What are the appropriate procedures to estimate agency costs?

· How can delivery methods be selected to maximize value money?

· How should agency costs be incorporated as a factor into other delivery method decision making frameworks?

Objective:

The main research objective is to identify the agency costs of using various delivery methods. The research will develop a methodology to measure such agency costs in transportation construction projects. The research will deliver a framework for determining how alternative contracting methods (ACMs) can be leveraged to optimize the use of limited available resources. Findings should be integrated with existing research on construction procurement, project performance, and project delivery selection.

Related Research:

NCHRP Synthesis 504: Strategic Program Delivery Methods

NCHRP Report 826: Estimating Highway Preconstruction Services Costs

TPF-5(260) Guidebook for Selecting Alternative Contracting Methods for Roadway Projects

Tasks:

Specific Tasks of the research to accomplish the main objectives include:

·

Task 1 – Review relevant literature related to agency costs, resource allocation, level of owner involvement, and/or level of administrative burden associated with different delivery methods.

·

Task 2 – Determine if/how agencies are currently tracking internal agency costs on a project level (or program level, or other level if applicable). Identify best practices, if any, on how agencies include existing resource constraints into their ACM decision making process. Prepare a white paper documenting the results of Tasks 1 and 2.

· Task 3 – Based on the results of Tasks 1 and 2, prepare a research work plan that describes the details of the research methodology and methods for identifying potential effective practices and developing authoritative conclusions that will lead to the accomplishment of the research objectives.* *The plan shall include a detailed description of any statistical analysis methods, qualitative research instruments and a justification that is well grounded in the literature to their use.

· Task 4 – Develop a rational methodology for determining total costs, including agency costs, by ACM from 3-5 federal/state agencies. Selected agencies should use multiple methods (DBB and DB at a minimum) to provide a basis for comparing costs. Such agencies may already be tracking agency costs or should at least be available to have such costs estimated or modeled through examining existing processes. Provide a list of potential case study agencies for approval by the NCHRP project panel.

· Task 5 – Execute the research work plan and prepare an interim research report that articulates the data collection and analysis as well as emerging conclusions, effective practices, lessons learned, and a proposed outline for the final report. Include appendices that contain the details of the analysis written in a form that permits it to be published separately as a stand-alone report should the NCHRP panel decide that would be appropriate.

· Task 6 - Prepare the draft report documenting the results of the analysis. Develop a framework for agencies use on how to effectively track and incorporate agency costs into their delivery method selection process.

· Task 7 - Publish the final implementation plan and a final research report that details the full results of the research.

Implementation:

The intent of this project is to determine how the use of ACMs relate to total project costs, including agency costs. The project will deliver insight for agencies on how to incorporate expected agency costs into the selection of ACMs. It will also provide guidance on the use of effective practices to track and estimate agency costs. Ultimately, this project will provide state transportation agencies with a means to improve control over ever-tighter budgets and to maximize value for money on the selection of project delivery methods.

Sponsoring Committee:AFH15, Project Delivery Methods
Research Period:12 - 24 months
Research Priority:High
RNS Developer:Matthew Scott Stanford, PE – University of Colorado Boulder Jorge A. Rueda, PhD – Auburn University Mounir El Asmar, PhD – Arizona State University Eric Kahlig, PE – Ohio Department of Transportation
Date Posted:11/07/2017
Date Modified:01/05/2018
Index Terms:Project delivery, Costs, Construction projects, Contract administration,
Cosponsoring Committees: 
Subjects    
Administration and Management
Construction
Transportation (General)
Finance

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