Project Delivery and Contract Strategy PDCS Project Delivery

Project Delivery and Contract Strategy (PDCS) Project Delivery and Contract Strategy Research Team Gary Vandiver Solutia CII Annual Conference 2001

PDCS Research Team Stuart D. Anderson Stanley F. Berger G. Wayne Burchette James R. Greene Robert P. Kehoe Larry Kruse Ade Oyetunji Tim Thury Gary Vandiver Paul Wicker Texas A&M 3 M Eastman Chemical, Chairman Abbott Labs NASA Murphy Company Texas A&M GSA Solutia GM Past Members Darrick D. Bowers David Combs Richard De Leon, Jr. Jerry Kirk John Phillips Janice White John Wrockloff Texas A&M John Gray UT System FPL U. S. Steel, former Chairman UT System U. S. Air Force

Team Mission Statement To produce a process to assist in selecting a contract delivery strategy to optimize owner's project objectives.

PDCS Within industry, no existing set of delivery systems applicable to a wide range of project types. CII commissioned the PDCS Research Team to: - Identify a larger set of project delivery systems and contract strategies. - Develop a decision process and tool.

PDCS The research team developed a procedure and tool to assist in selection of Project Delivery and Contract Strategy.

PDCS Procedure • Focuses on owner’s project objectives. • Focuses on project execution environment. • Incorporates quantitative assessment of PDCS alternatives in decision support tool.

Research conducted with: • CII members, non-members • Owners and contractors • Public agencies • Industrial and general building sectors

PDCS Definition • Defines roles and responsibilities of parties in a project. • Defines how owner pays for services. • Establishes framework for organization of project execution.

PDCS – Typical Representation Traditional Design-Bid-Build delivery system, PDCS 01 Phase Sequence: Serial sequence of design and construction (Procurement begins with construction) Design Procure Construct Bid Project Team Relationships Primary Contractual/Functional Relationships Owner Designer Constructor Compensation Approaches Designer: Firm Price Constructor: Competitive Lump Sum

PDCS – Purpose Develop a tool that will assist owners in selecting a project delivery method and contract strategy for their projects, based on their project objectives.

Objectives • Develop PDCS alternatives and selection factors for industry-wide application. • Develop procedure and analysis tool to aid PDCS selection. • Develop procedure to facilitate owner’s objectives.

Characteristics Identify and define: • Set of common PDCS alternatives currently used in industry • Set of factors considered in selection process • Approach for assessing factors leading to appropriate PDCS

Data Collection and Validation Phase I – Questionnaire data from 90 projects: • Defined PDCS alternatives and selection factors that are used in practice. • Evaluated decision analysis approaches.

Data Collection and Validation Phase II – Workshops involving 32 owner and contractor project managers: • Developed relative effectiveness scores that are intrinsic to spreadsheet analysis.

Data Collection and Validation Phase III – Validation of the Tool: • Identified 20 selection factors and 12 PDCS alternatives. • Tested and validated on 12 projects from research team member companies. Owners are using the tool to support PDCS decisions on new projects.

Data Collection and Validation • Result obtained was appropriate. • Procedure and tool are improvement over current practices. • Insight into selection of PDCS provided.

PDCS Decision Support Tool PROCESS FLOWCHART Start Review project objectives and profile Review list of Selection Factors Identify relevant factors. Go to Analysis Worksheet. Copy/paste factors into PW Table in Analysis Worksheet Compute Preference Weights Copy/paste Effectiveness Values into Aggregation Table in Analysis WS Review aggregate scores. Select top three. No Review Default Compensation Approaches Refine Compensation Approaches Default Compensation Approaches Okay? Yes Make Decision End • Review project objectives. • Identify selection factors (related to owner’s project objectives). • Assign preference rank and preference weights to selected factors to reflect priority.

PDCS Decision Support Tool PROCESS FLOWCHART Start Review project objectives and profile Review list of Selection Factors Identify relevant factors. Go to Analysis Worksheet. Copy/paste factors into PW Table in Analysis Worksheet (continued) • Paste effectiveness values into aggregate table. • Obtain aggregate scores from spreadsheet. Compute Preference Weights Copy/paste Effectiveness Values into Aggregation Table in Analysis WS Review aggregate scores. Select top three. No Review Default Compensation Approaches Refine Compensation Approaches Default Compensation Approaches Okay? Yes Make Decision End • Review results to make final decision. • Choose from 20 selection factors, 12 PDCS alternatives.

PDCS Decision Support Tool Factor Number Selection Factor Description for Comparing Factor Action Statement 1 Completion within original budget is cost growth Delivery system facilitates control of Control cost growth critical to success Early completion is critical to project success Delivery system ensures shortest reasonable schedule Ensure shortest schedule project 7 17 Project features are well defined at the award of the design construction scope prior to award design and/or construction Delivery system capitalizes on well defined project Capitalize on well defined scope and/or contract of

PDCS Decision Support Tool Table A-1: Compute Preference Weights Factor Action Statement Preference Rank Preference Scores Normalized Preference Weight Control time growth 1 100 0. 33 Protect confidentiality 2 80 0. 27 Capitalize on familiar project conditions 3 60 0. 20 Maximize owner's involvement 4 40 0. 13 Efficiently coordinate project complexity or innovation 5 20 0. 07 300

PDCS Decision Support Tool Table A-2: Compute Aggregate Scores Control time growth Protect confidentiality Capitalize on familiar project conditions Maximize owner's involvement Coordinate project complexity or innovation EMPTY 0. 33 0. 27 0. 20 0. 13 0. 07 0. 00 PDCS 01 20 90 0 80 70 46. 00 PDCS 02 50 90 60 66. 67 PDCS 03 20 70 0 80 50 39. 33 20 70 0 80 40 38. 67 50 70 40 80 40 56. 67 70 70 70 40 70 66. 00 90 0 10 100 58. 00 80 40 90 30 80 64. 67 PDCS 09 0 100 80 100 0 56. 00 PDCS 10 0 60 10 30 0 22. 00 PDCS 11 100 0 90 59. 33 PDCS 12 80 80 70 100 80 80. 67 Factor PDCS Alternatives PDCS 04 PDCS 05 PDCS 06 PDCS 07 PDCS 08 Predetermined Effectiveness Values (Table EV-1) Preference Weight Aggregate Score

Benefits of the Tool • Relates PDCS to project objectives and success parameters. • Provides a decision support tool to facilitate selection of most suitable PDCS. • Expands knowledge base with well -defined, documented PDCS alternatives.

Benefits of the Tool • Provides rationale for selecting PDCS, based on quantification of alternatives. • Supports CII Best Practices: - Alignment - Pre-Project Planning

PDCS Implementation Session LOW LEVEL OF CHANGES MAXIMIZE CONTROL LOWEST COST SHORTEST SCHEDULE

PDCS – Implementation Session Moderator Wayne Burchette Eastman Chemical Panel Stu Anderson Texas A&M University Stan Berger 3 M Company Larry Kruse Murphy Company Ade Oyetunji Texas A&M University Paul Wicker General Motors Company