Alternative Delivery Methods Bring Value to Industry
WWEMA held its 97th Annual Meeting this past month and had as its theme “Sea Change .
WWEMA held its 97th Annual Meeting this past month and had as its theme “Sea Change ... From Product Supplier to Solutions Provider”. Producers of water and wastewater technologies from across North America, and their representatives, met over the course of three days, discussing a host of topics ranging from emergency hurricane response plans to the developing world’s infrastructure needs.
One of more enlightening aspects of the program was an in-depth discussion of alternative project delivery methods. Representatives from local water authorities and the consulting engineering community served on a panel session addressing new approaches to project management. Their views on how to maximize value when designing and building water and wastewater projects were enlightening to the members of our Association who have been advocating value-based procurement for decades.
WWEMA’s chairman and president of Ashbrook Simon-Hartley, Bob Williams, began the panel discussion with an international perspective on project delivery methods, noting that the design-bid-build strategy typically employed in the U.S. is unique on the world market. He explained how specifications used by the 11 water companies in the U.K. could be one page long, while those in the Middle East could be one paragraph long, each focusing on the expected results. Conversely, one could easily find a specification used in the U.S. that is 400 pages long, with 398 pages dedicated to terms and conditions and the remaining two pages addressing expected outcomes.
He attributed this to the fragmented nature of the U.S. water and wastewater market, dominated by a strong consulting engineering community serving thousands of disparate public water and wastewater utilities. While acknowledging that there are applications for this traditional model, Williams observed that alternative approaches have significant positive attributes that deserve consideration.
As director of engineering for Collier County Utilities in Florida, Roy Anderson has had over 30 years experience working with various project delivery methods. He cited an example of using the low-bid approach in which he had to terminate the project at 80% completion due to protests, schedule overruns, nonpayment of subs and equipment disputes. He sought alternative methods with the prime driver of reducing risks and minimizing errors through better communications between the prime, contractor and supplier. His solution: Construction Management At-Risk.
By employing CM-at-Risk, he was able to use a prequalification process and negotiate a base price with allowances and contingencies. He also used a third-party construction engineer inspector on site, whose added value more than compensated for the added cost. The result was a project that came in on time with no change orders at a $600,000 savings.
Brian Wheeler, executive director of Toho Water Authority in Kissimmee, Florida, is also a fan of CM-at-Risk. His authority first employed it in 1995 with the construction of the North Bermuda Water Treatment Plant. They wanted to develop a team process for project delivery and have since constructed approximately $50 million in projects using this approach, while still using the traditional design-bid-build approach for pipelines, lift stations and other similar projects.
Under the CM-at-Risk method, the design engineer as well as the construction manager/general contractor is selected using competitive negotiations. SCADA and instrumentation consultants are also hired using competitive negotiations, as may be process consultants in the case of water reclamation projects, Wheeler explained. Equipment and materials requiring long lead times may be pre-purchased under this scenario, such as motor control centers and ultraviolet disinfection equipment, as well as rebar and PVC pipe if prices are expected to escalate. Equipment is selected based on life-cycle costs, operational performance and reliability. The end result may be a project that might cost five percent more up front, but provides greater quality and savings over the life of the project, noted Wheeler.
From a consultant’s perspective, alternative delivery methods are becoming increasingly popular in the water and wastewater industry. Don Munksgaard, vice president at CDM, explained that his firm got into alternative delivery methods in the early to mid 1990s as a defensive strategy against the European firms entering the U.S. market. Today, between 25-30 percent of CDM’s revenues come from projects utilizing alternative delivery methods. He noted that design-build will likely comprise 55 percent of all projects by 2015, with CM-at-risk comprising 10 percent of projects, and the balance utilizing the traditional design-bid-build approach. Projects using design-build exhibit the best aggregate project performance when compared to other delivery methods, according to an analysis performed by the University of Illinois’ Department of Civil Engineering, Munksgaard reported. Among the attributes he cited of design-build include single point of responsibility, reduced conflicts and administrative burden, and fewer errors and omissions claims between contractors and engineers.
Whether it is design-build, CM-at-Risk, or other variations of project management, it is apparent that owners today are looking for greater long-term value in the way they conduct business. Alternative delivery methods are becoming a reality in the water and wastewater industry, as is the move toward integrated solutions focused on life-cycle costs. This is a positive sea change for an industry that is slow to accept change.
For producers of technology, this creates a unique opportunity to be an integral part of the team by offering innovative products that achieve greater performance capabilities and long-term cost savings to the owner. The rules of the game are changing as must today’s product suppliers become tomorrow’s solutions providers.
About the author:
Dawn Kristof is president of the Water and Wastewater Equipment Manufacturers Association. WWEMA has operated since 1908 as a Washington, D.C.-based, non-profit trade organization representing the interests of companies that serve the water and wastewater industry.