Project Delivery & Contract Strategy (PDCS) OVERVIEW Project Delivery and Contract Strategy Alternatives PDCS Descriptions • ID numbers were used in lieu of names • Names were given to the PDCS options at the end of the research 12 PDCS Alternatives • Each is unique • Other options may exist but generally are variants or combinations of the 12 Project Delivery & Contract Strategy (PDCS) Criteria for Project Delivery and Contract Strategy Characterization PDCS Alternatives Definition Criteria • Phase sequence • Project team relationships • Compensation approach Phase Sequencing • The sequencing of the design, procurement, and construction project phases, relative to each other Project Team Relationships • Project team relationships are described in both contractual and functional terms Compensation Approach • The type of compensation approach that is used for each contractual relationship. Designer(s) Constructor(s) – Firm Price Cost reimbursable + fixed fee – Competitive Lump Sum Unit Price Guaranteed Maximum Price Cost Reimbursable + Fee PDCS Development • Eleven PDCS alternatives were identified based on the three criteria • Survey of CII and non-CII companies was undertaken to examine the use of each PDCS alternative • Data from 82 projects were collected • Eleven PDCS alternatives are currently used in industry • Twelfth alternative was added during development of tool Traditional Design-Bid-Build PDCS 01 Traditional with Early Procurement - PDCS 02 Traditional with Project Manager - PDCS 03 Traditional with Construction Manager - PDCS 04 Traditional with Early Procurement and Construction Manager - PDCS 05 Construction Manager-at-Risk PDCS 06 Design-Build (or EPC) - PDCS 07 Multiple Design-Build (or EPC) PDCS 08 Parallel Primes - PDCS 09 Traditional with Staged Development - PDCS 10 Turnkey - PDCS 11 Fast Track - PDCS 12 Key Assumptions • Use tool during front end planning • Safety goals/objectives can be achieved equally well by all PDCS alternatives • Alliance/partnering relationships can be used with all PDCS alternatives • Facility startup is excluded except under the Turnkey alternative • Infrastructure projects were not adequately represented Project Delivery & Contract Strategy (PDCS) Selection Factor Overview Development of Selection Factors Basic Premise: Project objectives are translated into selection factors that drive the choice of a PDCS alternative for a project • Research project 165: – – – – Identified typical project objectives Identified 30 selection factors Confirmed use and level of importance Reduced selection factors to 20 by eliminating redundancy and overlap Factor Groupings • Cost-related factors • Schedule-related factors • Other factors (5) (3) (12) Cost-Related Factors Selection Factor Factor Action Statement 1. Control cost growth Completion within original budget is critical to project success Cost-Related Factors Selection Factor Factor Action Statement 2. Minimal cost is critical to project success Ensure lowest cost Cost-Related Factors Selection Factor Factor Action Statement 3. Owner’s cash flow for the project is constrained Delay or minimize expenditure rate Cost-Related Factors Selection Factor Factor Action Statement 4. Owner critically requires early (and reliable) cost figures to facilitate financial planning and business decisions Facilitate early cost estimates Cost-Related Factors Selection Factor Factor Action Statement 5. Owner assumes minimal financial risk on project Reduce risks or transfer risks to contractor(s) Schedule-Related Factors Selection Factor Factor Action Statement 6. Completion within schedule is highly critical to project success Control time growth Schedule-Related Factors Selection Factor Factor Action Statement 7. Early completion is critical to project success Ensure shortest schedule Schedule-Related Factors Selection Factor Factor Action Statement 8. Early procurement of longlead equipment and/or materials is critical to project success Promote early procurement Other Factors Selection Factor Factor Action Statement 9. An above-normal level of changes is anticipated in the execution of the project Ease change incorporation Other Factors Selection Factor Factor Action Statement 10. A below normal level of changes is anticipated in the execution of the project Capitalize on expected low levels of changes Other Factors Selection Factor Factor Action Statement 11. Confidentiality of business/ engineering details of the project is critical to project success Protect confidentiality Other Factors Selection Factor Factor Action Statement 12. Local conditions at project site are favorable to project execution Capitalize on familiar project conditions Other Factors Selection Factor Factor Action Statement 13. Owner desires a high degree of control/influence over project execution Maximize owner’s controlling role Other Factors Selection Factor Factor Action Statement 14. Owner desires a minimal level of control/influence over project execution Minimize owner’s controlling role Other Factors Selection Factor Factor Action Statement 15. Owner desires a substantial Maximize owner’s involvement use of its own resources in the execution of the project Other Factors Selection Factor Factor Action Statement 16. Owner desires a minimal Minimize owner’s involvement use of its own resources in the execution of the project Other Factors Selection Factor Factor Action Statement 17. Project features are welldefined at award of the design and/or construction contract Capitalize on well-defined scope Other Factors Selection Factor Factor Action Statement 18. Project features are not well-defined at award of design and/or construction contract Efficiently utilize poorly defined scope Other Factors Selection Factor Factor Action Statement 19. Owner prefers minimal number of parties to be accountable for project performance Minimize number of contracted parties Other Factors Selection Factor Factor Action Statement 20. Project design/engineering or construction is complex, innovative, or non-standard Efficiently coordinate project complexity or innovations Project Delivery & Contract Strategy (PDCS) Weighting Selection Factors Weighting Selection Factors Preference Rank • Up to six selection factors should be identified • Selection factors should be ranked in ordered from most important to least important • Preference rank order should be tied to priority of project objectives and other key project requirements Weighting Selection Factors Preference Scores • Preference scores quantify the relative importance of each selection factor • Highest ranked selection factor is always assigned a preference score of 100 • Other selection factors are assigned preference scores to reflecting the magnitude of their importance to the project relative to the firstranked factor. • Use increments of five (5) or ten (10) at a minimum Weighting Selection Factors Illustration Factor Action Statement Control cost growth Maximize owners controlling role Ensure shortest schedule Ease change incorporation Rank Preference Score 2 4 85 55 1 100 3 70 310 Weighting Selection Factors Experienced Based • Priorities of project objectives should be a guide • Knowledge and experience of project managers and other team members should be tapped in weighting selection factors • Preference ranking and scores are not totally objective but should not be totally subjective either Weighting Selection Factors Relative Weighting • Preference scores are used to calculate the relative weighting between factors • Sum of relative weights always add to 1.00 • Relative weights are used with effectiveness values to calculate a rating score for each PDCS alternative Weighting Selection Factors Example Calculation Factor Action Statement Control cost growth Maximize owners controlling role Ensure shortest schedule Ease change incorporation Rank Preference Score Relative Weighting 2 4 85 55 0.27 0.18 1 100 0.32 3 70 0.23 310 1.00 Project Delivery & Contract Strategy (PDCS) Effectiveness Values Effectiveness Values Description • Represent performance level of each PDCS alternative relative to the other PDCS alternatives for each selection factor • Scores are between 0 and 100(increments of 5 or 10) • Assessed on selection factor-by-factor basis • Factors independent of each other • PDCS alternative with highest level of performance for a selection factor is given a score of 100 • PDCS alternative with lowest level of performance for a selection factor is given a score of 0 Effectiveness Values Illustration PDCS Number Traditional Design-Bid-Build Traditional with Early Procurement Traditional with Project Manager Traditional with Construction Manager Traditional with Early Procurement and Construction Manager Construction Manager-at-Risk Design-Build (or EPC) Multiple Design-Build (or EPC) Parallel Primes Traditional with Staged Development Turnkey Fast Track PDCS 01 PDCS 02 PDCS 03 PDCS 04 PDCS 05 Factor 9 Ease Change Incorporation 100 80 100 100 70 PDCS 06 PDCS 07 PDCS 08 PDCS 09 PDCS 10 PDCS 11 PDCS 12 60 10 0 20 40 0 70 Effectiveness Values Basis • Developed using expertise of research team • Confirmed through workshops with owner and contractor project manager representatives • Documented rationale behind effectiveness values for each selection factor • Ensured approach met requirements of decision theory analysis technique • Tested validity of effectiveness values statistically Effectiveness Values Examples Factor 1 Factor 2 Factor 3 Factor 4 Factor 5 Factor 6 Factor 7 Control cost growth Ensure lowest cost Delay or minimize expenditure rate Facilitate early cost estimates Reduce or transfer risks to contractor Control time growth Ensure Promote early shortest procurement schedule PDCS 01 80 90 100 0 80 20 0 0 PDCS 02 PDCS 03 PDCS 04 PDCS 05 PDCS 06 PDCS 07 PDCS 08 PDCS 09 PDCS 10 PDCS 11 50 80 80 50 60 90 70 0 0 100 100 70 70 60 40 80 80 0 0 80 70 90 90 60 40 10 30 50 60 0 20 10 10 20 70 90 80 20 0 100 50 60 60 20 70 90 80 10 0 100 50 20 20 50 70 90 80 0 0 100 50 10 0 40 80 100 90 90 60 100 90 0 0 90 100 100 100 80 50 100 PDCS 12 40 40 100 60 0 80 100 100 Factor 8 Effectiveness Values Rationale Factor 2 Minimal cost is critical to project success Ensure lowest cost PDCS 01 PDCS 02 PDCS 03 PDCS 04 PDCS 05 PDCS 06 PDCS 07 PDCS 08 PDCS 09 PDCS 10 PDCS 11 PDCS 12 90 100 70 70 60 40 80 80 0 0 80 40 Comments: Serial phasing provides more time to find lowest cost, though slow implementation may engender cost escalation – minimal cost at sacrifice of overall completion schedule. Arrangements involving a sole contractor with responsibility for design and construction, coupled with competitive bidding work well for minimizing cost – minimal cost at the sacrifice of owner’s control over finished project. Project Delivery & Contract Strategy (PDCS) PDCS Tool Walk-Thru • Tool Workbooks • Tool Operations Project Delivery & Contract Strategy (PDCS) Benefits of PDCS Tool • Considers larger set of relevant alternatives in the PDCS selection process • Encourages decision-makers to identify and focus on project objectives and other critical success factors early in project development • Enhances insight into PDCS selection through systematic consideration of all decision variables • Provides a defensible rationale for PDCS selection based on quantification of alternatives CII Value of Best Practices Corporate Survey • Questions regarding PDCS Tool – How frequently over the past two years would you say that the PDCS structured process was used on your capital projects? – None or A Few(1); About Half (4); All (7) – Please indicate how valuable you believe the PDCS structured process is to your organization? – Not Valuable (1,2); Moderately Valuable (5-7); Extremely Valuable (9,10) CII Value of Best Practices Corporate Survey • Use of PDCS – Eleven stated about half to All use the PDCS – Average = 5.3 • Value of PDCS – Eleven stated highly moderate to extremely valuable process/tool – Average = 7.8 Questions and Discussion! Thank You!