Agencies sometimes employ several different procurement approaches, and there is not always agreement about which approach works best.
ST uses a range of deliv ery methods for the contracts within its projects and will often use a mix of delivery methods within a single project ali gnment. The initial Link light rail segment was built using DBB, while the U-Link project included both DBB and CMR (the region calls the CMR delivery method “CM/CG”) contracts. The East Link project used DBB, DB, and CMR while the Federal W ay project is entirely DB. The Lynwood extension also two civil CMR contracts and one CMR contr act.351 While the agency has a detailed process to evaluate and determi ne which delivery method should be used on various projects, interviewees suggested three primary challenges with the region’s approach to the selection.
First is that the agency is often very involved with design even when using DB. In contrast to DBB, in which project sponsors review designs at 30, 60, and 90 percent completion, a DB procurement typically only requires two quick design reviews to allow the contractor to begin construction as quickly as possible. However, interviewees cited frequent interactions and reviews with DB designs, including a DBB-style approach to the design review process by requiring a 90 percent review, adding additional time. Others noted that the agency’s management team may comment too much on the contractor’s design and may not have enough trust that the contractor will meet their desired performance.
DB procurements ideally require less staff and time to oversee so long as an agency places enough trust in the performance criteria it provides to the contractor, and leaves enough room for creativity without being either overly prescriptive or too vague. However, ST has struggled with sufficiently incorporating its preferences and interoperability requirements in its design specifications for DB projects. Interviewees cited anecdotal examples where the contractor’s choice of components such as circuit breakers or rail clips met the project’s DB performance criteria, but did not match the same brand or style on other parts of the system. In these cases, modifying the desired specifications lead to further contract changes and scope modifications.
Finally, while DB and CMR approaches can save time, their procurements often take much longer than traditional DBB projects, eliminating some of the benefits of these models. For example, the procurement for the Federal Way project took nearly 20 months. While some of this is due in part to ST’s procurement process, there are also significant statewide procurement regulations and requirements that the agency is required to comply with, particularly for CMR projects.
Public entities must receive approval to use DB or CMR from Washington State’s Project Review Committee (PRC). Approvals can be granted for individual projects, or through a Public Body Certification. The process requires a public body to submit an application and demonstrate that the alternative contracting method will either have a fiscal benefit or help the entity meet its schedule or quality standard. ST received its CMR certification in 2013, and its DB certification in 2015 and both are renewed every three years.352 Previously, the agency submitted applications to the PRC to use DB and CMR on individual projects.
In order to receive a Public Body Certification, the entity must demonstrate that they have successfully managed at least one DB or CMR project in the last five years, as well as demonstrate that they possess the necessary experience and qualifications to evaluate, choose, and carry out an alternative delivery method.353 These regulations are a result of the state’s relative caution in responding to alternative delivery methods due to concerns from labor groups, contractors, and small businesses around fairness and competition, specifically over the ability to secure subcontracts.
ST’s challenges with procurement have created an environment that result in numerous contract change orders. While these technical changes can be relatively minor, if numerous they can quickly become disruptive to a project’s cost or schedule. An ST audit of a sample of 12 contracts on five major construction projects (totaling $2 billion) revealed nearly 300 change orders costing $172 million.354
Change orders are sometimes the result of site conditions that differ from initial plans and surveys, which are infrequent but have a significant impact. Unexpected underground soil or water conditions were responsible for $79 million in change orders (46 percent of the total). They can also be technical changes that are either a result of design or contract mistakes, which staff sometimes notice or uncover late in construction. More than half of these changes (160) were issued by ST because of mistakes or missing information in project designs or contracts. The audit suggested that increased investment in early underground exploration and a stronger design review process with standardized checklists could help curtail a significant amount of the change orders the agency encounters.
Officials also noted that the process for handling change orders is very regimented, takes too long, and involves too many people. In response, ST’s Board of Directors in 2018 changed policy to allow the board’s committees to approve up to $50 million (previously $5 million) for contracts, agreements, and land acquisition that fall under their jurisdictions, and raised the CEO’s approval authority to $5 million (previously $200,000) for construction, architecture, or engineering services contracts. The change also authorizes the CEO to approve up to $2 million in c ontracts for materials, technology, and other services.355
These changes intend to streamline and balance the number of change orders, contracts, and agreements that require board approval, and free up more time for the board to engage more deeply and productively on policy matters. Though these changes have been helpful, change orders must be reviewed by the contracting staff to ensure they fall within scope, the project controls group to verify they are within budget and timeline, and may also still have to be reviewed by the Board to ensure that the change is one that the agency wants.
Problems with procurements, specifications, and change orders led stakeholders in the region to develop strong opinions on which delivery method is the best for the region. Many believe that DB is the best approach but noted that agency staff need to be better at developing design specifications that are neither too broad nor too prescriptive and should cede more control over the design and design review process to the design-builder.
There is more concern and disagreement over the success of CMR. Some feel strongly that this delivery method had not worked out well for the agenc y and led to higher costs. CMR contracts can take significant time to negotiate, and lack the competitive pressure of other delivery methods, which can lead to a higher cost compared to DB contracts. Furthermore, CMR requires a different oversight approach than DB or DBB. ST’s experiences with multiple procurement approaches has made it difficult for it to understand the varying levels of control and management necessary for different project elements and delivery methods.