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A Comparison of Qualifications based-Selection and Best Value Procurement for Construction Manager/General Contractor Highway Construction (Civil Project)

ABSTRACT

Faster project delivery and the infusion of contractor knowledge into design are the primary drivers for choosing construction manager/general contractor (CM/GC) project delivery. This paper focuses on the use of qualifications-based (QBS) and best-value (BV) procurement approaches, how and why agencies use each, and their associated opportunities and obstacles. Data for this study were obtained from a majority of federally funded CM/GC projects completed between 2005 to 2015.

The findings are that BV and QBS projects characteristics and performance have no statistically significant difference. The choice of BV or QBS coincides with the agency’s CM/GC stage of organizational development and influences of non-agency stakeholders on the CM/GC process. When agencies and the local industry are new to CM/GC, they were found to use BV as it is closer to the traditional procurement culture and it is perceived to result in a fair market project price.

Alternatively, agencies and local industry partners with an established history of using CM/GC were found to choose QBS. The low level of design at the time of procurement, means that assumptions relating to risk, production rates, materials sources, etc. may be too preliminary to secure a reliable price. The use of BV procurement was found to pose a risk to innovation and increase negotiation efforts. Qualitative trends from the project data, interviews and literature point to agencies using QBS for the majority of CM/GC project and BV on CM/GC projects with lesser complexity or more highly developed designs at the time of selection.

CONSTRUCTION MANAGER/GENERAL CONTRACTOR PROCUREMENT

FIGURE 1 CM/GC Selection Processes

Figure 1 CM/GC Selection Processes.

Finally, the BV two-step model includes an RFQ similar to the requests of the QBS one5 step model and shown at the bottom of Figure 1. The selection panel then evaluates the submittals based on evaluation criterion stated in the RFQ and invites the short-listed contractors to respond to a RFP. The selected contractors then submit their pricing factors in response to the RFP for final review and ranking in this two-step processes. The reader should also note that the proposed fees included in the BV proposals are used in part as the basis for arriving at the final cost of the project.

AGENCY POLICIES AND PROCEDURES

In order to understand the current industry’s use of QBS versus BV, the authors performed a review of all of the CM/GC programs and CM/GC legislation in the FHWA CM/GC database and additional agencies known to use CM/GC. The review included DOTs from Alaska, Arizona, California, Connecticut, Colorado, Florida, Idaho, Maryland, Michigan, Minnesota, Oregon, Nevada, Rhode Island, Tennessee, Utah, Vermont, and Washington. As seen in Table 1, eight states require a cost analysis in procurement, four allow cost as an option, and two do not allow costs to be included in the pre-construction services selection.

RESEARCH METHODOLOGY AND DATA COLLECTION

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Along with empirical findings, this study explored qualitative reasons why agencies choose procurement methods in an attempt to find best practices, opportunities, and obstacles of each. The authors chose projects from five of the six of the states that participated in the aforementioned survey with a CM/GC project that used BV or QBS. The authors also attempted to interview a range of project types, contract award value, and complexity. Due to anonymity, no individuals, projects, or states are referenced in the citations. The resulting five interviewed projects can be seen in Table 2.

RESULTS AND FINDINGS

As previously stated, this research explores how, why, and the opportunities and obstacles of agencies’ use of QBS and BV. The following results present how agencies are performing CM/GC procurement to successfully choose a qualified contractor. These results stem from project representative interviews and literature. These results also discuss the opportunities and obstacles of using BV and QBS, and why each are used. These results include a presentation of procurement as found through surveys and interviews with supporting documentation from agency policies and procedures.

DISCUSSION

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As discovered through agency policies, legislation presented in Table 1, and supported through interviews, there appears to be an inclination for agencies and markets new to CM/GC to use BV procurement. BV procurement is closer to traditional procurement culture, allowing a level of comfort in knowing that agencies received a competitive price. However, our findings do not support the belief that a price component in procurement helps achieve a more competitive final project cost.

The trend in Table 3 actually shows BV as having a greater award growth than QBS, which, though not statistically significant, may indicate that using a price component is detrimental to cost negotiations. Agency representatives stated that, in practice, the jobs often change so significantly from CM/GC selection to final construction award that the pricing component held very little weight in GMP negotiations.

CONCLUSIONS

This paper found a variety of reasons why agencies select BV or QBS for CM/GC projects. However, it found no statistically significant difference in performance between the 29 BV and QBS projects in this study. The data also suggests that the decision as to whether to procure using QBS or BV are not, at a statistically significant level, based on contract value, size, duration, complexity, facility type, or highway type.

These conclusions are consistent with those reached in two recent NCHRP research reports (3,35). However, this paper did find that including pricing in the selection (BV) requires a higher level of administrative effort in procurement and may even be detrimental. As stated by one agency representative: “We vision of what cost was, what overhead was, and then what profit was. The contractor we ended up with didn’t see those same breakouts. We always struggled with what those breakouts had a were…”

Although this paper’s overall findings were more favorable towards the use of QBS than BV, it was found that more states are utilizing BV than QBS from a review of current state legislation and CM/GC manuals. This may be due, in part, to the relatively new use of CM/GC and this paper’s finding that the choice of BV or QBS coincides with the agency’s and market’s CM/GC experience.

This is likely due to QBS being against the traditional D-B-B agency procurement culture, but also may be due to state statute requirements, concerns from the local contracting industry, and/or taxpayer concerns that CM/GC proposals should be competitively bid. Based on UDOT’s experience, interview findings, and literature on the progression of D-B procurement, it could be expected that, as CM/GC matures, the industry will be more open to QBS procurement. In the future, the choice of chose procurement methods may be based on project characteristics like complexity, creating a statistically significant preference for one method over another.

Source: University of Colorado
Authors: Douglas Alleman | Arthur Antoine | Douglas D. Gransberg | Keith R. Molenaar

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