Edgemoor Insights

Exploring evolving trends in alternative delivery strategies for public and social infrastructure projects

The traditional design-bid-build (DBB) method of project delivery has a long history of success and remains an appropriate method for the delivery of many public and social infrastructure projects, namely roads, bridges, schools, universities, healthcare facilities, airports, institutions, and local and federal government facilities. The DBB approach is highly sequential, moving from programming through design to construction, and requires a government or institution (“Agency”) to manage many individual contracts. Under a traditional DBB, the institution is responsible for land acquisition, entitlement, utility availability, design and construction management, tenant/client relationships, interior furniture, fixtures and equipment, financing, and operations and maintenance (O&M). To effectively accomplish a DBB delivery, an Agency needs an experienced staff, an adequate timeline that allows each discipline to work in a linear sequence, and the ability to manage budget and schedule risks associated with delivery and operation of a new facility.

Currently, government and institutional leaders are faced with an urgent need to replace our Nation’s deteriorating infrastructure and to deliver new modernized facilities to serve their constituencies. The pressure to perform is set against a backdrop of economic uncertainty and steady-to-declining government and institutional budgets which are resulting in staff reductions with no corresponding reduction in assets or projects to manage. Because of these competing forces, now, more than ever, decision makers need to carefully assess the risk they are taking on in the delivery and long term O&M of a new facility. 

The Edgemoor Insights articles seek to illuminate evolving trends in turnkey delivery strategies, clarify the industry’s understanding of the term “turnkey”, and highlight how a wide range of public and institutional owners can benefit from these alternative delivery methods. These optional turnkey strategies for delivering public and social infrastructure projects eliminate many of the risks to the public sector that remain inherent under the DBB method of delivery and under standard models of facility operations after delivery. These articles provide thoughtful analyses as to when and why these optional strategies should be employed, arming decision makers with the proper tools to assess their project needs and organizational objectives. Once alternatives have been evaluated, the client can confidently determine which method is most appropriate for their project. 

No matter the method of delivery, the first step to any successful project is the clear determination of the primary goals for the facility. After the goals have been properly vetted by all stakeholders, the various methods of procurement can be properly evaluated and determined. The primary goals should include:

Provide an efficient, productive, safe, and stimulating working environment 

Incorporate safety and technology requirements into design from day one. Allocate individual and collaboration space efficiently and effectively, and create a work environment that is conducive to promoting positive morale and productivity.

Select a cost-effective solution that considers the life of the facility, not just initial cost

Evaluate initial, financial, and long-term costs to understand true cost of occupancy. Establish building operating standards and budgets prior to design. Design to these criterion and incorporate a capital maintenance program into operating budgets to avoid future problems created by deferred maintenance and unfunded capital replacements.

Protect against cost overruns associated with design, construction, and O&M costs

Establish realistic budget numbers for design, construction, and operations and manage to the budget. Obtain buy-in from all stakeholders to fix scope of work and budget early in the process. Only allow changes with detailed evaluation and approval. Allocate risk of cost, schedule, and operating cost overruns to the party best positioned to manage those risks.

Consider all financial alternatives to provide the best value option for financing the project

Evaluate all options, including possible grants, government loans, tax-exempt bonds, and private sector financing. Evaluate any opportunities to generate income in the completed facility including credits for energy savings and leasing of future expansion space.

This list of objectives would be tailored to the needs of a specific facility; however, it is important to reiterate the key to a project’s success: remaining focused on project goals leads to a clear choice in selecting a procurement method which best meets all of the objectives. This, in turn, enables selection of an appropriate delivery partner that can produce the desired outcome for the project.

In these challenging times of budget shortfalls and resource cutbacks, it is imperative for every organization to more effectively manage its resources and exposure to cost uncertainty. Turnkey delivery offers a range of strategies that can advance important facility projects with cost and schedule certainty. These strategies ensure the procuring Agency maintains control and is able to oversee all key components of project delivery.