Project delivery method

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Project delivery methods defines the characteristics of how a construction project is designed and built and the responsibilities of the parties involved in the construction (owner, designer and contractor). [1] They are used by a construction manager who is working as an agent to the owner or by the owner itself to carry-out a construction project while mitigating the risks to the scope of work, time, budget, quality and safety of the project. These risks ranges from cost overruns, time delays and conflict among the various parties. [2]

Contents

History

Though DBB is now used for most private projects and the majority of public projects, it has not historically been the predominant delivery method of choice. The master builders of centuries past acted both as designers and constructors for both public and private clients. In the United States, Zane's Post Road in Ohio and the IRT in New York City were both originally developed under more integrated delivery methods, as were most infrastructure projects until 1933. Integrated Project Delivery offers a new delivery method to remove considerable waste from the construction process while improving quality and a return to more collaborative methods from the past. In an effort to assist industry professionals with the selection of appropriate project delivery systems, construction management researchers have prepared a Procurement Method and Contract Selection Model, which can be used for high level decision making for construction projects on a case-by-case basis. [3]

Types

Common project delivery methods include:

Design-Bid-Build (DBB) or Design-Award-Build (DAB)

In Design-Bid-Build, owner develops contract documents with an architect or an engineer consisting of a set of blueprints and a detailed specification. Bids are solicited from contractors based on these documents; a contract is then awarded to the lowest responsive and responsible bidder. This is the traditional model for public sector infrastructure projects.

DBB with Construction Management (DBB with CM)

DBB with Construction Management is a modified version of the Design-bid-build approach With partially completed contract documents, an owner will hire a construction manager to act as an agent. As substantial portions of the documents are completed, the construction manager will solicit bids from suitable subcontractors. This allows construction to proceed more quickly and allows the owner to share some of the risk inherent in the project with the construction manager.

Design-Build (DB) or Design-Construct (DC)

In Design-Build, an owner develops a conceptual plan for a project, then solicits bids from joint ventures of architects and/or engineer and builders for the design and construction of the project. This is an alternative to the traditional model for public infrastructure projects that does not involve Private Financing.

Design-Build-Operate-Maintain (DBOM)

DBOM takes DB one step further by including the operations and maintenance of the completed project in the same original contract

Integrated Project Delivery (IPD)

Integrated Project Delivery seeks to involve all participants (people, systems, business structures and practices) through all phases of design, fabrication, and construction, with the goal of improving project efficiency and reducing "waste" in project delivery (i.e. any processes that do no directly add value to the final product). [4] [5] [6] IPD is closely associated with the philosophy of Lean construction.

Job Order Contracting (JOC)

A form of Integrated Project Delivery (IPD) specifically for repair, renovation, maintenance, sustainability, and "minor" new construction. Each job order contract uses a Unit Price Book for pricing each job via a multi-year umbrella contract.

Public-private partnership (PPP, 3P, or P3)

A public–private partnership is a cooperative arrangement between one or more public entities (typically the owner) and another (typically private sector) entity to design, build, finance, and at times operate and maintain, the project for a specified period of time on behalf of the owner. A minima, public-private partnership refers to the idea of cooperation between the public sector and the Private sector.
The following models are usually used for P3 projects, though they are also sometimes used for private sector projects.

Build-Finance (BF)

The private actor builds the asset and finances the cost during the construction period, afterwards the responsibility is handed over to the public entity. In terms of private-sector risk and involvement, this model is again on the lower end of the spectrum for both measures. [7]

Build-Operate-Transfer (BOT)

Build-Operate-Transfer represents a complete integration of the project delivery: the same contract governs the design, construction, operations, maintenance, and financing of the project. After some concessionary period, the facility is transferred back to the owner.

Build–own–operate–transfer (BOOT)

A BOOT structure differs from BOT in that the private entity owns the works. During the concession period, the private company owns and operates the facility with the prime goal to recover the costs of investment and maintenance while trying to achieve a higher margin on the project. BOOT has been used in projects like highways, roads mass transit, railway transport and power generation. [8]

Build–own–operate (BOO)

In a BOO project ownership of the project remains usually with the project company, such as a mobile phone network. Therefore, the private company gets the benefits of any residual value of the project. This framework is used when the physical life of the project coincides with the concession period. A BOO scheme involves large amounts of finance and long payback period. Some examples of BOO projects come from the water treatment plants. [9]

Build–lease–transfer (BLT)

Under BLT, a private entity builds a complete project and leases it to the government. In this way the control over the project is transferred from the project owner to a lessee. In other words, the ownership remains by the shareholders but operation purposes are leased. After the expiry of the leasing the ownership of the asset and the operational responsibility is transferred to the government at a previously agreed price.

Design-Build-Finance-Maintain (DBFM)

"The private sector designs, builds and finances an asset and provides hard facility management or maintenance services under a long-term agreement." The owner (usually the public sector) operates the facility. This model is in the middle of the spectrum for private sector risk and involvement. [7]

Design–build–finance–operate-maintain (DBFOM) or Design–build–finance–maintain-operate (DBFMO)

Design–build–finance–operate-maintain (DBFOM) [10] [11] also referred to as Design–build–finance–maintain-operate (DBFMO) [12] [13] is a project delivery method very similar to BOOT except that there is no actual ownership transfer. Moreover, the contractor assumes the risk of financing until the end of the contract period. The owner then assumes the responsibility for maintenance and operation. This model is extensively used in specific infrastructure projects such as toll roads. The private construction company is responsible for the design and construction of a piece of infrastructure for the government, which is the true owner. Moreover, the private entity has the responsibility to raise finance during the construction and the exploitation period. [14] Usually, the public sector begins payments to the private sector for use of the asset post-construction. This is the most commonly used model in the EU according to the European Court of Auditors. [15]

Design–build–operate–transfer (DBOT)

This funding option is common when the client has no knowledge of what the project entails. Hence the project is contracted to a company to design, build, operate, and then transfer it. Examples of such projects are refinery constructions. [16] [ citation needed ]

Design–construct–manage–finance (DCMF)

A private entity is entrusted to design, construct, manage, and finance a facility, based on the specifications of the government. Project cash flows result from the government's payment for the rent of the facility. Some examples of the DCMF model are prisons or public hospitals.


Conceptual differences between delivery methods

A graphical representation of the conceptual differences between project delivery methods. Project Delivery Methods.png
A graphical representation of the conceptual differences between project delivery methods.

There are two key variables which account for the bulk of the variation between delivery methods:

When the various service providers are segmented, the owner has the most control, but this control is costly and does not give each provider an incentive to optimize its contribution for the next service. When there is tight integration amongst providers, each step of the delivery is undertaken with future activities in mind, resulting in cost savings, but limiting the owner's influence throughout the project.

The owner's direct financing of a project simply means that the owner directly pays the providers for their services. In the case of a facility with a consistent revenue stream, indirect financing becomes possible: rather than be paid by the owner, the providers are paid with the revenue collected from the facility's operation.

Indirect financing risks being mistaken for privatization. Though the providers do have a concession to operate and collect revenue from a facility that they built and financed, the structure itself remains the property of the owner (usually a government agency in the case of public infrastructure).

Level of private involvement

Different Levels of Private sector engagement in public project delivery by model
Identify Infrastructure NeedPropose solutionProject designProject financingConstructionOperationMaintenanceOwnershipConcession?
Bid - buildPublic SectorPrivate SectorPublic SectorNo
BF

(Build finance)

Public SectorPrivate SectorPublic SectorNo
BLT

(Build–lease–transfer)

Public SectorPrivate SectorPublic SectorPrivate SectorTemporary
BOT

(Build-operate-transfer)

Public SectorPrivate SectorPublic SectorTemporary
BOO

(Build–own–operate)

Public SectorPrivate SectorYes
BOOT

(Build–own–operate–transfer)

Public SectorPrivate SectorTemporary
DB

(Design–build)

Public SectorPrivate SectorPublic SectorPrivate SectorPublic SectorNo
DBB

(Design–bid–build)

Public SectorPrivate SectorPublic SectorPrivate SectorPublic SectorNo
DBF

(Design–build–finance)

Public SectorPrivate SectorPublic SectorNo
DBFM

(Design–build–finance–maintain)

Public SectorPrivate SectorPublic SectorPrivate SectorPublic SectorNo
DBFO

(Design–build–finance–operate)

Public SectorPrivate SectorPublic SectorNo
DBFMO

(Design–build–finance–maintain–operate)

Public SectorPrivate SectorPublic SectorNo
Operation & maintenance contractPublic SectorPrivate SectorPublic SectorNo
Market-led ProposalsPrivate SectorPublic SectorNo

Related Research Articles

The private finance initiative (PFI) was a United Kingdom government procurement policy aimed at creating "public–private partnerships" (PPPs) where private firms are contracted to complete and manage public projects. Initially launched in 1992 by Prime Minister John Major, and expanded considerably by the Blair government, PFI is part of the wider programme of privatisation and financialisation, and presented as a means for increasing accountability and efficiency for public spending.

<span class="mw-page-title-main">Construction</span> Process of building or assembling a building or infrastructure

Construction is a general term meaning the art and science of forming objects, systems, or organizations. It comes from the Latin word constructio and Old French construction. To 'construct' is a verb: the act of building, and the noun is construction: how something is built or the nature of its structure.

<span class="mw-page-title-main">Public–private partnership</span> Government/private company partnership

A public–private partnership is a long-term arrangement between a government and private sector institutions. Typically, it involves private capital financing government projects and services up-front, and then drawing revenues from taxpayers and/or users for profit over the course of the PPP contract. Public–private partnerships have been implemented in multiple countries and are primarily used for infrastructure projects. Although they are not compulsory, PPPs have been employed for building, equipping, operating and maintaining schools, hospitals, transport systems, and water and sewerage systems.

Build–operate–transfer (BOT) or build–own–operate–transfer (BOOT) is a form of project delivery method, usually for large-scale infrastructure projects, wherein a private entity receives a concession from the public sector to finance, design, construct, own, and operate a facility stated in the concession contract. The private entity will have the right to operate it for a set period of time. This enables the project proponent to recover its investment and operating and maintenance expenses in the project.

Design–build, also known as alternative delivery, is a project delivery system used in the construction industry. It is a method to deliver a project in which the design and construction services are contracted by a single entity known as the design–builder or design–build contractor. It can be subdivided into architect-led design–build and contractor-led design–build.

Design–bid–build, also known as Design–tender, traditional method, or hardbid, is a project delivery method in which the agency or owner contracts with separate entities for the design and construction of a project.

Output-based aid (OBA) refers to development aid strategies that link the delivery of public services in developing countries to targeted performance-related subsidies. OBA subsidies are offered in transport construction, education, water and sanitation systems, and healthcare among other sectors where positive externalities exceed cost recovery exclusively from private markets. OBA is a form of results-based financing, with similar principles as performance-based contracting.

Construction management (CM) aims to control the quality of a project's scope, time, and cost to maximize the project owner's satisfaction. It uses project management techniques and software to oversee the planning, design, construction and closeout of a construction project safely, on time, on budget and within specifications.

<span class="mw-page-title-main">Concession (contract)</span> Grant of rights, land or property

A concession or concession agreement is a grant of rights, land, property, or facility by a government, local authority, corporation, individual or other legal entity.

Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as 'sponsors', and a 'syndicate' of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling; see Project finance model. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.

Lean construction is a combination of operational research and practical development in design and construction with an adoption of lean manufacturing principles and practices to the end-to-end design and construction process. Unlike manufacturing, construction is a project-based production process. Lean Construction is concerned with the alignment and holistic pursuit of concurrent and continuous improvements in all dimensions of the built and natural environment: design, construction, activation, maintenance, salvaging, and recycling. This approach tries to manage and improve construction processes with minimum cost and maximum value by considering customer needs.

An energy service company (ESCO) is a company that provides a broad range of energy solutions including designs and implementation of energy savings projects, retrofitting, energy conservation, energy infrastructure outsourcing, power generation, energy supply, and risk management.

Integrated project delivery (IPD) is a construction project delivery method that seeks the efficiency and involvement of all participants through all phases of design, fabrication, and construction. IPD combines ideas from integrated practice and lean construction. The objectives of IPD are to increase productivity, reduce waste, avoid time overruns, enhance final product quality, and reduce conflicts between owners, architects and contractors during construction. IPD emphasizes the use of technology to facilitate communication between the parties involved in the construction process.

Fast-track building construction is construction industry jargon for a project delivery strategy to start construction before the design is complete. The purpose is to shorten the time to completion.

<span class="mw-page-title-main">Infrastructure asset management</span> Maintenance of public infrastructure assets

Infrastructure asset management is the integrated, multidisciplinary set of strategies in sustaining public infrastructure assets such as water treatment facilities, sewer lines, roads, utility grids, bridges, and railways. Generally, the process focuses on the later stages of a facility's life cycle, specifically maintenance, rehabilitation, and replacement. Asset management specifically uses software tools to organize and implement these strategies with the fundamental goal to preserve and extend the service life of long-term infrastructure assets which are vital underlying components in maintaining the quality of life in society and efficiency in the economy. In the 21st century, climate change adaptation has become an important part of infrastructure asset management competence.

<span class="mw-page-title-main">Eagle P3</span> Public–private partnership operating trains in Denver

Eagle P3 is a public–private partnership (P3) involving the Regional Transportation District (RTD) of Denver, Colorado and Denver Transit Partners, a partnership of several private companies. Under the Eagle P3 signed in 2010, Denver Transit Partners holds a 34-year contract to design, build, finance, operate and maintain RTD commuter rail lines.

<span class="mw-page-title-main">Public–private partnerships in India</span>

The public–private partnership is a commercial legal relationship defined by the Government of India in 2011 as "an arrangement between a statutory / government owned entity on one side and a private sector entity on the other, for the provision of public assets and/or public services, through investments being made and/or management being undertaken by the private sector entity, for a specified period of time, where there is well defined allocation of risk between the private sector and the public entity and the private entity receives performance linked payments that conform to specified and pre-determined performance standards, measurable by the public entity or its representative".

<span class="mw-page-title-main">Hamilton LRT</span> Light rail line in Hamilton, Ontario, Canada

The Hamilton LRT is a planned light rail line in Hamilton, Ontario, Canada, to operate along Main Street, King Street, and Queenston Road. It is one of five planned rapid transit lines which form Hamilton's proposed BLAST network. The 14 km (8.7 mi), 17-stop route is planned to extend from McMaster University to Eastgate Square via downtown Hamilton.

<span class="mw-page-title-main">Public–private partnership in Canada</span> Alternative service delivery

Public–private partnership in Canada is a form of alternative service delivery that involves a formal, collaborative arrangement between the public and private sectors, typically of a long-term nature. Public–private partnerships are commonly used for infrastructure projects related to healthcare, transportation, the environment, justice and correction, recreation and culture, and education.

<span class="mw-page-title-main">Infrastructure Concession Regulatory Commission</span> Agency of the Federal Government of Nigeria

The Infrastructure Concession Regulatory Commission (ICRC) is an agency of the Federal Government of Nigeria responsible for the development and implementation of the Public-Private Partnership (PPP) framework for the provision of infrastructure services.

References

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