Integrating Innovative Project Delivery Methods into the Construction Curriculum

Introduction

Project delivery method is a general term describing the comprehensive design and construction processes, including all the procedures, actions, sequences of events, contractual relations, obligations, interrelations, and various forms of agreement-all aimed at successful completion of the design and construction of facilities (Dorsey 1997).  Traditionally the method of project delivery has been design-bid-build (DBB).  In DBB the owner commissions an architect and/or engineer to prepare drawings and specifications under a design contract, and subsequently selects a general contractor by competitive bidding to build the facility under a construction contract (Barrie and Paulson 1992).  The general contractor hires trade contractors using subcontract agreements to perform most of the work.

In recent years innovative project delivery methods are being developed to adapt to owners’ needs concerning quality, schedule, responsibility, and financing method.  Some of these methods have been implemented in the private sector and others have been utilized in both private and public projects.  More and more owners have enjoyed the benefits provided by these methods.  In order to reflect this trend in the industry, construction programs shall integrate innovative project delivery methods into their curriculum.  To accomplish this, first, programs need to understand which innovative project delivery methods have been developed and utilized in the industry.  Then, programs can select one or several particular innovative methods and incorporate them into the curriculum.

Study Objectives

There are two objectives for this study.  One is to conduct literature survey on innovative project delivery methods which have been developed and implemented in the construction industry.  This survey is the initial step toward understanding these methods and provides valuable information regarding pros and cons of these methods.  Another is to illustrate how to integrate one of the innovative methods, warranty contracting, into the classroom by defining the curriculum.

Literature Survey

Conference papers, journal articles, government documents, research reports, and texts were the primary source of information found in the literature survey.  Results of the survey identified 14 innovative project delivery methods that have been developed and implemented in the construction industry.  In summary these methods include the followings:

1.        Best-Value Contracting (Gransberg and Ellicott 1997),

2.        Build-Operate-Transfer (Campbell and Humphrey 1988, and Chiaverini 1997),

3.        Construction Management (Barrie and Paulson 1992, Haltenhoff 1998, and Scott 1999),

4.        Cost plus Time Contracting (Reseigh 1997),

5.        Design-Build (Design/Build 1994, Gransberg et al. 1997, Mulvey 1997, and Konchar and Sanvido 1998),

6.        Incentive/Disincentive Contracting (Herbsman and Ellis 1995, and Arditi and Yasamis 1998),

7.        Indefinite Delivery/Indefinite Quantity Contracting (Anderson and Russell 1999),

8.        Job Order Contracting (Badger and Kashiwagi 1991, and Chiaverini 1997),

9.        Lane Rental (FHWA 1995, Herbsman and Glagola 1998, and Scott 1999),

10.     Multi-Parameter Contract (Scott 1999),

11.     Partnering (Kugal 1994, Gransberg et al. 1999, and Scott 1999),

12.     Performance Contracting (Chamberlin 1995, and Scott 1999),

13.     Program Management (Barrie and Paulson 1992, Mulvey 1997, and Haltenhoff 1998), and

14.     Warranty Contracting (FHWA 1995, Haltenhoff 1998, and Scott 1999).

 Brief description and applications of each method are presented in Table 1.  Major advantages and disadvantages of each method are shown in Table 2.  These methods can be utilized individually or in combination format.  For example, design-build has been used successfully in combination with performance contracting (design-build-performance) and warranty contracting (design-build-warranty).  Some of the methods are quite identical such as best-value contracting and multi-parameter contracting.  The reason is that people in the construction industry have not reached the consensus in term of how to name these methods.  Methods such as construction management and design-build have been taught in some of the construction programs.  Others have not been introduced in the classroom, but have been utilized in the industry.  It is not intended to discuss each method in detail in this paper except for the warranty contracting.  Interested readers can find more information about these methods from the references.

Warranty Contracting

Warranty is an assurance by a providing party that the work, material, and equipment under warranty will perform as promised or as required by contract (Haltenhoff 1998).  Warranty contracting is a delivery method that requires a contractor to guarantee the integrity of an end product or component of the project and to be responsible for the cost of replacement or repair of deficiencies for a specified duration after construction completion (Scott 1999).  Typically, many materials and products used in construction will carry a short-term manufacturer’s warranty.  A construction warranty is different from a normal manufacturer’s warranty in that it is typically for three to five years or more and applies to the work as well as the materials used.  The use of long-term warranties is a common practice in European highway construction; see Table 3 (Hancher 1994).  The European countries such as Austria, Denmark, France, Germany, Norway, and Sweden believe warranties motivate the contractor to do a better job than would be done without such assurance.  Warranties have a perceived higher initial cost, but may result in lower life-cycle costs than those of traditionally contracted projects.  In practice, some believe the cost of a warranted contract is comparable to that of a non-warranted contract.

 Since the 1980s, maintenance and rehabilitation (M&R) have been the major activities for all highway agencies in the United States.  M&R have several consequences on agency resources and traffic distributions because of extensive and extended lane closure.  The traffic volumes on the primary highway system, especially in urban areas, have seen tremendous increases leading, in many instances, to earlier-than-expected failures of highway pavements. The aging of the interstate highway system and other primary systems, built during the 1950s and 1960s, have resulted in the expenditure of a large portion of highway funds on pavement M&R.  The Federal Highway Administration (FHWA) is struggling to find the best solution for this challenge.  One of the FHWA major effects in the early 1990’s was to initiate Special Experimental Project No. 14 (SEP 14).  The objective of SEP 14 was to identify, evaluate, and document innovative contracting practices that have the potential to reduce the life cycle cost of projects, while at the same time, maintain product quality.  The SEP-14 program has provided the State Department of Transportations (State DOTs) with a vehicle for evaluating various types of non-traditional contracting on Federal-aid highway contracts.  Three of the four experimental techniques originally identified have been declared operational, which are cost-plus-time bidding, lane rental, and warranty contracting.  Since then some State DOTs have successfully developed and implemented warranty contracting to different types of highway projects, see Table 4.

Although warranty contracting has been utilized both in the United States and overseas, this method has not been integrated into the construction curriculum in the United States based on the literature survey conducted during the process of this study.  With the need to prepare students for a broader role in the future of construction industry, the time has arrived to ask the question, “Are future industry leaders being prepared in current construction programs to address the innovative project delivery method issue?”  In response to the need for greater construction knowledge, warranty contracting course curriculum has been developed.

Warranty Contracting Course Curriculum

The focus of the curriculum is the study of warranty contracting issues through a combination of in-class lectures, case-study analyses, the development of warranty contracting specifications, and student presentations.  The curriculum consists of five modules as shown in Table 5.  The module structure provides freedom to the instructor.  Based on the available time and need of each program, the instructor may decide to cover some of the modules or all of the modules in the classroom.  This curriculum can also be integrated with existing construction management courses such as construction contracting course or project management course depending on the circumstance of each program.  After taking the class, students are expected to understand the fundamentals of warranty contracting including state-of-the-practice, warranty contracting specifications, potential disputes in warranty contracting and its resolution techniques.

Module 1

 In Module 1 the instructor shall provide students with fundamental knowledge about innovative project delivery methods including history, applications, advantages and disadvantages so that students will have an overview on the subject.  Some of the required course materials are presented in this paper, others can be found in the references. During this process the instructor needs to demonstrate the importance of warranty contracting, and then leads students to continue to Module 2.

Module 2

Both the United States and overseas practices shall be included in module 2.  More than 20 State DOTs have utilized warranty contracting in the highway projects, see Table 4.  Some of the European countries have long history of implementing warranty contracting.  The instructor may use the case study approach to demonstrate the benefits of warranty contracting.  Some of the benefits include reduction of owner human resources and project life-cycle cost, shifting risk from owner to contractor, improvement in quality of project, decrease of extensive acceptance testing and evaluation, and encouragement of contractor innovation.  Besides benefits, concerns within the government agencies and industry regarding warranty contracting shall also be addressed.  For example, warranty is only as good as the contractor and the surety company involved.  Will the contractor stay in business for the length of the warranty period?  Will the surety company provide the long-term bonding guarantees for large projects which involve high risks?  Small or minority contractors may be eliminated from the bidding process because of the difficulty in acquiring warranty bond.  The premature use of warranties without adequate technology or processes to handle the contracts may lead to an increase in disputes and costly litigation.  With benefits and concerns in mind, the instructor shall move to the next topic, warranty contracting specifications.

Module 3

The warranty specification is the most important document in warranty contracting.  A well organized and thoughtful specification can help the owner not only to realize the benefits and avoid the potential pitfalls, but also to effectively evaluate the bid proposals.  Comparing with the DBB specification, warranty specification does raise new issues as indicating in Table 6.  These issues, including both technical and commercial aspects, need to be addressed carefully in the contracting documents.  During the class the instructor may utilize the previous warranty project specifications to demonstrate how these issues were addressed in the past.

Although, all parties involving in the construction business try hard to avoid disputes, disagreements do occur during construction including warranty contracting.  It is important to discuss the potential disputes in warranty contracting and the resolution techniques which are the subjects of Module 4.

Module 4

 Annual evaluation is the most important cause of disputes and conflicts in warranty contracting.  Unlike other contracting methods, warranty specification contains thresholds used to evaluate visible distresses of highway infrastructures.  If a threshold is reached, the contractor is responsible for conducting remedial actions.  Occasionally, the owner and contractor will have different opinions regarding whether a threshold is reached.  If the people involved in the project can not solve the dispute in a timely manner and using established procedures, it may ultimately escalate into litigation between the parties.  It is recommended that it is better to keep the resolution of disputes close to the project level, rather than turning them over completely to third parties for resolution.  The use of the court system to resolve disputes should be the last alternative because the resolution of disputes through the judicial system is often very costly and time-consuming.  It is often said that the lawyers are the only parties who win in litigation cases.

In recent years alternative dispute resolution (ADR) techniques have been developed to accelerate the resolution process and to keep the legal expenses under control.  These techniques include arbitration, disputes review board (DRB), mediation, mini-trial, and partnering (Hinze 2001).  According to many of the State DOTs experiences, the DRB is the preferred technique.  The success rates of DRB are impressive.  Based on the data provided by the Dispute Review Board Foundation, by 2000, 97 percent of construction disputes using DRB were settled without proceeding to litigation.  These disputes involved 757 projects and $39.5 billion.  More information and cases on ADR can be found in the references (Hinze 2001, Robert 2000 and FHWA 2001).

Module 5

By this time students have learned the fundamentals of warranty contracting.  They are ready to do a hands-on project.  The instructor may assign a semester project and require students to develop a warranty contracting specification addressing both technical and commercial aspects for a particular project.  This could be an individual project or group project.  It is also a good idea at this time to invite construction professionals to the classroom and give advises to the students.  This can be done through guest lectures.  When the project is finished, students are required to submit the specifications and give presentations in the class.  This gives the instructor a chance to critique the students’ work and students to learn from each other.

Conclusions

The traditional contracting approach (Design-Bid-Build) requires a high degree of management and control.  It involves design by the owner or its consultant, competitive bids for construction, and a contract between the owner and the lowest bidder.  This approach is favored by the owners because it provides the ability to control cost and meets well-established legal and contractual precedents.  Its disadvantages include the need for high involvement by the owner, general adversary relationships with the contractor, and high overall project time from the planning phase through construction completion.  The last factor is particularly critical in situations where completion time is more important than project cost.

In recent years innovative project delivery methods, as discussed above, have been developed to address the issues such as quality, schedule, responsibility, and financing method.  These methods have been implemented both in the private sector and in the public projects with good results.  Because of the benefits that these methods can provide their utilization has increased dramatically in the construction industry.  In order to reflect this trend in the industry, construction programs shall incorporate innovative project delivery methods into the curriculum.

One of the methods has been singled out is the warranty contracting method.  This method has been utilized in the highway construction industry for many years both in the United States and Overseas.  A warranty contracting course curriculum is developed with five modules.  The focus of the curriculum is the study of warranty contracting issues through a combination of in-class lectures, case-study analyses, the development of warranty contracting specifications, and student presentations.  Based on the available time and need of each program, the instructor may decide to cover some of the modules or all of the modules in the classroom.  This curriculum can also be integrated with existing construction management courses such as construction contracting course or project management course depending on the circumstance of each program.

References

 AASHTO (1999).  Primer on Contracting 2000.  American Association of State Highway and Transportation Officials, Washington D.C.

Anderson, Stuart D. & Russell, Jeffrey S. (1999, December).  Improved contracting methods for highway construction projects (Final report).  National Cooperative Highway Research Program10-49, Transportation Research Board, Washington D.C.

Arditi, David & Yasamis, F. (1998, September/October).  Incentive/disincentive contracts: perceptions of owners and contractors.  Journal of Construction Engineering and Management, ASCE, pp. 361 to 372.

 Badger, William & Kashiwagi, Dean (1991).  Job order contracting: a new contracting technique for maintenance and repair construction projects.  Cost Engineering, Vol. 33, No. 3.

Barrie, Donald S. & Paulson, Boyd C. (1992).  Professional Construction Management (2^nd ed.).  McGraw-Hill, Inc., New York.

 Campbell, Bruce & Humphrey, Thomas F. (1988, December).  Methods of cost-effectiveness analysis for highway projects.  National Cooperative Highway Research Program Synthesis of Highway Practice 142, Transportation Research Board, Washington D.C.

Chamberlin, William P. (1995, December).  Performance-related specifications for highway construction and rehabilitation.  National Cooperative Highway Research Program Synthesis of Highway Practice 212, Transportation Research Board, Washington, D.C.

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 Dorsey, Robert W. (1997, March).  Project delivery systems for building construction. Associated General Contractors of America, pp. XI.

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FHWA (2001).  Contract Administration Technology and Practice in Europe.  Federal Highway Administration, Washington D.C.

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Gransberg, Douglas D., Dillon, William D., Reynolds, Lee, & Boyd, Jack (1999, May/June).  Quantitative analysis of partnered project performance.  Journal of Construction Engineering and Management, ASCE, Vol. 125, No. 3.

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Hancher, D. E. (1994).  Use of Warranties in Road Construction. Transportation Research Board, National Academy Press, Washington D.C.

Herbsman, Zohar J. & Glagola, Charles R. (1998, September/October).  Lane rental – innovative way to reduce road construction time.  Journal of Construction Engineering and Management, ASCE, Vol. 124, No. 5, pp. 411-417.

Herbsman, Zohar J. & Ellis, Ralph (1995).  Determination of contract time for highway construction projects.  National Cooperative Highway Research Program Synthesis of Highway Practice 215, Transportation Research Board, Washington, D.C.

Hinze Jimmie (2001).  Construction Contracts (2^nd ed.).  McGraw-Hill, Inc., New York.

Konchar, Mark & Sanvido, Victor (1998, November/December).  Comparison of U.S. project delivery systems.  Journal of Construction and Management, ASCE, Vol. 124, No. 6, pp. 435.

Kugal, M. T. (1994).  Engineered quality in construction: partnering and TQM.  McGraw-Hill, New York.

Mulvey, Dennis L. (1997, October).  Trends in project delivery – a contractor’s assessment. Proceedings of the Construction Congress V, ASCE, pp. 627-633, Minneapolis, Minnesota.

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