Engineering Inc - November/December 2017 - 43

GEAR; SWEDEANDSOUR/GETTYIMAGES, DOLLAR; DAVID M. ELMORE/GETTYIMAGES

the owner's estimate as needed to account for the allocation of
risks between the owner and contracted party. In addition, the
draft project agreement should align risk allocation to the party
best capable of addressing and mitigating the risk.
* Be clear about the project budget in the procurement documents.
Owners should explain whether the budget is a ceiling and under
what conditions, if any, that budget can be exceeded.
* Describe your approaches. Owners should require a description of
the proposed approach to constructability review of the design,
plan for construction and methodology use for open-book estimating. Owners should include the cost of work definition, ownership and use of project contingency and concepts for use and
sharing of savings if final costs are below the GMP.
IMPLEMENTATION BEST PRACTICES

* Hold a partnering session to coincide with the project kickoff. This
meeting will set the stage for a collaborative environment-establishing expectations, roles and responsibilities, communication
protocols, and procedures for change management and dispute
resolution.
* Acquire experienced estimating and scheduling resources. These
resources can be in-house, through consultants or a combination
of both. Owners should allow ample time for the review of cost
modeling, price estimates and schedules during the design, and
for review and negotiation of the project price.
* Prepare a preliminary price based on design that exists at the time
the contract is signed. A reconciliation of the differences between
owner estimate and initial pricing should be the first task, completed before any other elements of the collaborative delivery
firm's scope of work are undertaken. Sometimes the engineer's
estimate for a project may contain assumptions on risk, labor and
materials availability and current market pricing that may differ
from those of the PDB or CMAR firm.
* Keep adjusting as design progresses. Discuss and agree on preliminary estimates while making continual adjustments due to scope

or quality changes made by owner. The updated estimates should
always be compared with the owner's approved budget.
* Always consider specific projects risks and their impact on the final
project price. As the design progresses and the risks are understood, the cost of work will be subject to changes.
* Communicate openly. Both parties need to share all information
while working collaboratively to determine an acceptable construction cost for the project. Consideration must always be in
focus as to whether the estimated cost of the project is consistent
with the owner's ability to move forward with construction.
* Be patient. The collaborative delivery firm must recognize the owner's
position if the GMP exceeds the owner's budget. Allow enough time
to work with the owner to reconcile the differences in scope and
cost.
Utilizing best practices throughout the delivery of either a PDB
or CMAR project will avoid surprises associated with the final
GMP while increasing the likelihood of successful GMP negotiations. The parties will agree on a GMP that:
* Incentivizes the collaborative delivery firm to find savings that
bring the final cost below the GMP
* Meets the owner's project cost expectations and secures value for
the price paid
* Properly allocates risks between the owner and the collaborative
delivery firm
Of course, sometimes the parties just cannot come to terms on
GMP. Owners who employ industry best practices associated with
collaborative delivery methods will see their projects delivered when
the costs are matched with value and are consistent with approved
budgets. PDB and CMAR contracts should have "off-ramps"
available for an owner to exercise, with or without the involvement
of the PDB or CMAR firm, if they cannot agree on a price. ■
Mark E. Alpert, P.E., DBIA, is the executive director of the Water
Design-Build Council. Douglas Herbst, DBIA, is collaborative project
delivery advisor at Freese and Nichols, Inc.

NOVEMBER / DECEMBER 2017

ENGINEERING INC.

Table of Contents for the Digital Edition of Engineering Inc - November/December 2017