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    1

    Managing Change, Challenges &Other Things

    Malcolm T. Kerley, P.E.Chief Engineer, Virginia Department of Transportation

    Chair, AASHTO Subcommittee on Bridges & Structures

    April 19, 20102

    Topics

    • VDOT

    • Project Delivery Options

    • Changing Roles

    • A Few Other Things

    • Questions

    3

    Woodrow Wilson Bridge

    4

     About VDOT

    • VDOT maintains the 3rd largest

    state-owned road system in the

    country

    • 57,867 miles of state maintained

    roadway system

    5

     About VDOT

    • 20,914 Structures (Bridges and Large Culverts)

    - 19,380 (93%) Maintained by VDOT

    - 1,534 (7%) Maintained by Localities• 4 Underwater Crossings

    • 2 Mountain Tunnels

    • 3 Toll Roads, 1 Toll Bridge

    • 4 Ferry Services

    • 41 Rest Areas, 107 Commuter Parking Lots

    6

    Fy 2010 Transportation Revenues

    Sales & Use

    16%

    Other

    Revenues

    21%

    VA Motor Fuels

    24%

    Federal Fuels

    and Others

    25%Motor Vehicle

    Sales & Use

    14%

     Almo st 2/3s oftransportation

    revenues are tiedto fuel purchasesand auto sales

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    7

    2010 Transportation Revenue

    $0

    $100,000,000

    $200,000,000

    $300,000,000

    $400,000,000

    $500,000,000

    $600,000,000

    $700,000,000

    $800,000,000

    $900,000,000

    Motor Fuels

    Tax

    Vehicle Sales

    and Use Tax

    Vehicle

    License Tax

    Retail Sales

    and Use Tax

    Other 

    Sources

    Federal

    HMOF Construction

    8

     About VDOT

    48.3%

    19.8%

    13.6%

    10.7%

    7.6%

    Current FY2010 budget is $3.4 billion

    • $1.63 B (48.3%) – Maintenance (includes city and county street payments)

    • $669 M (19.8%) – Construction

    • $459 M (13.6%) –Support other agencies, tolls, admin, other programs

    • $362 M (10.7%) – Special financing and earmarks

    • $257 M (7.6%) – Debit service

    9

    SalemLynchburg

    Hampton Roads

    Richmond

    Fredericksburg

    Staunton Culpeper 

    NorthernVirginia

    Bristol

    N

    VDOT Construction Districts

    10

    VDOT’s Dashboard

    11

    Goshen Rehabilitation Project

    12

    Program Challenges

    • Economic recovery requires efficient transportation network

    • Infrastructure is aging

    • DOT workforce aging and shrinking

    • DOT budget shrinking

    • VMT stagnant during current recession, but had grown significantly

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    13

    Transportation Revenue Reductions

    Spring 2008 $1.11 billion

    February 2009 $2.57 billion

    Through FY 2009 $3.68 billion

     August 2009 $0.88 billion

    November 2009 $0.05 billion

    FY 2010 Revisions $0.93 billion

    Total $4.61 billion

    14

    Current Six-Year Improvement Program

    $8.9 b

    $2.9 b

    $6.0 b

    Revised

    FY 2009-2014

    Program

    $7.5 b

    $2.0 b

    $5.5 b

     Approved

    FY 2010-2015

    Program

    $7.6 b

    $2.1 b

    $5.5 b

    Revised

    FY 2010-2015

    Program

    $10.6 b

    $2.7 b

    $7.9 b

     Approved

    FY 2009-2014

    Program

    $11.5 bTotal

    $2.9 b

    Rail & Public

    Transportation

    $8.6 b

    Highway

    Construction

     Approved

    FY 2008-2013

    Program

    15

    Program Challenges - Bridges

    • Aging infrastructure- 56% of VDOT’s bridge inventory is 40 years or older 

    • 20% of the inventory is at risk of becoming SD

    • Shortfall in State and Federal revenues

    • Estimated $1.9 billion in maintenance and rehabilitation needs

    • Estimated $ 4.2 billion in replacement needs

    • Approximately $ 3.5 billion reduction in the six-year plan

    16

    VDOT’s Bridge Program

    NUMBER OF BRIDGES AND CULVERTS BY DECADE

    1515

    2323 2135

    3482

    4295

    1726

    865

    3905

    52099 35 20

    0

    1000

    2000

    3000

    4000

    5000

    2000-

    2009

    1990-

    1999

    1980-

    1989

    1970-

    1979

    1960-

    1969

    1950-

    1959

    1940-

    1949

    1930-

    1939

    1920-

    1929

    1910-

    1919

    1900-

    1909

    pre-

    1900

    DECADE

         N     U     M     B     E     R

    17

    VDOT’s Bridge Program

    CUMULATIVE PERCENT OF BRIDGES AND

    CULVERTS

    100.0%92.8%

    81.7%71.4%

    54.8%

    34.3%26.0%

    21.9%

    3.2% 0.7% 0.3% 0.1%0.0%

    20.0%

    40.0%

    60.0%

    80.0%

    100.0%

    120.0%

    2000-

    2009

    1990-

    1999

    1980-

    1989

    1970-

    1979

    1960-

    1969

    1950-

    1959

    1940-

    1949

    1930-

    1939

    1920-

    1929

    1910-

    1919

    1900-

    1909

    pre-

    1900

    DECADE

         P     E     R     C     E     N     T

    55% of inventory is 40 years or older 

    18

    Bridge Construction Unit Costs 1999-2009

    $0

    $50

    $100

    $150

    $200

    $250

    1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

    Year 

       D  o   l   l  a  r  s  p  e  r   S  q .

       F   t .

    On-System Cost per SF Off-System Cost per SF

    VDOT’s Bridge Program

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    Bridge Management Needs/Goals

    • Needs

    - Preventive Maintenance and Preservation

    - Restoration & Rehabilitation

    - Replacement

    • Goals

    - Identify and prioritize statewide needs

    - Provide adequate processes to plan, budget, implement and monitor

    work efforts

    - Use a life-cycle approach

    20

    The Blueprint

    • 3 Parts to Blueprint

     – Six-Year Program

    • Reduce by $4.6B

     – Organization/Staffing

    • Reduce employees by 1,000

     – Services/Programs

    • Centerline out

    72%

    15%

    13%

    Construction Program

     Admin & Sup port Pro gram

    Maintenance Program

    Reductions by Program Over 6 years

    (FY 2009 – 2014)

    21

    Public Policy Questions

    • Who should pay for Roads and Bridges?

     – What type of user fee makes the most sense?

    • Fuel tax?

    • Tol ls?

    • VMT?

    • Other?

    • Who should maintain and operate the transportation network?

    22

    Route 5 Bridge over Chickahominy River 

    23

    VDOT Past, Present and Future

    • 100 years of tradition 1906-2006:

     – Virginia policy mirrors federal policy

     – Motor fuels user tax [$0.17 per gallon since 1986], and local taxes

    are predominant funding source

     – Most VDOT project delivery is by traditional design-bid-build - paid

    with public funds

     – VDOT’s current budget is approximately $3.4 billion [US]

    24

    VDOT Past, Present and Future

    • Present Challenges Mirror Rest of US

     – Highway system is aging

     – Maintenance requires increasingly larger share of budget

     – Population and economy are growing

     – Current needs exceed available funds

     – Strong economy requires efficient transportation

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    25

    VDOT Past, Present and Future - Options

    • Determine and maintain core competencies

    • Develop new delivery methods

    • Develop internal systems that accommodate new delivery methods

    26

    Project Delivery Options

    DesignBid

    Build

    Private

    ContractFee

    Services

    DesignBuild

    DesignBuild

    OperateMaintain(DBOM)

    Long

    TermLease

     Agreement

    DesignBuild

    FinanceOperate(DBFO)

    DesignBuild

    OwnOperate(BOO)

    Public Agency Controlled Concessions / PrivatizationsMore Private Sector Control

    Public Pays

    Tax Exempt Financing

    Public Control

    Public Equity

    User Pays

    Taxable Financing

    Private Control

    Private Equity

    Public Private Partnerships

    Borrowed from C. Kane, formerly of Washington Group

    27

    Scoping - Influence Curve

    28

    VDOT’s Project Delivery Options

    • Design-Bid-Build

     – Remains primary delivery method

     – Suitable for many types of projects

    • Alternative delivery methods:

     – Public Private Transportation Act (PPTA)

     – Design-Build

    29

    Virginia’s Public-Private Transportation Act of 1995 [thePPTA]

    Policy

    • §56-558 A.

    - A public need for timely transportation development

    - Existing methods may not be adequate

    - Private development or operation may be more timely or more efficient or

    less costly – thereby serving the public interest

    • §56-558 C.

     – Intent is to encourage private investment in transportation facilities

    • § 5 6-559.

     –   Allows for solicited or unsolicited proposals

    Such partnerships are for carefully selected projects 30

    VDOT’s Procurement Process - PPTA

    Phase 2Independent Review Panel

    IRP Meetings

    Phase 1Quality Control

    •Receipt of Localities comments•Concessionaire presentation

    •VDOT presentations

    •Public Comments

    Phase 3CTB Action

    Phase 4Detailed Proposal

    Phase 5Negotiations

    Phase 6Interim or

    Comprehensive Agreement

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    3P Projects in Virginia

    32

    The Route 895 PPTA Project

    • Phase 1 – Virginia’s First PPTA Toll Road

     – The PPTA allows unsolicited proposals

     – FD/MK proposal in 1995

     – VDOT did not have construction funds

     – FD/MK proposed debt financing for DBF

     – VDOT would operate toll road upon completion

     – Road was constructed 1998 - 2002

    33

    The Route 895 PPTA Project

    • Phase 2 – Refinancing the debt, and

    • Virginia’s first PPTA concession agreement

     – Traffic revenue did not meet forecasts

     – Economic growth forecast a better long-term return

     – Transurban, LLC

    • 2006 - 2105

    • Finance, operations and maintenance

    • Valued at +$500 million [US]

    • Revenue sharing provisions34

    Route 895 – James River Crossing

    Route 895 PPTADBF 1998 - 2002, FOM 2006 - 2105

    35

    Route 895 PPTADBF 1998 - 2002, FOM 2006 - 2105

    36

    Downtown Tunnel/Midtown Tunnel/MLK Extension

    • Midtown Tunnel- New Construction,

     Approaches and

    Improvements

    • Downtown Tunnel- Improvements

    • Southern Extension

    of MLK Freeway

    (Route 58)

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    Midtown Tunnel

    38

    P3s … it’s not just tolling

    • Coalfields Expressway

     – Coal synergy

    • Route 28

     – Special tax district

    • I-495 Hot Lanes

     – Dynamic tolling

     – HOV/HOT lanes

    39

    Coalfields ExpresswayHawks Nest

    40

    Route 28 Corridor Improvements

    41

    I495 - Capital Beltway HOT Lanes

    42

    Design-Build

    • § 33.1-12 of the Code of Virginia, enacted in 2001

    - Authorizes the Commonwealth Transportation Board

    (CTB) to award Design-Build contracts

    - Requires Objective Criteria for project selection

    - Finding of Public Interest

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    Design-Build

    CTB Objective Criteria• Project shall include one or more of the following:

    - Expedited Schedule

    - Established Budget

    - Well Defined Scope

    - Favorable Risk Analysis

    - Prequalification of Design-Build Firms

    - Competitive Bidding Process

    44

    DB Bridge Contracts

    • Large and small projects

    • Route 460 Bridge - $90 million

    • Regional Bridge and Culvert Repair 

     – Bundled structures by geographic area

     – Contracts ~$1 million to $10 million

    • Route 609 ~$1 million

    • Route 713 ~$2 million

    45

    609 Bridge – 1st Single Phase

    46

    Giles Co. BridgePosted: 3 tons Maximum Load

    47

    Battlefield Parkway - Leesburg

    48

    Pacific Boulevard

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    Changing Roles

    50

    Design and Construction OversightOwner’s Role

    • P3 & DB delivery not simply a philosophical change

    • Different contractual arrangements require different policies

    and procedures

    • Act based on lifecycle risks

    • Executive Management must direct changes to traditional

    procedures

    51

    Risk Based Approach to Contract Administration

    • Quality Assurance and Quality Control

    • Plan Review

    • Construction Authorization and Oversight

    • Dispute Resolution

    52

    Observations

    • DOTs have 100 years of tradition

    • Conflicting Priorities (profit v public service)

    • Fundamentally different organizations can successfully coexist

    • Government must establish a business process

    • Private sector must perceive investment opportunities

    • Private companies can succeed or fail, and they do both equally

    well

    • Engineering is the easy part …

    53

    Owner’s Recommendation’s

    • Read the contract documents

    • Develop procedures based on your risks

    • Understand and enforce the contract

    • Direct your program

    • Communicate – to ensure support

    • P3 is not a panacea

    54

    Current Status

    • Traditional design-bid-build contracts

     – 84 Construction Contracts for $1 billon

     – 140 Maintenance Contracts for $300 million

    • More than $2 billion under construction and $3 billion work under

    development for PPTA & DB projects

     – Four active PPTA contracts under construction for +$1,900 million

     – 17 active DB contracts under construction for +$250 million

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    Smart Bridge - Blacksburg

    56

    … a few Other Things

    • How does a bridge engineer consider those policy and

    changing program and project delivery methods in the

    context of traditional design-bid-build contracting?

    • Is design-bid-build contracting still relevant?

    57

    Rapid Renewal ApproachesInnovative Contracting Options

    • Why use innovative contracting options?

     – Accelerate Delivery, Minimize Road User Impacts

     – Recover Road User Costs - not considered in traditional contracts

     – Risk Allocation

    • What are the types used by VDOT?

     – Incentives/Disincentives

     – A+B Bidding

     – Cost plus time bidding

     – No-Excuse Bonus

     – Fixed Date/Adjustable Schedule – Design-Build 58

    Basis for Rapid Renewal Approaches

    Simplified calculations for Road User Cost (RUC)

    • Vehicle Operating costs: ADT x Delay t ime x Vehi cle Oper ating Cost /mile

    -OR-

    • Lost Productivity costs: ADT x Av g pass enger p er vehi cle x Del ay x mi n. hou rly wage

    59

    Incentives/Disincentives

    Definition:

    Contract provision that compensates the Contractor for

    accelerating completion.

    Determination:• Apply to Critical Projects, Minimize RU impacts and costs• Incentive/Disincentive Phase – should complete in less than one

    construction season

    • Based on justifiable Road User Costs (not liquidated damages)

    • I/D $$ Sufficient to encourage acceleration (not exceed 5% of totalcontract)

    • Incentive/Disincentive $$ should match

    • Requires CPM schedule specification, accurate baseline, frequentupdates 60

    Incentives/DisincentivesPros And Cons

    Pros

    • Reduce Construction time

    • Reduce contractadministration costs

    • Improve public relations

    • Increase Contractors’interest

    Cons

    • Increase construction

    costs• Negotiating contract

    changes is difficult

    • Contractors submit moreTIA’s and claims.

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    Incentives/DisincentivesProject Selection

    62

    Incentives/DisincentivesRoute 340- Bridge Replacement At Jeremy’s Run

    63

     A + B Bidding

    Definition: What is the “A” and the “B”?

    • “A” = Traditional dollar amount for contract items

    • “B” = Calendar days bid to complete the work multiplied by daily RUC

    » B converts to new Contractor determined fixed completion date

    Determine the $$ Amount:

    • (A) + (B x [Road User Cost/Day]) = Total Bid

    • Lowest Bid for Award

    • Award $$ amount is limited to the “A” portion of the bid after Award

    • Can be coupled with Incentive/Disincentive based upon length of timebid to complete (I/D based around new fixed date)

    » Cap placed for budgeting project on incentive64

     A + B BiddingCriteria

    • High RUC, Safety/Emergency, community impacts

    • High Traffic Control costs

    • Relatively free of third party conflicts

    • Public interest expressed to expedite project

    • “B” portion should be sufficient to influence bids

    65

     A+B Bidding

    Pros

    • Increases bidders’interest

    • Encourages acceleration

    • Promotes efficiencies

    • Reduce RU impacts

    • Reduces pollution,environmental impacts

    Cons

    • Contract changes,delays, nullify advantages

    • Increases inspection andadministration costs

    • Negotiating contractchanges, TIA’s is difficult

    • Not to be used routinely

    66

     A + B BiddingProject Selection

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    No-Excuse BonusDefinition:

    Bonus to accelerate completion. Contractor assumes all risks for 

    completion and waives all right to claims.

    Criteria:• Unique/Complex Project, High Traffic Volumes/RUC’s

    Determine the $$ Amount:• Road User Cost

    • Cost of all known and potential risks

    • Must be sufficient to encourage acceleration and interest

    • Thorough pre-Award contract time analysis to determine majormilestones

    • Detailed construction inspection and administration estimate 68

    No-Excuse Bonus

    Pros

    • Reduced construction time

    • Increased Bidders interest

    • Better coordination between

    Primes and Sub-contractors

    • More innovative techniques

    Cons

    • Impacts quality of work

    • Increase construction costs

    and inspection costs

    • Waive all rights to claim

    • Negotiating contract changes,

    TIA’s is difficult

    • Requires detailed CPM

    Schedule specification,

    baseline, frequent updates.

    69

     ACCA Yard Project

    70

    Fixed Date / Adjustable Schedule

    • Advertise project with dual dates

    • Contractor selects work period within larger contractwindow

    • Contractor’s selection converts to fixed date

    • Usually reserved for smaller contracts

    Ex: Work requires 60 days to perform, but VDOT provides 180 day window.Contractor selects early or late period to optimize his schedule work.

    Benefit to VDOT: Increased competition

    71

    Rapid Renewal - Summary

    • Why use innovative contracting options?

     – Accelerate delivery

     – Minimize road user impacts / travel delay

     – Recover user costs

     – Risk allocation ~ contractor controls MOT and job sequencing

    • What is the top option used by VDOT?

     – Incentive/Disincentive

    • Successful

    • Easy Administration 72

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     AASHTO Bottom Line Report – 2009

    • Annual investment $166 billion [2010 to 2015]

     – Highways and Bridges

    • Highway capital investment 78.7 billion [2006]

     – Total from all levels of government

    • Model-based investment estimates do not address all needs

     – Additional annual highway requirements total over $13 billion

    • >$7 billion in environmental mitigation costs

    • $2.6 billion in highway operations costs

    • $1.2 billion in safety program costs

    • $1.6 billion in highway security costs.

    74

     AASHTO Bottom Line Report – 2009

    75

     AASHTO Bottom Line Report – 2009

    76

     AASHTO Bottom Line Report – 2009

    77

    Top 3 Challenges

    • Funding

     – Is the “pie” big enough?

    • Funding

     – Are you getting your “correct” piece of the pie?

    • Funding

     – Are you “eating” your pie appropriately?

    78

    Varina Enon Bridge

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     AASHTO Subcommittee on Bridges & Structures

    • Strategic Plan

    • 2005 Workshop Prioritized Major Challenges – Extending Service Life

     – Optimizing Structural Elements

     – Accelerating Bridge Construction

     – Advancing the AASHTO Specifications

     – Monitoring Bridge Condition

     – Contributing to the National Policy

     – Managing Knowledge

    80

     AASHTO Subcommittee on Bridges & Structures

    • 2000 Workshop Prioritized Major Challenges

     – Enhance Materials, Structural Systems, and Technologies

     – Efficient Maintenance, Rehabilitation, and Construction

     – Bridge Management

     – Enhanced Specifications for Improved Structural Performance

     – Computer-Aided Design, Construction, and Maintenance

     – Leadership

    81

     AASHTO Subcommittee on Bridges & Structures

    • Leadership Objective

     – Engage in policy development, planning and budgeting

    • Leadership Approach

     – Professional articulation of safety risks

     – Bridge Engineers viewpoint

    • Aesthet ics

    • Environment

    • Maintenance Investment

    • Bridge Alignment

    • Construction Methods

     – Leadership and Management Training for Bridge Engineers82

     AASHTO Subcommittee on Bridges & Structures

    83

    Questions

    84

    Questions

    • What is the primary source of transportation revenue for Virginia?

    • To which program does VDOT allocate the most money?

    • What is the predominant, traditional project delivery method?

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    Questions

    • What are one or two delivery methods wherein the owner

    relinquishes certain authority to the contractor?

    • Why would an owner choose an alternative delivery method?

    • What are the top three challenges faced by DOTs?

    • What is one of AASHTO’s Leadership Objectives for bridge

    engineers?

    86

     Answers to Questions

    • What is the primary source of transportation revenue for Virginia? – Fuel sales

    • To which program does VDOT allocate the most money?

     – Maintenance

    • What is the predominant, traditional project delivery method?

     – Design-Bid-Build

    87

     Answers to Questions

    • What are one or two delivery methods wherein the ownerrelinquishes certain authority to the contractor?

     – Public-Private Partnerships and Design-Build

    • Why would an owner choose an alternative delivery method?

     – To accelerate project delivery

     – To access additional funding sources

    • What are the top three challenges faced by DOTs?

     – Funding, Funding, Funding

    • What is one of AASHTO’s Leadership Objectives for bridgeengineers?

     – Engage in policy development, planning and budgeting