Alternative approaches, such as the design-build-operate (DBO) project delivery approach, can offer utilities and clients greater efficiency, lower cost and the best-value solution in contrast to conventional contracting models. Liz Kelly presents two case studies to highlight successful DBO projects at AWWA ACE14 this week.

By: Liz Kelly, CH2M HILL senior consultant

Liz Kelly will present her paper, “Assessments of Two Major DBO Projects Part Way into Their Operations Phases and Consideration of Enhancements to the DBO Contracting Model”, co-authored by CH2M HILL’s Robert Kuta, Seattle Public Utilities’ David Hilmoe, and San Diego County Water Authority’s Tim Suydam, at AWWA ACE on Tuesday, June 10, at 11:30 a.m. Get CH2M HILL’s full schedule of participation in ACE14.

The design-build-operate (DBO) contracting model, an alternative project delivery approach, is often seen by clients and owners as the best way to achieve innovation, efficiency, and lower construction and long-term operation costs because it requires designers, contractors, and operators to integrate and develop best-value solutions.

In contrast to the conventional contracting approach, wherein responsibility and liability are segmented, the DBO approach establishes a single point of accountability within the company team. This same consolidated accountability drives the selected team to coordinate design, construction, and operations phases to achieve better quality, a faster schedule, and a lower cost.

Cedar Water Treatment Plant

Two recent projects delivered under the DBO contracting model, the Cedar Water Treatment Plant (Seattle Public Utilities), and the Twin Oaks Valley Water Treatment Plant (San Diego County Water Authority), went into operations in 2004 and 2008, respectively. With several years of operations underway, these projects have been the subject of industry interest in understanding if the DBO contracting model does deliver results equal or superior to owner expectations and conventional contracting approaches.With this industry interest, a closer look has been taken at the many lessons learned on these two projects, including what works best with the DBO contracting model and how the projects have performed to date, what could be improved, and how the industry as a whole can benefit from any enhancements made to the DBO process.

Have these projects met the objectives of DBO contracting?

Overall, both plants are successes for their owners, stakeholders, neighbors, and water customers. Both the Cedar Water Treatment Plant and the Twin Oaks Valley Water Treatment Plant have substantially accomplished the objectives of DBO contracting, as evaluated from the perspectives of regulatory compliance, cost effectiveness, owner/operator relationships and owner satisfaction, and water quality.

More specifically, the answer is “yes” for both facilities, given the following criteria for DBO success:

  1. Aligning the design and construction phases to minimize construction costs and optimize constructability and safety
  2. Aligning the design and operations phases to ensure operations staff input to design for long-term functionality, as well as ease of operations and maintenance.
  3. Assignment of design, permitting, construction, and long-term operational risk to the party in the best position to understand and manage the risk.
  4. Improved schedule and cost control and certainty and incorporation of life-cycle assessment in proposal evaluation.
  5. Clearly defined operational performance requirements tied to incentives and liquidated damages.
  6. Incentivizing innovation and best ideas for meeting client and end user goals and requirements.

With these successes, could there still be improvements to the DBO contracting model? As with any process, there are always lessons learned and tweaks to be made. The Cedar and Twin Oaks projects have provide ample opportunities to learn and improve, particularly in the following areas: cost for permitting alternative technologies, limited mechanisms for adapting to changing conditions, optimizing costs over the life of the assets (not just the contract period), profitability transparency on the part of contractors, and incentivizing for advanced technologies and new investments. Taking these items into account as part of the DBO contract would result in an overall improved value proposition to both parties, and – most importantly – to the customers.

There are still several years remaining in the initial 15-year operations contracts for both Cedar and Twin Oaks. Overall and to date, each owner and the contractor are very pleased with the outcomes. The facilities were designed and constructed with attention to quality, safety, sustainability, as well as ease of operations and maintenance. With few exceptions, the facilities have met or exceeded performance requirements. The relationships between the owners and operators are positive and issues are addressed as they arise. Those closely involved in the projects believe that the objectives of DBO contracting have been achieved. In addition, they believe there is potential to incorporate further enhancements to the DBO contracting model wherein the value proposition to owners as well as DBO contractors can be improved.

Liz Kelly has more than 20 years of experience in water, wastewater, drainage, and solid waste utilities work, civil engineering, asset management, project management, and strategic planning. She is currently a Senior Consultant for CH2M HILL’s Strategic Consulting Solutions Team. During her career, she has managed a large number of employees and projects, ranging up to several hundred million dollar, complex design-build-operate projects. Ms. Kelly was most recently the Director of Project Management and Engineering Division for Seattle Public Utilities, where she oversaw a portfolio of projects totaling close to $735 million.