Pity today’s U.S. airport construction manager. He or she must deliver high-tech, glitzy, and complex facilities to meet growth demand, new regulations and stiffer competition for passengers and cargo. Billions of dollars in projects must be fast-tracked, harmonious and on budget, even when construction parameters waiver, airport operations dominate and work is governed by inflexible public sector rules of engagement.

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  • Welcome to the world of the men and women who must build the airports of tomorrow, stuck with the project delivery vehicles of yesterday. “Airports are the worst of all worlds,” says Steven Grossman, aviation director for the Port of Oakland, Calif. “It’s a private sector mentality governed by public sector authority.”

    With most U.S. airports under some kind of government jurisdiction, traditional methods of construction procurement, particularly design-bid-build (DBB), are the rule and the tradition. Airlines often have carte blanche to run projects as they see fit. Airports may not. In many states and localities, newer approaches such as design-build and construction management at-risk are seen as suspect by regulators and in-house staff and require yeoman effort to get through the legislature.

    “Airports have struggled for a long time with how to deliver a project,” says Daniel Molloy, assistant general manager of Atlanta International Airport. “Traditional DBB gives owners most control, but often the timing may be off.”

    But as some pioneering airports try the new approaches on huge expansion projects, successful schedule and budget results are commanding more attention. “There are lots of new options out there that are worth rethinking,” says Kitty Friedheim, an aviation consultant who formerly directed airport planning at Chicago’s O’Hare International Airport.

    The hodge-podge state of affairs in U.S. airport procurement has prompted a new    effort to demystify alternative project delivery terms and processes for airport construction managers.  High-profile problems on airport projects such as in Miami and Atlanta have also called attention to the need for a new approach. “When you dig deeper, you find the problems are often related to rushing into things,” says John Paolin, communications director of Hill International, a Marlton, N.J., CM firm involved in education efforts.

    Next month in Washington, D.C., aviation executives, contractors and consultants experienced in the new approaches will join forces in a two-day conference and “boot camp” to bring new methods and users together, many for the first time.

    “We have to get the awareness up,” says Richard Marchi, senior vice president of Washington-based Airports Council International, which represents 160 major North American airports with combined capital budgets of close to $10 billion.

    Another conference sponsor is Associated General Contractors, which will provide its project delivery textbook free to all registrants. “AGC is project delivery neutral,” says conference organizer Michael Kenig, chair of AGC’s project delivery systems committee and vice chairman of airport specialist Holder Construction Co., Atlanta. “But some of the guys that fought design-build are now doing it all over the place.”

    For a $300-million terminal and roadway upgrade, Oakland International Airport officials moved away from traditional project delivery methods. But they were unprepared for intense contract negotiations.

    Airport executives who have already seen the shortcomings of DBB in executing current and planned megaprojects will share experiences. “It all starts with the fallacy that the DBB process and the low bid generate the lowest price for a public project,” says Oakland’s Grossman. “When you go that route, you wind up encouraging contractors to bid below cost to get the job and make it up in change orders.”

    Grossman, who is also ACI chairman, was adamant about attracting “quality contractors who refuse to play that game”  for a $300-million terminal-roadway project that is scheduled to wrap in 2007-08.  The process involved the airport’s first use of proposals  where price was not the key element. “Of more importance to us [was] what was the contractor’s approach?” says Grossman. “The process took a long time and a lot of money and there was the subjectivity of selection.”

    Grossman admits that Oakland officials were unprepared for the tough negotiating process. “It’s not something you can teach,” he says. “You have to experience it. I expect a contractor to be a good negotiator, but once the deal is signed, I expect it to perform.” So far, Grossman is pleased with the contractor selected, Turner Construction Co. “Better projects mean contractors make more money. That is not a bad thing. Airports want projects with more certainty,” he says.

    Norman Y. Mineta San José International Airport in San José, Calif.,  will use design-build to execute expedited first-phase of a $1.5-billion construction program, to be completed in 2010.

    Still a Challenge

    Norman Y. Mineta International Airport in San José, Calif., reduced by half its original capital program as growth estimates slowed and its carriers winced at the cost. But the remaining $1.5-billion program still mandates extensive terminal and roadway construction challenges. “We need a contracting mechanism that takes the interconnectedness of the projects into account,” says David Maas, deputy master plan director.

    Forward-thinking airport managers already won approval for a departure from DBB in 2004. Now, San Jose is considering both design-build and CM at-risk for the program. “Our RFP is out on the street, with proposals due in mid-April,” says Maas. The construction of a new terminal “on top of the old” will require a 41⁄2-year construction program, he says. “Having one entity will speed things up,” says Maas. “We won’t have to manage so many low-bid packages.” Even with more traditional projects tasks under the scope of the DB firm selected, “we’re hoping the method still allows us control,” he adds.

    What Owners Want in Project Delivery Selection

    Lowest cost consistent with quality and performance objectives

    Initial cost versus lifecycle cost
    Shortest schedule for overall project delivery
    High quality
    Comply with technical specifications
    Meet overall expectations
    Promote innovation and value engineering
    Limit the cost of design changes
    Limit the risk of cost and schedule growth
    Control over design decisions
    Control over construction quality
    Limit impact on current operations, safety, security
    Limit construction aggravation
    Limit demands on owner resources
    Limit number of contractual entities/points of responsibility
    Limit claims for additional cost

    Much angst exists among airport construction staffs in transferring risk management to an “outsider” when using alternative processes. “A lot of the issue is fear of losing control. How do we get what we want?” says Atlanta airport’s Molloy.

    Still, no one is predicting DBB will depart from the airport market anytime soon. Some observers say it may be necessary on projects where there are complicating factors such as complex disadvantaged business enterprise (DBE) rules.  Some airports may be on too tight project delivery schedules to cope with the learning curve of a new process.

    Conference organizers readily admit that design-build, agency CM, CM at-risk and the rest are not a project panacea. “The intent of the seminar is to talk about risk,” says Marchi. Says AGC’s Kenig: “No one believes alternative project delivery is the cure for everyone’s evils. I tell owners that it won’t go well in the first round.”

    In many cases, experts suggest trying DB or other new approaches on simpler projects, such as roadways or hangars “where the details are not that critical,” says Maury Masucci, a conference sponsor and Hill International vice president who has co-authored a guide on project delivery for airport owners.

    Conference organizers want to attract airport engineering and construction managers who may be most naive and wary of project delivery approaches that cede their former authority and expertise to others. “Our design guys  don’t talk to contractors as much as they should,” says ACI’s Marchi. “We need to get their awareness up. They will be able to hear from colleagues they know and trust.”

    But foremost is the education mission, to sort out myriad variations and iterations of new project delivery methods that are now lost on many practitioners. “Most start out determined to select a project delivery method, but then quickly run into a wall of words with numerous meanings,” says the airport guide that is slated to become an industry “white paper” after the May 24-25 conference.  “With the absence of any industry standard, everyone feel as if they are the first to travel down this road.”