Infrastructure Reinvestment and Design-Build Contracting
Sarah Chittenden and Kathy Shandling — Apr 01, 2009
I
nvestment for infrastructure has become a hot topic in the United States as municipalities scramble for funding to support much needed energy, transportation and water projects. And, according to think tanks and industry organizations, increased spending on infrastructure projects could soften the impact of the recession in the short term while promoting economic prosperity in the long term, creating a “double dividend.”Water and wastewater infrastructure is one of the sectors in desperate need of investment. Although the issue is receiving increased attention at the federal, state and municipal levels, funding in this sector pales in comparison to the actual need.
In the coming weeks and months, states and municipalities will make decisions on which water and wastewater projects to implement through the various funding options currently, or soon to be, available by the federal government. In many cases, these decisions will be based on which projects are most urgent and which projects can be started and completed with the most economic impact, both in terms of jobs created and value to the local and state economies.
Now more than ever is the time for public officials and water system decision-makers to examine the benefits of the design-build method of project delivery, an approach that is key to the reinvestment and recovery plan.
Design-build is an effective approach for implementing and completing projects. Design-build is a project delivery method that entails one contract – that between the owner and the design-builder.
This differs from traditional design-bid-build, which entails two contracts — one with an engineering firm to design the project, and one with a construction company to build it as designed. In addition to quicker project implementation and completion, design-build allows contracts to be awarded on overall “best value” and provides single-point accountability, resulting in fewer change orders, claims and disputes. Design-build is continuing to grow and now represents about 20 to 25 percent of all U.S. water and wastewater projects.
Design-Build and Economic Recovery
The American Recovery and Reinvestment Act – the much ballyhooed “Stimulus Plan” – is just one of several measures floated in Washington, D.C., that could spur additional spending in the water/wastewater sector. The following list highlights funding initiatives, either signed into law or under consideration, that could help finance design-build water and wastewater projects.
American Recovery and Reinvestment Act
Within four weeks of taking office, President Obama signed into law the American Recovery and Reinvestment Act (ARRA), at a cost of $787.2 billion. Of the $140-plus billion specifically allocated to infrastructure investment, the water sector was granted $18.8 billion for clean water, flood control and environmental restoration investments. Of that amount, the State Revolving Fund (SRF) programs received $6 billion.
According to the economic analysis behind the stimulus bill, a large boost in infrastructure spending makes sense for a number of reasons:
- Infrastructure projects contribute to more productive local economies and directly impact the quality of daily life.
- Although much of the nation’s infrastructure is in disrepair, state and local governments have scaled back their investment for these projects due to tight budgets.
- Infrastructure projects will create millions of jobs in construction, engineering, manufacturing and related markets.
- Many infrastructure projects are ready to go, or soon will be, and will infuse the economy with direct spending within months of allocating funds to a project.
While the ultimate success of the stimulus will be assessed in the years to come, much of its near-term success will depend on the speed with which projects are funded, implemented and completed. To date, $6 billion in funds for water and wastewater projects have been proportioned out to the 50 states using a formula based on needs and statutory allotment percentages. States are in the process of reviewing applications and determining which projects to fund and for how much.
The Water Quality Investment Act of 2009
Just two weeks after ARRA became law, the infrastructure committee in the House approved the Water Quality Investment Act of 2009, an ambitious water and sewer bill that, if passed, will add more than $16 billion to the amounts already set aside by the stimulus plan. It comprises five water bills that had been approved last year in the House but stalled in the Senate. The Act could authorize another $13.8 billion of federal grants for the Clean Water SRF. The Act will also authorize grants of $250 million over the next five years for projects that rely on alternate water sources as well as $1.8 billion over the same time span for projects focused on controlling sewer overflows. In addition, $750 million will be allocated to clean up pollution in the Great Lakes.
Omnibus Bill 2009
On March 11, Obama signed a massive $410 billion omnibus spending bill that addresses a variety of spending needs for the remainder of the 2009 fiscal year. The bill would authorize continued funding for the annual operating budgets of almost every Cabinet department.
The omnibus bill contains added funding for the water and wastewater sector. Specifically, the SRF program will be awarded an additional $1.5 billion. The U.S. Army Corps of Engineers is slated to receive $5.4 billion for navigation infrastructure, flood protection efforts and water resource management. Roughly $15 million has been set aside to protect great water bodies such as the Great Lakes Region and the Chesapeake Bay. The Bureau of Reclamation is to receive another $1.1 billion for dams, water treatment and conservation, and rural water projects. Additional funds to the tune of $3.7 billion will be channeled through the Department of Agriculture for rural development and conservation programs such as select water projects in rural communities and upgrading aging flood control dams. This includes $39 million to develop and expand the use of recycled water. And $40 million has been allocated to research new ways of generating power from flowing water.
National Infrastructure Bank and FY2010 Proposed Budget
There is resurrected interest in establishing a National Infrastructure Bank. The concept was first proposed by Sens. Christopher Dodd (D-Conn.) and Chuck Hagel (R-Neb.) in late summer 2007. According to the drafted bill (S.1926), the bank would be tasked “with evaluating and financing capacity-building infrastructure projects of substantial regional and national significance.”
At the recent winter meeting of the National Governors Association, support for a National Infrastructure Bank was resounding. According to the legendary financier Felix Rohayton, who delivered a joint presentation with Pennsylvania Governor Edward Rendell, infrastructure should be treated “as an investment, not as a program.” The establishment of a National Infrastructure Bank would become an “effective vehicle to channel the available private money” to invest in large infrastructure projects.
Also of note is that Obama’s proposed budget outline for FY2010 includes a provision supporting the creation of a National Infrastructure Bank. Of importance to active practitioners within the U.S. water and wastewater sector, his budget proposal includes allocations for the U.S. Army Corps of Engineers to continue authorization for the Water Resources Redevelopment Act (WRDA), a bill that allows the Corps to accept funds from non-federal public entities to provide priority review of their permit applications. WRDA would allocate an unprecedented $3.9 billion for the SRF programs.
Design-Build Case Studies
Since every dollar of government funding is expected to be closely monitored, it is crucial that funds are spent in the wisest way possible.
For this reason, it is incumbent upon federal, state and local leaders as well as public works directors and SRF managers to seriously consider the benefits of using the design-build project delivery approach for implementation of water and wastewater projects. To date, the design-build approach has brought significant value to communities that have utilized it, including:
Goodyear, Ariz.: Goodyear selected design-build for a project aimed at increasing the City’s drinking water supplies in only seven months. The City overcame the aggressive schedule with intense communication and collaboration with the design-build team. Tight management, including constructability reviews during the project design, subcontractor pre-qualification and regulatory permit approval stages, kept the project on track. The design-build team transitioned the project to the City by conducting acceptance testing, commissioning and training of the City’s staff in facility operation and maintenance within the seven-month period Lawrence, Mass.: Lawrence determined that its outdated 1938 water-treatment plant needed to be replaced. The City faced an aggressive schedule mandated by a regulatory consent decree that included possible financial ramifications if the schedule was not met. In addition to schedule constraints, construction of the new facility could not interrupt the City’s water supply. The City chose the design-build project delivery method in order to meet the aggressive schedule.
As a result, even with construction occurring on the same site, the 1938 facility remained fully operational. The outcome was lauded by the City’s leaders and citizens – the design-build method of project delivery provided the City with ample opportunity for input in order to produce an aesthetically pleasing facility that kept the community in mind.
Ogden, Utah: The North Davis County Sewer District serves seven communities south of Ogden and several industrial wastewater users, including Hill Air Force Base. The District needed an effective way to expand and upgrade its wastewater treatment plant while securing adequate funding for the duration of the project. The District chose design-build, and with the help of the design-build team, the District secured $48.5 million through a general obligation bond election that passed with 90 percent voter approval. The District also secured a $20 million low-interest loan from the State of Utah Water Quality Board. In order to maintain cash flow and schedule receipt of bond and loan proceeds, the design-builder sequenced eight design-build task orders to be constructed over a five-year period. Further monetary and time savings came from procuring most of the equipment before the design was completed.
Water is our most basic resource and how we choose to conserve, reuse and protect it is vital to our health and our economic growth. It is important to make sure all government funding for clean water and wastewater projects is invested wisely. The design-build method of project delivery is an effective way to implement the much needed water projects in an effective and efficient manner.
Sarah Chittenden is executive director of the Water Design-Build Council (WDBC). Kathy Shandling is executive director of the International Private Water Association.
