Interim Guidance on Design-Build Project Delivery and the FFGA Process

Issue

Since a number of transit authorities have decided to use the design-build/design-build-operate-maintain (DB/DBOM) method of project delivery to build new or extended transit systems, this document describes a process a grantee may follow when pursuing a Full Funding Grant Agreement (FFGA) for a new starts project using this method. The DB/DBOM process involves the award of one or more contracts for the performance of design and construction or design, construction, operation, and maintenance of a project or project elements.

Background

Federal transit law requires the Federal Transit Administration (FTA) to evaluate and rate a new starts project before approving its entrance into preliminary engineering (PE) and/or final design (FD). Only a project that has been rated "recommended" or "highly recommended" may be further recommended for an FFGA award. The FFGA recommendation takes place as part of the annual budget process. Once a project is recommended for an FFGA, FTA may enter into the agreement only after the project has met all other FTA requirements based on the new starts criteria as defined in 49 U.S.C., Sec. 5309(e). Moreover, FTA policy and congressional direction permit execution of an FFGA on a new starts project after FTA has reached an adequate level of confidence in the final cost estimates of the project. Such confidence can normally be achieved by the grantee’s completing an advanced level of design, usually beyond PE, and accounting for additional risk elements and cost uncertainties.

DB/DBOM was introduced as a new starts project delivery method by the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA). ISTEA directed FTA to select one or more new starts projects to determine if DB/DBOM can save time, reduce cost, and introduce new technologies. The ISTEA provisions also requested FTA to issue technical guidelines on the use of DB/DBOM for transit projects. FTA selected five projects to participate in a DB/DBOM demonstration program. The demonstration projects include the Los Angeles Union Station Intermodal Terminal, Baltimore Light Rail Transit (LRT) System Extensions, San Juan Tren Urbano, Bay Area Rapid Transit District San Francisco International Airport Extension, and Northern New Jersey Hudson Bergen LRT line. These projects were selected because they represent various technologies, levels of investment, engineering complexity, financial arrangements, and management structures. Preliminary results are documented in a Report to Congress titled "Turnkey Experience in American Public Transit" and dated October 1998. The report can be obtained from the National Technical Information Service, 5285 Port Royal Road, Springfield, Virginia 22161, (703) 605-6000.

Process

This interim guidance only addresses the process of engineering and FFGA award. Subsequent guidance will address the full range of activities associated with a DB/DBOM project delivery. A grantee may award a single contract for DB/DBOM activities on an FTA new starts project using the following process, which is also depicted in the attached chart. Items of particular note include eligibility of contract preparation costs and sequencing the award of the contract. No existing FTA requirements have been changed or waived to accommodate the DB/DBOM process. However, the DB/DBOM demonstration projects did necessitate waivers on several administrative requirements.

As soon as a grantee decides to use the DB/DBOM method, the grantee could begin the solicitation process of advertising for letters of interest and requesting qualifications from DB/DBOM firms. When the grantee has met the National Environmental Policy Act requirements and completed PE, FTA will issue a Record of Decision (ROD) or Finding of No Significant Impact (FONSI). Value Engineering is expected to be performed at the conclusion of PE and may be incorporated into the DB/DBOM solicitation process.

After the ROD or FONSI is issued, the grantee may request project entry into FD. Also at this stage, the grantee may issue a request for proposals for the DB/DBOM contract(s). FTA’s approval of project entry into FD includes providing to the grantee authority to incur design costs on the future project before a grant is awarded ("pre-award authority"). In addition, the grantee may request a Letter of No Prejudice (LONP), which provides for eligibility for Federal funding of specified activities not covered under the pre-award authority. With such activities specified in the LONP, the grantee will then be allowed to pursue, for example, real estate acquisitions, utilities relocations, site preparations, and procurement. These activities, including the purchase of the unsuccessful proposals, are eligible project costs in either the PE or FD phases. The grantee will complete all the procurement aspects pertaining to the solicitation(s), including evaluation of proposals, selection of the DB/DBOM firm(s), and award of the contract(s).

At some point after a project is approved for entry into FD, the grantee will submit a financial plan and FTA will conduct a financial capacity assessment to evaluate the grantee’s financial status and commitment to the project. During the period when DB/DBOM proposals are being prepared, FTA and the grantee may begin FFGA discussions, if the project has been recommended for an FFGA. It is anticipated that as part of preparing the proposals for the DB/DBOM contract, updated cost estimates will be available, much of the needed real estate acquired, utilities relocated, and site preparation begun. Upon execution of the FFGA, the grantee may give the selected firm(s) the notice to proceed on the contract(s). In some cases, FTA may allow the notice to proceed to be given before the FFGA is finalized, in which case an LONP for the total project will be required.