Better Specifications for Underground Projects Workshop

Current underground industry specifications vary widely as their development is impacted on a project specific basis by the legal requirements and risk transfer by the owner, third-party stakeholders, engineering design approach, contractor practices and the complexity of the project. These and other factors have all contributed in some way to today’s practice of issuing more detailed and more prescriptive specifications to cover all options while adding an additional level of complexity and allocation and transfer of risk to the project.

To discuss these issues and ways to improve specifications in the underground industry, a workshop attended by industry representatives was held at the North American Tunneling Conference June 20 in Portland, Ore. This workshop developed out of discussions several industry leaders had on issues related to today’s specifications while in Europe last fall.

The purpose of the workshop is to provide a “global perspective” of specifications. Oftentimes, specifications are viewed from the perspective of representative parties (owner, contractor, engineer, etc.) who may not fully understand the external factors that influence other parties and which may impact specifications. The purpose of this article to is to present the different perspectives of the contractor, owner, engineer and supplier with regards to contract specifications in order to promote awareness and lead to better specifications.

Industry representatives included Richard Sage, Sound Transit; Doug Harding, The Robbins Company; Greg Colzani, Jacobs Associates; John Hart, CSI; John Hawley, Hatch Mott MacDonald; Mike Smithson, Kenny Construction; and Lester Bradshaw, Bradshaw Construction. Mike Bruen, MWH, and Dave Klug, David R. Klug & Associates, served as organizers and facilitators.

Each industry represenatative gave a presentation followed by a general discussion session involving all workshop participants. About 30 people attended the workshop.

Several themes emerged from the discussions including the need for early coordination from project participants on topics including owner requirements and constraints, risk allocation means and methods of construction. “Contractors are at the end of the line. We have five or six weeks to review something that may have been years in the making, and we don’t have the opportunity to discuss risk sharing with the owner. Early involvement with the contractor could allow more open communication and sharing of information.” … “We need professional informational meetins to include the contractor and suppliers. That’s one of the best things that can be done to improve specifications for construction.” … “Risk sharing is not possible unless everyone comes together and it requires a contract that involves all parties together early.”

Regarding the specifications themselves, participants agreed that they should be simple to avoid conflicts and confusion and should be carefully considered and updated based on the latest technology, material specifications, and be project specific (no cut-and-paste specifications). “There are regurgitated specs that may be the result of a lack of finances or a lack of time.” … “TBM specs are too long; the engineer should be focused on the end product.”

They agreed that tunnel construction is unique and many specifications not written for underground projects are not “tunnel friendly.” There was a consensus that means and methods and machine selection should be used sparingly.

Another point of discussion centered around the issue of owner education and who is best positioned to have influence over and assist the owner in the early stages of the project when critical decisions are being made. “Most owners now demand risk assessments, but it is still a two-tiered industry. You have large owners who are typically more educated, and the one-offers who are not interested in a new approach.”

The following provides a brief summary of the discussion points by the industry representatives and workshop participants.

Owner’s Perspective: Richard Sage

The quality of the plans and specifications can make or break a project. Along with the project, they can make or break the owner and/or the contractor. Between the plans and specifications, the specifications are the most important as they describe in detail the requirements of the project. The specifications incorporate the general conditions, special conditions, technical specifications and the geotechnical data and baseline reports. They may also include a safety requirement, an owner-controlled insurance program manual and a labor compliance manual.
The general conditions need to be comprehensive, changed infrequently (modify for specific project requirements via the special conditions), established before final designer selection, and provided to the final designer before design begins. The owner must ensure that the final designer reads and understands the general requirements before starting the design and especially the writing of the specifications in order to use consistent terminology, and avoid duplication and/or conflicts with the general conditions.

Risk Allocation – Prequalification vs. Qualifications: The owner must keep in mind that prequalification is both expensive and time-consuming for the contractors and the owner. Therefore, the prequalification of contractors should only be undertaken when the work to be accomplished is very specialized and/or when it is critically important to demonstrate a high level of competency with respect to management, coordination or sensitivity to an environmental consideration (whether that be a biological or social consideration). Prequalification of contractors is not needed for those types of work where there are a sufficient number of reasonably qualified companies or subcontractors.

Means and Methods – The specifications should only be prescriptive as to means and methods to the level necessary to support the design. As an example, when a pressurized face tunnel boring machine (TBM) is necessary for soft ground excavation, the specifications should only specify a pressurized face TBM, and not specify either a slurry or earth pressure balanced (EPB) TBM.

The principal reason that an owner would consider the direct purchase of a TBM and supplying it to the contractor is for schedule advantage. The owner must realize that, if it directly purchases and provides a TBM to the contractor, it buys all the risk through the purchase of the TBM. If the schedule is truly critical for a design-bid-build contract to the point where the advance purchase of the machine is necessary, in lieu of purchasing the machine, the owner should consider another means of project delivery, i.e. design-build.

Payment Provisions – All underground construction is equipment intensive requiring a substantial investment by the contractor prior to commencing construction of the permanent works. The owner is able to borrow money at a lower interest rate than the contractor, therefore, to alleviate some of the financing burden on the contractor, the owner should include a mobilization item for the procurement of the TBM and backup equipment, particularly if the owner specifies a new machine.

In addition to a TBM mobilization payment item, the owner should pay for cost of the contract required bonds and insurance as the contractor must pay for these at the beginning of the job and can be a substantial amount depending on the size of the contract. This amount would be paid in the first progress payment upon submission of a paid invoice. This amount would be part of the regular mobilization amount, only being paid earlier than the remaining amount.
If there is a possibility of encountering known or suspected work, which is not quantifiable (unidentified utility conflicts, unidentified contaminated soil and/or water, etc.), “provisional sum” payment items should be included in the contract. If there is the possibility of encountering variable ground conditions, “tool box” items to address and handle this variability should be included in the contract. These items are typically unit priced and may or may not be subject to the overrun/underrun clause of the general provisions, as determined by the conditions in the M&P clauses.

Engineer’s Perspective: John Hawley

The engineer’s considerations of the purpose when preparing specifications include:

Basis of bid – Recognizing that contractors have limited time to prepare bids favors more prescriptive specifications. Specifications try to avoid the situation where a less experienced contractor may underbid because he has not had time to fully understand the requirements, and will later claim a different interpretation.

Control and allocate risk – The owner’s view on acceptable risk is likely different from the contractor’s. The aim of competitive bidding is to get the best contractor, not the worst gambler. A failed project hurts the owner more than the contractor, often resulting in resorting to cost-plus basis, and has consequential costs that are probably unrecoverable.

Basis for quality control and payment – It is difficult to inspect against a performance specification (until it’s too late!). With performance specifications, more emphasis is placed on the contractor’s work plan, and this in itself can be a source of disagreement.
Tunneling and underground construction have some special aspects that have to be reflected in the approach to writing specifications:

Tunneling methods typically influence design, so if the contractor changes method it may change the design.

Specifications often reflect one way of doing the work – it is more difficult to write specifications that are enforceable yet give flexibility.

Tunnel work is typically covered up, and re-work is often infeasible, so specifications must provide for in-process inspection and verification.
Constraints:

The owner is often unwilling to vary established specifications that have been through legal review. In addition, specifications grow in attempt to prevent repetition of (perceived) problems.

Confusion over bid vs. out-turn cost – the initial bids are easy to compare with budget and estimate, and can be kept low by omitting items of uncertainty that then lead to claims and higher out-turn cost.

Prequalifications cannot be used to circumvent low-bid or achieve qualification-based selection for public works. Contractors are not always accurate or complete in their prequalification responses. Owners may be unwilling to disqualify a well-known or potentially litigious contractor.

Need to reflect (but not repeat) federal, state and local regulations. Third-party requirements and considerations are often outside the control of the owner or engineer.
Improvements:

Early contractor involvement – Get input from contractors (it is not uncommon to talk to TBM or other suppliers), but owners are often wary of talking to contractors and contractors may be unwilling to share information that might benefit their competitors.

Share risk assessment – Exposing the risk-sharing assumptions may encourage owners to be more objective about risk allocation, would help bidders understand and price the risk, and allow more effective risk management during construction.

Some standardization of specs – Standard specs with focus on differences might get better bids by allowing contractors to focus on special provisions during bidding.

Openness – More openness to changing specifications during construction to suit contractor should be seen as allowing the contractor to provide a better product, benefiting the owner.

Greg Colzani

The engineer’s/construction manager’s observations and considerations for specification preparation for underground projects include:

Conflicts – Conflicts within contract document requirements are commonplace and potentially costly

General conditions – Existing owner’s general conditions are often not tunnel friendly and require modification. The owner approval process to modify general conditions is commonly a long process. Late finalization of the general conditions requires extra coordination to fully coordinate the contract documents as a whole. This effort often takes place late in the design delivery schedule without sufficient time to fully investigate the documents for conflicts.

Permits, impact statements, and regulatory permissions – Permit documents attached or incorporated as contract documents contain terminology and contract terms discussions that are inconsistent with technical specifications and contract documents. Efforts to standardize terminology and terms to provide a consistent platform for all contract documents will reduce potential conflicts, issues and disputes. Additionally, means and methods discussions included in permit documents may severely restrict contractor creativity.

Referenced standards – Technical specifications include numerous references to standards, test methods and code requirements. However, the technical specifications often conflict with the referenced standards. Careful study of the referenced standards included in the technical specifications must be conducted to fully coordinate with technical specifications.

Multi-layered qualification – Contract documents for underground projects commonly include contractor prequalification, bid qualification and specification qualification requirements. Conflicts often occur throughout the layers of qualifications. In many instances these conflicts lead to unnecessary bid protests. Additionally, overly restrictive qualification requirements may limit the bid pool.

Tone of the Documents – In many cases contract clauses/documents are written with the underlying tone that bidders and contractors are less than honest, untrustworthy or incompetent. This “protection” language often becomes a “trap” for the creator of the documents. Clauses often state that the contractor is solely responsible for the design, implementation and completion of a particular requirement, then include a 40-page specification explaining to the contractor how to do what he is solely responsible for.

Also problematic is that readers of specifications often fail to look at the specifications as a whole, but rather focus on the precedence in an attempt to selectively use the contract to their advantage.

Risk Mitigation/Allocation/Transfer Considerations – The implementation of systematic risk management processes has become an integral practice in the development and design of underground projects. Administered properly, this process has become a very useful tool to reduce project risk, establish realistic project contingencies and develop construction risk management strategies. Developing and specifying risk mitigation measures requires careful consideration. Some risk rules of thumb for consideration are:

Many risks do not have a single owner. Appropriate risk accordingly.

If you are the proper owner of the risk – don’t shed it. (Common risk management/sharing practice in U.S. contracts is to transfer risk to the party that has no ability to object (CMAA, 2009)).

Prepare specifications that clearly define the responsibilities of all parties.

Verify that risk strategies do not increase risk.

Lastly, the industry needs to explore mechanisms to provide bidders access to project risk register/mitigation strategies for better understanding of design requirements as well as the owner’s risk tolerance level.

Contractor’s Perspective: Les Bradshaw

The primary trend in tunnel construction during my 30-plus year career has been toward ever greater mechanization of tunnel excavation and support. For most of my career two-pass tunneling was the gold standard with the greatest amount of flexibility to deal with a wide variety of soil conditions. Along with this march toward mechanization, contractual risk management by the owners and engineers essentially evolved around the federal differing site conditions (DSC) clause. The increasing risk was never truly assumed by anyone, but a reasonable level of détente was observed using the DSC and prior court precedence when matters proved too hard to negotiate.

In the past 10 years, we have seen an exponential increase in the use of mechanized tunneling methods. They have increasing sophistication and are used in conditions never before attempted, thus creating greater risk for all parties. In spite of the increasing risk, the demand for ever more economically efficient designs, lower construction costs and less impact to the public seems to only be proliferating their use regardless of the tradeoffs. We are seeing new records in tunneling with larger diameter segment supported TBM tunnels at one end of the spectrum and longer and even curved microtunnels at the other. Owners and engineers are adopting these mechanized methods, oftentimes in such haste that we find the specifications are inadequate or in direct conflict with the owner’s general conditions and/or standard specifications.

As more mechanized tunneling projects are specified, owners and engineers seem not to realize that the cost of the tunneling equipment is increasing exponentially as well. The purchase cost of the tunneling equipment seems to double every five to 10 years because of the specified level of sophistication. Finally, purchasing, setting up and launching a mechanized tunneling system is a far greater percentage of the total cost of the tunnel than ever before. It is this enormous upfront cost that allows mechanized tunneling to achieve lower unit costs of production than any other method. This also means that any delay in the project for any reason is exceedingly damaging to the economic success of a project.

From the contractor’s perspective we are seeing a seismic shift of the risk from the owner to the contractor. Owners are now creating new risk shifting contracts faster than the contractors can solve the problems of mechanized tunneling. GBRs, developed seemingly with the highest of intentions of leveling the bidding field by clearly assigning risk, have become nothing more than a long-winded document making the project essentially an unclassified excavation job by setting extreme baselines that transfer all risk to the contractor. Worst of all, such GBRs induce the very gambling by contractors that the original authors of the GBR concept claimed it would minimize.

The latest risk shifting strategy involves the owner and engineer writing a complete disclaimer statement such that no claims for anything associated with the tunneling can be made no matter what the cause. We have seen these on several recent projects and are now declining to bid such projects unless we are certain the specified means and methods give us a reasonable expectation of a successful bid and a zero chance of tunnel failure.

Eventually, the pendulum will swing the other way. When engineers realize that specifying means, methods and materials and then creating contracts that put all the risk on the contractor garner no bids or exceptionally high bids, then their owner’s may wake up.

In the meantime, I strongly recommend the use of disputes review boards (DRBs) for mechanized tunneling projects as small as $5 million. A DRB’s cost of $50,000 to $100,000 is insignificant when you realize that daily crew cost for even a small 60-in. diameter microtunnel is rapidly approaching $20,000 per 10-hour shift! Minimizing just a few days of delay alone can easily pay for a DRB’s time.

Mike Smithson

GBR – Intent and Practice: From the contractor’s perspective, it appears some engineers and owners are developing conservative or ultraconservative baselines as a contractual means to transfer risk to the contractor. This can be contrary to the intent of the GBR and lead to unintended consequences for the contractor and the owner.

When conservative baselines are utilized, the contractor must either prepare his bid in accordance with the baselines, or take additional risk by developing means and methods, and resulting costs, for anticipated conditions which are oftentimes less severe than the baselines. In the first case, the cost of the project will be artificially inflated potentially resulting in additional cost to the owner. In the second case, if conditions are more severe than the contractor anticipated, he is more likely to seek adjustments to recover additional costs leading to a more adversarial relationship between the owner and contractor and potentially leading to delays.

Dispute Resolution: Although, over recent years, the use of dispute review boards are more commonly used in large underground projects, though their incorporation or other methods of alternative dispute resolution (ADR) are not uniformly included. Disputes are fairly common in our industry, and when not resolved in a timely manner they can become expensive both in time and cost.

Given the typical project delivery method of design-bid-build used in the United States, rarely does the contractor have the ability to change or negotiate an owner’s general conditions. Onerous or one-sided changed conditions clauses require the contractor to choose between including additional contingency costs in its bid thereby inflating his bid price and threatening his chances of submitting the low bid, or “hoping for the best” whereby additional costs are not included in the belief he will be treated fairly by the owner. This type of contractual relationship may lead to a more adversarial relationship amongst the stakeholders, which can be detrimental to the success of the project.

From the contractor’s perspective, the inclusion of ADR in the contract acts as a tool which helps mitigate risk as it provides a means of recourse from an independent review body should a dispute arise. Its inclusion reduces risk and in many cases the need for additional contingency costs in the bid, which in the end should reduce overall project costs. Two of the contractor’s greatest concerns are proper risk allocation and equitable treatment under the contract terms and conditions.

Contract Payment Provisions: From the contractor’s perspective, it appears some owners have trended toward using lump sum contracts with and without additional contingency type pay items in an effort to minimize its risk (by transferring risk to the contractor), and to enable more favorable payment terms. The bid preparation period rarely provides enough time to perform an in-depth analysis of all means and methods. Lump sum contracts increase the risk to the contractor and are more likely to increase costs for the owner.

For underground projects, the contractor has high initial costs due to the expense of specialized equipment, the mobilization of specialized personnel and high initial bond and insurance expenses. The initial costs should be considered when the owner develops its payment provisions for the underground project. The owner must realize uncertainty or restrictive payment terms can lead to the contractor including additional contingency or financing costs in its bid, which could inflate the bid price and result in a non-competitive bid.

Surety and Insurance Issues: Given the current economic conditions, recent project developments and failures, and recent changes in owner terms and conditions, the contractors have seen an increased interest in the contract language on the part of their sureties and insurance companies. As the sureties and insurance companies are an integral part of the construction project, it may be prudent to include them in the early design stages or to allow the owners to communicate directly with them regarding their project needs.

Supplier’s Perspective: Doug Harding

The effects of the specifications as applied to the procurement of the equipment (TBM) for a particular project can have a strong and in some cases a negative impact without giving the needed benefit of a reduction in risk to the project.

There are many factors that can impact a project. For example, when equipment has too many specifics or is “over specified,” higher equipment costs can occur. Many projects can benefit from using a remanufactured or “nearly new” machine but cannot take advantage of this benefit due to the owner’s requirement that only a new machine is acceptable.

Some of the problems that occur are that the specifications from a previous project are applied to a new project. Specifications are “cut and pasted” from previous projects and could be misapplied or not applicable to the new project.

The means and methods should be left to the contractor who has final responsibility of building the project. Defining the use of a slurry excavation when an EPB may be a better choice, or when micro-tunneling is specified but a non pressurized type machine may be better suited, are a two such examples.

There are advantages to purchasing the needed equipment by the project owner prior to having a signed contract with the contractor. Purchasing the machine ahead of time reduces the construction period by taking the TBM delivery off the critical path.

Often times, mobilization payments that are noted within the bid specifications are not adequate for the procurement of the machine or even the engineering that is required. Because the mobilization payments are not adequate to finance the manufacturing of the equipment, the contractor or the supplier will need to provide this, usually at a higher rate than what the project owner can provide, with the costs being passed back to the project in a higher cost for equipment.

As previously stated, a highly or incorrectly applied specification for a major portion of the supply can greatly impact the overall cost. Another reason a project may be impacted is due to longer delivery times for critical path items like the (new or refurbished) TBM and having to comply with a specified method on construction.

Every project can benefit from one improvement or another. The equipment suppliers need to work more closely with the design engineers to educate one another on new technologies or project applications as applied to writing better specifications. One idea in regards to cooperation is to have the project owner and contractor work closely with the supplier and its engineers to form an alliance or a partnership on a given project, this helps to share the project risk and also the reward.

Another helpful improvement is adopting a policy to allow the contractor to select the means and methods if they differ from the bid specifications. If the owner can agree to share the risk, they can both share the possibility of reduced project costs.

John Hart

Most of the 20 or so specifications that I review annually are for gasket-sealed, high-grade concrete, one-pass tunnel liners for use with EPB or slurry tunneling machines. In any competitive bidding, the objective is to produce lowest bid and the depth and quality of the specifications control this response. With that in mind, it is important to consider the following:

Do the specifications prescribe design and details?

Is the specification clear on all design loads and the design life required?

Do the specifications require a further lining design to be submitted for approval?
In some of the specifications I review, they omit the requirement for tunnel liners to be produced by a specialist segment manufacturer and frequently miss or underrate minimum experience requirements.

Does the specification require the use of material suppliers with proven track records? Do they adequately state the performance and testing requirements? These questions should be addressed unambiguously for the waterproofing gaskets, concrete durability, mold and segment tolerances, segment interchangeability, packers and load distribution, bolting methods, fasteners and dowel locators and installation techniques, lifting devices and vacuum methods. I would recommend using a checklist to ensure that these aspects are covered.

An important aspect of the specification is to be sure that they clearly define all the testing requirements together with the applicable updated codes.

In recent years, the use of steel fibers with or without the addition of lighter secondary steel cage reinforcement has become a fashionable alternative in the desire to save costs. In most of the specifications I have recently reviewed the use of fiber or a hybrid design is not fully addressed as the primary or alternative design. Many of these specifications are not clear on the technical and design specifications requirements. There is a need to understand the manufacturing techniques and technical requirements so that there is clarity when permitting this substitution.

I have a suggestion that specifications are reviewed by industry suppliers to pick up and eliminate any errors and ambiguity before the specifications are finally published.

Summary: Mike Bruen and David Klug

The key factors impacting the development of today’s specification for the underground industry are:

• Specifications need to be project-specific, less restrictive, shorter
  
• General conditions are not tunnel friendly, needed early in design development
  New vs. qualified rebuild for equipment
  
• Excavation methods do influence design, only be prescriptive of means and methods to support the design.
  
• Qualifications
  
• Prequalification is needed for critical or complex work but may not be required if there are sufficient number of qualified contractors
  
• Specialty manufacturers for segments need to have minimum qualifications
  
• Trending to more mechanized tunnel excavation, support and lining placement has coincided with increased risk transfer by some owners to contractors
  
• Seeing increased project complexity, more difficult conditions, and designs
  
• GBRs are overly conservative to avoid claims
  
• High initial costs associated with mechanized equipment, bonding and insurance, etc. is a greater percentage of total cost, need to provide an appropriate level of mobilization/initial payments to Contractor.
  
• Evolving trends need to reflect latest performance and testing requirements (e.g., segments, excavation equipment)
  
• Increased risk transfer by owner to contractor
  
• Payment terms, lump sum
  
• Disclaimers
  
• Overly conservative baselines
  
• Considerations for improvement of specifications
  
• Early contractor and supplier involvement, as well as sureties and insurance companies, allowing more open communication and sharing of information either face-to-face, constructability input, or informational meetings.
  
• Educate industry – white paper, guideline specifications, and/or an accepted practice document (like GBR).
  
• Sharing risk-sharing assumptions (risk register) may encourage owners to be more objective about risk allocation, would help bidders understand and price the risk.
  
• Use of DRBs (ADR) for projects as small as $5 million is needed, lower contractor cost/risk through lower contingencies
  

The facilitators welcome any input regarding improving specifications. If you have suggestions or comments, please forward to Mike Bruen (Michael.P.Bruen@us.mwhglobal.com) or Dave Klug (dklug@drklug.com).