EDITOR’S NOTE: Implementing risk management strategies early on for underground and tunneling alternative delivery projects can mitigate the additional risks associated with these projects. This first part of a two-part article explains the ways to fairly allocate geotechnical risk mitigation across project teams. Part two will cover risk allocation and the division of roles and responsibilities for these projects.
According to a recent study, 55 to 60 percent of tunneling and underground projects in North America will be delivered using alternative delivery methods such as design-build (DB), CMGC, Progressive DB, CMAR, or public-private partnership (P3). The accelerated pace of alternative delivery methods combined with the unpredictability of tunneling and underground projects poses greater risks than those of traditional infrastructure projects.
Oftentimes these projects are marred by cost escalation, delays and even litigation. Geotechnical issues, such as the uncertainties of the ground’s physical and behavioral characteristics, and ways that risks are allocated among project participants for unanticipated subsurface conditions play a large role. Implementing fair geotechnical risk management strategies early in a project’s life cycle can reduce the potential for these issues.
Allocating Geotechnical Risk: The Issues
Dividing and apportioning risk to those project entities most suited to managing it is a vital component for these projects’ success. Risk mitigation measures should focus on variations between traditional procurement of design-bid-build (DBB) and alternative delivery methods, in terms of contractual arrangements and various entities’ roles and responsibilities. Geotechnical risk allocation is an important part of this equation.
Alternative delivery projects have less standardized risk allocation than conventionally built projects. And alternative delivery projects also have significant contractual term variations and delineations of entities’ roles and responsibilities with these projects that can have significant impacts on geotechnical issues. When making decisions about risk, it’s important to take these variables into account along with the roles, responsibilities and interrelationships of the owners, DB and P3 teams regarding geotechnical and subsurface conditions and allocate risk accordingly. Carefully constructed and fair allocation methods can head off disputes, delays and litigation.
Many issues factor into the way in which risk is allocated for geotechnical investigations in these tunneling projects. On the owner’s side of the equation, the scope of geotechnical investigation might be more limited than in traditional design-bid-build projects. The limits might result from expectations that the DB or P3 teams – who are responsible for final design parameters – will undertake their own investigations or analysis or that the DB team’s final design judgments and risks will drive the process. Owners may also be looking to save money during the preparation of the bridging documents.
Given the roles and responsibilities regarding the geotechnical assessment and the design development, the DB team is expected to have greater responsibility for unanticipated subsurface conditions. But limited time and funding available during the tendering period may prohibit DB or P3 teams from undertaking additional geotechnical investigations to support their design decisions and construction means and methods. And design specifications may prevent the DB team from developing innovative solutions to potential geotechnical issues.
Inherent conflicts in the dynamic between the owner and the DB engineer are also factors to contend with. The project owner “owns” the ground, but the DB engineer is the engineer of record and determines anticipated ground behavior during excavation and this creates a potential conflict between the two entities that must be resolved to avoid potential problems.
As a result, rather than developing an equitable risk sharing approach, owners sometimes shift geotechnical and subsurface risks to the DB or P3 team, which can present an issue considering that the owner owns the ground regardless of whether a contract calls for alternative or traditional delivery methods. Owners sometimes include disclaimers regarding the accuracy and reliability of the ground condition reports they furnish.
Guidelines and Potential Solutions
Fair and balanced geotechnical risk sharing will go a long way to reducing the potential for delays, cost escalation, poor relationships and litigation. Getting owners and DB or P3 teams involved early in the project lifecycle to make decisions about risk allocation will be a major step forward in achieving this goal.
Collaboration between owners and contractors would enable development and implementation of a comprehensive risk register through design and construction phases. Owners and contractors would work together to identify potential risks that may surface over the project lifetime and buy into the risk mitigation and ownership of the risk.
The first step in the process is standardizing guidelines and contracts before beginning the project and identifying the factors involved in risk allocation. This can seem difficult but could be accomplished using a reasonable geotechnical baseline report specific for alternative delivery method and/or using the processes established in the FIDIC (ITA sponsored) Emerald Book.
Developing geotechnical baseline reports requires cooperation and collaboration between owners and the DB teams. Creating a geotechnical baseline report-bidding (GBR-B) for bidding and GBR-C for construction enables all involved to clearly define and agree to ground behavior during excavation. The GBR-B provides full geotechnical information disclosure and establishes judicious parameters that in turn enable fair and balanced risk-sharing as all bidders are able to bid on a common basis. Based on anticipated ground behavior determined and consistent with the DB team design approach and means and methods, this document is also established jointly by the owner and the DB team. Once created, the GR-C becomes a contractual document that eliminates the potential for claims and conflicts. This approach reduces risk and enables the owner to avoid placing large contingency budgets in the bids, reduces unallocated contingencies by the contractor and allows for fair and sensible allocations of the contingency funds.
Placing contingency funds by the owner to deal with unknowns reduces unallocated contingencies by contractors and allows the owner to control the project contingency. Sensible and fair allocation provisions of the contingency funds must be provided.
Other important aspects of fair and sensible risk allocation include developing escrow bid documents, establishing an impartial dispute review board, and partnering to help owners and design-builders promptly resolve disputes, claims and controversial issues, as well as avoid delays and the associated cost.
Taking these steps helps ensure risk sharing that is fair to all participants, from the owner and the DB or P3 teams, to the engineers, insurers, and financiers, while at the same time benefiting the public we serve by preventing projects delays and costs overruns.
Nasri Munfah, P.E., is Director of Tunnel and Underground Engineering for AECOM.