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Executive Summary

Objective

The objective of this report is to investigate collaborative delivery contract models used by both private sector owners and non-federal public owners, and to identify industry best practices for collaborative delivery contracts that, if adopted by the government, may have significant benefits to federal agencies in meeting their Military Construction (MILCON) and Civil Works (CW) mission requirements.

Background

The Society of American Military Engineers (SAME) and the Construction Community of Interest (CCOI) chartered a Collaborative Delivery Working Group to investigate collaborative delivery methods used by industry to determine if these methods would be of benefit to United States Army Corps of Engineers (USACE), Naval Facilities Engineering Systems Command (NAVFAC), and Air Force Civil Engineer Center (AFCEC) in executing their construction programs. The CCOI Working Group for Collaborative Delivery focused on collaborative delivery contracting types, specifically contracts involving Qualifications-Based Selection (QBS) and negotiated pricing for construction that optimize the use of Early Contractor Involvement (ECI).

Findings

The CCOI found that new contracting tools are needed to meet unprecedented mission requirements. In addition to their annual MILCON and CW programs, USACE has been tasked with delivering massive disaster recovery and resiliency programs. NAVFAC and Air Force are also now delivering extensive programs for the recapitalization of our nation’s public shipyards and ballistic missile facilities.

The CCOI found that private sector and non-federal public sector owners using collaborative delivery experienced significant benefits with collaborative delivery methods in providing better risk management, better cost and schedule certainty, and better results in accomplishing desired project outcomes.

The CCOI found that, due to statutory restrictions, USACE, NAVFAC, and AFCEC are not able to use collaborative delivery methods for construction contracting that are considered best-practices in industry. The CCOI agreed that USACE, NAVFAC, and AFCEC need new acquisition tools for construction contracting to allow them to gain the same benefits demonstrated in the private sector and by non-federal public agencies enabling them to better meet their mission requirements.

The CCOI found that collaborative delivery methods are culturally different from traditional delivery methods in that the focus for collaborative delivery is on “designing to build” as opposed to “designing to bid.” A change in culture is needed where all stakeholders, led by the owner, are working collaboratively together to meet the project objectives.

Recommendations

We recommend that USACE, NAVFAC, and AFCEC (collectively the “Services”) consider the limitations of traditional construction contracts and recognize the benefits of collaborative delivery contracts which prescribe QBS, negotiated pricing for construction and early contractor involvement. We also recommend that the Services seek authority to use collaborative delivery contracting methods.

Construction Community of Interest Working Group for Collaborative Delivery

Table of Contents

Background

The United States has long understood that a well-funded and fully equipped military is vital to protecting and advancing American interests while preserving our Nation’s strength and defending our national interests. The U.S. continues to provide for our Nation’s national security and maintain our economic competitiveness by investing significant resources in our national defense and critical infrastructure including federally owned physical systems, and assets vital to our military services. The incapacity or destruction of such systems and assets would have a debilitating impact on national security and public health and safety. Billions of dollars are appropriated and invested each year via MILCON for Army, Navy, Marine Corps, Air Force and Space Force bases; and CW infrastructure throughout our country. These military bases and CW infrastructure are necessary to allow the U.S. to compete economically and project power throughout the world, thus protecting U.S. interests worldwide.

Construction for MILCON and CW is executed through USACE, NAVFAC, and AFCEC. These Services have been tasked with delivering their annual infrastructure programs as well as new massive programs over the last decade such as:

• The Navy Shipyard Infrastructure Optimization Program. Navy has provided preliminary estimates for the SIOP to be over $21B with final costs for infrastructure and equipment optimization expected to exceed $30B. ¹

• The Air Force Sentinel Program. Air Force has estimated the Sentinel Program at $140B with the infrastructure requirement possibly exceeding $30B.²

• The Army CW Disaster Recovery and Resiliency Programs. The Army Corps of Engineers has been provided over $37B in supplemental funding over the last five years for Disaster Recovery and Resiliency projects in addition to their annual CW programs. ³

USACE, NAVFAC and AFCEC all contract for both construction and design through procurement methods defined in the Federal Acquisition Regulation (FAR). Acquisition strategies, delivery methods, and contract types must stay within the framework outlined in FAR as well as specific statutory codes applicable to MILCON and CW. Federal agencies such as USACE, NAVFAC, and AFCEC are required by law to use competitive pricing in accordance with the Competition in Contracting Act of 1984⁴ and other federal statutes for construction contracting thus restricting available contracting types to competitively priced contracts.

Given the statutory competitive pricing restrictions and the limited number of contract types available to USACE, NAVFAC, and AFCEC, the Services are unable to use contract types, delivery methods and selection procedures that both private sector owners and non-federal public agencies have been using for decades, specifically Progressive Design-Build (PDB), Construction Manager At-Risk (CMAR), and Construction Manager/General Contractor (CM/GC). While USACE, NAVFAC, and AFCEC have used design-build as a collaborative delivery method with success, they need additional acquisition tools to effectively deliver their annual MILCON and CW programs as well as the massive new programs such as the SIOP, Sentinel, and CW Disaster Recovery/Resiliency programs they have been tasked with delivering.

Government Program Shift

Army, Navy, and Air Force MILCON programs have grown significantly during the last decade due to recapitalization and modernization of shipyards, bases, and airfields, many which have not been re-capitalized since they were built decades ago.

• Multi-billion-dollar MILCON and CW projects used to be rare, but are now common.

• The SIOP projects for re-capitalization of the four public shipyards range in construction costs from $2B to $10B. The U.S. Navy has never seen infrastructure projects of this magnitude until recently.

• Under the Sentinel Program, the U.S. Air Force will modernize existing launch facilities, missile alert facilities, communication systems, infrastructure, and technologies necessary to replace 450 Minuteman III ICBMs with the new Sentinel ICBM.

• USACE CW Disaster and Resiliency projects have been increasing every year due to the greater frequency and severity of disaster-related events.

These new requirements are in addition to annual MILCON and CW program requirements. The magnitude of these new requirements to rebuild our nation’s infrastructure far exceeds what we have asked Army, Navy, and Air Force to deliver using traditional contracting methods. Traditional delivery models such as Design-Bid-Build (DBB) are simply not adequate to meet these new requirements.

The infrastructure delivery requirements placed on the Services today are not only massive programs with unprecedented funding, but are also comprised of large, complex, and technically difficult projects. Traditional delivery methods that are selected primarily, or even partially, on low-price are often not the best option for these complex projects the Services are seeing today.

Traditional delivery methods based on competitive pricing limit agencies from obtaining the outcomes they desire for schedule and cost certainty.⁵ The traditional delivery method process takes more time than the process for collaborative delivery methods and has a higher potential for change orders and conflict due to not integrating the design and construction and the lack of early contractor involvement. Traditional methods often result in mistakes discovered late in project development where the costs to make changes or corrections are greatest. Both NAVFAC and USACE officials face significant challenges with cost growth and schedule delays on MILCON projects and need new contracting tools to help them meet these challenges.⁶

Figure 1. Programs are growing in size and complexity

Why Collaborative Delivery

Current Statutory Authorities

Current authorities only allow for traditional delivery models for construction contracting which require competitive pricing as opposed to QBS and negotiated pricing. This limitation precludes the use of collaborative delivery methods widely used in the private sector and by non-federal public agencies. Specifically, MILCON and CW contract types are restricted by the following federal statutes:

Contracting methods available to most federal agencies for construction contracting transfer most of the risk to the contractor with the Government paying the contractor for this risk transfer. While traditional methods are often acceptable for non-complex, traditional, mid-size projects with typical risk profiles, they are often not the optimum solution for complex mega-projects with long durations. The cost of risk paid by the government is simply too expensive and the government cannot afford the cost of the risk transfer to the contractor for these mega-projects. A different risk management strategy is needed that allows for better risk-sharing and overall reduction of costs and project durations.

Given the increase in program requirements, program sizes, and risk, federal agencies are struggling to meet the vast increase in contracting workload. Traditional contracting methods, combined with the inability to scale agency staff levels in proportion to the growing contracting workload, have placed increased strain on Department of Defense (DoD) construction agencies. Since significantly increasing the size of the government workforce is not supported by elected officials, more effective contracting methods are urgently needed. DoD construction agencies need more acquisition tools in their toolbox, specifically tools that would allow for better risk sharing, less changes during construction, reduced construction durations, and cost certainty.

Small Business Programs

Small businesses have also been affected by the current contracting structures. They often lack internal functions, such as an in-house legal team, to fully evaluate common risk sharing practices, such as requests for equitable adjustments or claims. Traditional delivery methods, where most of the risk is transferred to the contractor, discourage small businesses from entering and/or staying in the federal space given the inherently higher risk to the contractor. This risk, even on a small project, can be a barrier to a small business and, unfortunately, one “bad project” can often put a small business out of business. As a result, although the total funding allocated to small businesses continues to grow, the number of individual small businesses serving as prime contractors for federal contracts has been steadily declining.

Construction contracting tools that allow the government to negotiate price with a small business are needed to help reverse the trend. The government currently has authority to select 8(a) small businesses based on qualifications and negotiate construction pricing. This practice has proven to be very successful in both risk sharing and reducing risk for both the government and small businesses, resulting in more small businesses entering the federal space as prime contractors. It is important to note that, other than the Section 8(a) program small businesses based on qualifications and negotiate construction pricing. This practice has proven to be very successful in both risk sharing and reducing risk for both the government and small businesses, resulting in more small businesses entering the federal space as prime contractors. It is important to note that, other than the Section 8(a) program,¹⁵ authorities available to federal agencies require competitive pricing as a selection criteria for all business from small to large.

While FAR Part 15 provides for negotiated construction contracts, it does not explicitly allow for QBS and negotiated pricing for construction contracts. Federal agencies need authorities to allow them to use QBS and negotiated pricing where they determine it is in the best interest of the government and best supports their program and the goals of federal small business programs.

Collaborative delivery contracts such as PDB allow a small-business prime contractor to work together with the owner to produce beneficial solutions for the project. It is also more efficient with subcontractors during the proposal phase. In this model the prime small business has the benefit of knowing the time invested in the proposal process will eventually lead to a contract as opposed to competitively bidding which is often won by the team who provided the cheapest price and “missed the most” in the scope. The time and labor that a small business expends in negotiating with the government will not only help them better meet the project objectives but will also help the small business to build expertise and capability.

Industry Best Practices

Private sector owners typically prefer to select design-build teams primarily based on qualifications. Owners prefer QBS for design-build contracts because it allows them to select a contractor based on their qualifications and expertise rather than the lowest bid, allowing for a streamlined process.¹⁹ Owners have found huge advantages in selecting the team that will develop the best, most valuable solutions for the design and construction of the project within budget and schedule constraints. This enables owners to collaborate with contractors they believe are best suited to meet project objectives, rather than selecting contractors primarily or partially based on the lowest bid.²⁰ Federal agencies have found QBS to be extremely effective in architectural & engineering (A/E) contracting. Private sector and non-federal public agencies have found similar results with QBS for construction and DB contracts.

Federal agencies need additional tools in their contracting and programs toolbox to meet these new challenges. Collaborative delivery methods can provide federal agencies new contracting tools they currently lack such as PDB and CM/GC, which will allow agencies to more effectively leverage and partner with industry to meet their program goals.

Current contracting models available to USACE, NAVFAC, and AFCEC do not allow the use of collaborative contracting models used by the private sector and non-federal public agencies. Private sector owners choose collaborative delivery methods for the vast majority of their projects in water, wastewater, oil, gas, and chemical industrial sectors because those methods provide the quality, cost, and schedule outcomes they desire. Collaborative delivery models are widely considered a best practice for meeting owner objectives, aligning scope, and establishing cost and schedule certainty early in the project.

Collaborative Delivery for Non-Federal Public Agencies

Figure 6: Early Contractor Involvement (ECI) Makes a Difference

Collaborative Delivery Contract Models

Design-Build

Design-build (DB) contracts have been used in the U.S. for decades with positive results for both owners and design-builders. FMI Consulting estimates design-build will account for 47% of construction spending in 2026.²⁵ Design-build contracting has steadily grown over the last 30 years as both owners and builders alike have seen its benefits as compared to traditional project delivery methods. The Design-Build Institute of America (DBIA) research has determined that design-build contracting provides:²⁶

The 1998 CII report was updated in 2018 with a new sample of 212 projects which were then compared to the original sample set of 350 projects. The results showed that: “After 20 years, DB projects are still delivered faster and with greater reliability in cost and schedule performance.” ²⁹

Progressive Design-Build

Experienced private sector owners, as well as many public sector owners, have chosen the progressive design-build (PDB) model as their preferred delivery model when they “want to work collaboratively with the design-build team to develop a design and implement construction means and methods that best meet the project’s goals. Recognizing the benefits of having the best team working on their behalf, experienced design-build Owners typically select design-build teams primarily on qualifications and other indications that the selected team will develop the best, most valuable solutions for the design and construction of the project.” ³⁰

During phase one of a PDB model, owners collaboratively work with the design-build team to verify and align the project’s schedule, scope, and budget based on the most accurate information available. This results in a realistic estimate of the project’s schedule, scope and budget based on input from both the owner and design-builder. “PDB’s primary benefits are the increased transparency and collaboration that follow the open book pricing process.”³¹

During the second phase, the owner and design-build team continue to work collaboratively together to develop the project design and construct the project to meet the objectives determined during phase one.

Cost estimates and schedule updates are continually provided allowing the owner to make informed decisions early in the process where impacts from changes are minimal.

Once the design has advanced enough to allow for definitization of the project, the design-builder will provide a formal proposal for the construction of the project to include the construction cost and schedule. The owner and the design-builder then negotiate the proposal to come to agreement on the terms of the contract for scope, schedule, and price. Once an agreement has been reached, the parties enter into either a contract amendment for construction or a second contract for construction.

If the owner and design-builder cannot reach agreement on the final contract terms, the owner may then consider an “off-ramp” provision where it terminates the negotiations with the design-builder and moves ahead with the project through another contract strategy. If the owner and the design-builder agree on the final contract terms for a contract, they will enter into a fixed-price contract that includes the project’s final price, final scope, and final schedule.

PDB can serve as another “tool in the toolbox” for owners to help in reducing construction delays due to claims, changes, disputes, and litigation.³² Also, a significant advantage of PDB and integrated-design-and-construction-DB is the ability to reduce the overall project schedule by combining the design and construction phases. Concurrent design and construction by a design-builder provides the owner the ability to significantly reduce schedule duration without increasing cost.

The Design-Build Institute of America (DBIA) has determined that, as a result of the deep collaboration between all parties, PDB contracts tend to be more reliable, and the project goals are more likely to be achieved.³³ Both private-sector and public-sector owners have chosen PDB for their largest and most complex projects.

Figure 8: Collaborative Delivery Goals

Construction Manager/General Contractor

The Construction Manager at Risk (CM/GC) model is similar to PDB in terms of QBS selection and negotiated construction pricing with one key difference. For the PDB model, the design-build team is one legal entity under contract to the owner. For the CM/GC model, the team is comprised of two separate entities, and the designer and the builder each have a contract with the owner.

1. The owner procures a professional services contract from both a designer and a construction manager.
2. Both contractors can be selected based on qualifications at the beginning of the design phase.
3. The construction manager provides suggestions, innovations, and constructability input to the designer during the design phase.
4. Upon completion of the design, the construction manager and owner negotiate a price for the construction contract.
5. Once an agreement is reached, they enter into a construction contract and the Construction Manager (CM) acts as the General Contractor (GC) to complete the construction.

Much like PDB, if the owner cannot reach agreement on the final contract terms with the CM, the owner may consider an “off-ramp” provision where it terminates the negotiations with the CM and moves ahead with the project through another contract strategy. The CM/GC model provides for early contractor involvement with the design team and owner which allows for ECI constructability input early and throughout the project.

The Federal Highway Administration (FHWA) conducted a study where they compiled a dataset of 291 completed highway projects from State Departments of Transportation that were active projects between 2012 and 2018. The dataset consisted of traditional DBB projects, and alternative delivery DB and CM/GC contracts. The FHWA found that the use of alternative delivery methods significantly reduced the project duration for the highway projects they sampled.³⁴ As shown in Table 2, the mean project duration for the CM/GC projects when compared to DBB was 48% shorter (929 days compared to 1,774 days). The DB/LB project durations were 50% shorter than the DBB durations and the DB/BV durations were 15% shorter than the DBB projects. It is important to note that the main reason for the significant difference in the mean project durations is due to the difference in the mean design durations. By combining the design and construction phases, CM/GC and DB projects greatly reduced the design durations and ultimately the mean project durations.

FHWA not only found significant benefits from CM/GC and DB contracts in reducing project durations but also found significant benefits of CM/GC and DB contracting in reducing cost growth, i.e., the cost at contract award compared with the final contract cost. FHWA found that State DOTs “are expediting the overall project delivery time and gaining early cost certainty without witnessing additional cost growth in the construction contract. This is particularly notable given the early award of DB and CM/GC projects.”³⁵ FHWA also found that a significant benefit of alternative delivery projects is much earlier cost certainty, which is the point at which an agency has a reliable project cost. Cost certainty is critical for both project and program management and is needed early in the project to avoid reprogramming actions and cost overruns. FHWA found that, when compared to DBB, the average point of cost certainty for CM/GC is more than 60% earlier for the projects in the study and the point of cost certainty for DB/BV is approximately 40% earlier than for DBB.

Contract Method	Mean Cost	Mean Project Duration (Days)	Mean Agency Design Duration (Days)	Mean Construction Duration (Days)*
DBB (n = 74)	$21,687,447	1,774	932	642
CM/CG (n = 24)	$41,368,952	929	361	511
DB/LB (n = 18)	$12,249,585	889	268	435
DB/BV (n = 21)	$48,532,458	1,516	662	837
Total (n = 137)	$28,010,219	1,470	710	620

*Construction duration for DB projects includes design-builder and construction (i.e., the DB contract duration.)

Table 2: FHWA Study Results³⁶

Construction Manager at Risk

Construction Manager at Risk (CMAR) is similar to the CM/GC model in that the design-build team is two separate entities. The key difference between CM/GC and CMAR, however, is that, in a CMAR delivery method, the owner provides an initial design to a Construction Manager (CM), who then collaborates with the designer to further develop and refine the project design.

During the design phase, the CM will work on the owner’s behalf to provide suggestions, innovations, and constructability input to the designer. Prior to the design being complete, the CM will present the owner with a proposal for a Guaranteed Maximum Price (GMP). The CM and owner will then negotiate a final GMP. Once there is agreement, the CM and the owner will enter into a fixed-price contract and the CM will assume the risk of delivering the project within the GMP parameters. The CM is responsible for selecting sub-contractors and overseeing construction of the project.

Much like PDB and CM/GC, if the owner and design-builder cannot reach agreement on the GMP, then the owner may consider an “off-ramp” provision where it terminates the negotiations with the CM and moves ahead with the project through another contract strategy. CMAR and CM/GC are both proven to be effective collaborate delivery models and have demonstrated similar benefits for owners.

Collaborative Delivery Methods-Similarities and Differences

Program Considerations

Modernization of MILCON and CW Program Rules

Federal agencies outside of DoD have the ability to efficiently program construction funds at the time of construction contract award, without lengthy and difficult reprogramming actions involving scope reductions and redesigns, resulting in significant time savings and better project outcomes. Also, owners have found it is much better to determine the true cost of construction at the time of construction award, when the project is adequately definitized through collaborative delivery, rather than awarding to an unrealistic number at the time of construction award and then finding out the true cost of construction at the end of the contract after multiple changes.

One of the key benefits of collaborative delivery is providing construction price certainty at the time of project definitization. It is important to note that, if USACE, NAVFAC, and AFCEC receive statutory authority to use collaborative delivery models, commensurate changes must be made to MILCON and CW programming rules. In order to take full advantage of collaborative delivery models, MILCON and CW program rules will need to be modernized to provide a process that results in accurate and timely programming estimates adequate enough to capture the cost of construction as determined by the solicitation process, thus avoiding the need for significant reprogramming actions. Federal agencies outside of USACE, NAVFAC, and AFCEC have programming processes with much more flexibility than the MILCON rules provide, allowing them flexibility and latitude in reprogramming actions. It is imperative that DoD modernize MILCON program rules to provide this same flexibility and latitude.

The Federal Bureau of Investigation (FBI) has used a very successful model of two-phase design-build. The FBI realized significant cost savings by consolidating three buildings into one.³⁷ Under MILCON program rules, a scope change of this magnitude, even if resulting in cost savings, would require an agency to go through a lengthy and difficult process to request authorization changes and reprogramming actions.

Current MILCON and CW programs develop budget estimates early in the development of the projects, typically years in advance of planned construction. While there are opportunities for updating the estimates, project budgets are set prior to design completion and full project definitization. At the time of construction contract award, if the cost of construction, as determined by industry through the solicitation of proposals, is greater than the programmed amount then additional funds must be reprogrammed, or the scope must be reduced.

The reprogramming of funds or a change of project scope at the time of construction award is usually a difficult process and often results in undesired program impacts and significant delays. Current MILCON and CW programming rules are clearly intended to limit cost growth and scope increases and facilitate efficient program execution; however, unless the rules allow for the development of accurate project budget estimates and initially program the amount of funds needed at the time of construction contract award, the current MILCON and CW program rules are problematic and work against efficient program execution.

A key component of any project is the financing and programming of funds necessary to deliver the project. Most private sector owners require cost certainty at the beginning of construction. Other than appropriate contingencies, private sector financing solutions typically do not include funds for cost and schedule growth. Cost growth requires additional financing or a reduction in scope and usually schedule slippage, all of which result in undesired outcomes for the owner. Given this, private sector owners choose collaborative contract types that provide them with the cost and schedule certainty they require at the time of construction contract award.

Public sector owner objectives are not dissimilar to private sector owner objectives; both desire cost and schedule certainty as early as possible but certainly need it at the beginning of construction. With the benefits of early contractor involvement and negotiated construction pricing, both private sector and non-federal public sector agencies have found cost and schedule certainty at the time of construction contract award. This certainty in cost and schedule has resulted in minimal or no cost growth from the time of construction contract award to the time of construction contract completion and is one of the major benefits of collaborative delivery contracts.³⁸ To take full advantage of the benefits from collaborative delivery contracting, MILCON and CW programming rules will need to be updated to allow for the initial programming of funds at a point where the project has been adequately definitized.

STRATCOM Headquarters Example

The U.S. Strategic Command Headquarters Facility Construction Project is an example of the challenge federal agencies have in completing large, complex, and difficult projects when constrained to traditional delivery contract methods and current programming rules. The original need for a new STRATCOM HQ building was detailed in 2007. The standard DoD process was used for the scoping, planning, designing, and then construction of the facility. The initial MILCON planning estimate for the building was $453M. After successive rounds of scope reduction and multiple amendments to the solicitation documents, the construction contract was awarded for $524M in November 2011.

In February 2018, 11 years after the need was identified, construction was complete at a cost of $617M and 29 months behind schedule. Given that a contract claim has not yet been resolved, final construction contract costs have yet to be determined but may end up around $750 million, the average of industry proposals for the initial solicitation.³⁹

The following table outlines a chronology of significant events related to the planning, design, and construction phases for the STRATCOM Headquarters building.

Date	Activity	Cost
Jul. 2007	DTRA assessment	N/A
Jul. 2008	Customer Concept Design (CCD) completed which identified the initial scope (997,000 SF) and estimated project costs at $453 million	$453M
Nov. 2009	Planning Charrette Completed, 1M SF facility	$560M
Dec. 2009	Design Charrette Completed	$562M
Feb. 2010	The Air Force included the USSTRATCOM replacement facility in the Air Force FY 2011 President’s Budget (FYs 2012 to 2014 for $564 million)	$564M
Apr. 2010	35% Design Review and initial cost estimates. The design consultant estimated projects costs at $641M and the government estimated construction costs at $666M.	$641M (A/E) -$666M (Gov)
Sept. 2010	The USSTRATCOM replacement facility was included in the Air Force FY 2012 program objective memorandum for $564 million.	$564M
Oct. 2010	60% Design Review; reduced scope by eliminating golf course, revised demolition methodology and removed two cooling towers	$576M (A-E) -$570M (Gov)
Mar. 2011	95% Design Review	$551M
Aug. 2011	Request for Solicitation advertised as a fully designed, one-step Best-Value analysis, using technical and price evaluation factors. The working estimates were $547 million (base bid) and $560 million (with options).	$560M base with options
Nov. 2011	The Government amended the solicitation 11 times resulting in a government estimate including the total basic and total options, of $538.3 million. Four potential contractors submitted proposals that were about $200 million above the Government estimate—the lowest proposal contained a $660 million base bid and $728 million with options. The Government developed three courses of action to award the construction contract: Redesign the facility within $564 million by delaying award 15 months and pushing full operational capability 2 years. Award project within $564 million by reducing scope through post-proposal receipt amendments, expediting award to maintain construction schedule, and identifying post-award scope reductions. Pursue additional funds to maintain full scope. The Government proceeded with the second course of action.	Government Estimate: $538M base with options Lowest contractor bid: $728M base with options
Dec. 2011	Congress approved the FY 2012 National Defense Authorization Act (NDAA), signifying approval to construct the USSTRATCOM replacement facility at the $564 million requested amount.	$564M
Feb. through Aug. 2012	After significant scope reductions and amendments to the solicitation, the construction contract was awarded for $524.4 million with a 48-month contract duration (estimated completion date of Sept. 2016).	$524.4M
Aug. 2012 through Jan. 2018	Government issued multiple modifications to the construction contract to extend the period of performance by 29 months and increase the contract value by $93M.
Feb. 2018	Construction Complete (Phase 1), Preliminary final construction cost: $617 million (20% cost growth), Construction duration: 77 months (60% schedule increase)	$617M

Table 3. STRATCOM Project Timeline⁴⁰

As demonstrated in this example, the MILCON programming process is not only lengthy but did not provide realistic scoping and did not result in accurate cost and schedule estimates. The STRATCOM project is just one example demonstrating the need for MILCON program reform and modernization. Unfortunately, federal construction projects like this example are not uncommon.^{41 42} Changes are needed to provide USACE, NAVFAC, and AFCEC the best contracting and programming tools available to be able to collaboratively work with construction contractors to incorporate early constructability input and negotiate accurate and realistic construction cost estimates.

Recommendations & Conclusion

We recommend that USACE, NAVFAC, and AFCEC consider the limitations of traditional competitive-priced construction contracts, and the benefits of collaborative delivery contracts widely used by private sector owners, non-federal public agencies, and other federal agencies. We recommend the following specific actions be considered:

Seek Authority.

USACE, NAVFAC, and AFCEC should seek clear and explicit authority to use collaborative delivery contracting methods proven in the private sector as best practices for obtaining desired project, cost, and schedule outcomes.

Modernize Program Rules.

Modernize MILCON and CW program rules to be commensurate with any contracting model changes and streamline the program rules to capture the full benefits that collaborative delivery models offer.

Update Federal Acquisition Regulations (FAR).

Should new contracting authorities be provided to allow the use of collaborative delivery methods by USACE, NAVFAC, and AFCEC, the Federal Acquisition Regulation (FAR) should be updated to provide agencies guidance on the use of collaborative delivery contracting methods. FAR updates should include best practice contracting guidance already proven in the private sector. Federal agencies should provide specialized training to agency personnel on the use and implementation of collaborative contracting methods.

Leverage Contracting Tools.

Federal agencies should maximize the benefits of any new authorities and new collaborative delivery contracting tools by leveraging these tools to execute their largest, most complex, and most difficult projects. In addition, agencies should especially focus on using any new collaborative delivery model authority to advance Small-Business program goals and maximize federal contracting opportunities for small businesses.

Incorporate Lessons Learned.

USACE, NAVFAC, and AFCEC should explore collaborative delivery procurement methods already in use by some federal agencies and many non-federal public agencies and incorporate lessons learned and best practices that public agencies have used in implementing collaborative delivery contracting models.

References

1. Naval Sea Systems Command Office of Corporate Communications. (April 2019). NAVSEA SIOP office leading $21-billion naval shipyard modernization. https://www.navsea.navy.mil/Media/News/Article/1804996/navsea-siop-office-leading-21-billion-naval-shipyard-modernization/ ↩︎
2. Erwin, Sara. (July 2024). Pentagon greenlights $140 billion ICBM program despite cost overruns: A DoD review identified the command and launch segment as a primary driver of cost growth. https://spacenews.com/pentagon-greenlights-140-billion-icbm-program-despite-cost-overruns/ ↩︎
3. The Army Civil Works Disaster Recovery and Resiliency Programs (2018-2023).
   a. Disaster Recovery Supplemental Appropriations 2023. https://www.congress.gov/bill/117th-congress/senate-bill/5355
   b. Disaster Recovery Supplemental Appropriations 2022. https://www.congress.gov/bill/117th-congress/house-resolution/973?g=%7B%22search%22%3A%22b.%5CtDisaster+Recovery+Supplemental+Appropriations+2022.%22%7D&s=2&r=1
   c. BIL/IIJA 202. https://www.transit.dot.gov/IIJA
   d. Disaster Relief Act 2019. https://www.congress.gov/bill/116th-congress/house-bill/2284?g=%7B%22search%22%3A%22d.%5CtDisaster+Relief+Act+2019%22%7D&s=4&r=1
   e. Bipartisan Budget Act 2018. https://www.congress.gov/bill/115th-congress/house-bill/1892?q=%7B%22search%22%3A%22e.%5CtBipartisan+Budget+Act+2018%22%7D&s=5&r=1 ↩︎
4. H.R.5184. Competition in Contracting Act of 1984. https://www.congress.gov/bill/98th-congress/house-bill/5184/all-info#:~:text=%2F20%2F1984)-,Competition%20in%20Contracting%20Act%20of%201984%20%2D%20Amends%20the%20Office%20of,in%20conducting%20any%20procurement%20activity. ↩︎
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6. U.S. Department of Defense. (2024). Inspector General: (U) Audit of Cost Increases and Schedule Delays of Military Construction Projects Managed by Naval Facilities Engineering Systems Command. https://media.defense.gov/2024/Nov/07/2003579924/-1/-1/1/DODIG-2025-017%20SECURE.PDF ↩︎
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8. 10 U.S.C 3241. Design-build Selection Procedures. ↩︎
9. 10 U.S.C. 3323. Cost-plus Contracting prohibited for military construction. . ↩︎
10. FAR 36.209. https://www.acquisition.gov/far/36.209 ↩︎
11. 40 USC 1101. AE Selection Procedures. https://uscode.house.gov/view.xhtml?path=/prelim@title40/subtitle1/chapter11&edition=prelim ↩︎
12. FAR Part 14. Sealed Bidding. https://www.acquisition.gov/far/part-14 ↩︎
13. FAR Part 15. Contracting by Negotiation. https://www.acquisition.gov/far/part-15 ↩︎
14. FAR 36.3. Two-Phase Design-Build Selection Procedures. https://www.acquisition.gov/far/subpart-36.3 ↩︎
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Applicable References

• Headquarters, Department of the Army (31 January 2025). Report to Congress on Progressive Design-Build Model for Military Construction.
• House report 118-125, Report accompanying H.R. 2670, the National Defense Authorization Act for Fiscal Year 2024, Page 405.
  https://www.congress.gov/congressional-report/118th-congress/house-report/125/1

Appendix A

Name	Location	Design-Builder	Procurement Method Contract Format	Completed Final Cost
University of Washington Health Sciences Education Building	WA	Lease Crutcher Lewis	Progressive Design-Build	$77,466,227
Lift Station 87 Wet Weather Flow Transfer	FL	Archer Western Construction, LLC	Progressive Design-Build	$11,507,000
1021 O Street State Office Building	CA	Hensel Phillips	Progressive Design-Build Lump Sum (or Fixed Price)	$435,655,369
Lewiston WTP Retrofit	ID	IMCO General Construction, Inc.	Progressive Design-Build Lump Sum (or Fixed Price)	$29,342,793
Silicon Valley Clean Water Gravity Pipeline Project	CA	Barnard-Bessac Joint Venture	Progressive Design-Build Lump Sum (or Fixed Price)	$228,000,000
Midland Water Pollution Control Plant (WPCP) Expansion	TX	Jacobs	Progressive Design-Build (A PDB contract was executed between Pioneer and Jacobs)	$134,000,000
Cutter Lateral Reach 21 Water Treatment Plant and Associated Items, Navajo Gallup Water Supply Project	NM	Jacobs	Progressive Design-Build Lump Sum (or Fixed Price)	$70,729,847
University of Washington Hans Rosling Center for Population Health	WA	Lease Crutcher Lewis	Progressive Design-Build (UW issued a custom PDB contract to Lewis; Lewis issued a DBIA 540 to Miller Hull.)	$176,000,000
New FOX Factory Headquarters	GA	Carroll Daniel Construction Co.	Progressive Design-Build Lump Sum (or Fixed Price)	$47,172,103
Chula Vista Fire Station 3 & 5	CA	EC Constructors, Inc.	Progressive Design-Build Design-Build Guaranteed Maximum Price (GMP)	$16,599,946
Montevina Water Treatment Plant Improvements Project	CA	HDR	Progressive Design-Build The law firm of Hawkins, Delafield & Wood assisted San Jose Water Company to prepare a customized, two-part PDB agreement to be used exclusively by San Jose Water Company for the project.	$53,523,342
McAlpine Creek WWMF Design-Build Effluent Filters Upgrades and Expansion	NC	Crowder Construction Company	Progressive Design-Build Guaranteed Maximum Price (GMP)	$25,285,000
Los Angeles International Airport Central Utility Plant Replacement	CA	Clark Construction Group	Progressive Design-Build Target Price	$295,068,021
Los Angeles Unified School District – Jordan High School Redevelopment Project	CA		Progressive Design-Build Guaranteed Maximum Price (GMP)	$72,682,845
Texas Health Recovery & Wellness Center	TX	The Beck Group	Progressive Design-Build Design-Build	$34,218,753