The Poseidon Adventure: California Embarks on Desalination

In Carlsbad, California "more than 300 construction workers are digging trenches and assembling a vast network of pipes, tanks and high-tech equipment" for a new desalination plant being developed by a private venture.  When completed in 2016, this $1 billion project will provide 50 million gallons of drinking water a day for San Diego County.

Here's the San Jose Mercury News: 

Fifteen desalination projects are proposed along the coast from Los Angeles to San Francisco Bay. Desalination technology is becoming more efficient. And the state is mired in its third year of drought. Critics and backers alike are wondering whether this project ... is ushering in a new era.

From the private developer's website: 

Poseidon Water is a project development specialist that partners with water agencies to deliver water infrastructure projects. Our primary focus is on the development of large-scale reverse osmosis seawater desalination plants. At the end of 2012, Poseidon reached financial close of the Carlsbad Desalination project, which, post-construction, will be the largest seawater desalination plant in the Western Hemisphere.

The completed plant is expected to deliver approximately seven percent of the City of San Diego's water supply by 2020.  Construction cost is reported to be about $560 million.  The San Diego County Water Authority has committed to purchase a minimum of 48,000[1] acre feet of water per year for 30 years at a price from $2,014 to $2,257 an acre foot for the water, depending on how much it buys. With that guaranteed annual revenue stream of $101 million per year, Poseidon and its investors were able to sell bonds to finance the project. The company will be guaranteed a rate of return between 9 and 13 percent, depending on operating costs.

[1] An acre foot is approximately what a family of five uses for a year.  So the 48,000 acre-foot commitment will be sufficient for a bit over 60,000 households.  

Here is Poseidon's description of their public-private-partnership elements:

For large-scale desalination projects the features of a Public-Private Partnership include:

• Long-term water purchase agreement
• High service quality and statutory requirement adherence
• Timely construction and project implementation
• Energy consumption and price increase allocation
• Performance-level guarantees for operator
• Fully-insured, turnkey, fixed price and date-certain engineering, procurement and construction contracts
• Adequate return on investment for debt and equity investors

Poseidon seeks to partner with water agencies, investors, project operators and contractors in order to structure projects where all parties receive project benefits commensurate with the risk of their project contribution.

Mitchell Swann: How Does Design Build Affect the Standard of Care?

Mitchell Swann outlines issues that can arise between the architect and contractor on a design-build project. How complete are the owner's bridging documents?  What warranties are associated with those documents, if any?  What is the standard of care for the architect to enable the contractor to create accurate take-offs?  Does design-build alter the traditional allocation of means and methods?  Who is responsible for resulting delays and changes?

Aba div 4_swann_design_build_standard_of_care_2014_05_27 from Roland_Nikles

April 10-12, 2014 Annual Meeting: Division 4 Activities

The Roosevelt Hotel – New Orleans, LA

April 10-12, 2014

The Project Delivery Systems Division welcomes your attendance and participation at the following events during the Forum’s upcoming 2014 Annual Meeting:

Thursday – April 10, 2014

8:00 pm

Project Delivery Systems Division Dinner

Dickie Brennan’s Bourbon House – 144 Bourbon Street – www.bourbonhouse.com  

RSVP by Monday, April 7, 2014 to: Arlan Lewis (D4 Chair) at alewis@babc.com

The pre fixe, three course menu and pre-selected wines offer a variety of options for this “Dutch Treat” Division Dinner. As is customary for our division dinners, the total cost will be divided by the number of guests. The price per person is anticipated to be in the range of $110 (depending on alcohol consumption).  NOTE: PAYMENT BY CASH ONLY. 

Friday – April 11, 2014

12:30 pm – 1:30 pm

Division Lunch Program | Project Delivery Systems Division

The Billion Dollar University Medical Center Project

Fred Hames – Skanska USA Building, Inc.

Mark Rapier – Skanska USA Building, Inc.

The new University Medical Center (UMC) is currently under construction on approximately 34 acres near the CBD of New Orleans.  It is expected to be completed in 2015 at a cost of $1.1 billion dollars.  The UMC will replace the Medical Center of Louisiana at New Orleans, which closed after sustaining serious flood damage during Hurricane Katrina. Located on Canal Street in downtown New Orleans, the 424-bed medical center will be the cornerstone of an expanding medical district that will attract the world’s top medical professionals while delivering high-quality care and advanced research. Skanska MAPP is the joint venture construction manager for the UMC project and Mr. Fred Hames of Skanska will discuss the current status and other interesting facts about this amazing project.

5:30 pm – 7:00 pm

Special Division 4 Reception | Herlihy Residence – 1008 Orleans Ave.

Sponsored by Wyatt Tarrant & Combs, LLP

RSVP by Monday, April 7, 2014 to: Julie Herlihy at jherlihy@wyattfirm.com

Julie Herlihy (Division 4 Steering Committee) has graciously extended an invitation to members of Division 4 for a reception at her home as a prelude to Friday evening festivities in the French Quarter.  We look forward to seeing you there! 

Arlan D. Lewis

Bradley Arant Boult Cummings LLP

Chair, Division 4

Cell phone (205) 218-5093 

E-mail alewis@babc.com 

Sid Scott of Hill International Expresses Optimism for U.S. P3 Market

Here is Sid Scott's presentation to Division 4, on Tuesday, March 25, 2013.   Sid Scott is a Senior Vice President in the Construction Claims Group of Hill International. He is based in Philadelphia.  He has more than 25 years of experience in engineering and construction with a strong focus in transportation.  He is a nationally-recognized expert in procurement and contracting methods for the construction industry, particularly in the areas of specifications for highway construction, design-build and innovative contracting. Scott has also researched and developed best practices for the planning, management, and administration for some of the nation's largest transportation projects. 

He noted that there are currently 11 states in the U.S. with Public Private Partnership projects in development.  He reported that based on current trends and deal flows, the U.S. may become the larges market in the world for P3 over the next ten years.  

Risks & Advantages of P3 Projects by Sid Scott, Hill International from Roland_Nikles

Congressional Budget Office Publishes Testimony Regarding Economics of Transportation P3s

On March 5, Joseph Kile, Assistant Director for Microeconomic Studies for the Congressional Budget Office (CBO), testified before the U.S. House of Representatives Panel on Public-Private Partnerships (part of the Committee on Transportation and Infrastructure).  A copy of the testimony can be found here.  The main topics of the testimony were (1) private financing of P3 projects and (2) private provision of design, operation, and maintenance for P3 projects. I include an overview of the testimony and key takeaways below.

The CBO testimony adds to a prior report from the CBO in January 2012 called "Using Public-Private Partnerships to Carry Out Highway Projects."  CBO notes that vehicle miles traveled in the United States continues to rise and outpace the addition of miles of public roads.  Among the 4 million miles of public roads in the United States, federal, state, and local government expenditures totaled $155 billion in 2012 for building, operation, and maintenance.  CBO points out that the vast majority of these expenditures are performed using a traditional public procurement model of design-bid-build.  While public-private partnerships (or P3) are becoming a popular topic of discussion in the construction industry and appear to be growing in terms of actual use for procuring transportation projects, CBO states that a mere 1.5% of all projects from 1989 to 2013 exceeding $50 million were P3--across just 29 projects (not including 69 design-build projects).

Regardless of the limited history to analyze, the CBO testimony suggests P3 presents significant opportunities for transportation projects.  The benefits, risks, and structures of P3 have shifted in recent years, with the CBO testimony highlighting the following points:

• The overall cost of privately financing a highway project is roughly equal to the cost of financing using traditional public mechanisms (e.g., bonds, revenues, grants)
• The availability of incentives (such as having private entities hold equity in the project or contracting for payments or penalties based on contingent milestones) may encourage reduction of project costs and/or schedule
• Current P3 transportation projects are relying less on toll revenue to repay project debt (based on several early failures such as the South Bay Expressway in San Diego) and more on compensation during the concession period from state general revenue
• Recent P3 projects have less private partner debt service and more state or local financing utilizing the TIFIA program and municipal tax-exempt private activity bonds
• Compared to traditional design-bid-build, P3 transportation projects have delivered new assets with a "slightly" reduced time for design and construction and a "small amount" of cost savings
• A concession contract that consolidates design, construction, operations, and maintenance may better align contractor incentives with long-term project goals
• Loss of public control over a P3 project can raise overall public costs--most notably, private authority to set tolls and projected costs to renegotiate contract terms in the future

The biggest takeaway from the CBO testimony is that the current slate of P3 projects (both completed and ongoing) simply provide too small of a sample size to adequately conclude the cost and time benefits of P3 procurement models for highway projects.  Even so, where state and local governments have chosen to restrict transportation spending based on legal or budgetary constraints, the private financing options of P3 provide additional funding availability.  This reality suggests continued exploration of P3 for U.S. transportation projects.

Unknown Unknowns

Harvey Bernstein and Donna Laquidara-Carr of McGraw Hill Construction write about the growth of Lean, and lack thereof, in the February 17 issue of ENR.

A striking statistic:  "two-thirds (62%) of the fims using lean construction, or at least one of the lean practices measured in the survey, recognize that current, standard construction processes are inefficient.  In contrast, only 14% of the firms not practicing lean regard current construction processes to be inefficient."

Unkonwn unknowns, as Rumsfeld would say.

Trade contractors, it seems, suffer more from unknown unknowns:

55% of trade contractors report they are not familiar with any of the lean practices measured in the survey, compared with 38% of general contractors.  This 17-point gap is considerably larger than the 7-point gap between general contractors and trade firms that have adopted at least one lean practice.

But it's not because trade contractors are Luddites.  More of them use global positioning systems to track their materials, equipment and tools, more of them optimize crew sizes, more of them conduct studies of worker ergonomics and and activities, and more of them use preparatory tools and materials to train worker for specific tasks.

The study suggests that 80% of trade firms that do adopt lean practices see greater profits and reduced costs.  

Checklists and the Construction Industry

Following up on Roland’s January 4 post, for an interesting discussion of the use of checklists in the construction industry readers should pick up The Checklist Manifesto:  How to Get Things Right, by Atul Gawande (the author of the article referred to in Roland’s post).  In a chapter entitled The End of the Master Builder, Gawande points to the construction industry as a validating example of checklist success.

Gawande, a doctor, was prompted to investigate the construction industry further when observing the construction of a skyscraper and reflecting on how the workers could be sure they were properly constructing such a complex building.  Gawande asks the following questions, “First, how could [the workers] be sure that they had the right knowledge in hand? Second, how could they be sure that they were applying this knowledge correctly?”  As Gawande describes it, the problem of construction complexity is daunting.

 

In designing a building, experts must take into account a disconcertingly vast range of factors:  The makeup of local soil, the desired height of the individual structure, the strength of the materials available, and the geometry, to name just a few.  Then, to turn the paper plans into reality, they presumably face equally byzantine difficulties making sure that all the different tradesmen and machinery do their job the right way, in the right sequence, while also maintaining the flexibility to adjust for unexpected difficulties and changes.  

Yet builders clearly succeed. 

With these questions in mind, Gawande set out to learn how architects, engineers, and contractors construct complex buildings.  He talks with engineers, project managers, and other personnel involved in the construction of a medical center near his office in Boston.  In the course of his research, he learns that historically building were built by a “Master Builder,” a single individual who was responsible to design, engineer, and then oversee all the details of construction.  The “Master Builder” concept largely relied on the judgment and expertise of that one person.  But according to Gawande, by the middle of the 20^th century “[t]he variety and sophistication of advancements in every stage of the construction process had overwhelmed the abilities of any individual to master them.” 

In Gawande’s telling, what emerged to replace the “Master Builder” model was increased specialization combined with the use of modern construction and submittal schedules, essentially checklists that ensure that the dispersed knowledge of all the different construction specialists gets considered and incorporated into the project.  Gawande states, “What results is remarkable:  a succession of day-by-day checks that guide how the building is constructed and ensure that the knowledge of hundreds, perhaps thousands, is put to use in the right place at the right time in the right way.”  Gawande focuses in particular on how the construction and submittal schedules are flexible enough to deal with even the most complex construction problems.  Many problems are not amenable to a simple checklist solution.  Construction projects often involve complex engineering questions that require individual judgment under uncertain conditions.  In these uncertain situations, Gawande points out that the schedules didn’t dictate specific construction tasks, instead they specified “communication tasks.”

 

According to Gawande:

For the way the project managers dealt with the unexpected and the uncertain was by making sure the experts spoke to one another – on X date regarding Y process.  The experts could make their individual judgments, but they had to do so as part of a team that took one another’s concerns into account, discussed unplanned developments, and agreed on the way forward….  

In the face of the unknown – the always nagging uncertainty about whether, under complex circumstances, things will really be okay – the builders trusted in the power of communication.

While conceding that the process is not always perfect, Gawande praises the construction industry, pointing out that its “record of success has been astonishing,” building millions of complex commercial and residential buildings with very low rates of failure.  Gawande attributes this success to the power of the construction planning process to integrate the specialized knowledge of architects, engineers, manufacturers, and skilled trades into the project and to ensure that all of these specialists communicate on complex problems. 

As construction lawyers who often dwell on the things that go wrong on construction projects, it is useful to step back and consider how often things go right, and why.  Gawande’s book is aimed primarily at promoting the use of checklists to reduce medical errors.  He encourages the medical field to adopt some of the processes used by the construction industry to build complex buildings.  The construction industry, in turn, can benefit from his book by asking how to further improve these checklists to avoid persistent defects and quality issues.  

Is Lolo School Circumventing Competition?

Lolo, Montana, is a community of 4,000 residents situated just south of Missoula, at the northern edge of the Bitterroot Mountain Range.  There, the local school board has created quite a stir by awarding a guaranteed maximum price design-build contract for construction of its new school building, without competitive bidding. 

The Missoulian, the daily newspaper just up the road, casts a skeptical eye:  

Is this the direction Montana wants to proceed when bidding public construction jobs? Will all of our public construction projects start picking whatever proposals they want without putting them out for bid? Is this opening a pathway for circumventing competition by not allowing other capable contractors (who are very interested) to bid on the new Lolo School?

Lolo School violated open bidding laws when building the lunch room in the ’90s.

The Lolo School District #7 is building its new school using GMP Design-Build contract without competitive bidding.  Project savings, if any, are returned to the Owner (the school, not taxpayers) as per Montana Code Annotated §§7-5-4302 & 18-1-102. M.C.A. § 7-5-4302 provides the requirement for public works projects above $80,0000 to have open bidding and the process for advertising the project, and § 18-1-102 requires that public works projects go to the lowest responsible bidder regardless of residency although Montana residents are given preference.

Will this decision lead to similar public construction projects being performed without competitive bidding? Is this kind of project delivery method more beneficial for public construction projects? Click the link below for more information and feel free discuss the potential ramifications of Lolo's decision.

Is Lolo School Circumventing Competition?

A New York Times I-W35 Retrospective, and Digging Out of Our Infrastructure Hole?

The New York Times has a good video report on the I-W35 bridge collapse in Minneapolis and our ongoing need to invest in bridge infrastructure.

How the United States allowed some of its most precious assets to decay so badly may say something about both its character and its leadership. This is a nation ever in the thrall of innovation. We like to build new things. We’re not so crazy about the drudgery of keeping the old in decent shape. Most bridges are meant to last 50 years; those classified as structurally deficient are, on average, a good deal older than that. As for political leaders, spending time and money on essential maintenance holds scant sex appeal. How many elected officials are just dying to preside over a ribbon-cutting ceremony for a new gusset plate? 

In the end, it all boils down to money. There’s not nearly enough. The Federal Highway Trust Fund, the principal financing source for transportation projects, is practically kiting checks. That’s how close it is to insolvency. Part of the problem is that it depends heavily on a federal tax on gasoline, which provides about $39 billion a year. That tax, 18.4 cents a gallon, has not changed since 1993. Because of inflation, it has lost 40 percent of its value over the years.

Obama recently proposed raising about 10 percent of what's needed through the the closure of a series of business tax loopholes.

As the nation’s economic struggles continue, Americans are driving less. Pumping less gas leads to reduced tax revenues. There is, too, an ironic twist in the national goal of improving vehicles’ fuel efficiency. The less gas a car needs, the smaller the yield from that tax. 

With all this as a backdrop, Mr. Obama has now turned to an altered business-tax structure as a way to raise his desired $302 billion. Even if he gets what he wants, the money is still far short of what the civil engineers society has said is needed to stop the infrastructure decay: $3.6 trillion.

Should we be charging toll on more bridges?  We travel free of charge across a lot of these old bridges that need retrofitting or replacement.  Installing tolls can provide a funding stream that opens the panoply of project financing options: traditional bond revenue financing, public private partnership financing, or supplementing general revenue tax financing.

There are lots of tools available to finance these projects ... we have no excuse to continue to procrastinate.

Road Building the Old Fashioned Way.

My family emigrated from Switzerland to the wilds of British Columbia in 1967.  Up there, out in the bush, fifty miles north of the bend in the river where the Fraser makes its turn south, homesteading and logging in the sub-Boreal-Spruce forest, the Alaska Highway had a mythic draw.  It was a symbol of the wild expanse extending northward, up to where the Aurora Borealis shimmered in the night sky.  It captured our imagination like the Congo, the Zambezi, the Limpopo rivers captured Stanley's and Livingston's  in the 19th century.  It made it possible to jump in your truck and drive 2,000 miles due north, encountering nothing but mountains, rivers, lakes, endless forest,  moose, bear, elk, beavers, loons, and fish.  

World War II provided the impetus for construction of the road.  The Army Corps of Engineers roughed in 1,500 miles of road and got it open in an astonishing seven months.  Eighty-one civilian contractors followed close behind:  86 bridges, 25,000 men, 25 months; one legendary road. 

Hat tip to Nick Cuccia.

PPP/DBOM Model of Building Public Infrastructure, What I Learned as a Sailor, and the San Francisco Bay Bridge

After graduating from law school I lived on a sailboat for a few years.  Based on that experience, it seems elementary to me that if you mount a fixture to a deck by drilling and bolting, you want to apply caulking in the holes and between the deck and the fixture.  You don't mount the fixture and then goop caulking around the outside ... because it will leak.  

The new eastern span of the San Francisco Bay bridge continues to have new problems.  Although we are well towards Spring, we've just had our first winter storm, and it now seems there are leaks into the bridge decking structure.

From this morning's Chronicle:

[T]he guardrails on the suspension part of the bridge are made of steel to save weight - but they are proving to be problematic.When it drew up plans for the project in 2001, bridge designer T.Y. Lin International specified that the 2 1/2-foot-tall guardrails be bolted down through holes drilled in the underlying steel structure that supports the roadway. The design called for a continuous line of caulk between the bottom of the guardrails and the steel structure. That way, water would not make its way through the bolt holes and into the hollow structure below.

Caltrans in its infinite wisdom allowed a deviance.  The contractor complained that placing caulk between the bottom of the guardrails and the steel structure would make installation harder, so Caltrans allowed caulking to be added as a bead around the outside.  Every sailor would know better, it seems. ...

Last year, Caltrans changed the plans, saying it was the "contractor's option" to apply the caulk outside the guardrails after setting them in place - much like a homeowner might lay down a bead of caulk where a bathtub meets a tiled wall.

So what happened ...

The bridge opened in September, and within three months [or more succinctly after the first storm], it was clear that water was getting into the steel deck cavern when it rains, Casey said.

Thoughts

Between all the stories about the defective bolts, and now these leaks, one could get the idea that Caltrans was in over their head with this project.  

Does this suggest that a PPP, with American Bridge/Fluor (in this case) assuming full design-build responsibility and obligation to maintain for 35 years, would have been a better way to go?

Caltrans speaks of a five year shake out period.  It's likely that similar issues would come up with a PPP.  They would happen not in the light of day; we'd never hear about it.  Would it be cheaper?  More efficient?  

It's not inherently obvious that the same decision on caulking would not have been made by the contractor in a PPP/DBOM context.  Of course, the concession entity would bear the cost of making good.  

Is PPP/DBOM better for the public?  Less publicity of problems is not necessarily better.  It would mean less pressure to address some of these problems.  It would not necessarily guarantee fewer problems.  

Introducing Our Newest Triclinium Contributor: Ross Hutchison

J. Ross Hutchison has joined the Triclinium crew.  Ross is an associate at LeVan, Sprader, Patton & McCaskill in Nashville, Tennessee. His practice focuses on representing individuals, businesses and insurance companies in a variety of civil litigation matters, including construction disputes, premises liability, products liability, automobile accidents, subrogation claims and freight and logistics disputes. Mr. Hutchison is a graduate of the Mercer University School of Law in Macon, Georgia.

We are thrilled to have Ross join us on the Triclinium.  

Glenn Ballard Speaks: Touts Consistent Savings of 15%-20% Against the Market

New year. New you. You probably know at least one person, maybe even yourself, who set a New Year's resolution to tighten up that body and become a more productive person in this new year.

University of California at Berkley Professor Glenn Ballard discusses how many in the construction industry have similar goals. Ballard, co-founder of the Lean Construction Institute, and one of the foremost proponents of "Lean Construction" keeps track of the movement around the globe.  The goal of Lean Construction is to foster construction practices that reduce cost by being less wasteful while achieving high productivity and efficiency.

Says Ballard:  "We are consistent in using lean design and construction in healthcare and educational facilities in the United States and we're averaging 15-20% cost reduction against the market, and we are doing it every time--so it's not an accident."

Here he is in an interview in Finland.

Glenn Ballard on Lean Construction

Introducing Ryan DeMotte

Ryan DeMotte has joined the Triclinium crew.  Ryan is an associate in the Construction and Engineering practice group in the Pittsburgh office of K&L Gates LLP.  In addition to his construction experience, he also has experience in antitrust, insurance coverage, and general commercial litigation.  Mr. DeMotte is a graduate of the University of Pittsburgh School of Law.

We are thrilled to have Ryan on board and look forward to many interesting posts from him.  

Help make the Triclinium a vibrant place.  Add your comments, spread the word.  

Robotic Construction: The Wave of the Future?

3D printing technology may be coming to the construction industry.  University of Southern California Professor Behrokh Khoshnevis has built a large 3D printer that reportedly can construct a house in less than 24 hours.  Using technology called Contour Crafting, a large gantry with a nozzle basically lays concrete layer-by-layer according to a computer design.  Individual workers can then take care of plumbing, wiring, and finish work.  Proponents of the technology believe that it could reduce the cost of housing and help to quickly erect high-quality housing in disaster relief areas.

While this technology remains in the development stage, it is worth taking a moment to consider the business and legal implications if 3D printing and robotic construction someday move into the mainstream of the industry.

Professor Khoshnevis discusses his technology in the presentation below. 

Not so Fast: A Viking Stadium Construction Update

We reported on the financial close of the Viking Stadium Construction underway in Minneapolis. Construction progress appears halted in light of a new lawsuit filed yesterday. The gist of this petition, filed directly in the Minnesota Supreme Court pursuant to a jurisdictional grant in the Stadium Act, seems to be that the city has pledged $150,000,000 of its future hotel tax revenue to pay off state appropriations bonds, and the petition contends that the Minnesota constitution prohibits this.

From the Minneapolis Business Journal:

State officials slammed the brakes on an expected $486 million bond sale to pay for the Minnesota Vikings stadium as an old foe of the project filed a last-minute legal challenge that could upend plans to open the stadium in 2016. 

Minnesota Public Radio reports on a petition that former Minneapolis mayoral candidate Doug Mann filed with the Minnesota Supreme Court to block the bond sale. Mann, who lost a similar challenge last year, argues that a $150 million portion of the bond sale that Minneapolis plans to use to pay its portion of the stadium's $1 billion price tag is unconstitutional. ... 

Minnesota Sports Facilities Authority chairwoman Michele Kelm-Helgen said that the agency will be short $28 million by the end of the month without the bond sale. It might also affect the accompanying Downtown East project.

A copy of the petition is here.  I'm sure Mortenson's counsel are having an interesting week.

In the meantime.... Go Niners!

Maintaining Integrity in Public Bidding

The United States has been in the forefront of fighting corruption in public procurement in the Organization for Economic Cooperation and Development (OECD countries).  Domestically, it seems to me that procurement in public construction in the United States has been relatively free of corruption over the course of my career for the past 25 years.  

It has not always been so.

We can't take the progress that has been made for granted, of course.  This morning, there is a little tidbit in my hometown paper related to Governor Christie's troubles to serve as a reminder:

The inspector general at the U.S. Department of Housing and Urban Development will audit how New Jersey spent $25 million of Sandy aid funds, according to the office of Rep. Frank Pallone Jr., a New Jersey Democrat who asked the inspector general to look into the issue in August. 

At issue in the new probe are funds from a disaster recovery block grant. New Jersey had received permission to spend funds on a marketing campaign to encourage tourism to the Jersey Shore. 

But Pallone's office says the contract to develop the marketing plan was awarded to a firm that charged $4.7 million. The next lowest bidder proposed only $2.5 million. The winning bid proposed including Christie in the ads, Pallone said in the letter asking for an audit. The lower cost proposal did not include a Christie ad. Pallone's office said Monday that the inspector general's office had found enough evidence to justify a "full-scale audit."

The merits of this are to be determined.  I don't know if these proposals are apple to apple comparisons (aside from the Christie ad).  Perhaps it's different scopes, perhaps there are are other good and valid reasons for awarding a contract to the highest bidder.  Also, this is not construction.

Still, as we continue the move away from low bid procurement models in public construction, it's important to keep working to maintain integrity in the selection process.  It's good to be reminded periodically.

Deconstructing the East Span of the Oakland Bay Bridge

From Wired Magazine. 

History venerates the builders of great bridges, ... [b]ut rare are commemorative plaques for the un-builders—those charged with the equally heroic task of dismantling those grand structures, once they become dowdy, obsolete, or downright dangerous. Herewith, [a]case stud[y] in the art of mega-destruction ....the old, seismically shaky eastern span of the San Francisco–Oakland Bay Bridge. 

Demolition began: November 2013 | Duration of project: 3 years

The original eastern span of the San Francisco–Oakland Bay Bridge, photographed from the Oakland side on November 8, 2013. 

 Built during the Great Depression, the eastern span of the San Francisco-Oakland Bay Bridge was a marvel of utilitarian efficiency. (Some of the construction cranes were even incorporated as part of the structure.) But now that its graceful replacement is operational, the old span has to be taken down—without dropping anything into the water. Expected cost: $240 million. —Eric Smillie

To figure out the best sequence for removing the high-tension pieces, engineers will use a 3-D model, based on structural analysis and historical records, that shows how the forces are distributed. Bryan Christie Design

Control the Tension

The piers of the cantilever truss aren’t holding the bridge up. They’re holding it down. “This is like a highly strung bow,” says senior bridge engineer Brian Maroney. (A bow made of 50 million pounds of steel.) “You don’t want to just cut the bow because the thing will fly off in all directions.” So crews will first remove the pavement on the upper deck to lighten the bridge’s load and reduce the tension. Next they’ll isolate steel supports, jacking them out of tension until they can be cut without whipping apart. Then they’ll slowly release the jacks.

Cut the Truss Spans

Named for their length in feet, the 504 and 288 truss spans are not under as much tension as the cantilever, so there’s less chance they’ll explode in your face when you cut into them. Still, caution is called for: The 80-year-old steel is not like modern steel; crews must be prepared for differences in strength and hardness.

Cart the Pieces Away
The steel beams are coated with greenish-gray paint, under which is a coat of lead-based stuff. To avoid contaminating the bay, all that metal has to be trucked away and cleaned, after which it will be resold as scrap.

Build a Monument

The massive art-deco column of pier E1, near Yerba Buena Island, may be preserved as a monument to the bridge that served the Bay Area for 77 years. The E2 pier will also likely remain and be converted into an observation platform for the new span.

Blast Foundations

The foundations of piers E3 to E5 are like honeycomb inside. One idea for demolition: Drill into them, plant a series of computer-controlled explosives around the internal walls, set off the charges, and let the concrete collapse into the void.

Mind the Birds

The shallow-water foundations of piers E19 to E22 may be saved for a new pedestrian walkway and bird sanctuary. On the bridge itself, a long-armed snooper truck will be used to install spikes to deter nesting. Any avian holdouts will be removed by hand.

The Labor Market Participation Rate and Prospects for Construction in 2014

The U.S. economy added just 74,000 jobs in December.  Economists focus on how many adults are working compared to population, the labor market participation rate, and they see this:

Brad DeLong explains. Construction companies cut 16,000 jobs in December, partly due to cold weather. But not good.

Here is the AGC's economist, Ken Simonson, with prospects for 2014:

The year opened with an upbeat report on construction spending from the Census Bureau on January 2. The agency reported that spending in November was the highest since March 2009 at a seasonally adjusted annual rate (a statistical technique to remove distortions due to normal weather or monthly variations). For the first 11 months of 2013 combined, year-to-date spending rose 5.0 percent from the same months in 2012. 

But the pickup was very unevenly distributed. Private residential spending soared 18 percent year-to-date, powered by a 45 percent leap in multifamily construction, a 28 percent jump in single-family, and a 2 percent uptick in improvements (additions and major renovations to both types). Private nonresidential construction was unchanged, on balance. Public construction slipped 3 percent, dragged down by an 8 percent contraction in public educational spending, which more than offset a tiny rise in highway and street construction. These two segments account for more than half of public construction. 

The overall flatness of private nonresidential construction masked extreme differences in some segments. The top performer through the first 11 months was lodging construction, which climbed 26 percent as hoteliers modernized older properties and began putting up new big-city hotels and extended-stay properties in areas receiving an influx of oil and gas-related workers. At the other end of the spectrum were communications construction, down 13 percent, and power, down 11 percent. However, the apparent plunge in power construction was driven by a surge in construction of wind facilities in late 2012 to beat a yearend deadline to qualify for the wind production tax credit. In 2013, the credit applied to projects begun by year end, so there was no comparable spike in spending. 

For 2014, the two biggest private nonresidential segments—power and manufacturing—should both post double-digit increases, along with lodging and warehouse construction. Office and retail construction should continue to make modest gains, although they will remain far below pre-recession levels. But private hospital and educational construction will remain in the doldrums. 

Overall, private nonresidential construction should increase 5-10 percent. Private residential construction will grow another 10 percent or more, thanks to continued double-digit growth in apartment construction, although single-family homebuilding  will probably stall later in the year. Public construction will slip again, though perhaps not as much as the 3 percent drop in 2013. Adding up the pieces, total construction spending will rise close to 10 percent, a significant improvement over last year’s 5 percent growth.

With the economy continuing to struggle and interest rates at historic lows, public sector construction should not be slipping further.  It seems that public entities should not be speaking of P3 at this time: they should be taking advantage of historically low bond rates and catching up on deferred infrastructure maintenance and building needed new infrastructure.

Atul Gawande, the Pilot's Check List, and Construction QA/QC

Six years ago, Atul Gawande wrote an interesting article about the effectiveness of using checklists in the critical care of patients.  The point was: they work, they're simple, but people don't use them. 

They  should work in construction as well. 

I recently was involved in a construction defects case.  The defects involved more than a mile of rusting base flashing around the perimeter of buildings, and defective construction of stair landings. The owner had hired prominent architects, a top flight contractor, paid the contractor to have a full time quality control person attend to construction, and hired a reputable and experienced water-proofing consultant.  How could it have happened? 

Looking through the documentation and history of the project it became apparent that the construction team was not following a disciplined check list procedure. Although there were mock-ups, the mock-up did not systematically verify a) is the design correct, b) is the design being followed, c) are the correct materials being used, d) are they correctly installed, e) will the work stand the test of time?  Although all the right parties were present and observed, none was ultimately responsible to a check-list and each other.  They stood around, but their critical faculty was not engaged.

          The Problem in the Critical Care Unit

[There]  is the puzzle of I.C.U. care: you have a desperately sick patient, and in order to have a chance of saving him you have to make sure that a hundred and seventy-eight daily tasks are done right—despite some monitor’s alarm going off for God knows what reason, despite the patient in the next bed crashing, despite a nurse poking his head around the curtain to ask whether someone could help “get this lady’s chest open.” So how do you actually manage all this complexity? The solution that the medical profession has favored is specialization. …. 

Like medicine, of course, construction is complex and many steps by different people are involved. 

          The B-17 Bomber and the 'Pilot's Checklist'

On October 30, 1935, at Wright Air Field in Dayton, Ohio, the U.S. Army Air Corps held a flight competition for airplane manufacturers vying to build its next-generation long-range bomber. It wasn’t supposed to be much of a competition. In early evaluations, the Boeing Corporation’s gleaming aluminum-alloy Model 299 had trounced the designs of Martin and Douglas. Boeing’s plane could carry five times as many bombs as the Army had requested; it could fly faster than previous bombers, and almost twice as far. A Seattle newspaperman who had glimpsed the plane called it the “flying fortress,” and the name stuck. The flight “competition,” according to the military historian Phillip Meilinger, was regarded as a mere formality. The Army planned to order at least sixty-five of the aircraft.

A small crowd of Army brass and manufacturing executives watched as the Model 299 test plane taxied onto the runway. It was sleek and impressive, with a hundred-and-three-foot wingspan and four engines jutting out from the wings, rather than the usual two. The plane roared down the tarmac, lifted off smoothly, and climbed sharply to three hundred feet. Then it stalled, turned on one wing, and crashed in a fiery explosion. Two of the five crew members died, including the pilot, Major Ployer P. Hill.

 An investigation revealed that nothing mechanical had gone wrong. The crash had been due to “pilot error,” the report said. Substantially more complex than previous aircraft, the new plane required the pilot to attend to the four engines, a retractable landing gear, new wing flaps, electric trim tabs that needed adjustment to maintain control at different airspeeds, and constant-speed propellers whose pitch had to be regulated with hydraulic controls, among other features. While doing all this, Hill had forgotten to release a new locking mechanism on the elevator and rudder controls. The Boeing model was deemed, as a newspaper put it, “too much airplane for one man to fly.” The Army Air Corps declared Douglas’s smaller design the winner. Boeing nearly went bankrupt.

 Still, the Army purchased a few aircraft from Boeing as test planes, and some insiders remained convinced that the aircraft was flyable. So a group of test pilots got together and considered what to do.

 They could have required Model 299 pilots to undergo more training. But it was hard to imagine having more experience and expertise than Major Hill, who had been the U.S. Army Air Corps’ chief of flight testing. Instead, they came up with an ingeniously simple approach: they created a pilot’s checklist, with step-by-step checks for takeoff, flight, landing, and taxiing. Its mere existence indicated how far aeronautics had advanced. In the early years of flight, getting an aircraft into the air might have been nerve-racking, but it was hardly complex. Using a checklist for takeoff would no more have occurred to a pilot than to a driver backing a car out of the garage. But this new plane was too complicated to be left to the memory of any pilot, however expert.

 With the checklist in hand, the pilots went on to fly the Model 299 a total of 1.8 million miles without one accident. The Army ultimately ordered almost thirteen thousand of the aircraft, which it dubbed the B-17. And, because flying the behemoth was now possible, the Army gained a decisive air advantage in the Second World War which enabled its devastating bombing campaign across Nazi Germany.

         Adapting the Pilot's Check List to Medicine 

Medicine today has entered its B-17 phase. Substantial parts of what hospitals do—most notably, intensive care—are now too complex for clinicians to carry them out reliably from memory alone. I.C.U. life support has become too much medicine for one person to fly. 

Yet it’s far from obvious that something as simple as a checklist could be of much help in medical care. Sick people are phenomenally more various than airplanes. A study of forty-one thousand trauma patients—just trauma patients—found that they had 1,224 different injury-related diagnoses in 32,261 unique combinations for teams to attend to. That’s like having 32,261 kinds of airplane to land. Mapping out the proper steps for each is not possible, and physicians have been skeptical that a piece of paper with a bunch of little boxes would improve matters much.

 In 2001, though, a critical-care specialist at Johns Hopkins Hospital named Peter Pronovost decided to give it a try. He didn’t attempt to make the checklist cover everything; he designed it to tackle just one problem, the one that nearly killed Anthony DeFilippo: line infections. On a sheet of plain paper, he plotted out the steps to take in order to avoid infections when putting a line in. Doctors are supposed to (1) wash their hands with soap, (2) clean the patient’s skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in. Check, check, check, check, check. These steps are no-brainers; they have been known and taught for years. So it seemed silly to make a checklist just for them. Still, Pronovost asked the nurses in his I.C.U. to observe the doctors for a month as they put lines into patients, and record how often they completed each step. In more than a third of patients, they skipped at least one.

 The next month, he and his team persuaded the hospital administration to authorize nurses to stop doctors if they saw them skipping a step on the checklist; nurses were also to ask them each day whether any lines ought to be removed, so as not to leave them in longer than necessary. This was revolutionary. Nurses have always had their ways of nudging a doctor into doing the right thing, ranging from the gentle reminder (“Um, did you forget to put on your mask, doctor?”) to more forceful methods (I’ve had a nurse bodycheck me when she thought I hadn’t put enough drapes on a patient). But many nurses aren’t sure whether this is their place, or whether a given step is worth a confrontation. (Does it really matter whether a patient’s legs are draped for a line going into the chest?) The new rule made it clear: if doctors didn’t follow every step on the checklist, the nurses would have backup from the administration to intervene. 

Pronovost and his colleagues monitored what happened for a year afterward. The results were so dramatic that they weren’t sure whether to believe them: the ten-day line-infection rate went from eleven per cent to zero. So they followed patients for fifteen more months. Only two line infections occurred during the entire period. They calculated that, in this one hospital, the checklist had prevented forty-three infections and eight deaths, and saved two million dollars in costs. …. 

The checklists provided two main benefits, Pronovost observed. First, they helped with memory recall, especially with mundane matters that are easily overlooked in patients undergoing more drastic events. (When you’re worrying about what treatment to give a woman who won’t stop seizing, it’s hard to remember to make sure that the head of her bed is in the right position.) A second effect was to make explicit the minimum, expected steps in complex processes. Pronovost was surprised to discover how often even experienced personnel failed to grasp the importance of certain precautions. ….

           Natural Resistance to Using Checklists 

After the checklist results, the idea Pronovost truly believed in was that checklists could save enormous numbers of lives. He took his findings on the road, showing his checklists to doctors, nurses, insurers, employers—anyone who would listen. He spoke in an average of seven cities a month while continuing to work full time in Johns Hopkins’s I.C.U.s. But this time he found few takers.

There were various reasons. Some physicians were offended by the suggestion that they needed checklists. Others had legitimate doubts about Pronovost’s evidence. So far, he’d shown only that checklists worked in one hospital, Johns Hopkins, where the I.C.U.s have money, plenty of staff, and Peter Pronovost walking the hallways to make sure that the checklists are being used properly. How about in the real world—where I.C.U. nurses and doctors are in short supply, pressed for time, overwhelmed with patients, and hardly receptive to the idea of filling out yet another piece of paper?

…. “Forget the paperwork. Take care of the patient.” ….

The doctors and nurses on rounds tried to proceed methodically from one room to the next but were constantly interrupted: a patient they thought they’d stabilized began hemorrhaging again; another who had been taken off the ventilator developed trouble breathing and had to be put back on the machine. It was hard to imagine that they could get their heads far enough above the daily tide of disasters to worry about the minutiae on some checklist.

          Changing Cultures  

Yet there they were, I discovered, filling out those pages. Mostly, it was the nurses who kept things in order. Each morning, a senior nurse walked through the unit, clipboard in hand, making sure that every patient on a ventilator had the bed propped at the right angle, and had been given the right medicines and the right tests. Whenever doctors put in a central line, a nurse made sure that the central-line checklist had been filled out and placed in the patient’s chart. Looking back through their files, I found that they had been doing this faithfully for more than three years. 

Pronovost had been canny when he started. In his first conversations with hospital administrators, he didn’t order them to use the checklists. Instead, he asked them simply to gather data on their own infection rates. In early 2004, they found, the infection rates for I.C.U. patients in Michigan hospitals were higher than the national average, and in some hospitals dramatically so. Sinai-Grace experienced more line infections than seventy-five per cent of American hospitals. Meanwhile, Blue Cross Blue Shield of Michigan agreed to give hospitals small bonus payments for participating in Pronovost’s program. A checklist suddenly seemed an easy and logical thing to try.

 In what became known as the Keystone Initiative, each hospital assigned a project manager to roll out the checklists and participate in a twice-monthly conference call with Pronovost for trouble-shooting. Pronovost also insisted that each participating hospital assign to each unit a senior hospital executive, who would visit the unit at least once a month, hear people’s complaints, and help them solve problems.

The executives were reluctant. They normally lived in meetings worrying about strategy and budgets. They weren’t used to venturing into patient territory and didn’t feel that they belonged there. In some places, they encountered hostility. But their involvement proved crucial. In the first month, according to Christine Goeschel, at the time the Keystone Initiative’s director, the executives discovered that the chlorhexidine soap, shown to reduce line infections, was available in fewer than a third of the I.C.U.s. This was a problem only an executive could solve. Within weeks, every I.C.U. in Michigan had a supply of the soap. Teams also complained to the hospital officials that the checklist required that patients be fully covered with a sterile drape when lines were being put in, but full-size barrier drapes were often unavailable. So the officials made sure that the drapes were stocked. Then they persuaded Arrow International, one of the largest manufacturers of central lines, to produce a new central-line kit that had both the drape and chlorhexidine in it. 

In December, 2006, the Keystone Initiative published its findings in a landmark article in The New England Journal of Medicine. Within the first three months of the project, the infection rate in Michigan’s I.C.U.s decreased by sixty-six per cent. The typical I.C.U.—including the ones at Sinai-Grace Hospital—cut its quarterly infection rate to zero. Michigan’s infection rates fell so low that its average I.C.U. outperformed ninety per cent of I.C.U.s nationwide. In the Keystone Initiative’s first eighteen months, the hospitals saved an estimated hundred and seventy-five million dollars in costs and more than fifteen hundred lives. The successes have been sustained for almost four years—all because of a stupid little checklist. …..

          Gawande Concludes 

We have the means to make some of the most complex and dangerous work we do—in surgery, emergency care, and I.C.U. medicine—more effective than we ever thought possible. But the prospect pushes against the traditional culture of medicine, with its central belief that in situations of high risk and complexity what you want is a kind of expert audacity—the right stuff, again. Checklists and standard operating procedures feel like exactly the opposite, and that’s what rankles many people.

Does This Apply to Construction?

It was clear to me on my recent construction defects case that the project would have benefited from a check list procedure, rigorously implemented.  Construction is too complex for architects to fully show and think through all details during the preconstruction design stage.  The steps are too complex and numerous to expect union hall workers to reliably carry them out faithfully just because they've done it lots of times before in similar applications.  Is the design correct?  Is the design being followed?  Are the correct materials being used? Are they being correctly installed.  Will the work stand the test of time?  If the architect, contractor, trade contractors, and consultants jointly develop a checklist, and hold each other responsible for implementing it, there is every reason to think that the same dramatic improvements can be achieved as in medicine, or flying a complicated airplane.