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Capital Expansion and Facility Upgrade – Does your Methodology Fit Your Organization Like a Glove?

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The Controversy—Is there one capital delivery methodology that is considered the industry's "Best Management Practice"? Is there a silver bullet that can defend utilities against the risks and ills of delivering capital programs?

In 2006 Public Private Partnerships (PPEA) joined the list of capital project delivery methodologies available to Virginia's municipalities and utility authorities. In the past the traditional Design/Bid/Build delivery process was the preferred contracting methodology. Owners looking for more efficient and effective ways to deliver their capital projects continue to study and experiment with alternative delivery methods, including Design/Build, Program Management for a Fee (Owner's Agent), Program - Construction Management at Risk, Design/Multiple Prime, and, in the most extreme case, privatization.

Public entities studying the "best management practices" of private, profit-driven firms and their international counterparts have discovered a gap between themselves and the "best-of-the-best." With the private sector's recent interest in competing directly in the traditionally public utility marketplace, as public entities realize time has a real monetary value, and as today's accounting systems can capture the true, total cost of service, delivering capital projects cost effectively and efficiently is becoming a critical issue. Initial capital costs are now recognized, more than ever, as affecting the bottom line in a big way, and therefore impact customer rates accordingly.

When searching for the "right" management style, contract vehicle, and delivery methodology, we propose there is no singular "best" method. But rather, that the owner's organizational personality, management, planning and technical capabilities, and availability of internal staff are each major contributing factors when it comes to identifying the "right" project delivery method from the available options.

Our research and experience indicate that the "right" delivery methodology also depends heavily on the unique project requirements and delivery (to operational start-up) time demands. Prototype or repetitive facilities, i. e., pump stations, are very different animals when compared to large, complex treatment facilities.

This paper and subsequent presentation shall look at an owner's organization and culture, constraints, and unique requirements, and the strengths and weaknesses of the most common capital project delivery methods and facility types, and sort how each criterion plays a role in determining the "best of the best" for you and your organization.
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Document Type: Research Article

Publication date: 2007-10-01

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