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Often
there's more to learn from failure than from success.
Review of the BCH Energy Project is just such a case
in point.
By
Stephen C. Schwarz and Daniel E. Dietch
Project delivery
in the development of environmental facilities has shifted
away from traditional design-bid-build and moved toward
using alternative delivery methods such as design-build
and design-build-operate, affecting both new solid waste
projects such as landfill gas-to-energy systems and
waste-to-energy facility retrofits.
Design-bid-build
is the traditional method for most public works projects.
In this method the owner hires a designer who is directly
responsible to the owner. The designer produces a complete
set of design documents, which the contractor then bids
on. A winning contractor is selected, usually by low
bid, followed by the construction of the facility. This
method gives the owner the most control over facility
design since the designer is directly contracted to
the owner.
In design-build
the responsibilities of the designer and contractor
are combined into one entity. Proponents of this method
argue that it speeds construction and saves money, simplifies
lines of communication, and gives the owner a single-party
responsible for on-time, on-budget performance.
The shift
from design-bid-build to design-build has affected both
public- and private-sector project development where
there has been a reconsideration of risk position relative
to perceived benefits. The table below identifies the
commonly cited benefits and drawbacks of the design-build
delivery method.
While there
are numerous examples for both successful and failed
projects, there are common issues to consider. To highlight
the potential pitfalls of any design-build project,
the failed BCH Energy Project will be used as an example.
In this project, the design-build method was chosen
because it was believed to be the most cost-effective
delivery method. Further, it shifted the primary responsibility
to deliver a completed project based on the owner's
specifications to the design-builder. Unfortunately,
the shifting of responsibility partially became the
basis for the project's failure because the agreement
was imprecise in assigning and enforcing roles.
BCH
Energy Project: Anatomy of a Failure
The BCH Energy
Project was developed as a design-build refuse-derived
fuel (RDF) project to process 900 tpd of MSW, collected
initially from three participating counties in North
Carolina. Solid waste was collected and delivered to
a material recovery facility (MRF) for processing to
recover recyclables and remove nonprocessible waste.
After processing at the MRF, the MSW was transported
approximately 18 mi. and further processed and combusted
at an energy-generating facility (EGF). Process steam
was to be sold to an adjacent manufacturing facility
and electricity generated was to power the EGF with
the excess sold to a local power utility. Project development
commenced in 1992, and construction was essentially
completed in early 1996. The project never operated
reliably, however, and was ultimately shut down and
its facilities dismantled and sold for scrap.
Issues
Identified As Being Central to the Failure of the Project
Proposing
a Conceptual Design. Owners have to be very careful
about what they specify in a conceptual design. Unless
sufficient preliminary engineering work has been done
to ensure that what is proposed in the conceptual design
will really work, it might be better to say nothing about
how the results are to be achieved and rely on purely
performance-type specifications.
In this case,
the owner provided a conceptual design to the design-builder,
which illustrated the owner's vision for the project.
This design, which was preliminary in nature, was included
in the Request for Proposals documents on which the
design-builders bid. Certain features, which proved
problematic in the project, such as the MSW-receiving
and RDF storage bins, were called for in the conceptual
design. A major point of contention was whether or not
the design-builder was supposed to build the project
as depicted in the conceptual design or whether its
responsibility was to alter it as necessary to deliver
a working project.
Managing
Vendor Interfaces. The design-builder's failure
to manage the vendor interfaces effectively contributed
to the project's failure. Under the contract terms, the
design-builder had the responsibility of coordinating
and managing the design and construction of the project.
Because the design-builder recognized early on in the
design phase that multiple vendors would be used to supply
the fuel handling system, it hired a firm to coordinate
and manage the various engineering interfaces between
the equipment vendors. As the project transitioned from
design to construction, the design-builder decreased the
firms' level of involvement, leaving this essential aspect
of the project only partially addressed.
Enforcing
Contract Terms. A further problem with
the agreement was, at times, the owner's lack of enforcement.
For example, the agreement required that the design-builder
perform factory tests prior to installing critical equipment
at the EGF to ensure that the equipment met performance
requirements. Despite this clause in the agreement,
three key pieces of the fuel handling system were shipped
to the EGF without being tested. As a result, the MSW
receiving bins proved incapable of providing a consistent
metered flow, the shredders were untested with MSW,
and the boiler infeed conveyors could not meet the dosing
requirements of the boilers. If the owner had enforced
the design-builder's testing responsibilities, these
problems could have been mitigated or avoided.
Lessons
Learned
The project
was innovative in its approach and as such was an ambitious
undertaking. Despite the project's commercial failure,
there are many contractual lessons to be learned.
Selection
of the proper delivery method sets a project's contractual
context. While using the design-build delivery method
for this project accelerated the time of completion
and reduced costs, the owner ultimately relinquished
control over the design and means and methods of construction.
Had the owner selected the design-bid-build delivery
method, it could have had a more active role in the
development and management of the project but likely
would not have been able to achieve the shortened delivery
time and reduced cost.
In addition,
the agreement did not provide the owner with the legal
means to ensure that the design-builder delivered a
working project. Making matters worse, it appeared that
the design-builder failed to fully embrace its design-build
responsibility to ensure the overall functionality of
the project. Instead it approached the project more
as a construction contractor in a design-bid-build project,
responsible for providing the owner with exactly what
it specified.
The contract
framework is just a small part of the design and construction
of a solid waste processing project; however, its impact
extends far beyond the initial phases. A well-designed
contract can lay a strong foundation for building a
successful project.
Stephen
C. Schwarz is vice president and director of solid waste
programs, and Daniel E. Dietch is project scientist
for Malcolm Pirnie Inc. in Ft. Lauderdale, FL.
MSW
- November/December 2003
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