C:\Documents and Settings\MStern1\Local Settings\Temporary Internet Files\OLK35\Session 9 11-14-06.doc 1 Session 9: Delivery Systems 1. Introduction and Comments by Dr. Firouz Vakil 2. Alternate Delivery Systems a. Project Cycle • Planning • Design • Construction b. Delivery Systems c. International Practice 3. International Concessions 4. Planning a. Strategic Planning b. Tactical Planning 5. Marketing New Project Delivery Systems and Concessions Internationally a. Current Structure b. The Future Structure c. Finance d. Operators e. Suppliers/Manufacturers/Vendors f. Material and Suppliers 6. Class Discussion including Dr. Firouz Vakil a. “ICA Empresas and the Mexican Road Privatization Program” b. Readings from “The Lexus and the Olive Tree,” Chapters 17, 18 19 and 20 7. Session 10 – Establishing a Foreign OfficeC:\Documents and Settings\MStern1\Local Settings\Temporary Internet Files\OLK35\Session 9 11-14-06.doc 2 Session 9: Delivery Systems Today’s session will deal with global strategic planning and two closely related issues, alternate project delivery systems and concessions. 1. Introduction and Comments by Dr. Firouz Vakil Dr. Vakil is the former Minister of Planning and Budgeting for the Government of Iran. He is an MIT graduate and an internationally recognized figure in the development planning and project finance fields. 2. Alternate Delivery Systems A number of your other courses have dealt quite well with both traditional and newer project delivery systems. In this session we will focus on the application and opportunities of introducing these systems in the international arena, with the caveat that a number of the systems such as design/build and BOT (build/own/transfer) were actually initially developed outside of the U.S. A good deal has been written about “delivery systems” - the way we “deliver or undertake” a project - and much of it in response to the new global wave of privatization and concessions. But, remember, privatization and concessions are not delivery systems. Most project delivery systems can be used for public, private and hybrid projects, though typically, some are better suited and more frequently adopted by the public sector, while others more often by the private sector. a. The Project Cycle International and domestic projects can, according to Charles Thomsen, the former President of 3DI and an outstanding expert in the field, be divided into three distinct phases - Definition, Design and Construction. These phases (and their sub-phases) can overlap, be subdivided or regrouped, but none can be eliminated and if one phase is poorly executed, the subsequent phases may be impaired. All delivery systems cover some planning, as well as the design and construction phases, while some may go beyond and also include finance, commissioning, ownership, leasing or outsourcing, maintenance and operation. Planning includes:C:\Documents and Settings\MStern1\Local Settings\Temporary Internet Files\OLK35\Session 9 11-14-06.doc 3 • Discovery: The identification, analysis and definition of project requirements, constraints, including potential “fatal flaws” and establishment of priorities. • Integration: Establishment of probable project scale, parameters, possible variations and the implementation plan or plans (including initial estimates of costs and schedule). • Evaluation: The economic, financial, technical, legal and environmental reviews and analysis, including optimal timing (staging), network or linkage impact if any, sizing and appropriate scale and selection of the most attractive alternate(s). • Preconstruction Activities: Legal, financial, site acquisition, permitting, public outreach, etc. Design was divided into four phases by Thomsen (remember he is an architect) including: • Schematic Design: The basic concept, plan and design criteria and parameters. • Design Development: An evolution of design that defines the functional and aesthetic aspects of the project and, equally important, the building systems that best satisfy them. • Construction Drawings and Specifications: The details of project assembly and construction. • Construction Costs, Estimates and Constructability/Value Engineering Analysis: The project cost estimates and assessments of the practicality of the designs. Construction typically is divided into at least six activities: • Contractor Selection: Preparation of tender documents; and/or evaluation and prequalification of bidders; evaluation of offers; negotiation; and award of contracts to construct the project. • Procurement: Purchase of components, equipment and off-site assemblies. • Shop Drawings: The final fabrication drawings for construction components and systems.C:\Documents and Settings\MStern1\Local Settings\Temporary Internet Files\OLK35\Session 9 11-14-06.doc 4 • Fabrication, Delivery and Assembly which includes: o Site Construction: The labor-intensive field construction which one typically associates with construction, installation of components, systems and equipment and provision of construction management or supervision, QA/QC, environmental monitoring and site safety procedures. o Warranties, Guarantees, Commissiong and Project Closeouts – Increasingly critical components especially in modern mega-projects, often including certification, start-up and commissioning. This phase may also include an extended testing operations/maintenance or turnkey period. b. Delivery Systems Early in the project cycle, an owner must select an appropriate project delivery system for design, construction and increasingly, commissioning, maintenance and operation. A client typically has a number of available options. In addition to the traditional design/bid/build process, a client can select design/build, fast-track, multiple primes or a variety of hybrids. Alternate pricing includes Guaranteed Maximum Price (GMP), cost-plus, target-price and fixed-price. Each of these has advantages and disadvantages and the best choice is governed by the specific requirements,