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

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 ABSTRACT

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.

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