It is said that imitation is the sincerest form of flattery. However, North Carolina and Texas legislators seem to be trying to imitate a Virginia law that has its detractors here at home.
“We had the privilege to work on a PPEA project early,” Marlene Shade, AIA, said. “It was very successful project financially, won several awards. Everybody walked away completely happy.” PPEA is the acronym for the Public-Private Education Act, passed into law in 2002 in Virginia.
An associate principal in Dewberry’s Fairfax office, Shade said that since that time the firm has been involved in several design-build and PPEA projects. As the years passed, however, the demands upon the architects have come to the point where some clients are seeking a full design-development package on the first submittal. With extremely scant scope information, she indicated, this was all but impossible.
“You would find yourself designing in a vacuum,” she said. “If you were successful, you’d have to go back to the beginning to develop a scope and redesign accordingly. Schematic is one thing, but a full package is another.”
“We have had some localities tell us they use the PPEA process to evaluate design options while more than covering their costs,” BCWH founding principal Rob Comet, AIA, said. He explained that some smaller localities have solicited proposals without having the financing to continue with a project. Under the PPEA, those submitting proposals must include with their submittal a fee to cover the localities’ review expenses. These fees, he said, can be $25,000 to $50,000.
The law’s genesis stemmed from a desire to encourage private investment in Virginia infrastructure projects. While “education” is in the short title, the law encompasses any type of project for the state or for localities except roads and bridges.
“Overall, the PPEA has worked for the state,” according to Bert Jones, an architect and the director of the Virginia Division of Engineering and Buildings. Because of the magnitude of paperwork and the approval process, he said, “it typically gets tried only on $20 million-plus projects.”
In comparing it to the traditional design-bid-build delivery method, Jones said it takes no more time from start to finish. Nor does it take any more money. From his experience on three or four projects for the state, though, there has been no private financing. “All the ones I have been involved with have been financed with bond funds.”
He said it is most akin to design-build without the time required to go through the Design-Build/Construction Management Review Board. “But it’s more complex. If you’re not a sophisticated owner, you should stay away from this,” Jones said.
The complexity is such that the General Assembly established the PPEA Working Group to monitor the actions taken under the legislation and to develop guidelines to help localities implement its provisions.
“This is the first standing committee that tracks elements of the code and tries to marry up the suggested changes with guidelines,” said Paul Proto, general services director for Henrico County. Proto serves on the working group. In his position in Henrico County, he directs all construction and maintenance for Henrico County-owned buildings.
“My personal feeling is that I don’t see any magic to it,” he said of the PPEA process. “It gives localities an additional approach to do things, but I don’t think it solves a specific problem in that one would say ‘This is the way to go on this project as opposed to design-bid-build.’”
Henrico County has little experience with PPEA projects and only one PPTA (Public-Private Transportation Act) project, Proto said. (The PPEA was modeled on Virginia’s PPTA.) He said the county has received four or five unsolicited proposals, but never went forward with any of them.
The PPEA needs to provide two things to a locality, according to Proto: identifying a needed project and providing an otherwise unobtainable financial advantage. So far, neither has happened for Henrico. The county’s process of developing and continually updating its capital needs within a five-year plan eliminates one of the advantages for Henrico. And so far, he said, no team has provided the financial incentive. “In each case, we found we could borrow money cheaper.”
About two years ago, the county chose the PPTA route in an attempt to correct major traffic congestion in a more timely fashion. He said the up-front negotiations ate up most of the anticipated time savings. And although construction is currently under way, he admitted there seemed to be no advantage over the traditional delivery method.
During the time since its inauguration, the PPEA law has been amended 50 to 80 times, Jones said. “They have added so many checks and balances that it is harder to do from a usability perspective.”
Instead, the state finds itself turning more often to the construction-management-at-risk delivery method. Whereas Virginia consistently has two or three PPEA projects a year, Jones said it has 20-30 projects right now using the CM at Risk method.
In Virginia, localities may use the PPEA or the CM at Risk method. Effective July 1, the state will dissolve its Design-Build/Construction Management Review Board, which acted as a gatekeeper to localities seeking to use either alternative delivery method. This means localities will have no oversight into their design-build or construction management projects. Instead, they will follow the DB/CM guidelines published in the Construction and Professional Services Manual by the Virginia Bureau of Capital Outlay Management.
Legislation instituted the DB/CM Review Board in 1996 to review a locality’s published procurement policies and its staff or contracted professionals to determine whether a specific locality could proceed with a project using either the DB or CM method. It also was to report to the General Assembly its analysis of the process as it was used by various localities throughout the state.
“Unfortunately the board was not empowered to do anything about how the localities conducted their projects,” according to James Lowe, PE, Esq. Lowe — along with Henrico’s Proto — was among the first members appointed to the DB/CM Review Board. As a lawyer and as counsel in the Roanoke office of HSMM (now AECOM), he volunteered to draft the board’s regulations. He quickly discovered that no authority existed in the legislation to suspend projects or in any way force the localities to collect or submit their data.
“Without such authority, the DB/CM Board had no power to collect data” to write such reports, Lowe said. “I think we issued two.” The first was too soon; there wasn’t a statistically viable sample of projects. In the second, he said the board wrote that the localities were not submitting data or submitting incomplete data. “So we cannot make any recommendations or determinations,” it stated.
“Enactment of PPEA gutted the DB/CM Board,” Lowe said. “It enabled localities to do what was supposed to be under the purview of the DB/CM Board. Effectively localities could go two ways. I thought that DB/CM route would be easier than PPEA because with PPEA a locality had to analyze all of these proposals. It wouldn’t take any more time on a locality’s part to put together an RFQ for the DB/CM route than it would to analyze all projects through PPEA.”
Proto agreed with Lowe’s assessment, saying, “One could go (the PPEA) route and not have to go through design-build/construction management processes.” He added that the board in his tenure reviewed about 13 projects, but he could remember none that came in after the PPEA was passed.
With their actions to initiate PPEA projects, Lowe said, “The localities have voted that they prefer to spend the time with PPEA.” As DEB’s Jones has indicated, localities still have multiple routes to take.
David Crawford, Hon. AIA, the executive vice president of AIA North Carolina, said he has been lobbying against the PPEA entering North Carolina. His position is that the bill is nothing more than design-build by another name, reiterating Jones’ analysis.
R.B. Lawhorne in the Roanoke office of management and budget tends to agree with Crawford’s view point. He and Roanoke Assistant City Attorney Gary Tegenkamp serve with Proto on the PPEA Work Group.
Roanoke has done two PPEA projects, a garage and a police academy building. “It’s my opinion,” Tegenkamp said, “that with all the time constraints and requirements, the PPEA doesn’t save anything. If it’s a typical project, I think going design-bid-build is going to be quicker and cheaper.”
“All the local attorneys I’ve talked to,” he said, “felt it was not a time saving and not money saving and, potentially, PPEA could involve more expense because you spend more time on the thing than traditional design-bid-build.”
Comet, of BCWH in Richmond, said the PPEA has become too political. He said it has gutted the QBS section of the code. There are few restrictions on what is illegal to stimulate a client to choose a particular team.
Lowe and Proto indicated they understood that sentiment, but would not go that far. Lowe said there are problems with every system and that there always will be people trying to game whatever system is in place. Proto said he depended on the market place to try to stem such activity. If the public entity doesn’t follow ethical processes, he said, “then you run the risk of someone challenging you.”
“I don’t think there is a right way or wrong way to do this,” Proto said. “Whether competitive negotiation, design-build, construction management, or PPEA . . . all have their places. None is going to eliminate all the world’s problems. That’s just not the case. I’m a strong believer in looking at whatever the undertaking is and select the method that will be the best for that undertaking.”
Virginia statute endorses traditional design-bid-build as its preferred procurement method. The alternative methods — design-build, construction management at risk and PPEA — all have their positive and negative points, Comet, Lowe and Proto agreed.
Perhaps because it is the relative newcomer, the PPEA method comes with multiple layers of complexity including a contract negotiation process that devours time and legal wrangling in month-long bites.
“These kinds of techniques work best with a well-educated owner who’s willing and qualified to take risks,” Comet said. “It just doesn’t fit with most of the municipalities I work with. They don’t want to take risk and they misunderstand design-build or PPEA as a process that guarantees absolute price where they can make design changes without having an impact.
“Clients who change the method do not understand we no longer work for them in a traditional advisor’s role in a PPEA,” he said.
Crawford said the lawyers are the ones promoting the process in North Carolina. In his view, it seems like there is a lot of potential for abuse in the law. Comet agrees, calling it “a design-build vehicle with lots of openings for abuse.”
Crawford said his North Carolina AIA members prefer construction management at risk. “They did not care for it when it came in because they lost some control over the scope in the project. But ultimately it became a more guaranteed way of bringing in a project.”
In comparing the public-private method considered in the North Carolina legislation to the state’s experience with construction management, he said, “At least, (our members) have a way of competing in the market” with CM.
If procurement systems are breeding grounds for corruption, Lowe said “the cure is that the design community must be diligent and vigilant to shine a light on those that are handled inappropriately. It is inadequate to complain on the front end but otherwise not be engaged. Go to council meetings, question the public officials, do your responsibilities as a citizen.”