EEP summary of procurement methods pros and cons
From Water Wiki
Summary of EEP Procurement Methods
Design-Bid-Build and Full Delivery
The N.C. Ecosystem Enhancement Program (EEP) uses two primary mechanisms for outsourcing the design and construction of restoration projects needed to meet compensatory-mitigation compliance obligations: Design-Bid-Build and Full Delivery. This summary describes these contracting approaches and explains the basic processes, the pros and cons, and the scenarios in which these procurement methods are employed.
FD is the procurement method in which EEP advertises to private or public mitigation providers an amount, type, and location of compensatory mitigation credits that EEP wishes to purchase.
A structured proposal targeting a location along with the type and amount of mitigation need and specifications for proposals is advertised through DENR Purchase and Services. Mitigation providers typically have 3-6 months in which to develop proposals and secure land option agreements to deliver all or part of the advertised credit amounts. At the end of the advertising period they submit two proposals in separate sealed envelopes (a technical proposal and an associated cost proposal). The cost proposal offers a fee per individual mitigation unit designated for each mitigation credit type. The technical proposals are opened and reviewed by a team comprised of EEP staff from the FD and Watershed Planning and Project Implementation (WPPI) sections. Those teams review the technical proposals and make project site visits in order to develop a technical rating and assess the viability of the project in meeting EEP and regulatory quality standards.
For those proposals that meet minimum standards, the cost proposals are then opened. Contracts are awarded to projects that meet the technical, cost, and current mitigation needs criteria for each CU in order to meet the EEP’s strategic planning goals. It takes seven to 12 months to award FD projects once the request has been advertised. Once a contract has been awarded, EEP staff manages the contract and conducts site visits to insure the deliverables are met by the provider. Payments are made and based on achieving milestone deliverables associated with the project. These contracts typically last for seven to eight years and include securing the land through at least a conservation easement transferred to the state, an Environmental Resource Technical Report, a Restoration plan, a Mitigation plan, five years of Monitoring plans, any required maintenance, and any required permits.
The FD contracting process does not differentiate between the costs of the subcomponents of a project (acquisition, design, construction, monitoring, etc). Instead the mitigation provider is evaluated based on the total lump sum cost of the project and on the overall technical quality of the project. Thus, the FD contracting process allows individual mitigation providers to negotiate higher or lower compensation packages for each component piece. This enables FD providers the opportunity to encourage landowner participation by offering potentially higher than market prices for the land. In some project scenarios, that same balance allows FD providers to acquire additional buffer acreage and even adjacent upland areas that increase the project’s overall wildlife/resource benefit.
Full Delivery Pros
• This method can deploy a lot of resources in an area in a short amount of time in order to identify and secure projects when mitigation demand is high.
• FD providers are not bound by State Property Office (SPO) (fair market land value) or State Construction Office (SCO) rules (for hiring engineers, architects and construction contractors),
• It does not eliminate but does reduce the overall amount of time EEP and SPO must dedicate to a project. The FD provider manages landowner outreach and property acquisition, design development, construction management, and monitoring and report submittal. EEP staff manages the FD contract and provides project quality assurance. The State Property Office reviews and approves all final conservation easements, plats, titles etc and ensures that the conservation easement is properly transferred to the State. The State is not involved with the actual land transactions between the land owner and full delivery provider.
• It bypasses State Construction Office requirements and thus eliminates SCO time to review and approve.
• FD projects typically require only one seven-to-eight year contract to complete. DBB typically requires four separate contracts to complete through monitoring. There is contracting time saved by only having to utilize one contract.
• FD providers assume more financial risk should project credits drop. If a FD project needs maintenance, then it is up to the provider to incur the cost of repair or to drop the amount of credits that will be delivered. If credits are dropped, then adjustments are made to the contract in order to pay only for the amount of mitigation units delivered. However, if the project is dropped by EEP or the provider, the FD provider is allowed to invoice for work that has been completed per the executed contract.
Full Delivery Cons
• FD submittals are an unreliable source of procurement as they may or may not choose to respond to a request for proposals. Providers typically don’t respond to mitigation requests unless there is a large request within a CU. If EEP is relying on a FD project for compliance and does not receive a proposal, it may become non-compliant and will have to decide to reissue or undertake the project through other processes (e.g., DBB).
• The number of watersheds containing sufficient mitigation needs to elicit FD submittals has dropped dramatically as EEP has developed the required advanced mitigation using both procurement programs, thus making FD procurement approaches inappropriate across a large portion of the state.
• The FD project-contracting process results in a large amount of procurement and compliance uncertainty during the process. State rules do not allow EEP and FD companies to discuss potential projects before they are submitted. EEP has no way of knowing whether it will get a response to the advertisements until the three-to-six month advertising period has ended. Furthermore, it has no way of knowing if the proposed projects will be technically or financially feasible for another two-to-three months.
• FD project-contracting processes present more quality control challenges than other project contracting processes. EEP staff has less control of the project design and implementation. Although EEP staff reviews and approves the initial proposal and provides quality assurance for design and monitoring reports, it has no way to insist that a design approach be modified or improved upon. In some cases, this has resulted in permits needed for construction being denied by the regulatory community. Once a permit is denied, the FD provider must either change its design or drop the project. Both result in time delays. If the project is dropped, then EEP is left having paid for the project up to that point, holding the easements, and not having the mitigation counted on for compliance. Additionally, although the projects are provided by private companies, ultimately EEP is held responsible by the regulatory community when a project doesn’t meet their standards.
• FD project contracts are less flexible with regard to changing mitigation forecasts. Once the contract is executed, there is no ability to slow down or speed up the implementation and pay out of that contract. EEP can cancel the contract but it can’t put it on hold or increase its rate of delivery. No FD contract has been terminated during the last couple of years while EEP has worked with NCDOT to reduce surplus-mitigation assets procured by NCDOT and to adjust to an overall drop in the mitigation requests.
• FD projects are less likely to be located in EEP targeted local watersheds. EEP has tried for several years to encourage FD providers to locate proposed projects in targeted watersheds based on EEP’s River Basin Restoration Priorities (RBRPs), by offering additional points awarded to the technical score for locating projects in targeted areas. The data indicates that this approach has not been very successful.
• FD provides less compliance control. EEP assumes all compliance risk. If a FD project is dropped or does not meet its success criteria and therefore provides less than the contracted amount of credit, then EEP is still responsible for the credit and therefore is out of compliance until it provides that lost credit.
• As with Design-Bid-Build, EEP assumes financial risk. If a FD project is dropped (typically due to easement or permitting issues), EEP is not reimbursed for the money spent to that point in the project. EEP must recover those losses by achieving additional efficiencies in other procurement efforts and/or by increasing revenues by increasing mitigation fees.
• Nationally, the mitigation banking community and ILF programs have come under fire for poor quality and sometimes lack of initiation of projects at all, leaving the regulatory community hesitant to work with them. Having the EEP layer of FD oversight seems to have helped mend those relationships.
• Overall, FD is more expensive than the DBB process.
Design Bid Build
DBB is the standard contracting process in North Carolina. For EEP this process includes contracting for watershed planning, site engineering, construction, maintenance if needed, short term monitoring and project close out. Land acquisition is undertaken through the State Property Office. EEP staff develops, contracts, and manages mitigation projects that have been identified and prioritized through watershed planning and outreach efforts. DBB projects differ significantly from FD procurement in that each project is first identified and then divided into discrete acquisition and contracting components.
The Watershed Planning and Project Implementation (WPPI) staff is responsible for initiating and managing contracts and local stakeholder groups for the development of Local Watershed Plans (LWPs) that identify prioritized potential sites to provide watershed functional uplift. WPPI staff insures that the implemented project designs meet watershed goals and objectives, acquiring potential projects prioritized through EEP’s two main watershed-planning processes: RBRPs and LWPs.
WPPI staff develop initial technical approaches and budgets, having the potential projects reviewed and approved by the Project Review Committee (PRC), working with the SPO and the landowner to secure the conservation easement, providing contract management and quality assurance of project design development with a private design company, and providing quality assurance and contract management of project construction with a private construction company. EEP design-and-construction review coordinators provide a level of engineering review for quality control of the restoration plans and construction plans, ensure proposed sediment and erosion control measures are sufficient, assist in the bid and award process to construction contractors, assist in the construction quality assurance, and ensure that SCO guidelines and processes are being followed until SCO accepts the project as complete. Once the project construction is complete, the EEP monitoring section contracts with a monitoring firm and provides quality assurance of the project-monitoring contract deliverables, initiates contracts for any necessary maintenance activities, and leads in the development of the closeout documents and regulatory site visits until the project is accepted and closed.
Design Bid Build Pros
• DBB concentrates watershed restoration projects in watershed planning areas.
• DBB can be utilized for any size of needs in a CU, including volumes smaller than what FD providers would be willing to respond to.
• DBB provides weekly status updates which allow EEP to understand whether it is meeting its compliance requirements and adjust strategies rapidly if needed.
• EEP staff is directly involved in every phase of project development and therefore can better ensure that the project meets quality standards, and that any adjustments to the plan or construction that are necessary can be addressed rapidly to meet quality standards.
• DBB projects are flexible. As EEP has helped NCDOT manage its surplus-asset issues and NCDOT mitigation requirements have dropped due to the economy and ever-changing transportation- improvement-projects prioritization, multiple DBB projects were put on hold. If a DBB project needs to be put on hold, dropped or even added, it can be done quickly. DBB projects can also be restarted as needed.
• DBB projects can utilize other state agencies (e.g., Wildlife Resources Commission and Division of Soil and Water Conservation) to provide technical assistance, project design and construction, and landowner outreach to maximize quality and minimize cost.
• DBB projects involve more community partnerships. WPPI staff often partner with municipalities and other local entities during the LWP process that extends to project implementation.
• DBB projects provide more market access to private design firms and construction companies. Design and construction contracts are awarded by a request for qualifications and competitive bid process, which allows any qualified company a chance to be awarded a contract.
• DBB projects are subject to state construction and state purchasing rules and regulations which help ensure there is a fair process and open access.
• DBB procurement-contracting processes increase private-sector competition in the industry by providing a fair and open process where even small firms can compete for contracts. This also promotes more competitive pricing and reduces costs.
• Some landowners favor a state-managed project. The DBB program provides for a state-managed mitigation project scenario that some landowners perceive as “safer.” Some elements that contribute to this perception are security of the funding for the project, the feeling of having access to all of the resources state government can offer, and state oversight through existing state processes.
• DBB projects as a whole are less expensive.
Design Bid Build Cons
• Due to ongoing projects and limited staff, DBB may not be able to rapidly deploy a lot of resources in an area to identify and secure projects in a short period of time
• Due to SPO rules, the DBB process is limited in the amount it can pay for land titles or easements.
• DBB requires more SPO and EEP staff time to secure projects.
• DBB requires more EEP staff time to provide design and construction development and oversight.
• The contracting, SCO review, and regulatory-review process associated with DBB requires more EEP staff time to complete.
Employing Procurement Methods
Both FD and DBB procurement methods are necessary to ensure EEP success. The strengths and weaknesses of each method are carefully considered during the strategic planning process before a method is assigned for employment in an area.
The FD procurement method is most often utilized when:
• There is substantial amount needed in a short period of time.
• There is medium amount of credits needed (~7,000-15,000 stream credits or 5-15 wetlands credits), there isn’t a LWP in place or in development, and EEP has no presence in the watershed area.
• There is low amount of credits needed (5,000-7,000 credits or 3-5 wetland credits), and EEP doesn’t have the resources available to acquire a site in time to meet compliance.
• DBB has not been successful in the area.
The DBB procurement method is most often utilized when:
• EEP has developed a LWP that can deliver the necessary amounts of credit.
• There isn’t a LWP established, but there are enough staff resources and time available to meet a need.
• EEP has a presence in an area such that it can deliver the credit needed.
• There isn’t an amount needed that would generate a response from FD providers.
• FD has been unsuccessful in the area.
Both methods are simultaneously employed most often when:
• There is a high amount of credits needed (>15,000 stream credits or >15 wetlands credits) and LWPs have been developed.
• There is a high need but with staggered timing. EEP may issue a Request for Proposals for the need that is due soon in order to meet the early compliance requirements while initiating or continuing to develop a LWP in order to deliver projects for the compliance requirements that are due in later years (three years or more).