McKinsey & Company Report On CU Construction [PDF]

Zitiervorschau

Developing Capital Excellence

Full report January 2016

Pre-Decisional - Proprietary and Confidential

Executive summary (1/2) ▪ 

Diagnostic – CU Boulder makes significant investments in capital projects and is exploring ideas and opportunities to improve efficiency and effectiveness in the execution of these projects

▪ 

Completed 1900+ Minor and Outlay projects over the past five years routinely fall under budget similar to other public organizations, accounting for about 18% of total budget value

▪ 

Completed 30 Major projects (those above $2M), which account for 80%+ of the total spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays

▪ 

Interviews with over 40 personnel across all stakeholder groups, review of selected projects, and analysis of available documentation on processes surfaced opportunities for increased excellence: –  a) Capital planning: Right-time commitment of funds in the project planning stage to align with available information on scope and schedule –  b) Contracting methodology: Provide clear guidelines for the project delivery method or contracting terms to manage owner risk –  c) Communication: Proactively manage risks through increased project tracking and clarity in communicating progress with appropriate stakeholders –  d) Project Manager workforce: Enhance PM workforce execution through structured training and onboarding processes

▪ 

Recommendations – four themes have emerged as opportunities for increasing capital excellence based on the above diagnostic:

–  Develop a clear, well-documented, and scalable stage gate process to drive capital investment success –  Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability

–  Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency

–  Train and retain the Project Manager workforce to ensure best practices adoption and execution in project delivery 1 Budget performance based on initial Vice-chancellor approval limit for projects, not legislative approval 2 Compared to original estimated completion date in program planning Pre-Decisional - Proprietary and Confidential | 1

Executive summary (2/2) Implementation –CU Boulder has the opportunity to transform its capital program and potentially capture up to 15% in planned capital spend

▪ 

In addition to the efficiencies captured, the implementation of the recommendations would bring other performance and health benefits to CU Boulder including: –  Performance: improve pipeline management; ability to attract best contractors; ability to anticipate and resolve performance issues –  Health: improve relationships across stakeholders; increase in morale, accountability and ownership; heighten value proposition to current and potential workforce

▪ 

Though current recommendations focus primarily on streamlining project delivery, CU Boulder can engage in a broader set of available strategies for capital excellence which could potentially result in even higher savings

Athletics Complex – project review reveals that the Athletics Complex faced several challenges in scope and schedule management due to complex, often unclear, multi-party interactions at an accelerated pace

▪ 

Scope misalignment between Athletics, designer, and PD&C resulted in ongoing changes and cost escalations throughout the project lifecycle

▪ 

High staff turnover – both internal and external to PD&C – created coordination and communication challenges given lack of continuity in an already fast-tracked project

▪ 

In order to prevent future costs, project closeout and quality assurance is an important final step and may require additional support to supplement capacity of existing team structure

Pre-Decisional - Proprietary and Confidential | 2

Over the past 5 years, CU Boulder’s capital spend has been concentrated on Major projects with a valued budget of ~$870M PRELIMINARY Number of projects

Total budget on projects1

Examples Project size range Total value

302

Major

Category I Range $2-$50 Total value $318M

Category II Range $50-$100 Total value $240M

Category III Range $100+ Total value $308M

$867M Range $500K-$1M Total value $42M

980

Minor

Range $25k-$500K Total value $91M

$171M

Range $1-$2M Total value $39M 957

Outlays

Projects over $2M ▪  Athletics Complex ▪  Systems biotechnology building ▪  Recreation facilities improvements

Projects between $25k$2M ▪  Food service renovation ▪  Replace boilers, roof ▪  Lab renovation

$8M Projects under $25k ▪  Sound proofing ▪  Temporary cooling ▪  Fire alarm upgrade

1,967

Total

$1,046M

1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015 2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M

Source: PD&C, Team analysis

Pre-Decisional - Proprietary and Confidential | 3

Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays PRELIMINARY

NON-EXHAUSTIVE

USD Million

Initial legislative spending limit2

Athletics Complex1

142

System Biotech Projects impacted by significant scope or timeline fluctuations

160

113

Campus Utility1 SEEC1

USD Change in legislative spending limit 18

169

75

91

60

56 16

112

53

% Change in legislative spending limit

50% 21% 88%

28

37

10

35%

SB Academic Wing1

22

28

6

28%

Ketchum1

13

23

10

75%

Ekeley Middle Wing

12

14

2

17%

SPSC - Data room

12

N/A

N/A

N/A

0

0%

0

0%

64

64

43

43

EUCLID1 (CASE) Wilderness1

18

20

3

14%

IBS

14

16

2

13%

Bball/ Vball Practice

11

11

0

2%

Wilderness - Recom

7

7

0

0%

Stad - Video Board

7

7

0

0%

5

5

0

0%

Glenn Miller Ballroom

4

4

0

10%

Hallett Renovation

4

4

0

0%

Atmospheric Lab

3

3

0

0%

GIPF Bldg

(Athletics) 1

Detailed next

12%

JILA

Rec Facilities

Normal projects

Current legislative spending limit3

Observed difference in performance between projects which are pursued as expected and those impacted by: ▪  Accelerated scheduling ▪  Significant or constant scope changes ▪  Delayed timing in decision-making

1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval

Source: Team Analysis, PD&C

Pre-Decisional - Proprietary and Confidential | 4

Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities Opportunities to increase efficiency and effectiveness

Cross-cutting

Project execution

Contracting

Design

Capital Planning

▪  ▪  ▪  ▪  ▪  ▪  ▪ 

More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project Augment alignment between PD&C and administration in regards to project budget estimates and timelines Continue with recently launched effort for early engagement of Project Manager in project lifecycle

Emerging themes for developing excellence

▪ 

Develop a clear, welldocumented, and scalable stage gate process to drive capital investment success

▪ 

Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability

▪ 

Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability Consistently enforce contract terms in the field leading to lower owner risk

▪  ▪  ▪ 

Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)

▪ 

▪  ▪  ▪ 

Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency

Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of insight Provide training for onboarding new employees and continuous development

▪ 

Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management

▪ 

Source: Interviews

Pre-Decisional - Proprietary and Confidential | 5

CU Boulder can adapt best practices in capital management across the four themes to continue to pursue excellence Emerging theme Stage-Gate process: how do projects move through A multiple fund and scope approval gates through the lifecycle?

▪ 

Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks

▪ 

Clear guidelines on contracting strategy to best manage owner risk

▪ 

Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability

▪ 

Tracking information on cost, schedule and milestones for each project

▪ 

Project controls dashboards enable PMs and Project Coordinators to: –  Proactively identify issues –  Ensure relevant information is at hand to contribute to the decision making process in a timely manner

▪ 

Standardized processes with capability building training to ensure consistent execution

▪ 

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

VGI-AAA123-20090508-

Contracting strategy entails defining 3 linked elements of a project … Key dimensions of contracting strategy

Key questions to be considered Delivery model (How do I determine optimal contracting scope?)

▪ Should I own the asset or are other ownership structures more suitable, e.g., lease?

▪ Which project value chain steps should be done internally and which ones by contractor(s)?

▪ Into how many contracts should the project scope be split? ▪ What is the optimal split of scope between the contractors?

1 Delivery model

Award process (How do I select my contractors?)

▪ How can the effectiveness of existing award process be enhanced ? ▪ How many and which suppliers/contractors should be invited? ▪ How do we get the suppliers interested? ▪ What is the criteria for evaluation various suppliers?

3 Contract terms 2 Award proces s

Contract terms (How do I ensure most optimal contracting terms?)

▪ What are the key project cost, performance, and schedule risks? ▪ Who is the natural owner of the risks? ▪ What mechanisms exist to transfer or share risk? ▪ How can objectives be aligned between owner and contractor to ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.? McKinsey & Company | 3

SJO-AAA123-20110525-

4 Planning and scheduling process

Create/ update plan

Process step

Users

▪ ▪

Progress measurement

Provide timely, accurate inputs Help in identifying critical milestones

▪

Create WBS Identify critical milestones Create/ update plan Publish plan

▪

▪

Customized analysis

Provide timely, accurate inputs Execute recommended focus actions

▪

Monitor & report project progress Recommend focus actions/ area Publish report

▪

▪

Identify required analyses Provide timely, accurate inputs

Roles

Printed

Single and comprehensive capital investment framework

W orking Draft - Last Modified 07-Sep-11 6:35:55 PM

Project Managers: how well is project D management best practice followed?

▪ 

Printed 4/6/2011 4:32:15 PM

Transparency: how do project controls C allow for “right information at the right time”?

Description

W orking Draft - Last Modified 9/7/2011 3:32:09 AM

Contracting: how project delivery and B contracting methods are selected

Best practice

Planning team

▪ ▪ ▪ ▪

▪ ▪

▪

Recommend & perform required analyses Publish analysis report

McKinsey & Company | 5

Pre-Decisional - Proprietary and Confidential | 6

STAGE GATE PROCESS

A Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects #

Funding gate

From...

#

Review-only gate

Operations PD&C Planning Led Process

Project Initiation/ Concept Development

Consultant and Contractor Selection

Program Planning 1

PD&C Project Manager Led Process

Schematic Design

Design Development

Construction Documents

Bidding and Negotiation

Construction

Close Out

2

Project Obtains Board Approval and is Funded

Cabinet Review and Authorization

…to PD&C Planning Led Process Project Initiation/ Concept Development

1

Program Planning/ Scope Selection

Is this needed? Is it a priority?

2a

PD&C Project Manager Led Process

Consultant and Contractor Selection

Schematic Design

Design Development

Construction Documents

2b

Is the best option still viable after scoping? Freeze Scope. Release full budget.

Develop feasible options. Release seed money.

Bidding and Negotiation 3

4

Close Out 5

Is the project ready to begin operation?

Is option still viable given the refined estimate?

Source: PD&C process, Expert interviews, Team Analysis

Start-up/ Commissioning

Construction

Is the project ready to be turned over?

6 Any outstanding accounts or issues?

Pre-Decisional - Proprietary and Confidential | 7

CONTRACTING PROCESS

B Proposed contracting process establishes a consistent risk based approach to enhance project outcomes Steps

Select a Delivery Model

▪ 

Goals

Actions

Who to involve

Establish a Contracting Strategy Playbook for optimizing cost/ schedule/quality aligned with State regulations and CU Boulder past experience

▪ 

Understand how alternative models (bundling, PPP, IPC) could be utilized to better spread risks

▪ 

Understand CU Boulder desired role (skill building)

Select a Contractor

▪ 

Integrate Contractor selection process into Contracting Strategy Playbook to best utilize process to meet cost, schedule or quality based outcomes

Determine Contract Terms and Sign §  Transfer project risks to align objectives between owner and contractors, not to outsource them §  Ensure the terms of the performance contract are pragmatic, clear, and measurable

▪  Develop Contracting Strategy

▪  Integrate contractor

▪  Develop standard language

▪  PD&C ▪  Legal ▪  Procurement ▪  Vice Chancellor ▪  Contractor Rep ▪  Design Team Rep

▪  PD&C ▪  Legal ▪  Procurement ▪  Vice Chancellor ▪  Contractor Rep ▪  Design Team Rep

▪  PD&C ▪  Legal ▪  Procurement ▪  Vice Chancellor

Playbook working group to explore best delivery options of CU Boulder projects

selection methods into Contracting Strategy Playbook ▪  Formalize Contractor Score Card

added to State contracts to provide a fair and equitable balance of risk on large Capital Projects

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TRANSPARENCY

C CU Boulder requires a systematic approach to building transparency among stakeholders in project delivery Description

▪  Define key data and clear C1 KPIs for project delivery

▪  ▪  ▪ 

Create an C2 accessible KPI dashboard

▪  ▪ 

Provide a forum for C3 decision making

▪ 

CU Boulder should define Key Performance Indicators (KPIs) at a project level based on project categories defined (i.e. Major, Minor, and Outlays) with clear targets across each An individual should also be identified as a responsible party for reporting and meeting the KPI target (may be different individuals) Clear direction and training should be provided on how to calculate and report the KPI KPI dashboard should be accessible at multiple levels (e.g. project level and portfolio level) to the relevant stakeholders The accessible dashboard can be communicated widely to build transparency among all stakeholders (e.g. users, administration, PD&C) and increase project accountability KPI dashboards can be used as a tool in a regular forum of stakeholders (e.g. a Project Review Board) to discuss project progress Project Review Boards will also help resolve issues proactively as it will: –  Enable decision makers to have the right information –  Allow PMs to raise concerns at right time

KPI dashboard is designed at both project and portfolio level Source: Expert interviews, Team Analysis

Pre-Decisional - Proprietary and Confidential | 9

PROJECT MANAGER PERFORMANCE

D D Project manager performance is the single most influential driver of construction project profitability Highest priority Skills

Project performance is not correlated with: ▪  Geography ▪  Asset class ▪  Complexity ▪  Customer ▪  Project manager age or tenure (“grey hair”)

Source: Interviews, Team analysis

II

III

IV

Mgmt capabilities Financial astuteness

We have found that project performance is highly correlated with project manager capabilities

Commercial orientation

I

Org capabilities

We have run an analysis of 10,000 projects, checking the correlation of project performance with different factors

High performing PMs excel at these skills

Train Sustain

1.  1

Optimizing schedule, scope, and cost dimensions

2 1. 

Planning & tracking project performance

3 1. 

Managing internal and external teams

4 1. 

Understanding financial statements

5 1. 

Mitigating project risk

6 1. 

Maintaining project lifecycle view

1.  7

Overseeing contractors effectively

8 1. 

Mastering contract details

1.  9

Leveraging organization resources

1.  10 Managing client needs (e.g. change orders)

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PROJECT MANAGER PERFORMANCE

D A field and forum format ensures appropriate balance between effort, effectiveness, and reach ILLUSTRATIVE Forum Classroom setting where skills are taught by experienced PMs and “standard setters”

Preparation for forums ▪  Select participants ▪  Plan curriculum and field work

▪  ▪ 

▪ 

Set expectations through program overview Deliver first series of workshops combining activities and pure lecture modules Outline field work assignments

#1 (1 day)

▪  ▪ 

▪ 

Celebrate stories of success from field work Establish forum for PMs to discuss what worked and what was challenging Deliver next set of lectures and field work

#2 (1 day)

Train Sustain

Session sequence ▪  Forum 1 – Overseeing contractors effectively and Mitigating project risk ▪  Forum 2 – Planning & tracking project performance ▪  Forum 3 – Managing client needs ▪  Forum 4 – Managing internal & external teams #4 (1 day)

2016

Q4

Source: Team analysis

Skills

Repeat defined forum format

#3 (1 day)

2015

Field Practice application of lessons and coaching sessions to help PMs operate with excellence

▪ 

Q1

Q2

Field work (~12 weeks)

▪ 

Fill out KPIs and use to have discussions with management, clients, and contracts on the progress and performance of projects

Partnering with training provider can help reduce timeframe required for field work

Q3

Field work (~12 weeks)

▪  ▪  ▪ 

Provide workshops for clients on PD&C’s processes Perform “project kick-off” with client Use transparency tools throughout project

Q4

Field work (~12 weeks)

▪  ▪ 

Leverage contracting playbook during contracting Create risk assessments before project on critical areas and develop mitigation plans

Field work (~12 weeks)

▪  ▪ 

Coach new PMs in process Engage with internal/ external teams to develop improved working processes

Pre-Decisional - Proprietary and Confidential | 11

Applying capital productivity levers can increase CU Boulder’s effectiveness and improve its organizational health in the project delivery functions Applying capital productivity levers can achieve substantial efficiency in capital deployment….

…in addition to multiple other benefits to University of Colorado, Boulder

▪ 

Estimated savings of 15% of the overall capital spend based on select levers of streamlining project delivery: –  Stage-Gate process: move through multiple fund and scope approval gates across lifecycle allocating full funding when with a higher degree of cost certainty –  Contracting: select the project delivery method and contract terms to match the project goals and share risks –  Transparency: add project controls and tracking to provide “right information at the right time” –  Project Managers: spread project management best practice to create consistent approach

▪ 

Grow a transparent and trust-based relationship across all stakeholders (Board of Regents, Administration, Planning, Design & Construction, and Users) involved in project delivery

▪ 

Increase morale, accountability, and ownership of projects in project delivery functions

▪ 

Better able to attract and retain top talent in the project delivery functions at CU Boulder

▪ 

Better able to manage the pipeline of upcoming projects from an internal resource perspective

▪ 

Attract best contractors to engage in project delivery of complex and base projects

▪ 

Better able to anticipate and resolve project performance related issues

Estimated savings of 30% based on all capital levers across project prioritization, streamlining delivery, and making the most of existing facilities

▪ 

Maintain and enhance the beauty of the unique campus architecture in a cost effective manner

▪ 

Source: Expert interviews, Team Analysis

Pre-Decisional - Proprietary and Confidential | 12

PM Tools

Transparency

Contracting

Stage gate

CU Boulder has started initiatives that address aspects of the four recommendation focus areas Initiative

Description

Involving PM earlier in the process

Involving PM earlier at project conceptualization instead of Design Development phase

Leverage technology for permitting and inspections

Implementing electronic permitting technology to ensure tracking of permitting and inspection

Engaging contractors with performance specifications

Investigating use of performance-based specifications to transfer risk to contractor and design team

Simplifying campus design formats

Redeveloping campus design standards to more concise format

Detailing project plans through Project Charter

Providing an executive summary of Program Plan covering agreed budget, schedule, and scope, signed by PD&C and Administration

Creating Key Performance Indicators dashboard

Developing preliminary set of project KPIs dashboards with Office of Performance Improvement

Investing in software tools and solutions

Undergoing an evaluation of software options to be used across Facilities Management (e.g. developing database for smaller projects to provide better cost estimates)

Source: CU Boulder Master Plan and Interviews

Pre-Decisional - Proprietary and Confidential | 13

Overall implementation plan Phase 1: quick wins & critical actions

PRELIMINARY

Phase 2: building excellence

Activity A. Stage gate process Share plan and create SG working group Define stage-gate process for CU (roles, deliverables, etc @ each gate) ▪  Major projects ▪  Complex Minor and Outlays Syndicate with key stakeholders Launch: pilot, adjust, scale to all complex projects Assess results and define next steps (e.g. extend to base Minor and Outlays projects) B. Contracting strategy Identify CS working group Create contracting strategy playbook Syndicate with key stakeholders Launch: pilot, adjust, scale to all projects Assess results and define next steps C. Transparency Syndicate version 1.0 of transparency measures (dashboard and PRB) Implement version 1.0 for all Major projects Design, pilot, and adjust PRB & dashboard v2.0 Scale v2.0 to all projects Assess results and define next steps D. Project Managers Identify mode for PM trainings (internal/external) Map needed PM skills (and current state) Design program (curriculum and format) Launch field and forum trainings Define & implement policy to ensure sustainment (e.g. training refreshers, assessments, etc.) Assess results of PMs and define next steps E. PMO for implementation

2015

2016

Oct Nov Dec

Jan

Phase 3: sustaining excellence

Feb Mar

Apr

Phase 4: future considerations

May Jun Jul

Aug Sep Oct

Nov Dec

Implementation of 1.0 continues until v2.0 is scaled to all

Workshop(s) to share recommendations and future plan Source: Team analysis

Pre-Decisional - Proprietary and Confidential | 14

Appendix

Pre-Decisional - Proprietary and Confidential | 15

Contents

▪  Organization context ▪  Athletics project review ▪  Overall diagnostic ▪  Recommendations ▪  Value at stake ▪  Implementation plan

Pre-Decisional - Proprietary and Confidential | 16

Planning Design & Construction is a ~65 FTE organization within Facilities Management that manages project delivery for CU Boulder Department of Facilities Management – Planning, Design and Construction Facilities Management PD&C

Facilities Planning (7)

Facilities Engineering (12)

CAD/Document Management/ CASP (6)

Design & Construction (37)

Office Administration (3)

▪ 

▪ 

▪ 

▪ 

▪ 

▪  ▪  ▪ 

Manages and directs the planning and design of campus facilities and grounds Maintains the space database Processes official requests for space Performs space utilization/needs analyses

▪ 

▪ 

▪ 

Reviews designs for compliance with codes, UCB standards, good engineering practices Provides engineering support to the facilities maintenance and operations staff, design guidance to UCB project managers, and designoversight of consultants. Develops and maintains university standards, design guidelines, and construction-requirements lists in cooperation with maintenance staff. Ensures code compliance

Source: CU Boulder organizational chart and PD&C website

▪ 

▪ 

▪ 

Maintains library of campus site and building engineering drawings Catalogs and archives campus project documents and related materials Updates achieve drawings accurately reflect the campus and its structures. Develops and maintains campus GIS and maps database

▪ 

▪ 

Provides administrative, management and professional services required to facilitate and accomplish projects on the campus Coordinates the bidding process procuring consulting services Administers and maintains contracts, budgets, and schedules

Supports PD&C

Pre-Decisional - Proprietary and Confidential | 17

PD&C uses the following capital construction process for Major BCPC = Boulder Campus Planning Commission projects (1/2) CCHE = Colorado Commission on Higher Ed. FM = Facilities Management

Project Initiation and Feasibility

Program Planning

▪ 

Defines the basic scope and likely cost of the project

▪ 

Informs the administration about the project

▪ 

Secures campus administration approval to proceed with development of a program plan

▪ 

▪ 

▪ 

Outcome: Approval to prepare a Program Plan

Source: Colorado.edu

▪ 

Defines the programmatic requirements for the designer Defines limits of work, including site and infrastructure requirements Builds consensus as to scope, cost and time line of the project Defines the financial plan and sources of funds

Outcome: Campus agreement on scope of project and a funding plan identifying sources of revenue

Approvals

▪ 

Secures Approval from Board of Regents and CCHE

▪ 

Incorporates project into larger capital financial planning of university and state

▪ 

▪ 

Develops support for the project at all levels of state government

Architect Selection

Concept and Schematic Design

▪ 

Selects the mostqualified architect and engineering firms to do the project

▪ 

Confirms and enhances program plan requirements

▪ 

▪ 

Encumbers money to begin the project

Generates concept for final building

▪ 

Contractors are selected for some delivery methods

▪ 

Provides room by room layout of spaces

▪ 

Secures approval of DRB and review by BCPC of schematic plans

Secures funding for State-funded project

Outcome: Authorization to begin expending money on a capital construction project

Outcome: A design team is contracted to design the entire project

Outcome: Schematic design is approved and project budget is confirmed

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PD&C uses the following capital construction process for Major BCPC = Boulder Campus Planning Commission projects (2/2) CCHE = Colorado Commission on Higher Ed. FM = Facilities Management

Design Development

▪  ▪ 

Develops detailed room requirements Integrates infrastructure systems into the building design

▪ 

Provides pricing documents for contractor

▪ 

Secures final DRB approval and other entitlements

Outcome: Design Development is approved within the contract budget.

Source: Colorado.edu

Construction Documents

▪ 

▪ 

▪ 

Translates the design intent into documents from which a builder can construct the project Describes the quantity and quality of the materials to be provided by the contractor Provides final estimates of the project prior to bidding

Outcome: A complete set of plans and specifications is produced that describes the design fully.

Bidding & Negotiation

▪ 

▪  ▪ 

Initiates procurement processes for all trades Produces a final construction price

Construction

Occupancy and Warranty Period

▪ 

Contractor constructs the project

▪ 

▪ 

FM ensures that the building is built per plans and specs and meets building codes

The building is occupied by the users for which it has been designed

▪ 

FM monitors the project to identify and correct any construction defects

Contracts with builders to construct the project

Outcome: Final contract for construction

Outcome: The project is realized

Outcome: The building is accepted and available to move in

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Contents

▪  Organization context ▪  Athletics project review ▪  Overall diagnostic ▪  Recommendations ▪  Value at stake ▪  Implementation plan

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Athletics Complex has been a challenging program and continues to be a source of concern for CU Boulder

▪  Original Program Plan called for a phased approach and was envisioned to be completed August 2016/17 –  Accelerated timeline and performing all phases concurrently has created additional stress on delivery model

▪  Internal misunderstanding in early phases between Athletics and PD&C resulted in ongoing project changes and cost escalations

▪  Lack of team continuity, both internal and external, created hand-off challenges and eventually coordination and communication challenges

▪  GMP was not executed, despite constant assurance provided by Mortenson and an agreed upon scope and budget that led to an agreement in GMP –  GMP agreement of USD 141 M achieved in April 2015 –  In May 2015 Mortenson refused to sign

▪  Quality assurance during project closeout is an important final step in Athletics Complex project in order to prevent future costs and may require additional support to supplement capacity of existing team structure –  Current closeout process is mainly safety focus and user has already discovered some closeout issues

Source: PD&C, Team analysis

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Introduction to the Folsom Field ‘Athletic Complex’ upgrade plan Athletic Complex project was intended to modernize and advance CU’s facilities among growing talent competition

Phases were intended to help reduce cost and inconvenience of a full blown construction site but would have taken longer

▪  ▪ 

▪ 1

Phase 1: 4th Floor Buildout

▪ 2

Phase 2: Indoor facility, practice field, and parking

▪ 

▪ 

Last major construction effort in 1991 with addition of Dal Ward Upgrade to the facilities was an effort to increase recruitment success of top-performing student athletes which were being drawn to nearby schools with more advance facilities Original Program Plan (and original cost) called for a phased approach with the following phase split: –  Phase 1: 4th Floor Build-Out to serve as Olympics Sports Offices (USD 6.1 M) –  Phase 2: Indoor facility, practice fields, site development, and above ground parking lot (USD 117.9 M) –  Phase 3: Dal Ward renovation1 (USD 15.8 M) Original occupancy date was estimated August 2016/17

Contract was drafted as a Design/Build with a Guaranteed Maximum Price (GMP) but clause was not executed

▪  ▪ 

▪ 

Under design/build contract, lead contractor is tasked with developing designs for the end building and executing on that design GMP clause is a clause which sets an upper budgetary limit which project is expected not to surpass. Costs which exceed that limit are not to be paid by the client and is an effective risk mitigation tool –  GMP clause was never formally executed by Mortenson Contract form is ideal for fixed and known project scope, situations similar Folsom Field ‘Athletic Complex’ with evolving scope is not best suited

▪ 3

3 1 2

Phase 3: Dal Ward

Winners of contract were contractor Mortenson and architectural engineering firm Populous

Role on project Team Governance Site presence

▪ 

Winning contractor, led contractor relationship with CU

▪ 

Design part of bid team, essentially worked for Mortenson

▪ 

Final decision-maker for build team

▪ 

Made recommendations which needed Mortenson’s approval

▪ 

Multiple staff flying in as needed

▪ 

Select staff moved to Boulder, others

1 Includes Space for Olympic Sports teams and their support spaces, training table, and renovated and expanded academic support center Source: Interviews, Athletic Complex Program Plan

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Athletics Complex has been impacted by high rates of personnel turnover both at CU and Mortenson Lack of continuity has significantly impacted progress of the project Group

Position

Active period 2013

Athletics Department Planning, Design, & Construction Administration

Mortenson

Athletic Director

AD 1

Assistant AD

AAD 1

Campus Architect, Director of PDC

CA 1

Project Manager User Rep

2014

2015

Present

AD AAD 2 CA 2 PM 1

UR 1

PM 2 No replacement

Dir of Project Dev

Dir 1

Dir 2

C&D Liaison

CDL 1

Lead estimator

LE 1 and CDL 2

VP, Gen Manager

VP 1

SR Proj Manager

PM 1

Project Manager

PM 1

Lead Designer

LD 1

Multiple PMs

Populous

Source: Interviews

Pre-Decisional - Proprietary and Confidential | 23

Changes represented a significant upward budgetary push, which were offset by cost cutting initiatives in other areas of the project PRELIMINARY

USD millions Increases driven by twelve significant scope evolutions, but those increases were controlled by three reductions 1 Indoor Parking1

24

▪ 

Focus of changes only on significant changes to scope

▪ 

Does not include required changes to schedule, manpower, and other changes required to support scope change

2 IPF2 Track

11

8

Rooftop Design

3 5

IPF2 Height Reduct

-1

7

5th

Floor Add-on

4

0.3

6

Dal Ward

-6

1

Total

1

12

Footprint

Aud/ Vis

1

8

9

2

13

10

Rooftop bridge

0.4

Grounds Temp

1

Kitchen

1

Brand

0.2

IPF2 Sprinklers

Total

0.7

Total

2

Total

1

Total

0.2

Total

14

-0

3

15

16

Tenant Finish

1

Value Eng

-2

DAS Systems

0

Total

1

Total

-2

Total

0

1

-2

3 2 1 Feb

1

0

Jun

Jul

0

7

Apr

Total

1

Mar

May

Sep

Dec

Jan

2014

2015

1 Separate project but had schedule and cost implications on Athletics Complex 2 IPF = Indoor Practice Field Source: Interviews

Pre-Decisional - Proprietary and Confidential | 24

Going forward, there are three important considerations for the Athletics Complex project

1 As of December 2015, the project is 93% of budget (USD 140 M) has been released to Mortenson 2 Current closeout process has strong administrative and safety focus, no identifiable quality assurance closeout plan is in place and may require additional support capacity 3 Throughout the project, Mortenson provided constant assurance to CU personnel that project was on track with agreed upon budget and timeframe

Source: Interviews, Press Search, Mortenson

Pre-Decisional - Proprietary and Confidential | 25

Contents

▪  Organization context ▪  Athletics project review ▪  Overall diagnostic ▪  Recommendations ▪  Value at stake ▪  Implementation plan

Pre-Decisional - Proprietary and Confidential | 26

Overall capital program diagnostic Quantitative performance on CU Boulder’s capital portfolio over the past 5 years shows overruns and delays for a set of Major projects as well as underruns for Minor and Outlay projects

▪ 

Major projects (projects above $2M) comprise of 80% of the spend. Approximately 8 projects requiring additional spending limit were typically those impacted by accelerated timeline, scope changes, or decision delays

–  Significant portion of the spend, ~$250M, is still outstanding and provides an opportunity to improve project delivery in on-going projects

–  Though market conditions impacted the overall cost of projects since 2009, there is no immediate impact on attractiveness of CU projects based on bid analyses

▪ 

More than half (>1000 projects) of all Minor and Outlay projects are completed at 5% or more under the original target cost, similar to other public agencies

Qualitative analyses and review of select Major projects show that CU Boulder’s capital program faces challenges in both strategy and project delivery with the following key opportunities:

▪ 

Capital planning: Meet target costs by rethinking approval process to match the release of funds to the maturity level of the project

▪ 

Contracting methodology: Manage owner risk through clear guidelines on selection project delivery method or contracting terms

▪ 

Communication: Manage risks proactively by increasing project tracking and clarity in communicating progress with appropriate stakeholders

▪ 

Project Manager workforce: Increase consistency in PM workforce through structured training and onboarding processes and a decrease in turnover Pre-Decisional - Proprietary and Confidential | 27

Over the past 5 years, CU Boulder’s capital spend has been concentrated on Major projects with a valued budget of ~$870M PRELIMINARY Number of projects

Total budget on projects1

Examples Project size range Total value

302

Major

Category I Range $2-$50 Total value $318M

Category II Range $50-$100 Total value $240M

Category III Range $100+ Total value $308M

$867M Range $500K-$1M Total value $42M

980

Minor

Range $25k-$500K Total value $91M

$171M

Range $1-$2M Total value $39M 957

Outlays

Projects over $2M ▪  Athletics Complex ▪  Systems biotechnology building ▪  Recreation facilities improvements

Projects between $25k$2M ▪  Food service renovation ▪  Replace boilers, roof ▪  Lab renovation

$8M Projects under $25k ▪  Sound proofing ▪  Temporary cooling ▪  Fire alarm upgrade

1,967

Total

$1,046M

1 Representative project scale but not exhaustive. Current budget for projects from March 2010 after the implementations of the CP module to September 2015 across all stages of development from planning (~$30 M) to closed. Budget defined as most recently approved budget in FAMIS as of mid-September 2015 2 Two grants listed as separate projects were merged with their associated projects. Three projects out of the 30 are ESCO with combined project value of USD ~21 M

Source: PD&C, Team analysis

Pre-Decisional - Proprietary and Confidential | 28

Projects requiring additional spending limit were typically impacted by accelerated timeline, scope changes, or decision delays PRELIMINARY

NON-EXHAUSTIVE

USD Million

Initial legislative spending limit2

Athletics Complex1

142

System Biotech Projects impacted by significant scope or timeline fluctuations

160

113

Campus Utility1 SEEC1

USD Change in legislative spending limit 18

169

75

91

60

56 16

112

53

% Change in legislative spending limit

50% 21% 88%

28

37

10

35%

SB Academic Wing1

22

28

6

28%

Ketchum1

13

23

10

75%

Ekeley Middle Wing

12

14

2

17%

SPSC - Data room

12

N/A

N/A

N/A

0

0%

0

0%

64

64

43

43

EUCLID1 (CASE) Wilderness1

18

20

3

14%

IBS

14

16

2

13%

Bball/ Vball Practice

11

11

0

2%

Wilderness - Recom

7

7

0

0%

Stad - Video Board

7

7

0

0%

5

5

0

0%

Glenn Miller Ballroom

4

4

0

10%

Hallett Renovation

4

4

0

0%

Atmospheric Lab

3

3

0

0%

GIPF Bldg

(Athletics) 1

Detailed next

12%

JILA

Rec Facilities

Normal projects

Current legislative spending limit3

Observed difference in performance between projects which are pursued as expected and those impacted by: ▪  Accelerated scheduling ▪  Significant or constant scope changes ▪  Delayed timing in decision-making

1 Ongoing project | 2 Initial legislative approval | 3 Current legislative approval

Source: Team Analysis, PD&C

Pre-Decisional - Proprietary and Confidential | 29

Specific context of building projects reveal important details about on the dynamic process of design and construction (1/3) Athletics Complex

System Biotech

▪ 

▪ 

▪ 

Driver for cost change: Accelerated project timeline, insufficient time for program planning complex project Additional context –  Accelerated timeline provided limited time for planning efforts to which external consultant was hired to supplement –  Inadequate familiarity/attention to capital process and requirements by new campus staff –  Important changes and decisions were being made as late as construction

▪ 

Driver for cost change: Unforeseen construction escalation in laboratories and need to master plan the building site for East Campus Additional context –  Efforts were required to master plan the site for East Campus impacting the budget and schedule –  Laboratory facilities required more advanced features than expected –  Additional design fees for LEED certification

Campus Utility

SEEC

▪ 

▪ 

▪ 

Driver for cost change: Delayed approval and new environmental requirements Additional context –  Original program plan developed in 2007 which set budget in dollars for that market –  Original plan called for $134 M project but program was only approved for $75 M – plan was reworked –  Approved 2011 plan operated in a more expensive market; student support for continued CoGen

Source: Team Analysis, PD&C

▪ 

Driver for cost change: Delayed funding, changed site and program fluctuation Additional context –  Program planning efforts began in 2002 and were paused, restarted and finalized in 2008 –  Series of approval delays and program plan amendments led to the escalation of cost compared to original budget request –  Nature of the building and the market costs changed significantly from 2008 to 2015

Pre-Decisional - Proprietary and Confidential | 30

Specific context of building projects reveal important details about on the dynamic process of design and construction (2/3) JILA

Systems Biotechnology Academic Wing

▪ 

▪  ▪ 

▪ 

Driver for cost change: Delayed federal funding and unforeseen construction needs Additional context –  Original project cost estimated in 2007 but federal funding was not available until 2009 –  Unforeseen existing conditions around hazardous materials were discovered underground (e.g. aged plant fuel storage tanks) –  High sensitivity of research equipment required advanced vibration-prevention features

Driver for cost change: Delayed funding availability Additional context –  Educational wing of this facility delayed from 2006 to 2015-16 due to the demand for state capital construction funding and economic hardship –  Original cost was completed before the construction upswing in the Denver area –  Increase of cost driven by higher market demand and inflationary cost which occurred between 2008 and present day

Ketchum

Ekeley

▪ 

▪ 

▪ 

Driver for cost change: Scope significantly evolved from original capital renewal scope Additional context –  First state funding request was in 1998 which was only for capital renewal of the building; Circa 1938 building –  Appropriated design funds rescinded along with construction phase funding in 2007-08 –  2014 funding was granted for a complete overhaul with an expanded program plan

Source: Team Analysis, PD&C

▪ 

Driver for cost change: Delayed funding and inflationary impact of costs Additional context –  Project plan originally scoped in late 1990s –  Appropriated design funds rescinded along with construction funding in 2007-08 –  Inflationary cost pressures from the original funding approval impacted the budgetary needs of the project

Pre-Decisional - Proprietary and Confidential | 31

Specific context of building projects reveal important details about on the dynamic process of design and construction (3/3)

SPSC – Data Room

▪  Driver for cost change: Cost decreased significantly due to ▪ 

dramatic technological innovation in market Additional context –  Original plan was to develop a facility to hold data servers to back-up crucial university information –  Popularization of online “cloud” memory capabilities significantly drove down the need to purchase devices to support data needs of university –  Project costs were dramatically reduced

Source: Team Analysis, PD&C

Pre-Decisional - Proprietary and Confidential | 32

Denver market conditions impact project performance (both positively and negatively) and need to be accounted for in planning 4,500 6,890

6,985

7,010

7,078

7,000

4,450 6,341

6,384

4,450

4,400

6,500

4,300

5,000 4,500

4,250

4,000

4,150

4,178

Recession recovery

3,500

Growth period

3,000

4,092

4,100

Observations: ▪  Denver area market experienced growth increase in prices over the past five years

▪ 

From June 2009 to July 2010 the compound aggregated growth rate was 1.91% for BCI and 3.04% for CCI

▪ 

Further pricing pressure may existing due to scarcity of labor at subcontracting levels and increasing project demands coming online

2,500 2,000

4,050 4,000

CCI

5,500

4,317

4,200

BCI

6,000

4,342

4,350

7,500

1,500

3,975

1,000

3,950

500

3,900

0

2010

2011

2012

2013

2014

2015

NOTE: The ENR indexes measure how much it costs to purchase the following hypothetical package of goods compared to what it was in the base year. The CCI uses 200 hours of common labor, multiplied by the 20-city average rate for wages and fringe benefits. The BCI uses 68.38 hours of skilled labor, multiplied by the 20-city wage- fringe average for three trades– bricklayers, carpenters and structural ironworkers. For their materials component, both indexes use 25 cwt of fabricated standard structural steel at the 20-city average price, 1.128 tons of bulk portland cement priced locally and 1,088 board ft of 2x4 lumber priced locally.

Source: Engineering New Record, Team analysis

Pre-Decisional - Proprietary and Confidential | 33

Analysis of bids reveal CU projects are attractive to general market Project

Construction start

Project budget (USD M)

Total interested bidders

13

Total qualified bidders

6

6

Highest – Lowest Spread (%) 11%

Second Lowest – Lowest Spread (%) 3%

IBS

Jun ‘09

Sys biotech

Sep ‘09

B/V Ball

Apr ‘10

11

8

WLRD Rec

May ‘10

7

7

HLET

May ‘10

4

Jila

May ‘10

East Elect

May ‘11

4

Video board

Apr ‘12

7

Rec facility

Jun ‘12

Utility syst

Aug ‘12

EKLC

Apr ‘12

Comp data

Aug ‘13

4

4

12%

3%

Atmos lab

Aug ‘13

3

4

12%

1%

MAC

Dec ‘13

Athletics

Apr ‘14

GM Ballrm

May ‘14

4

GIPF Blg

Sep ‘14

7

Ketchum

Jan ‘15

Wilderness

Mar ‘15

Ecme Hvac

Sep ‘15

Euclid

Oct ‘15

E-wing

Jan

‘161

1 Expected construction start

Source: PD&C, Team Analysis

9

143

4

32% 10%

5

32

13

0%

14%

6 5

5%

24%

4%

23%

6%

6

41%

4

18%

64

10

86

5

13

14

91

23%

4 14

6

8

32

3 10

2 43

13% 23%

2 6 Ø8

6%

4

5

40% 3%

6%

11 2

17%

46%

3

22

25%

4

10

148

6%

32%

3

9

3% 2%

35%

8

5%

40% 13%

5

22% 1% 0%

17%

3

4% 40%

Ø 23

No discernable trend can be identified when reviewing past history of Major bids, while total number of interested bidders is trending lower in 2nd half of 2015

15% Ø8

Pre-Decisional - Proprietary and Confidential | 34

Minor and Outlay projects are routinely under budget Total budget over/underrun USD Millions

#

Minor projects1 N = 7862

Outlay projects1 N = 6102,3

342

▪  ▪ 

▪  ▪ 

55% of projects USD 20.2 M underrun

64% of projects USD 1.5 M underrun

214 186

106

5

5-20

20-50

50+

0

0.6

3.1

3.1

15

>-20 -20- -5

-5-5

5-20

20-50

50+

Percentage over/under budget 14.7

▪ 

Underruns in Minor and Outlay projects amount to ~$22M, less than 2% of overall capital budget over five years

▪ 

Underruns are expected given low project values and lack of knowledge on existing field conditions

99

Percentage over/under budget -0.2

Majority of projects were under budget by more than 5% (55% of Minor and 64% of Outlay)

122

24 -5-5

▪ 

176

1092

10

>-20 -20- -5

PRELIMINARY

-0.1

0

0

0.2

0.5

0.8

1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015 2 Excludes projects with USD 0 spend, Minor = 11 and Outlay = 12 3 Excludes 215 closed projects with a budget of USD 0 but representing USD 890 K of actual spend Source: PD&C, Team Analysis

Pre-Decisional - Proprietary and Confidential | 35

Among other public organizations, regular underruns for Minor and Outlays are not uncommon but may constrain user PRELIMINARY access to capital Underrun represents approximately 18% of total budgeted amount for Outlay and Minor projects1… Outlay

USD Millions 129

8

-22 2

…which is in line with other public organizations setting budgets for similar projects Average % budget underrun

Minor

21

107

1 0

Public org 1

14-18%

0 Up to 30%+

Public org 2

120 CU

▪  Budgeted

Underrun

Overrun

Spend

▪ 

18%

Potential to unlock limited value by tightening budget estimation processes or employing staged release of funds during project execution –  Lower underruns may allow greater budget to perform more projects Performance metrics need to capture user satisfaction, delivery schedule, and execution cost

1 Includes Substantial Completion, Post Construction, and Closed Representative from March 2010 after the implementations of the CP module to September 2015 Source: PD&C, Team Analysis, Press search

Pre-Decisional - Proprietary and Confidential | 36

Rapid diagnostic evaluates the effectiveness of CU Boulder’s Capital program across the following dimensions Best practice area

▪ 

Formal mechanisms for ensuring corporate strategy implementation

Risk/return appetite estimation

▪ 

Establishing corporate/group level risk and return expectations

Capital headroom calculation

▪ 

Calculation/simulation of cash generation and investment ability

Portfolio review

▪ 

Top down review of project portfolios, including improvement potential

Portfolio allocation

▪ 

Selecting projects for execution, understanding interactions, risk

Ongoing returns tracking

▪ 

Evaluating how results match to risk/return appetite

Opportunity Origination

▪ 

Initial scoping of opportunities and preparation for project success

Business case optimization and concept selection

▪ 

Development and testing of concepts against a reference case for most effective selection

Design, procurement, & contracting

▪ 

Detailed project design, planning, and procurement

Construction & Execution

▪ 

Tactical project execution – including scope changes

Comm. & Ramp-up

▪ 

Startup and handoff to ongoing operating team

Project control

▪ 

Assessing project outcomes, establishing feedback loops

Organization

▪ 

Organization structures and standards applied to capital

Mindsets and capabilities

▪ 

Personnel attitudes and skill sets devoted to capital

Processes and tools

▪ 

Enabling systems applied to capital budgeting and delivery

Capital Strategy Strategy translation

Portfolio Strategy

Project Delivery

Enablers

Description

Source: McKinsey Capital Productivity Practice

Pre-Decisional - Proprietary and Confidential | 37

Rapid diagnostic based on interviews and select project reviews reveals that strategy as well as project delivery are below industry average at CU Boulder

PRELIMINARY

Enablers Project delivery Opportunity origination

Concept selection

Project definition and approval

Project execution

Project ramp-up

Project control

Commissioning and ramp-up

Organization 4.0

Processes and tools Mindsets and capabilities

3.0 2.0

Construction and Execution Design. procurement. and contracting Business case definition and concept

Strategy translation to asset base

1.0 0.0

Risk/Return appetite

Industry average = 2-3

Opportunity origination Ongoing returns tracking

Capital headroom calculation

Capital Strategy

Portfolio review Portfolio allocation

Portfolio Strategy

Source: Based on 40+ interviews with PD&C

Pre-Decisional - Proprietary and Confidential | 38

Based on 40+ interviews, select project reviews, data analysis, and focus groups we identified a set of opportunities Opportunities to increase efficiency and effectiveness

Cross-cutting

Project execution

Contracting

Design

Capital Planning

▪  ▪  ▪  ▪  ▪  ▪  ▪ 

More consistent Program Planning efforts, aligned with paced project schedule to decrease owner risk Address backlog in maintenance through improved capital allocation Enhance integrated portfolio view with clear project prioritization Rethink approval process to match the release of funds to the maturity level of the project Augment alignment between PD&C and administration in regards to project budget estimates and timelines Continue with recently launched effort for early engagement of Project Manager in project lifecycle

Emerging themes for developing excellence

▪ 

Develop a clear, welldocumented, and scalable stage gate process to drive capital investment success

▪ 

Adopt clear guidelines in contracting strategy to address project risk based on project scope, target cost, expected delivery schedule, market conditions, and internal capability

▪ 

Refine choice in contracting strategy (choice of delivery model, contract type, award process) to align to scope, project schedule, market conditions, and owner execution capability Consistently enforce contract terms in the field leading to lower owner risk

▪  ▪  ▪ 

Standardize project execution processes Adopt and enforce tools and as a standardization method Increase ownership of project controls (i.e., cost and schedule tracking)

▪ 

▪  ▪  ▪ 

Deploy project controls to drive transparency of cost, schedule, and milestones during project execution thus increasing consistency

Enhance communication on project progress Celebrate success Leverage performance monitoring (e.g., lessons learned at project completion) as source of insight Provide training for onboarding new employees and continuous development

▪ 

Train and retain the Project Manager workforce to ensure best practices adoption and execution in project management

▪ 

Source: Interviews

Pre-Decisional - Proprietary and Confidential | 39

Contents

▪  Organization context ▪  Athletics project review ▪  Overall diagnostic ▪  Recommendations ▪  Value at stake ▪  Implementation plan

Pre-Decisional - Proprietary and Confidential | 40

CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence Emerging theme Stage-Gate process: how do projects move through A multiple fund and scope approval gates through the lifecycle?

▪ 

Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks

▪ 

Clear guidelines on contracting strategy to best manage owner risk

▪ 

Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability

▪ 

Tracking information on cost, schedule and milestones for each project

▪ 

Project controls dashboards enable PMs and Project Coordinators to: –  Proactively identify issues –  Ensure relevant information is at hand to contribute to the decision making process in a timely manner

▪ 

Standardized processes with capability building training to ensure consistent execution

▪ 

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

Source: Interviews, Expert interviews, Team analysis

VGI-AAA123-20090508-

Contracting strategy entails defining 3 linked elements of a project … Key dimensions of contracting strategy

Key questions to be considered Delivery model (How do I determine optimal contracting scope?)

▪ Should I own the asset or are other ownership structures more suitable, e.g., lease?

▪ Which project value chain steps should be done internally and which ones by contractor(s)?

▪ Into how many contracts should the project scope be split? ▪ What is the optimal split of scope between the contractors?

1 Delivery model

Award process (How do I select my contractors?)

▪ How can the effectiveness of existing award process be enhanced ? ▪ How many and which suppliers/contractors should be invited? ▪ How do we get the suppliers interested? ▪ What is the criteria for evaluation various suppliers?

3 Contract terms 2 Award proces s

Contract terms (How do I ensure most optimal contracting terms?)

▪ What are the key project cost, performance, and schedule risks? ▪ Who is the natural owner of the risks? ▪ What mechanisms exist to transfer or share risk? ▪ How can objectives be aligned between owner and contractor to ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.? McKinsey & Company | 3

SJO-AAA123-20110525-

4 Planning and scheduling process

Create/ update plan

Process step

Users

▪ ▪

Progress measurement

Provide timely, accurate inputs Help in identifying critical milestones

▪

Create WBS Identify critical milestones Create/ update plan Publish plan

▪

▪

Customized analysis

Provide timely, accurate inputs Execute recommended focus actions

▪

Monitor & report project progress Recommend focus actions/ area Publish report

▪

▪

Identify required analyses Provide timely, accurate inputs

Roles

Printed

Single and comprehensive capital investment framework

W orking Draft - Last Modified 07-Sep-11 6:35:55 PM

Project Managers: how well is project D management best practice followed?

▪ 

Printed 4/6/2011 4:32:15 PM

Transparency: how do project controls C allow for “right information at the right time”?

Description

W orking Draft - Last Modified 9/7/2011 3:32:09 AM

Contracting: how project delivery and B contracting methods are selected

Best practice

Planning team

▪ ▪ ▪ ▪

▪ ▪

▪

Recommend & perform required analyses Publish analysis report

McKinsey & Company | 5

Pre-Decisional - Proprietary and Confidential | 41

STAGE GATE PROCESS

A Existing CU Boulder approval process for Major projects does not match project maturity with funding commitments # Funding gate

# Review-only gate

Current Process PD&C Planning Led Process Project Initiation/ Concept Development

Consultant and Contractor Selection

Program Planning 1

PD&C Project Manager Led Process

Schematic Design

Design Development

Construction Documents

Bidding and Negotiation

Construction

Close Out and Warranty Period

2 Project obtains board approval and is funded

Cabinet review and authorization Observations

▪  ▪  ▪  ▪  ▪  ▪ 

Unclear project pipeline prioritization process leads to suboptimal use of resources in developing Program Plans Consensus must be built across many campus departments to xdevelop a Program Plan which requires considerable investment of time and effort from the PD&C planning staff 100% of project target cost is established and committed before design is adequately developed Length of time from project approval at funding gate 2 to project bidding exposes CU Boulder to market conditions as project estimates no longer reflect the current market conditions Project Managers enter the process after critical project decisions regarding scope and schedule are made Continued scope development occurs in the schematic design and design development stage through user input

Source: CU Boulder PD&C website and interviews

Pre-Decisional - Proprietary and Confidential | 42

STAGE GATE PROCESS

A Adding stage gates to existing Capital Project Process will focus University resources and increase control for Major projects # Funding gate From...

# Review-only gate

Operations PD&C Planning Led Process

Project Initiation/ Concept Development

Consultant and Contractor Selection

Program Planning

1

PD&C Project Manager Led Process

Schematic Design

Design Development

Construction Documents

Bidding and Negotiation

Construction

Close Out

2 Project Obtains Board Approval and is Funded

Cabinet Review and Authorization

…to

PD&C Planning Led Process Project Initiation/ Concept Development

1

Program Planning/ Scope Selection

Is this needed? Is it a priority?

2a

PD&C Project Manager Led Process

Consultant and Contractor Selection

Schematic Design

Design Development

Construction Documents

2b

Is the best option still viable after scoping? Freeze Scope. Release full budget.

Develop feasible options. Release seed money.

Source: Expert interviews, Team analysis

Bidding and Negotiation

3

Construction

4

Start-up/ Commissioning

Close Out

5

Is the project ready to begin operation?

Is option still viable given the refined estimate?

Is the project ready to be turned over?

6 Any outstanding accounts or issues?

Pre-Decisional - Proprietary and Confidential | 43

STAGE GATE PROCESS

A Proposed process splits the funding gate and provides an opportunity to develop the design prior to committing total funds # Funding gate

Consultant and 2a Contractor Selection

Project Initiation Program and Concept 1 Planning Development Cabinet Review and Authorization pre-design

Schematic Design

Select best option or set of alternatives to further develop

2b

# Review-only gate

Design Development

Release full project funds with stronger confidence

Estimate Accuracy1 Percent

Share of total Percent 30%

>50 50

100% of funding committed

40

30

25

30 20

20

0.5 – 10% of funding committed

10 0

15

-10 5-15%

-20

10%

10

-30 5%

-40 -50

0.5% Funding required (percent of total investment cost)

5 2% Engineering complete

Estimate accuracy

0

1- Cost estimate accuracy increases (narrows) as design progresses, even as the cost estimate mid-point fluctuates as design progresses.

Source: Expert interviews, Team analysis

Pre-Decisional - Proprietary and Confidential | 44

STAGE GATE PROCESS

A Stage-Gate Process for complex projects at CU Boulder will help manage resources and provide more financial control (1/2) Stages

# Funding gate

Project Initiation and 1 Concept Development

Activities

▪  Someone identifies a project

▪  Options are generated with order of magnitude estimates

Program Planning

2a

A/E and/or Contractor Selection

Schematic Design

# Review-only gate

2b

▪  The best option ▪  Design Team and/or Contractor Selected is selected and funds are allocated to complete preliminary engineering

either in a temporary (Paid competition/initial design phase contract) or permanent basis depending on project and delivery method selected ▪  Basic engineering is conducted to create a decision-worthy estimate

Review gate 1

Funding gate 2a

Funding gate 2b

Gate questions: ▪  Is the project need legitimate? ▪  Is it a priority?

Gate questions: ▪  Do feasible options exist that match the intended purpose?

Gate questions: ▪  Is the best option still viable after scoping?

Stakeholders: ▪  User ▪  PD&C (Planning) ▪  Vice Chancellor, Administration

▪  Board of Regents (Informed)

Stakeholders: ▪  User ▪  PD&C (Planning and PM) ▪  Vice Chancellor, Administration ▪  CFO ▪  Finance ▪  BCPC (Informed)

Stakeholders: ▪  User ▪  PD&C (PM, Eng., Shops) ▪  Design Team & Contractor ▪  Vice Chancellor, Administration ▪  BCPC ▪  Board of Regents

Final approval authority: ▪  Vice Chancellor

Final approval authority: ▪  CFO

Final approval authority: ▪  Board of Regents

Source: Expert interviews, Team analysis

Pre-Decisional - Proprietary and Confidential | 45

STAGE GATE PROCESS

A Stage-Gate Process comparison for the Wildlife Place project # Funding gate

Existing Process

1

2

Contractor Selection/Schematic Design

% Design Complete

0%

5%

Project Estimate

--

$17.9M

Funding Required

Program Plan Funding

100% of project estimate

Board of Regents

--

Board approves full capital spend

1

Proposed Process

Program Planning

Program Planning

Contractor 2a Selection/Schematic Design

% Design Complete

0%

5%

Project Estimate

--

$9M - $26.9M ($17.9M)

Funding Required Board of Regents

Program Plan Funding --

Source: Expert interviews, Team analysis

$2.2M (12.5% of Estimate) Board informed of design start

Design Development

# Review-only gate

Construction Documents

After Funding: ▪  Increase to $22.4M at 100% DD estimate ▪  VE and ESCO engaged, schedule slips ▪  Board of Regents approves additional $2.5M (Total $20.4M) ▪  Additional funding required to achieve project scope

Design Development

2b

Construction Documents

30-50%

▪  ▪ 

Project estimate tightens through SD ($19M - $25.8M ) VE to reduce cost, based on need and function, retain quality $20.2M (mid-point of estimate less $2.2M from Stage 2a funding gate)

Board of Regents approves capital spend for remaining unfunded portion of project (~80-90%) Pre-Decisional - Proprietary and Confidential | 46

STAGE GATE PROCESS

A An internal stage gate working group of stakeholders can design processes and develop necessary documentation

Detailed next (sample)

Stage Gate documentation: suggested table of contents Stage Gate Playbook creation process Suggested working group: ▪  PD&C (3) –  Planning Representative –  Project Manager –  Engineering ▪  Vice Chancellor ▪  Potential Participants (at key intervals): –  Users –  Legal Activities: ▪  Conduct a series of workshops to address each section of the stage gate playbook ▪  Review playbook with key stakeholders to validate approach

Source: Expert interviews, Team analysis

Stage Gates ▪  Decision and funding gates for: –  Base Projects –  Complex Projects Gate 1 ▪  Objectives for Gate ▪  Key Deliverables for Gate –  By Function –  Timeline ▪  Critical Functions of Team ▪  Summary Process Map for Gate ▪  Project Managers Roles in completing Gate ▪  How to ensure success at Gate 1 Gate 2a ▪  Objectives for Gate ▪  Key Deliverables for Gate –  By Function ▪  Critical Functions of Team ▪  Summary Process Map for Gate ▪  Project Managers Roles in completing Gate ▪  How to ensure success at Gate 2a

Gate 2b ▪  Objectives for Gate ▪  Key Deliverables for Gate –  By Function –  Timeline ▪  Critical Functions of Team ▪  Summary Process Map for Gate ▪  Project Managers Roles in completing Gate ▪  How to ensure success at Gate 2b Gates 3-6

▪  ▪  ▪  ▪  ▪  ▪ 

Objectives for Gate Key Deliverables for Gate –  By Function –  Timeline Critical Functions of Team Summary Process Map for Gate Project Managers Roles in completing Gate How to ensure success at Gate 2b

Appendix

▪  ▪ 

Alternative Gates for Special Projects CU Boulder Standard forms

Pre-Decisional - Proprietary and Confidential | 47

STAGE GATE PROCESS

A Stage 1 – Project Initiation and Concept Development Objectives, key deliverables, and critical functions ILLUSTRATIVE

Objectives

Key deliverables

▪  Select best scope

▪  Explicit reconciliation of variances

alternative that meets the CU Boulder’s needs and objectives

▪  Define all scope elements to a level enabling sound decision making

▪  Define project execution plan to meet targets as required

▪  against project requirements ▪  ▪  Complete scope identification and selection of a single option for all scope ▪  elements ▪  ▪  ▪  Complete draft of a project execution plan

▪  Initial risk assessment ▪  Cost estimate with an accuracy of

Planner - lead Users Engineering Operations / Shop support Outside support: –  Estimating –  Scheduling

±50%; and a first estimate at an operations expenditure budget

▪  Develop an initial schedule through completion, including resources for next phase

Source: Expert interviews, Team analysis

Critical functions

Support functions

▪  Finance ▪  Vice Chancellor

Pre-Decisional - Proprietary and Confidential | 48

STAGE GATE PROCESS

A Stage 1 – Project Initiation and Concept Development (1/2) Deliverables by function ILLUSTRATIVE Function

PD&C (Planning and Project Manager)

Deliverable

▪  ▪  ▪  ▪  ▪ 

▪  ▪ 

Project charter Issue record of decision for alternative selection Provide detailed scope Conduct analysis to facilitate key decision points(e.g., site, execution strategy) Develop initial project execution plan (scope / change management plan; project team and resources; contracting strategy; risk management; project controls (KPIs); estimate (±50%), quality, procurement, testing and close out, schedule; communication plan; contractor management

Engineering lead

▪ 

Evaluate technical alternatives analysis and provide recommendation Complete basic engineering data requirements (e.g., load requirements, equipment sizing, energy use, etc.) Implement optional value improving practices (VIPs): –  Types of plant and equipment –  Concept optimization –  Constructability reviews

Regulatory

▪  ▪ 

Assign code representative, if applicable Assign environmental representative, if applicable

Source: Expert interviews, Team analysis

Pre-Decisional - Proprietary and Confidential | 49

STAGE GATE PROCESS

A Stage 1 – Project Initiation and Concept Development (2/2) Deliverables by function ILLUSTRATIVE Function Contracting Strategy Operations and Maintenance Quality assurance Finance

Legal

Deliverable

▪ 

Define delivery method, contract award method, and contract terms

▪  ▪  ▪ 

Provide OPEX cost estimate, if applicable Assign operations representative for next phase, if applicable Define maintenance requirements, if applicable

▪ 

Define quality oversight

▪  ▪ 

Review estimate, validate financial view calculation Input project into the budget

▪ 

Provide support, as required

Source: Expert interviews, Team analysis

Pre-Decisional - Proprietary and Confidential | 50

STAGE GATE PROCESS

A Stage 1 – Project Initiation and Concept Development (1/2) Summary process map ILLUSTRATIVE

Form core project team §  Review business case §  Clarify roles and responsibilities §  Identify targets as per CU Boulder needs §  Review project charter §  Identify additional resources required §  Project manager assigned

Initiate conceptual engineering §  User requirements §  Preliminary massing §  Assess infrastructure requirements

Source: Expert interviews, Team analysis

Identify financial and logistical issues

Narrow down potential sites (if applicable)

Narrow down building concept and potential MEP systems

Update conceptual engineering §  Include massing §  Process control strategies

Apply value improvement practices §  Finalize programmed areas §  Agree on standards and specifications §  Conduct process simplification and/or value engineering §  Conduct early constructability analysis

Scope and document the best option: §  Conduct formal evaluation of alternatives including fatal flaws analysis, and select best available option for application §  Document record of decision

Pre-Decisional - Proprietary and Confidential | 51

STAGE GATE PROCESS

A Stage 1 – Project Initiation and Concept Development (2/2) Summary process map ILLUSTRATIVE

Develop operations and maintenance strategies

Decision Gate Estimate OPEX Recycle Proceed to Stage 2a

Conduct preliminary equipment sizing

Finalize and review scope of work

Develop Plans for Completing: §  Basic engineering §  Detailed engineering §  Procurement §  Construction §  Contracting §  Project controls

Reconcile project objectives

Develop schedule to reach Stage 2a and detailed milestone schedule for execution phase

Develop resource requirements for Stage 2a

Cancel/postpone Develop detailed risk matrix

Update Campus project budget

Issue record of decision Confirm business objectives, risks and uncertainties and confirm compliance with both CU Boulder and user requirements and strategies

Prepare factored estimate (±50%)

Confirm project objectives, priorities, trade-offs Confirm scope to be developed and compliance with University objectives Present cost and schedule

Confirm basic engineering requirements Develop renderings

Review engineering requirements for permits

Source: Expert interviews, Team analysis

Summarize project execution strategy and plans Identify resource requirements for next phase and through project completion

Pre-Decisional - Proprietary and Confidential | 52

STAGE GATE PROCESS

A Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (1/2) Rough cost of project

Major Project Threshold

2,000,000 Complex projects 500,000

▪ 

Base Projects can continue to utilize existing stage gate process, potentially adding key QA/QC steps

▪ 

Complex and Major Projects should use proposed stage gate process

▪ 

Definition of thresholds should be agreed through StageGate working group

Base projects 150,000

Low

Med/High Complexity

Source: Team analysis

Pre-Decisional - Proprietary and Confidential | 53

STAGE GATE PROCESS

A Though the proposed stage-gate process is currently defined for Major projects, CU Boulder can extend the process to complex and eventually all Minor and Outlay projects (2/2) Expansion of stage gate process Phase 3 (2 months)

Phase 2 (3 months)

Phase 1 (4.5 months)

All Minor/Outlay Projects: ▪  Applicable processes from Phases 1 and 2 ▪  New processes, etc. with a focus for streamlining

Develop and Implement Process for Complex Minor Projects ($0.5M-2M): ▪  Applicable processes from Phase 1 ▪  New processes, templates, agendas, reviews required for Phase 2

Develop and Implement Stage Gate Process for Major Projects ($2M and over) including: ▪  Pre-work required for each gate ▪  Templates ▪  Agenda for stage gate meetings ▪  Reviews required Time line of stage gate rollout Source: Team analysis

Pre-Decisional - Proprietary and Confidential | 54

STAGE GATE PROCESS

A University capital project funding thresholds vary widely but are typically higher than CU Boulders USD Millions

Delgated budget threshold 60

Initial project approvals thresholds

Observations

40 2

5

10

▪ 

CU Boulder has low approval thresholds even after accounting for expected regional cost variations (e.g. UC expected $/sqft costs are 1.6-1.8x CU expected costs, but UC initial approval thresholds are 10x CU thresholds)

▪ 

Delegated approval systems require up-front Board approval of Long Range Development Plans and thereafter allow Campuses to act autonomously up to a larger cap

▪ 

Percentage of budget expansion varies widely, with common aim to keep projects moving in uncertain circumstances

▪ 

Smaller campuses networks have smaller thresholds

15 5

10

20

Percent of initial cost 30% 25% Change approval thresholds

# of academic campuses Expected $/ sqft1

10%

10%

5%

4

185-305

1

185-305

8

NA

1

265-395

10

340-490

1 Hard construction costs $/GSF for University buildings in select US cities, Rider Levett Bucknall Quarterly Construction Report, 2nd Quarter 2015 Source: Press Search

Pre-Decisional - Proprietary and Confidential | 55

CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence Emerging theme Stage-Gate process: how do projects move through A multiple fund and scope approval gates through the lifecycle?

▪ 

Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks

▪ 

Clear guidelines on contracting strategy to best manage owner risk

▪ 

Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability

▪ 

Tracking information on cost, schedule and milestones for each project

▪ 

Project controls dashboards enable PMs and Project Coordinators to: –  Proactively identify issues –  Ensure relevant information is at hand to contribute to the decision making process in a timely manner

▪ 

Standardized processes with capability building training to ensure consistent execution

▪ 

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

Source: Interviews, Expert interviews, Team analysis

VGI-AAA123-20090508-

Contracting strategy entails defining 3 linked elements of a project … Key dimensions of contracting strategy

Key questions to be considered Delivery model (How do I determine optimal contracting scope?)

▪ Should I own the asset or are other ownership structures more suitable, e.g., lease?

▪ Which project value chain steps should be done internally and which ones by contractor(s)?

▪ Into how many contracts should the project scope be split? ▪ What is the optimal split of scope between the contractors?

1 Delivery model

Award process (How do I select my contractors?)

▪ How can the effectiveness of existing award process be enhanced ? ▪ How many and which suppliers/contractors should be invited? ▪ How do we get the suppliers interested? ▪ What is the criteria for evaluation various suppliers?

3 Contract terms 2 Award proces s

Contract terms (How do I ensure most optimal contracting terms?)

▪ What are the key project cost, performance, and schedule risks? ▪ Who is the natural owner of the risks? ▪ What mechanisms exist to transfer or share risk? ▪ How can objectives be aligned between owner and contractor to ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.? McKinsey & Company | 3

SJO-AAA123-20110525-

4 Planning and scheduling process

Create/ update plan

Process step

Users

▪ ▪

Progress measurement

Provide timely, accurate inputs Help in identifying critical milestones

▪

Create WBS Identify critical milestones Create/ update plan Publish plan

▪

▪

Customized analysis

Provide timely, accurate inputs Execute recommended focus actions

▪

Monitor & report project progress Recommend focus actions/ area Publish report

▪

▪

Identify required analyses Provide timely, accurate inputs

Roles

Printed

Single and comprehensive capital investment framework

W orking Draft - Last Modified 07-Sep-11 6:35:55 PM

Project Managers: how well is project D management best practice followed?

▪ 

Printed 4/6/2011 4:32:15 PM

Transparency: how do project controls C allow for “right information at the right time”?

Description

W orking Draft - Last Modified 9/7/2011 3:32:09 AM

Contracting: how project delivery and B contracting methods are selected

Best practice

Planning team

▪ ▪ ▪ ▪

▪ ▪

▪

Recommend & perform required analyses Publish analysis report

McKinsey & Company | 5

Pre-Decisional - Proprietary and Confidential | 56

CONTRACTING PROCESS

Steps

B Existing process shows opportunity for an integrated contracting strategy to mitigate and share project risks

▪ 

Observations

▪  ▪ 

Current tools

▪ 

▪  ▪  ▪ 

Limited range of delivery models for large capital projects available to CU Boulder per State requirements Inconsistency in application of delivery models across capital projects Lack of institutional experience in alternative delivery models (Public Private Partnerships, Integrated Project Delivery) as not commonly used for mega projects Go to strategy is design build or CM at risk delivery model with a GMP

▪ 

State procurement guidance documents PD&C staff experience (CU and previous experience) PD&C internal discussion to determine appropriate contact type

▪  ▪ 

Source: Expert interviews, Team analysis

Determine contract terms and sign

Select contractor(s)

Select a delivery model

▪  ▪ 

Complex award process due to state rules and regulations Competitive bids required contracts over $20k Contractor interest is based on guaranteed payments and prestigious projects, however perception of CU Boulder as challenging client due to regulation burden

▪ 

▪ 

▪  ▪ 

▪ 

State procurement guidance PD&C staff experience (CU and past work experience) PD&C internal discussion to determine appropriate contact type

▪ 

Cost, performance, schedule, and disruption to campus operation are strongly considered, but unclear how terms are incorporated into contract terms CU Boulder is often the natural owner of risk, with contractors able to leverage schedule and change orders to their advantage State limits the ability to include incentives in contracts CU Boulder often not in a position to enforce contracts (liquidated damages) due to lack of authority, tracking, and quality assurance/quality control State contracts

Pre-Decisional - Proprietary and Confidential | 57

CONTRACTING PROCESS

B Optimal contracting strategy decisions should aim to maximize project success within known constraints Optimal contracting strategy should aim to maximize project success…

Schedule

Project Success

… while being constrained by three major elements

Project risks

Cost Internal capabilities Quality/ operation efficiency Market capabilities

Source: Team analysis

▪ 

How does this project fit into CU Boulder’s capital strategy and what are they trying to achieve with it?

▪ 

How complex is the project? How much experience does CU Boulder have with this type of project? What are the associated risks?

▪ 

What are the risks associated with each step of the project? Who can manage them best?

▪ 

What elements of the project can CU Boulder manage themselves? (skills and availability of resources)?

▪  ▪ 

What can be done better by other parties?

▪  ▪  ▪ 

What systems and processes does CU Boulder have in place to support the contracting strategy? What are the capabilities of available contractors? Where can CU Boulder leverage them? Is the level of competition sufficient to ensure appropriate negotiation power?

Pre-Decisional - Proprietary and Confidential | 58

CONTRACTING PROCESS

Steps

B Proposed contracting process establishes a consistent risk based approach to enhance project outcomes

Goals

▪ 

▪ 

Who to involve

Actions

▪  ▪ 

▪  ▪  ▪  ▪  ▪  ▪ 

Determine Contract Terms and Sign

Select a Contractor

Select a Delivery Model

Establish a Contracting Strategy Playbook for optimizing cost/ schedule/quality aligned with State regulations and CU Boulder past experience Understand how alternative models (bundling, PPP, IPC) could be utilized to better spread risks Understand CU Boulder desired role (skill building)

▪ 

Develop Contracting Strategy Playbook working group – to explore best delivery options of CU Boulder projects

▪ 

PD&C Legal Procurement Vice Chancellor, Administration Contractor Rep Design Team Rep

▪  ▪  ▪  ▪  ▪  ▪ 

▪ 

Integrate Contractor selection process into Contracting Strategy Playbook to best utilize process to meet cost, schedule or quality based outcomes

–  Transfer project risks to align

▪ 

objectives between owner and contractors, not to outsource them Ensure the terms of the performance contract are pragmatic, clear, and measurable

Integrate contractor selection methods into Contracting Strategy Playbook Formalize Contractor Score Card

▪ 

Develop standard language added to State contracts to provide a fair and equitable balance of risk on large Capital Projects

PD&C Legal Procurement Vice Chancellor, Administration Contractor Rep Design Team Rep

▪  ▪  ▪  ▪ 

PD&C Legal Procurement Vice Chancellor, Administration

Pre-Decisional - Proprietary and Confidential | 59

CONTRACTING PROCESS

B An internal contracting working group of stakeholders can develop a Contracting Strategy Playbook Contracting Strategy Playbook: suggested table of contents Contracting strategy playbook creation process

▪  ▪ 

▪  ▪  ▪ 

▪  ▪ 

▪ 

Suggested working group: PD&C (3) –  Planning Representative –  Project Manager –  Engineering Legal (1) Procurement Team (1) Potential Participants (at key intervals): –  Contractor Representatives –  Architect Representatives Activities: Conduct a series of workshops to address each section of the contracting playbook Review playbook with key stakeholders to validate approach

Delivery method Preferred delivery methods for: ▪  Base Projects ▪  Complex Projects Delivery methods to maximize: ▪  Cost ▪  Schedule ▪  Quality Key considerations for delivery methods and project types: ▪  Operator experience required ▪  Pool of experienced contractors available ▪  Ability of contractor to integrate with others ▪  Ramp-up/Turnover consistency ▪  Single execution voice ▪  Project controls ▪  Contracting risk exposure Project Managers Roles for each Delivery Method

Project Managers Role for each Contractor Selection Method Contractor Score Card Contracting terms Selecting contract terms to maximize: ▪  Cost ▪  Schedule ▪  Quality Project Managers Role for each contract type Appendix Standard Delivery Models CU Boulder Contract forms

Contractor selection Appropriate contractor selection process for: ▪  Base Projects ▪  Complex Projects Selection process considerations per Delivery Method Pre-Decisional - Proprietary and Confidential | 60

CONTRACTING PROCESS

B Contracting strategy playbook example: selecting preferred contract given decision making posture ILLUSTRATIVE Preferred contract form

Type of Project

Nice to have

Must have

Implication to owner

Base

Design-BidBuild (DBB)

Base Complex

Design-Build (DB)

Complex

Complex

Construction Management / General Contractor (CM/ Hybrid DB and CM/GC GC)

Lowest quality with significant potential delays and cost overruns

Complex

Provides highest quality project with minimum or no delay, under budget

Public Private Partnerships (PPP)

Rationale

1 Operator experience

Larger number of contractors has a higher probability of engaging an experienced contractor on the project to achieve quality

2 Pool of experienced people

Larger pool of companies to pull resources from reduces risk of schedule slippage

3 Ability to integrate with others

Smaller number of interfaces reduces the risk of team misalignment affecting schedule and quality

4 Ramp-up/turnover consistency

Higher risk of schedule slippage when multiple contractors are responsible for commissioning and ramp up

5 Single execution voice

Lower risk of schedule slippage with a single company approach to solicitation strategy

6 Project controls

Fewer companies to align on tools reduces the risk of delays and budget overruns due to documentation and budget management

Contracting risk exposure

Late contractor involvement could lead to redesigns

Overall score

Most compatible Moderately with owner compatible with strategy owner strategy

Source: Team analysis

Contractor driven cost savings undermines quality

Late involvement from subs leads to cost and schedule overruns

If terms are not well defined could lead to cost, schedule, quality issues

Lack of CU Boulder experience could lead to cost, schedule, and quality issues.

Less compatible Moderately with higher owner compatible with risk owner strategy

Least compatible with owner strategy

Pre-Decisional - Proprietary and Confidential | 61

CU Boulder can adapt best practices in capital management across the four themes to begin developing excellence Emerging theme Stage-Gate process: how do projects move through A multiple fund and scope approval gates through the lifecycle?

▪ 

Stage-gate process matches the release of required funds to the maturity level of project definition; specifically, it ensures projects do not progress without an adequate evaluation of the underlying business case, completion of key deliverables, and mitigation of critical risks

▪ 

Clear guidelines on contracting strategy to best manage owner risk

▪ 

Selecting contracting strategy (delivery model, contract terms, award process) based on project specifications (size, cost, delivery schedule, complexity), market conditions, and internal capability

▪ 

Tracking information on cost, schedule and milestones for each project

▪ 

Project controls dashboards enable PMs and Project Coordinators to: –  Proactively identify issues –  Ensure relevant information is at hand to contribute to the decision making process in a timely manner

▪ 

Standardized processes with capability building training to ensure consistent execution

▪ 

Establishing standardized methods, training for PM staff on consistent approaches, and support from key decision makers which allow PM team to increase success in delivery of projects

Source: Interviews, Expert interviews, Team analysis

VGI-AAA123-20090508-

Contracting strategy entails defining 3 linked elements of a project … Key dimensions of contracting strategy

Key questions to be considered Delivery model (How do I determine optimal contracting scope?)

▪ Should I own the asset or are other ownership structures more suitable, e.g., lease?

▪ Which project value chain steps should be done internally and which ones by contractor(s)?

▪ Into how many contracts should the project scope be split? ▪ What is the optimal split of scope between the contractors?

1 Delivery model

Award process (How do I select my contractors?)

▪ How can the effectiveness of existing award process be enhanced ? ▪ How many and which suppliers/contractors should be invited? ▪ How do we get the suppliers interested? ▪ What is the criteria for evaluation various suppliers?

3 Contract terms 2 Award proces s

Contract terms (How do I ensure most optimal contracting terms?)

▪ What are the key project cost, performance, and schedule risks? ▪ Who is the natural owner of the risks? ▪ What mechanisms exist to transfer or share risk? ▪ How can objectives be aligned between owner and contractor to ensure an efficient execution through compensation elements such as incentives, penalties, warranties, etc.? McKinsey & Company | 3

SJO-AAA123-20110525-

4 Planning and scheduling process

Create/ update plan

Process step

Users

▪ ▪

Progress measurement

Provide timely, accurate inputs Help in identifying critical milestones

▪

Create WBS Identify critical milestones Create/ update plan Publish plan

▪

▪

Customized analysis

Provide timely, accurate inputs Execute recommended focus actions

▪

Monitor & report project progress Recommend focus actions/ area Publish report

▪

▪

Identify required analyses Provide timely, accurate inputs

Roles

Printed

Single and comprehensive capital investment framework

W orking Draft - Last Modified 07-Sep-11 6:35:55 PM

Project Managers: how well is project D management best practice followed?

▪ 

Printed 4/6/2011 4:32:15 PM

Transparency: how do project controls C allow for “right information at the right time”?

Description

W orking Draft - Last Modified 9/7/2011 3:32:09 AM

Contracting: how project delivery and B contracting methods are selected

Best practice

Planning team

▪ ▪ ▪ ▪

▪ ▪

▪

Recommend & perform required analyses Publish analysis report

McKinsey & Company | 5

Pre-Decisional - Proprietary and Confidential | 62

TRANSPARENCY

C CU Boulder requires a systematic approach to building transparency among stakeholders in project delivery Description

▪  Define key data and clear C1 KPIs for project delivery

▪  ▪  ▪ 

Create an C2 accessible KPI dashboard

▪  ▪ 

Provide a forum for C3 decision making

▪ 

CU Boulder should define Key Performance Indicators (KPIs) at a project level based on project categories defined (i.e. Major, Minor, and Outlays) with clear targets across each An individual should also be identified as a responsible party for reporting and meeting the KPI target (may be different individuals) Clear direction and training should be provided on how to calculate and report the KPI KPI dashboard should be accessible at multiple levels (e.g. project level and portfolio level) to the relevant stakeholders The accessible dashboard can be communicated widely to build transparency among all stakeholders (e.g. users, administration, PD&C) and increase project accountability KPI dashboards can be used as a tool in a regular forum of stakeholders (e.g. a Project Review Board) to discuss project progress Project Review Boards will also help resolve issues proactively as it will: –  Enable decision makers to have the right information –  Allow PMs to raise concerns at right time

KPI dashboard is designed at both project and portfolio level Source: Team analysis

Pre-Decisional - Proprietary and Confidential | 63

TRANSPARENCY

C1 Defining relevant data and KPIs will help prioritize efforts in developing a practical dashboard for project delivery

Cost

Major

Schedule

Scope

Quality

Health

Safety

KPI / data

Unit

Where does it live?

Legend: Who reports?

EAC at initial approval

$M USD

Board Meetings docs?

Current approval amount

$M USD

Current EAC

Data

KPI

PRELIMINARY

How to report?

Target

Planner

Shared excel?

N/A

Board Meetings docs?

Planner?

Shared excel?

N/A

$M USD

Latest GC update

PM

Shared excel?

N/A

Cost variance (Current EAC/ EAC at initial approval)

%

Calculated

PM

Shared excel?