Cape Hatteras

National Seashore
North Carolina

U.S. Department of the Interior
National Park Service

Background

The Cape Hatteras Lighthouse, the namesake for the Cape Hatteras National Seashore and a nationally recognized symbol of the southeastern U.S. coastline, was designated as a National Historic Landmark in August 1998. The lighthouse and its associated structures (Double Keepers' Quarters, Principal Keeper's Quarters, Oil House, three rain water cisterns, and the granite block footing that surrounds the lighthouse) compose the Cape Hatteras Lighthouse District, a property on the National Register of Historic Places. Protection of historic resources has always been central to the National Park Service (NPS) mission. The Organic Act of 1916 (16 USC Sec. 1 et seq.) stated that the purpose of the agency is "to conserve the scenery and the natural and historic objects and the wildlife therein, and to provide for the enjoyment of the same in such manner and by such means as will leave them unimpaired for the enjoyment of future generations." The Historic Sites, Buildings, and Antiquities Act of 1935 (USC Sec. 461-467) and the National Historic Preservation Act of 1966 (16 USC Sec. 470) broadened the NPS role in Historic preservation. Thus preservation of the lighthouse and its associated structures is mandated by the core mission of the NPS.

Relocation of the lighthouse and associated structures has allowed the NPS to accomplish its more that 60 year effort to protect the lighthouse from the sea. Measures employed in an attempt to reduce erosion have included construction of an artificial dune; construction of groins; repeated beach nourishment efforts; repeated installation of sandbags; the extension of a groin; and repeated installations of artificial seagrass. These efforts have been inconsistent with certain NPS policies and North Carolina State law; they have been expensive; and they have been ineffective except as a series of short-term holding actions against the sea.

The NPS contracted with the National Academy of Sciences (NAS) in 1987 for a study to provide definitive, achievable advice on how to save the lighthouse. The NAS report concluded that incremental relocation of the lighthouse was the best alternative, as it would provide the nost reliable, cost-effective, and prudent long-term protection. Quoting from the report, "Despite the apparent difficulty of moving a large brick structure, the operation entails minimal risk. Many structures older and larger than Cape Hatteras lighthouse have been moved successfully, and the technology for such operations is well established." As a result of the NAS report, the NPS prepared a Development Concept Plan that was completed in 1990. That plan, with appropriate environmental compliance and public participation, was the decision document establishing the current course of action, moving the historic district. In further developing the project, the NPS developed a two phased project, the first phase moving the historic district, the second, constructing visitor support facilities including utilities, parking, and visitor contact facilities necessary to make the new development functional. Phase I would be accomplished by contracting for design and construction; phase II would be designed in house with the construction being contracted. The project was again scrutinized in 1997 by an Ad Hoc Committee of Faculty at North Carolina State University which concluded the move of the lighthouse district remained the best course of action for preservation.

Design/Build Contracts

The NPS recognized that the expertise in moving structures the size of the lighthouse was so specialized and unique that companies with those capabilities would be limited. The problem became how to solicit competition and award a contract to the most capable contractor. Most construction contracts awarded by the NPS to date were based on sealed bid contract award, where contract documents are advertised in the Commerce Business Daily; contractors request copies of the documents; secured bids are submitted by a determined date, opened, and award is made to the lowest bidder if the contractor is a reputable company. Specific technical qualifications, such as what the lighthouse move project required, are not a consideration in the sealed bidding process, nor is price negotiated.

Effective January 1, 1997, Government agencies were authorized to utilize two-phase design-build selection procedures pursuant to 10 U.S.C. 2305a and 41 U.S.C. 253m. The first phase establishes a "short list" based upon offerors' qualifications in the same manner as architect/engineers (A/E) are selected under Brooks Bill procedures. The second phase requests design, price, and qualifications information. Since the Federal Acquisition Regulations were revised about the same time as the Denver Service Center was looking for ways of improving its contracting processes, the design-build method appeared to provide the results the lighthouse project warranted.

As outlined in the March 1998 issue of Construction Briefings, there are several distinct advantages and disadvantages in utilizing the design-build methodology. The advantages included:

1. A single responsible party. Under design-build contracts, the government contracts with a single contractor instead of both an architect/engineer (A/E) for design and a separate construction company. The design-builder is responsible for the project as a whole and, in the event of a problem or defect, the government does not have to determine whether the A/E design firm or the construction contractor is responsible. There is a single point of responsibility for quality, cost, and schedule adherence. Singular responsibility serves as motivation for quality and proper project performance.
2. Reduced Administrative and Claim Costs. Design-build contracts have the potential to reduce the government's administrative costs and contract claims. Some savings may be achieved because the government need only administer a single contract instead of separate design and construction contracts. Moreover, because the design-build contractor is responsible for designing the project, the government does not warrant the adequacy of the specifications and thus, faces no potential liability for defective specification claims. The design/build contractor must include a contingency in its bid for normal design errors and must protect itself from other errors and omissions with insurance or joint venture clauses that allocate the risk to the appropriate party. The design-build contractor warrants to the owners that it will produce design documents that are complete and free from error.
3. Earlier Project Completion. Design-build contracting also offers the potential for earlier project completion. The government can use a form of fast track construction whereby the initial construction work (such as site clearing and grading) is begun while the design is being finalized.

Recognizing the advantages to the design-build contracting method, several disadvantages were cited. They include:

1. Quality/price tradeoffs. Price is generally a significant evaluation factor in selecting the successful contractor. Thus, there is a natural tendency for the design-build contractor to resolve design and construction decisions in favor of the less expensive option. The result can be a less expensive, but lower quality, project.
2. Project Does Not Meet Requirements. Because each potential contractor will be responsible for designing the project, the government must ensure that the performance specifications provided to the potential contractors are sufficiently detailed and clearly set forth the government's requirements. Any attempts to impose additional performance requirements after award may lead to costly requests for equitable adjustment.
3. Difficulty in Determining Best Value. Because each contractor is proposing a distinct design, the selection official(s) may have a difficult time determining which combination of capability, design, and price offers the best value to the government. This makes it very important that the selecting official (or panel) be experienced in the project and disciplines being evaluated.
4. Increased Price. The design-build award amount appears higher than conventional sealed bid procedures; however, it represents costs of both the design and construction phases.
5. Increased proposal Costs. Design-build proposals can be very expensive to prepare because contractors are required to provide much more with their technical proposal. In the lighthouse solicitation conceptual design, proposed technical solutions, and some geotechnical investigations were required. Thus, the costs of proposal preparation can exceed normal bid and proposal costs.

Specific Project Needs/NPS Approach

The lighthouse project also faced a unique situation where the actual funds available would be appropriated in two separate fiscal years. Fiscal years in the government run from October 1 to September 30. National Park Service construction appropriations are determined by the United States Congress and signed into law by the President. During budget negotiations between the two congressional houses and the Office of Management and Budget (OMB) representing the President, monies for projects may get dropped, shifted, or appropriated over more than one fiscal year. The lighthouse project originally estimated to cost $12,500,000 was financially scaled back to $11,800,000 and funded over two fiscal years ($2,000,000 in fiscal year 1998, and $9,800,000 in fiscal year 1999). Under government procurement regulations, contracts cannot be awarded to contractors unless the full amounts of the contract are available. Since the budget appropriations were scheduled for two fiscal years, awarding a design-build contract could not be accomplished as originally intended with award of both the design and construction. The NPS solved the dilemma by issuing a solicitation using an option clause. This allowed the contract to be awarded as a design-build contract, awarding the design portion first (within the availability of first year funding), and awarding the construction portion in the following fiscal year, subject to the availability of second year funding.

The NPS used a two-phase process for selecting the design-build contractor. The first phase, solicitation of qualifications, required potential contractors to respond to five criteria listed in the Commerce Business Daily. These were, in descending order of importance:

1. Specialized and recent experience with projects of similar type and nature;
2. Demonstrated professional expertise and technical competence;
3. Past performance and work quality;
4. Ability to provide a multi-disciplinary work force; and
5. Understanding of historic preservation requirements.

In order to encourage competition, the NPS offered in its announcement to pay a fee of $26,000 to those contractors whom made the "short list" but failed to win the contract award. Stipulated fees typically cover only ¼ to 1/3 the actual costs of preparing an offer. Although bid preparation and proposal costs are generally not reimbursed by the government, the Design Build Institute recognized such fees as good practice specifically for the purpose of attracting the best contractors and enhancing competition.

A panel comprised of an NPS historic architect, structural engineer, and constructability engineer, supplemented by two non-voting members of the North Carolina State University Ad Hoc committee, and members of the original National Academy of Science investigation, reviewed six submittals of qualifications submitted under Phase One of the selection process. Their review resulted in the identification of two final, highly qualified contractors. These contractors were sent a Request for Proposal which outlined the remainder of the selection process (Phase Two), and contained the design criteria from which the design-build firm would complete the design process to a point where a firm fixed-price could be determined. The contractors were asked to submit both a technical and price proposal. Using competitive negotiation procedures, the government anticipated selecting the best-qualified contractor for the project using the best value approach wherein technical qualifications were considered to be more significant than price. Design criteria for Phase Two included:

1. Preparatory work: suitability of work; compatibility with building fabric;
2. Lift method; suitability and reliability;
3. Transportation system: suitability and reliability of system;
4. Expectations of incidental building damage during move;
5. Foundations: suitability for loads and site conditions; compatibility with existing appearance;
6. Protection of historic building fabric;
7. Design/build schedule;
8. Management philosophy;
9. Team organization/key personnel;
10. Quality control plan;
11. Safety plan;
12. Public relations.

Both technical and price proposals were evaluated and rated separately. The panel then considered the relationship of price and quality of the technical proposals to determine which contractor provided the best value to the government. International Chimney Corporation of Buffalo, New York, was the selected contractor. The unsuccessful contractor was awarded the $26,000 stipend.

Results/Observations

The National Park Service has been extremely pleased with the results of the design-build contract. International Chimney Corporation and their associated firms have proven to be highly capable and professional in their undertaking of all aspects of the project, validating the design-build selection process. The design-build contract has saved significant administrative costs normally incurred in NPS construction contract management. By reducing the project to only one solicitation, the contract selection process eliminated the need to procure design and construction services separately. The firm fixed-price contract places all of the risk on the contractor, thereby eliminating the need to provide construction management oversight, a costly NPS task on more traditional construction contracts. NPS on-site activities were performed by Cape Hatteras Chief of Maintenance Dan McClarren and involved coordination with ongoing park operations, resources management activities, and any oversights caused by the construction sequencing. The NPS feels strongly that the design-build method of contracting, as proven on the Cape Hatteras lighthouse relocation project, has much merit and will be used more in the future.