Transit agencies face complex decisions when converting their fleets to buses that run on compressed natural gas (CNG), a cleaner, lower cost fuel than diesel. Acquiring the bus rolling stock is central. But, equally important is the best approach to contracting for the infrastructure needed to fuel a CNG bus fleet.
Some transit agencies elect to have their CNG infrastructure delivered using the construction procurement practice known as Least Cost (or low cost) Design-Bid-Build contracting, or DBB. But use of Best Value Design, Build, Operate and Maintain procurement methods, known as DBOM, has grown rapidly. There is no one-size-fits-all for CNG infrastructure solutions, because different transit fleets face different needs, capabilities and constraints. Transit agencies can capture significantly higher performance at lower costs and in less time by using best-value DBOM contracting when compared to using a traditional least-cost DBB model.
Best-value vs. least-cost
“Least-cost contracting can be very effective for purchasing routine services and materials. But a CNG station is a complex system that should be designed and operated as a whole in order to function correctly, reliably and successfully,” says Jennifer De Tapia, director of market development for Trillium CNG. Trillium has built more than 130 CNG stations over the past 20 years and manages CNG infrastructure for over 25 transit properties, including New York City Transit, Calif.’s San Diego Metropolitan Transit System and the Orange County Transportation Authority, Va.’s Greater Richmond Transit, and Colo.’s Roaring Fork Transit Authority.
Under the traditional DBB model, a transit agency issues separate solicitations for design and construction of CNG infrastructure, including the all-important compressors and CNG storage vessels, gas dryers, controls and monitoring equipment and CNG dispensers (see diagram). And, the construction solicitation cannot start until the first solicitation and subsequent design is complete. The agency might also issue solicitations for a contractor to operate and maintain the infrastructure, or, alternately, elect to operate and/or maintain the infrastructure using its own in-house technicians and resources. Typically, a DBB model would use “Least Cost, Technically Acceptable” contracting, whereby the agency sets forth its minimum technical engineering specifications and invites proposals that meet these. A contract is awarded to the bidder that proposes the lowest cost in meeting the minimum specifications.
Best-value DBOM contracting is more comprehensive — an all-in-one, optimum maximizing solution. It involves issuing only a single solicitation for a multi-year commitment by a firm, usually for a minimum of five years, but often, for 10 years or more, to design, build, operate and maintain, and in some cases, finance the infrastructure. Best-value DBOM contracting involves specifying overall performance goals for the infrastructure and inviting bidders to propose technical, engineering and service performance solutions to meet these goals.
Advantages of DBOM
The advantages of using best value DBOM contracting instead of least cost DBB contracting are significant, and can be summed up as follows:
Comprehensively Integrated Engineering and Operations: Transit CNG is a unique market. By having a “single chef in the kitchen,” best-value DBOM contracting allows the bidder to offer integrated solutions. These solutions typically optimize design and engineering with equipment procurement and operations and maintenance capabilities that exceed minimal requirements. This allows the best configuration to meet future fleet growth scenarios. A firm that specializes in providing best-value DBOM solutions is best positioned to recognize opportunities to reduce costs and enhance efficient and reliable performance.
Best-In-Class Project Delivery: When it comes to CNG infrastructure, the whole is greater than the sum of its parts. For CNG systems that will typically have a minimum life of 10 years before major refits are needed, best-value DBOM contracting allows the transit agency to take account of a record of successful project delivery by the contractor’s professional team using best-in-class management and quality control plans and expertise. References and experience become valued-added criteria, rather than a simple pass/fail consideration. It also ensures the highest quality system, including assurances that all important station controls are updated to maximize efficiency throughout the life of the assets, because the DBOM firm has a long-term relationship with the agency, as opposed to a DBB firm that simply designs and/or builds the system and then departs for another project.
Lower Cost and Quicker Time to Market: Integrated scheduling unique to the DBOM model has been repeatedly shown to significantly accelerate infrastructure delivery at lower costs. Research published in 2011 (”Alternative Project Delivery Methods for Water and Wastewater Projects: Do They Save Time and Money?”) by the American Society of Civil Engineers (ASCE) found that integrated design-build contracting produced cost savings of up to 43% and reduced project schedules by as much as one-third when compared to the conventional DBB approach. This was particularly true “when applied to projects involving new facilities or discrete additions to existing facilities, projects that are schedule-driven or projects that offer the potential for innovative solutions,” as applies to CNG infrastructure projects. The Federal Highway Administration has concluded “the advantage of the DBOM approach is that it combines responsibility for usually disparate functions — design, construction and maintenance — under a single entity. This allows the private partners to take advantage of a number of efficiencies.”
Optimizes Training, Monitoring, Safety and Maintenance: Buses need to be on the road every day. Because their business success depends on it, companies that deliver DBOM infrastructure solutions continually train their technicians in the latest maintenance, repair and safety protocols. They also install centralized monitoring systems that allow for diagnosis and early detection of potential problems, oftentimes resolving those problems minutes after detection with remote solutions. The contractor’s ability to quickly deploy technicians for bigger issues that require repairs optimizes seamless station performance over the station’s life.
Lower Risk: Having a single DBOM contractor lowers risks, by providing a single point of contact for resolving issues, whereas a DBB procurement approach that separates out engineering, construction, equipment purchase and maintenance inherently increases risk, to budgets, schedules and ongoing operations. DBOM contracting shifts risk from the agency to the DBOM firm, since the firm bears the ongoing performance risk of the station through the contract’s life. The ASCE article found that integrated design-build contracting reduces the probability of litigation over disputes, lowering costs and accelerating project delivery.
Enhanced ROI and Financing: A DBOM contractor that amortizes the cost of CNG infrastructure over time through fueling contracts can enable a transit agency to avoid the need to issue debt or use capital budget to build the infrastructure. The scale economies that a firm brings to the market through best-value DBOM contracting allows the firm to offer lower costs and better performance over the lifetime of the infrastructure. In localities where public-private partnerships are allowed, partnering with a DBOM firm can generate revenues for the transit agency from sales of CNG to outside parties, including other government and commercial fleets, further reducing the cost of deploying a CNG fleet and boosting the agency’s return on investment.
CNG infrastructure from A to Z
Successful CNG infrastructure is much more than simply a construction project. It’s more akin to a complex piece of equipment, such as a new bus. Instead of an engine, transmission, axles and a brain to control it all, though, the infrastructure includes compressors, dryers, valve panels, dispensers, and computerized controls and monitors. Transit agencies do not contract with a firm to design a bus and then contract with a different firm to build it. That’s a recipe for disaster. It’s the same for a CNG fueling station, which is much more complex than gasoline or diesel infrastructure.
Using best-value, DBOM contracting for CNG infrastructure optimizes a transit agency’s performance, minimizes risks and costs, and maximizes return on investment. For most agencies, best value DBOM contracting is likely to provide higher quality, more reliable, efficient, and safe performance than what is obtainable from separate DBB contracting alternatives.
Matthew Slavin is president of AFV Intelligence, consulting on sustainable transportation, energy and land use. He can be reached at firstname.lastname@example.org.