Glossary of Alternative Project Delivery Terms

A project delivery model other than the traditional design-bid-build approach. This term encompasses a variety of methods – such as design-build, progressive design-build, construction manager at risk, and public-private partnerships – which can be chosen based on a project's specific needs. These alternative approaches often provide benefits in risk-sharing, accelerated schedules, cost savings, or lifecycle efficiency when carefully matched to the project context.

A procurement process feature that allows bidders to propose innovative alternatives to the owner's baseline technical requirements during a solicitation. An ATC must offer equal or better performance than the original criteria, and if approved by the agency it can be incorporated into the bidder's proposal. This mechanism encourages contractors to suggest cost-effective or time-saving design and construction solutions that still meet the project's objectives, fostering innovation and value in competitive procurements.

A payment structure in certain public-private partnerships where the public agency makes periodic payments to the private partner based on the infrastructure's performance and availability for use, rather than the private partner collecting user fees. The private partner earns these performance-based payments only if defined service standards (for example, facility uptime and maintenance levels) are met, and payments can be reduced or withheld for shortcomings. In an availability-payment P3, the public sector retains demand risk (such as traffic volume), while the private sector is incentivized to keep the asset in proper working condition to "earn" its payments.

A selection method in which a contract award is based on an evaluation of both price and qualitative factors to determine the overall best value to the public agency. Instead of automatically choosing the lowest bid, the owner considers criteria such as proposer experience, technical approach, project schedule, innovation, and quality in addition to cost. Best-value procurement is enabled in many alternative delivery statutes and allows agencies to obtain a more qualified contractor or solution that offers a better long-term outcome, not just the lowest upfront price.

In the context of infrastructure P3s, a long-term contract in which a government or public agency grants a private entity (the concessionaire) the right to finance, build, operate, and maintain a public facility for a specified period. The private partner often recoups its investment through user fees (such as tolls) or via government payments over the term of the concession. Throughout the agreement, the public owner typically retains title to the asset, and the contract will stipulate that the asset be handed back in good condition to the public agency at the end of the term.

An alternative delivery method where a construction manager is engaged by the owner early in the design phase and later serves as the general contractor during construction. Under a CM/GC contract, the construction manager provides pre-construction services (such as cost estimating and constructability input) during design and then commits to deliver the project within a negotiated Guaranteed Maximum Price, taking on the risk of cost overruns. This approach gives the owner the benefit of the contractor's expertise during design and an "open-book" transparency on subcontractor pricing, while the CM/GC assumes the risk for construction performance, rather than the owner.

The traditional public works project delivery method in which design and construction are completely separated. The public agency first hires designers (architects and engineers) to prepare complete plans and specifications, then puts the fully designed project out to bid for construction. A construction contract is awarded to the lowest responsive bidder, who must build the project exactly as designed. In DBB, the public owner holds separate contracts for design and construction and generally retains the risk of any design omissions or errors, since the builder is obligated to follow the owner's design documents.

A project delivery method in which the design and construction phases are combined into a single contract with one entity (a design-build team). The public owner conducts one procurement to select a team that will both complete the final design and construct the project. Because the design-builder is responsible for design completion, construction, and ensuring the project meets performance requirements, the risk of design issues is shifted to that design-build team (they must resolve design errors or omissions). Design-build allows for overlap of design and construction work – for example, construction on early phases can begin while later phases are still being designed – potentially accelerating project completion compared to Design-Bid-Build.

A variant of design-build in which the selected design-build team also provides upfront financing for some or all of the project's cost. The public owner repays the private partner (often in installments or upon completion) according to terms in the contract, which can help the agency defer payments and manage cash flow. Typically, payment to the design-builder under a DBF is tied to successful project delivery or milestones, creating an extra incentive for on-time, on-budget performance since the private team's capital is at risk until those milestones are met.

A comprehensive form of public-private partnership that bundles together project design, construction, financing, operations, and maintenance into a single long-term contract. The private partner (sometimes called the concessionaire or project company) not only designs and builds the infrastructure but also finances a portion of the capital cost and then operates and maintains the facility for a specified concession term (often 25–35 years or more). The public entity typically makes payments to the partner (for example, availability payments) or allows the partner to collect user fees, contingent on the asset meeting performance standards. This model transfers substantial risks – including construction cost, schedule, financing, and long-term maintenance and performance – to the private sector, giving the partner a strong incentive to minimize life-cycle costs and ensure quality service delivery over the life of the asset.

A project delivery approach, authorized in certain California statutes, that allows the phases of design and construction to be overlapped in a sequence to expedite project completion. Rather than waiting for 100% of design documents for the entire project before starting construction (as in pure DBB), design sequencing permits construction to commence on part of a project when the design for that part is complete, while design of subsequent phases continues. This method was used as a pilot by Caltrans to speed up delivery on complex projects by breaking them into segments that can be designed and built in succession.

In a P3 or any project involving third-party financing, the milestone at which all financing agreements have been executed and all conditions precedent are fulfilled, allowing funds to be disbursed and the project to move forward. Achieving financial close means the private partner's debt and equity financing is firmly in place – typically occurring after the concession or project agreement is signed (commercial close). At financial close, the project's construction phase can begin in earnest, since the necessary capital is available under the agreed financing terms.

A contract pricing mechanism under which a contractor or design-builder commits to a maximum price for the work. If the actual costs exceed this ceiling (absent scope changes), the contractor is generally responsible for the overrun, but if costs come in below the GMP, the savings may accrue to the owner (or be shared, depending on contract terms). GMP contracts provide cost certainty to the owner while still allowing an "open-book" review of costs; they are commonly used in CM at Risk and progressive design-build deliveries, where the contractor is involved in design and then guarantees a price before full construction.

The return of an infrastructure asset to the public owner at the end of a P3 or concession term. P3 agreements include handback provisions that require the private partner to maintain the asset to specified conditions and performance criteria throughout the contract and especially as the term ends. At handback, the facility must meet those agreed-upon standards (for example, a certain state of repair or capacity), ensuring the public agency receives a serviceable asset with a defined remaining useful life when control reverts to the public sector.

A collaborative project delivery approach that contractually aligns the owner, designer, builder, and potentially other key stakeholders into a single unified team by way of one multi-party contract. In true IPD, all primary parties share risks and rewards based on project outcomes and work jointly from the earliest stages of design through completion. This high level of integration – with early involvement of key participants, transparency, and shared goals – is intended to optimize project results, reduce conflicts, and maximize efficiency, as all parties "win or lose together" rather than in traditional siloed roles. IPD as a formal method has been used mainly in building projects and may require enabling authority for public agencies in California.

A legal entity formed when two or more public agencies enter into a joint powers agreement to collaboratively exercise a power common to them. A JPA is a stand-alone public agency that can, for example, plan, finance, and deliver a regional infrastructure project on behalf of its members. By pooling resources and authority, JPAs (authorized by California Government Code) enable cities, counties, or special districts to jointly implement projects or services that transcend their individual jurisdictions. Many regional transit or infrastructure projects in California are managed by JPAs created for that purpose.

An alternative delivery method, used primarily by California schools and local agencies, that combines project construction with a financing arrangement. In a lease-leaseback, a public entity leases its property to a developer or contractor (often for a nominal amount) and that developer builds or renovates facilities on the site. Upon completion, the developer leases the completed facility back to the public agency, which makes lease payments over time (providing a mechanism to finance the project). At the end of the lease term, ownership and full use of the facility revert to the public agency. This method allows selection based on qualifications and best value (instead of low bid) and can streamline project delivery, though it requires compliance with specific statutes and was traditionally used to avoid upfront bond funding.

The total costs associated with an infrastructure asset over its entire service life, including planning, design, construction, operations, maintenance, and eventual rehabilitation or disposal. Considering lifecycle costs (rather than just initial construction cost) is crucial in alternative delivery because methods like design-build-maintain or DBFOM encourage up-front design decisions that reduce long-term maintenance and operation expenses. Traditional low-bid procurement may neglect these future costs, whereas alternative approaches aim to optimize overall value by accounting for the asset's performance and cost over decades.

A project delivery practice that emphasizes transparency in contractor pricing and costs. In an open-book arrangement, the contractor (or developer) provides the owner full access to cost data (such as subcontractor bids, unit prices, and contingency usage) and often collaborates with the owner on pricing decisions. This is commonly used in progressive design-build, CM/GC, and pre-development agreements, where the final price is negotiated rather than hard-bid. Open-book contracting builds trust and allows the owner to ensure competitive pricing and fair fees, since the owner can see and audit the actual costs as the project progresses.

A two-phase form of design-build in which the design-builder is selected primarily on qualifications (and possibly a conceptual proposal) before the design is fully developed or a final price is fixed. After selection, the owner and the chosen design-build team work collaboratively during the preliminary design phase to define the project, evaluate value engineering and risks, and develop the design. The "progressive" aspect refers to the fact that the price is negotiated progressively: the parties establish either a guaranteed maximum price or lump sum after the design reaches an agreed-upon stage (with an open-book review of costs). This method provides flexibility to address uncertainties or complex project elements in collaboration with the contractor and is well-suited for projects that are too complex or specialized to effectively award on a complete hard-bid set of documents upfront.

A broad category of alternative delivery in which a public agency partners with a private entity to deliver a public infrastructure project, sharing risks and responsibilities. In a P3, the private partner typically performs a combination of project phases – design and construction, and often financing, operations, or maintenance – under a long-term contract. The public agency, in turn, may provide payments over time (or grant revenue rights) contingent on the private partner meeting performance standards. Well-structured P3s seek to leverage private sector expertise and capital to achieve better cost and schedule performance or lifecycle maintenance outcomes, while the public sector retains ownership of the asset and ensures public interests, such as fare levels and service quality, are protected.

A collaborative procurement approach used primarily in P3 projects, where the public agency selects a private development partner at an early stage to help advance project development before committing to a full concession. Rather than requiring a fixed price bid up front, the agency awards a PDA based on a best-value evaluation of the developer's capabilities and proposed development plan. The public agency and selected developer then work together in an open-book, iterative process to refine the project's scope, mitigate risks, and develop the design and financial plan. Only after this joint development period – when the project is better defined – does the public agency decide whether to proceed with a final P3 agreement (for example, a lease or concession) with that developer. PDAs allow earlier private-sector input and innovation on complex projects, while deferring the final pricing until there is more project clarity.

A formal solicitation document issued by a public agency to request detailed proposals from pre-qualified or short-listed firms for a project. In alternative delivery procurements (after an initial RFQ stage), the RFP outlines the project requirements, performance criteria, and contract terms, and asks proposers to submit both technical and price proposals. The RFP phase is typically evaluated on a best-value basis – considering factors like design approach, management plan, key staff, schedule, and price – to select the proposer that offers the optimal combination of quality and cost. The RFP process in design-build and P3 projects often allows for confidential proposer meetings or alternative technical concepts to refine proposals before final submission.

A solicitation issued by a public agency as the first step in a two-step procurement, inviting interested firms to submit their experience and qualifications for a project. The agency evaluates the responses to identify a short-list of the most qualified teams, who will then be invited to compete in the next phase (typically by submitting full proposals in response to an RFP). Using an RFQ helps ensure that only teams with the appropriate design, construction, financial, and management capability are considered for complex alternative delivery projects, thereby streamlining the competition to serious qualified bidders.

A type of public-private partnership in which the private partner's return on investment comes from user-generated revenues (such as tolls, fares, or facility charges). In a revenue-risk P3 (often used for toll roads, consolidated car rental facilities, or similar projects), the private developer finances and delivers the project and is then allowed to collect revenues from the project's users for a period of time as agreed. The private partner assumes the risk that usage and revenue might be lower than projected – if, for example, traffic or ridership is below forecasts, the private party's income is reduced. Conversely, if usage exceeds expectations, the private partner can profit. This model shifts demand risk to the private sector, aligning incentives for the partner to optimize the facility's performance and appeal to users. By contrast, in an availability payment P3 the public sector retains demand risk.

The process of assigning the responsibility for potential project risks to the party (owner or contractor or developer) best able to manage and mitigate those risks. Alternative delivery contracts typically include detailed risk allocation provisions – for example, transferring construction cost overrun and schedule risks to a design-build contractor, or transferring long-term maintenance and obsolescence risks to a DBFOM concessionaire. Effective risk allocation can result in cost savings and improved performance, as the private partner will price and manage the risks it accepts; at the same time, the public agency should retain risks that it can handle more effectively (such as certain regulatory approvals or right-of-way acquisition). In traditional design-bid-build, most project risks (aside from specified construction issues) remain with the public owner, whereas alternative methods allow a more strategic distribution of risks to reduce overall project cost and contingency.

A payment made by a public agency to unsuccessful proposers in a competitive procurement to partially compensate them for the time and expense of preparing a detailed proposal. Stipends are commonly used in design-build and P3 procurements due to the significant effort and cost required to develop technical and price proposals. In exchange for paying a stipend, the public agency usually secures the right to use ideas or design innovations from the unsuccessful proposals in the project (even though those firms were not selected). This practice encourages more firms to participate and submit high-quality proposals by reducing the financial risk of pursuit.

A project proposal submitted to a public agency by a private party without the agency having issued a formal request. Unsolicited proposals typically outline an innovative project concept or approach (often involving private financing or delivery methods) that the private proponent believes could benefit the public agency. California agencies like LA Metro have established processes to evaluate unsolicited proposals – the agency may reject the idea, proceed to initiate a competitive procurement for that project concept, or in some cases negotiate directly with the proposer if no competition is feasible, all while ensuring fairness and transparency in accordance with state law and policy. Unsolicited proposal programs can leverage private-sector creativity to identify projects or solutions the public sector might not otherwise pursue.

An analysis conducted to determine whether a particular procurement approach (often a P3 or alternative delivery) is advantageous for the public from a financial standpoint compared to the conventional method. A VfM analysis involves estimating the total lifecycle cost of delivering a project as a traditional public sector project versus as a P3, including adjusting for risk transfer, financing costs, and efficiencies. If the risk-adjusted costs of the alternative delivery are lower (or yield greater benefits) than the public delivery baseline, it demonstrates "value for money." Public agencies in California and elsewhere perform VfM analyses before committing to major P3 procurements to ensure that the chosen approach will likely provide cost savings or qualitative benefits over the project's life.