(a)

1. (1) Allocation of the project risks inherent in highway projects is a major factor in and underlying the D-B development model.
2. (2) The definition of ownership and responsibility for each task and its associated risk is an important consideration of the D-B process.

(b)

1. (1) On a traditional DB-B project, the Arkansas Department of Transportation acts in two (2) roles, as both the owner and engineer.
2. (2) The owner and engineer roles require the department to bear most, if not all, of the risk for the success of the design.
3. (3) In a D-B project, the guiding principle should be the assignment of risk to the party (owner or design-builder) which can most effectively and economically manage that particular risk.

4. (4)

   1. (A) One key question to be asked in a risk allocation assessment is, “How much is the department willing to pay a design-builder to assume risk that the department typically bears?”.
   2. (B) The risk resolution or mitigation will include a cost either way, so the response to the question would need to consider who is better able to mitigate or avoid the risk.
   3. (C) The same question may be appropriate for each individual task on a project to tailor the D-B project development and contracting approach to each particular project.

(c)

1. (1) Project risk is the defining issue that permeates all decisions related to developing the DBA provisions.
2. (2) High-risk items should be addressed prior to awarding a D-B project to avoid forcing the department to pay a premium on the unknown risk or in the contingency portion of the design-builder proposal.

3. (3) Some examples of high-risk items include:

   1. (A) Environmental studies;
   2. (B) Public endorsement;
   3. (C) Inter-agency agreements;
   4. (D) Project utility agreements;
   5. (E) Right-of-way acquisition; and
   6. (F) Project funding.

(d)

1. (1) If unanticipated issues or unforeseen conditions arise during the project, such as differing site conditions, hazardous materials, cultural resource sites, endangered species, or other issues of an environmental nature, the department should, unless specified otherwise in the DBA, develop, direct, manage, and monitor the performance of any mitigation plans required of the design-builder to address those issues.
2. (2) If the responsibility of unforeseen conditions is not directly assigned to the design-builder in the DBA, the design-builder may be asked by the department to perform the associated work to mitigate such unforeseen conditions under a change order to the DBA.

3. (3)

   1. (A) An example of this approach would be where the department accepts the risk of any environmental discoveries by agreeing to reimburse the design-builder for remediation costs in order to reduce the overall costs submitted in the proposals.
   2. (B) Conversely, in a corridor in which the department has an increased confidence that environmental discoveries are less likely, the department could pass on to the design-builder all risks for unanticipated environmental discoveries.

(e)

1. (1) The department may deviate from the normal position of maintaining responsibility for high-risk or otherwise unforeseen conditions only if a thorough assessment is performed of the department cost versus the department benefit derived from allocating the risk responsibility to the design-builder.
2. (2) In some cases, the high-risk items may be allocated jointly to both parties, the department and design-builder, or shared in a prorated structure, dependent upon each parties’ responsibility and/or ability to most effectively mitigate the respective unanticipated risk.

3. (3)

   1. (A) An example of this approach would be where the department exhibits high confidence that the design-builder would discover hazardous materials during excavation.
   2. (B) In such case, the department could acknowledge the potential discovery of hazardous materials in the RFP and then share the risk with the design-builder so that neither party was required to bear the entire cost in the event of a discovery.
   3. (C) The department could place the risk for remediation on the design-builder, however, cap the design-builder’s exposure in the RFP to a specific dollar amount and, if exceeded, the department would cover any additional costs.

(f)

1. (1) The department should begin to identify potential risks early in the project development and to assign responsibility for each of these risks to the appropriate party or parties.
2. (2) The risk review and assignment is not a one-time project development task but part of a continuing process for the project that could be modified as more information becomes available.

(g)

1. (1) One suggested method to manage the project risks is the development of a project risk allocation matrix (RAM).
2. (2) The RAM is a concept suggested from an extensive review of best practices nationally.
3. (3) An example of a project RAM is included as Appendix D.
4. (4) The RAM helps to present all relevant associated information concerning an anticipated risk which allows the department to discuss and determine the allocation of risk the department is willing to accept for the project.

(h)

1. (1) The RAM is a summary document, normally prepared in tabular format, listing the determined project risks, along with associated information provided, such as:

   1. (A) The category or risk type;
   2. (B) Risk description;
   3. (C) Risk cost drivers;
   4. (D) The risk assignment or risk allocation; and
   5. (E) The end result or risk treatment.
2. (2) The RAM should be tailored to each individual project.
3. (3) It is not intended to be a department-wide, all-inclusive document for every project.
4. (4) The RAM should be carefully reviewed so that all elements are included that could impact the specific project.

(i)

1. (1) The department should continue to utilize the RAM throughout project development, procurement, and implementation of the project.
2. (2) The RAM will not only assist in determining which party is responsible for a specific risk, but it will also help the department determine how far to advance each technical element within the preliminary design during development of the RFP to meet the current objectives of the RAM.
3. (3) The risk allocation decisions, allocations, and treatments are integrated into the DBA so that both parties are clear on respective responsibilities, rights, and remedies if the other party does not fulfill their obligations.