Building Success Stories: A Survey of Construction Delivery Methods

PRESENTED BY:

BLAKE G. POWELL

Texas Government Code  § 2269.001 et seq.Construction Delivery Methods

Competitive Bidding

Competitive Sealed Proposals

Construction Manager-Agent

Construction Manager –At-Risk

Design-Build

Job Order Contracts

Competitive Bidding (“Hard Bid”)TEX. GOV’T CODE  § 2269.101 ET SEQ.

Construction, alteration, rehab/repair of a facility

Gov’t shall select A/E to prepare construction documents (“CDs”)

Request for bids must include: (CDs, estimated budget, scope and estimated project completion date)

Advertise for bids

Publicly open and read aloud “names of the offerors and their bids”

Select (award to) lowest responsible bidder

Not later than 7th day following award, document basis and make evaluations public

Competitive Sealed Proposal (“CSP”) TEX. GOV’T CODE  § 2269.151 ET SEQ.

Gov’t requests proposals, ranks offers, negotiates then contracts for construction, alteration, rehab/repair of a facility

Gov’t shall select A/E to prepare CDs

Request for CSP must include: (CDs, selection criteria/weighted values, estimated budget, scope and estimated project completion date)

Publicly open and read aloud names of the offerors and their monetary proposals

Not later than 45th day following award, document basis and make evaluations public

Select (award to) proposer that submits “best value” based upon criteria values and ranking

Construction Manager-Agent(“CMA”) TEX. GOV’T CODE  § 2269.201 ET SEQ.

Description: Standard method of construction contracting with award to the lowest responsible proposers for each scope of work. Multiple prime contracts are awarded. The CMa acts on behalf of the District in a fiduciary capacity for a fixed fee.

Prime Players: District, Architect/Engineer, Construction Manager Agent and General Contractor or Multiple Prime Contractors.

Construction Manager-Agent(“CMA”) TEX. GOV’T CODE  § 2269.201 ET SEQ.

• Best Suited: Complex projects, schedule sensitive projects, or projects subject to change

• Least Suited: Utility projects

Advantages: • Faster Delivery Schedule • Helps Build Integrated Team• Design Phase Builder Assistance • Fixed Fee by the CMa so the District’s

best interest is always first• Most Transparent Bid Process (Bids

are opened and read aloud at a deeper level than normal)

• Check and Balance between A/E and Contractor

Disadvantages:• Multiple Prime Contracts• Prime Contractors (Typically Subcontractors) are

required to have bonding and insurance as required by law alleviating some firms from participating

Construction Manager-at-Risk(“CMAR”) TEX. GOV’T CODE  § 2269.251 ET SEQ.

Description: Construction Manager is brought on earlier in the design process to allow for interface with design consultants. Selection can take into account factors in addition to price, including vendor reputation, quality of goods or services and vendor’s past relationship with the District.

Prime Players: District, Architect/Engineer, Construction Manager At Risk.

Enables fast-track delivery (beginning construction before design is complete)

Design-Contract-Build

Construction Manager-at-Risk(“CMAR”)

Best Suited: Larger projects that are complex , schedule sensitive, difficult to define, and/or change subject to change

Least Suited: Smaller projects

Advantages: • Faster delivery schedule • Helps build integrated project team • Design phase builder assistance/

expertise • Early construction cost commitment • Change flexibility • Single point of responsibility for

construction • Check and balance between A/E and

contractor

Disadvantages: • Scope is not clearly defined if

selection occurs during design process

• Percentage based fees promotes higher budgets

• Hidden costs in GMP for cost of work items

• Subcontractor bids are not always “best value”

• Contractor controls Contingencies

Design-Build(“D-B”) TEX. GOV’T CODE  § 2269.301 ET SEQ.

Gov’t contracts with a single entity to provide design and construction services for construction, alteration, rehab/repair of a facility

D-B firm must include and A/E

Gov’t must also select an A/E independent of D-B firm for project

D-B firm selected from RFQ criteria / best value / ranking process

Job Order Contracts(“JOCs”)TEX. GOV’T CODE  § 2269.401 ET SEQ.

Allowed for: “maintenance, repair, alteration, renovation, remediation, or minor construction of a facility when the work is of a recurring nature but the delivery times, types, and quantity of work required are indefinite”

Whether to use A/E depends on nature of the work

Gov’t may procure through CSP or Interlocal Contract

Gov’t may award to multiple contractors

Term may not exceed 2 years

Fixed or unit pricing allowed

Decision Making Factors Time

◦ Start with the “end” in mind (maze mentality)◦ When will you move in?◦ “Back Into” your time schedule

Money ◦ What is the cost difference?

External Stakeholders ◦ What do they expect?

Control ◦ What level of control do I want to exercise?

Delivery Schedule

Total Delivery Time – In Months

Figure 1 – Traditional Bid Process

BidDesign Build

Total Delivery Time – In Months

Figure 2 – Design Build/CM-at-Risk

Design

Bid

Build

Decision Matrix

Contract Forms

Delivery Method Contractor Form Architect Form

Traditional Bid/Sealed Proposal

AIA – A101 &AIA – A201

AIA – B141

CM Agency AIA – B801CMa (CM) AIA – B141CMa

CM-at-Risk AIA – A121 – CMc/AGC Form 565

AIA – A201

AIA – B141

Design Build AIA – A191 (part 1 & 2) N/A

Purchasing Requirements for Subcontractors

• CM-at-Risk• Bids or proposals• Opened privately• Public only after ward• Difficult for owner to evaluate without good scopes of work

• Design/Build• No requirements for subcontractor bids

• Competitive Sealed Proposals• Public opening by owner• Must define selection criteria and weights

• CM – Agency • Hard bid• Public opening • Competitive sealed proposals • Multiple contracts

Construction Cost Pyramid

GMP or Hard Bid $

Summary of Subcontractor Pricing,

General Conditions, Soft Costs, CM Fees, and

Contingency

Cost of Materials, Labor, Insurance, Bonding, Job Site Costs, and Change OrdersEnd

of Project

Start of Project

Estimated Cost

CM/Contractor

Actual Cost

Owner

Timing the GMP

Consider the Split of Contingency

Narrow down the “Guesswork”

Inverse relationship between plan completion and contingency

Defining Contingency Clearly define the components of “Cost of the Work”

◦ Closely related to timing of GMP◦ Mostly used for items included in the plans, but not picked up by

◦ bidding process

Review all contract amendments carefully

Set rational expectations

Insist on monthly usage reports

Managing Disagreements Delete Arbitration

Consider adding Non-Binding Mediation

Keep all transactions at “arm’s length” and within the contract documents

Consider monthly meetings with all Parties

Consider Partnering

Avoiding Pitfalls

• Choose delivery method and do it in a board meeting

• Follow the purchasing statutes

• Use the right contract for the method you have chosen

• Understand the components of construction cost

• Time your GMP properly

• Clearly define contingency

• Manage disagreements effectively

Blake G. Powell

Powell & Leon, LLP115 Wild Basin Road, Suite 106

Austin, Texas 78746Phone: (512)494-1177

Facsimile: (512)494-1188Email: bpowell@Powell-leon.com

www.Powell-leon.com