HomeMy WebLinkAbout02/10/2009 Council Presentation - Construction Contracts
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I_ _ _ _.' N
WHY CONSTRUCTION MANAGER AT RISK MAY NOT BE THE BEST
PROCUREMENT METHOD FOR PUBLIC AGENCIES ON HORIZONTAL PROJECTS
• SELECTION PROCESS IS SUBJECTIVE AND DOES NOT HAVE THE TAXPAYER'S
INTEREST IN MIND:
• Not regulated by State Statutes -municipalities can use whatever criteria and scoring
methodology they choose.
• Majority of the selection committee members can be employees of the agent.
• Scoring can be unfair/manipulative to select the "preferred" contractor.
• Committee members prejudiced or lack the technical knowledge.
• BELIEF THAT YOU WILL HAVE A BETTER PROJECT BECAUSE THE CONTRACTOR IS
INVOLVED IN THE DESIGN PROCESS PERFORMING CONSTRUCTABILITY AND VALUE
ENGINEERING REVIEWS:
• Contractor is compensated for pre-construction services which includes plan review and cost
estimating.
• Any potential benefit is negated when CMAR is brought in after plans are essentially complete.
• Design changes late in the design process may result in a change order to the designer.
• Multiple layers of plan review and increased cost.
• BELIEF THAT YOU CAN SAVE TIME BECAUSE YOU DO NOT GO THROUGH THE
FORMAL BID PROCESS AND IT WILL BE CONSTRUCTED WITHOUT DELAY:
• Does not save significant time because construction will not be permitted until plans are 100%
complete and approved. Owner has control for design schedule.
• Contractor controls construction schedule -time built into it to allow for project unknowns.
• BELIEF THAT YOU. WILL HAVE ZERO CLAIMS BECAUSE THE CONTRACTOR HAS
GUARANTEED A MAXIMUM PRICE (GMP) AND IS ASSUMING THE RISK. THE OWNER
STAYS WITHIN THEIR ALLOTTED BUDGET:
• Assuming risk comes with a price.
• A guaranteed maximum price (GMP) includes allowances for any unknown or undetermined
work.
• A GMP includes a contractor's contingency as a reserve against circumstances not completely
predictable or foreseeable (subcontractor-material cost increases/oversight on the plans}.
• The GMP includes an owner's contingency to allow for any changes or additional work.
• Essentially these allowances and contingencies are built into the GMP pricing upfront to absorb
what, in a competitive bid situation, would be change orders to the contract.
• BUT ARE YOU GETTING MARKET VALUE?
• Competitive bidding drives the contractors to obtain the best possible pricing and seek cost
effective advantages to ensure success in the bidding process.
• GMP's are comprised of the cost of the work, general conditions, overhead and profit, taxes,
bonds and insurance. "Cost of the work" can vary between contractors based on a multitude of
factors - do they own or rent their equipment, mobilization costs, subcontractor/supplier
relationships.
• Engineer's estimates can be a measuring tool for reasonableness, however, they are typically not
reflective of the current market conditions.
• As shown on the attached bid tabs, projects are bidding at 19% - 41% below the engineer's
estimate.
• BELIEF IT ELIMINATES THE ADVERSARIAL RELATIONSHIPS:
• CMAR projects are predicated on developing team relationships through partnering sessions.
• Same partnering process is used on all of ADOT's competitively bid projects.