Construction Contract Delivery Systems Mikal Nicholls, P.E

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Construction Contract Delivery SystemsMikal
Nicholls, P.E.Senior Director
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Tools for Construction Delivery

• Many tools are available for construction
  delivery
• Need to follow
• Bid Limits
• Public Contract Code 20111
• Public Works Contract definition
• Public Contract Code 1102
• Design-Build
• Education Code 17250
• Lease Leaseback
• Public Contract Code 20670
• Education Code 17400
• Authority to Use
• If specifically legislated for others, but not
  you, then you probably cant use it
• i.e. LAUSD is authorized to use JOC, but no other
  school district can

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Contract Delivery ToolsOwners Risk
GC
L-LB w/o design
CM /GC
CM at Risk
D-B
L-LB w/design financing
Higher Risk
Lower Risk
CM Multiprime

• Construction Manager at Risk (CM at Risk)
• Design-Build (D-B)
• Lease-Lease Back (L-LB)

• Construction Manager Multiprime (CM/Multiprime)
• Lump Sum General Contractor (GC)
• Construction Manager General Contractor (CM/GC)

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Tools Require Proper Supervision and Training

• CM Multiprime Needs
• Sophisticated District project team
• Cost controls
• Decision making
• CPM schedule experts
• Daily inspection reports w/photos
• Disputes review
• Change order specialists
• Construction Maintenance expertise
• District tolerant of mistakes and briefed on the
  potential risks
• Means to quickly give direction in the field
• Force account
• Field instructions
• Ratify Board authority
• Internal staff augment for paperwork that is
  normally handled by General Contractor
• Insurance program to cover damage that nobody
  did
• Designed to delivery method
• CM that
• Advises District but doesnt control the work

• General Contract Needs
• Average District project team
• Cost controls
• Decision making
• CPM schedule review capability
• Daily inspection reports w/photos
• Disputes review
• Change order review capability
• Construction Maintenance expertise
• District briefed on
• Potential risks
• Refereeing between designer and general
  contractor
• Understands
• Design errors
• Design omissions
• Unforeseen conditions
• Contractor workmanship mistakes
• Means to quickly give direction in the field
• Force account

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Tools Require Proper Supervision and Training
(cont.)

• CM at Risk Needs
• Sophisticated District project team
• To negotiate with Construction Manager
• Understanding the changing roles of CM
• Pre-bid professional consultant on Owners side
• Post-bid General Contractor at risk to
  complete project on time and within budget
• Following to hold CM accountable
• Cost controls
• CPM schedule experts
• Daily inspection reports w/photos
• Disputes review
• Change order specialists
• Construction Maintenance expertise
• District tolerant of mistakes and briefed on the
  potential risks
• Means to pay quickly after CM makes changes
• Ratify Board authority
• Internal staff augment for paperwork that is
  normally handled by General Contractor during
  bidding phase only
• Insurance program in CM contract to cover damage
  that nobody did
• Designed to delivery method

• CM General Contract Needs
• Average District project team
• Cost controls
• Decision making
• Construction Manager
• District briefed on
• Potential risks
• Refereeing between designer and general
  contractor
• Understands
• Design errors
• Design omissions
• Unforeseen conditions
• Contractor workmanship mistakes
• Construction management mistakes
• Just an advisor
• Means to quickly give direction in the field
• Force account
• Field instructions
• Ratify Board authority

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Tools Require Proper Supervision and Training
(cont.)

• Lease - Leaseback Needs
• Sophisticated District project team
• Lawyer to negotiate land, design and construction
  deal
• Cost controls
• Decision making
• Plus attributes of GC after DSA approval
• More upfront effort, less in back end
• District briefed on
• Potential risks
• Understands
• Design errors omissions
• Unforeseen conditions
• Contractor workmanship mistakes
• Contract is basically a GC after DSA approval
• Means to change contract if modifications need to
  be made
• Contingency/Force Account in contract?
• Ratify Board authority
• Need to review design before final price
  agreement
• Designer/Criteria Designer

• Design-Build Contract Needs
• Project value gt10M
• Sophisticated District project team pre-RFP
• Cost controls
• Decision making
• Plus attributes of GC after DSA approval
• More upfront effort, less in back end
• District briefed on
• Potential risks
• Understands
• Design errors omissions
• Unforeseen conditions
• Contractor workmanship mistakes
• Contract is basically a GC after DSA approval
• Means to pay quickly if changes are made
• Contingency/Force Account in contract
• Ratify Board authority
• Need to compare final design to RFP to make sure
  corners arent cut
• Criteria Designer

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Roles Under Construction Management with Multiple
Prime Contracting

• District has direct overall supervision for
  professional consultants, indirect supervision of
  one construction manager and direct supervision
  of all Multi-Prime Contractors (all in Bold).
• Construction Manager has an indirect supervision
  of the Multi-Prime Contractors (depending upon
  the District and the contract provisions).
• Construction Manager has no risk in this role.

• Construction Manager can be hired during design
  period to provide construction perspective prior
  to bidding.
• All payment, change orders, and direction is
  supposed to come from the District.
• District has risk for unforeseen, design,
  disputes between Prime contractors, bid document
  coordination between CM and designer and scope
  gaps.
• Prime contractors have risk for construction in
  their trade only!

Note Professional Services contracts are above
the red line
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Roles Under General Contracting

• District has risk for the design and soils.
• General Contractor has risk for construction.

• District has direct overall supervision for
  professional consultants and one construction
  contractor (all in Bold).
• General Contractor adjudicates all changes from
  subcontractors and presents as one issue to the
  District.

Note Professional Services contracts are above
the red line
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Roles Under Construction Management with General
Contracting

• District has direct overall supervision for
  professional consultants and indirect supervision
  of one construction contractor (all in Bold).
• Construction Manager has indirect supervision of
  the General Contractor (depending upon the
  District and the contract provisions).
• Construction Manager can be hired during design
  period to provide construction perspective prior
  to bidding.
• Construction Manager provides advice to District
  on construction payments, change orders and
  direction.
• Construction Manager has no risk in this role.

Note Professional Services contracts are above
the red line
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Roles Under Construction Management at Risk

• District has direct overall supervision for
  professional consultants and initial direct
  supervision of all Multi-Prime construction
  contractors (all in Bold).
• Construction Manager is hired during design
  period to provide construction perspective prior
  to bidding.
• After bidding by the District, the Construction
  Manager is assigned responsibility for all
  District Prime Contracts including construction
  payments, change orders, direction and disputes
  (under the terms of the bid).
• Construction Manager has risk for construction
  schedule and costs after assignment of Prime
  Contractors.
• Construction Manager becomes General Contractor
  after assignment and is no longer Professional
  staff to the District. (this may not be legal)
• Warning CM is privy to District secrets
  before bidding and potential adversary after
  bidding!

Note Professional Services contracts are above
the red line
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Roles Under Design-Build Contracting

• District has direct overall supervision for most
  professional consultants (except Designer) and
  design-build entity (all in Bold).
• Design-Build Entity is responsible for design,
  DSA approval, and construction. It can also be
  responsible for soils conditions and meeting
  District milestones, if assigned in contract.
• District has risk for criteria and customer
  requested changes, and unforeseen conditions.
• Remaining risk is with the Design-Build Entity.

Note Professional Services contracts are above
the red line
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Roles Under Lease Lease Back Contracting

• District has direct overall supervision for
  professional consultants.
• Lease Lease Back Entity is responsible for the
  property, design assistance and construction. It
  can also be responsible for financing, and
  meeting District milestones, if assigned in
  contract.
• District has risk for customer requested changes
  and unforeseen conditions with limited risk for
  EO since designer and contractor collaborated on
  design. More limited if contract has GMP GCD.
• May not be subject to 10 change order limitation
  (Public Contract Code 20118.4).
• Remaining risk is with the Lease Lease Back
  Entity.
• An advantage over General Contracting is that the
  District can select the contractor through RFP.
  This is also a disadvantage since there is no
  price competition for the contract general
  conditions (3 15 of contract price).

Note Professional Services contracts are above
the red line
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Owners Comparison

• General Contractor
• One stop shopping
• Most designers are preparing construction
  documents for this delivery method
• One accountable party for construction

• Multiprime Contracting
• Chaotic
• Need more District staff to handle the paperwork
  that cant be delegated
• Need CM to watch over the work and direct
  contractors in the field
• Needs to design for this delivery method
• Owner gets to mediate problems between
  contractors

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GC V. Multiprime (1 of 2)

• Combo v. a-la-carte
• Combo buys economy of scale
• A-la-carte buys same items at stand alone cost
• GC
• Owns scope gaps
• Cost risk if scope gaps occur
• Fees based upon bidding environment
• Change orders based upon project (contract)
  amount (10 law)
• Paperwork less
• One bill each month
• Subcontractor change orders are summarized by GC
  into one

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GC V. Multiprime (2 of 2)

• Multiprime
• Owner owns scope gaps
• May have to bid them out due to 10 law
• Little to no risk to CM if scope gaps occur
• Fees are based upon professional services and
  billed hourly
• Little control by District to keep fees and hours
  in line
• Change orders based upon individual contract
  value
• Often run up against 10 law (Public Contract
  Code 20118.4)
• More paperwork
• Contracting with up to 60 prime contractors
• 60 bills each month
• Contractors changes can effect other contractors
• District in charge of backcharging contractors
• No usable construction cost data at the end of
  the project (cost/sf)

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Means and Methods

• CM without risk contracts
• Only an administrator?
• Not responsible for means and methods (MM) of
  the contractors
• However,
• CM prepares master schedule (MM)
• Approves RFIs (MM)
• Signs off on payments (MM)
• Directs contractor with Field Instructions (MM)
• Prepares bid packages breaks up design and
  potentially takes designer off the hook (MM)

• CM at risk contracts
• Paid as professional during design period
• Paid as a percentage of the contract amount
  during construction
• Is assigned the construction contracts to
  administer after bidding by the District
• Responsible for the means and methods
• Not responsible for unforeseen conditions or
  owner directed changes

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Professional Services

• Indirect Tools

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Program/Project Manager Construction Manager

• Agent for Owner?
• Split tasks?
• Different CM P/PM
• CM with GC CM Multiprime?
• Scope gaps
• Professional services payments
• Owners Supervision

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DSA Approval Complete Design

• DSA regulatory review, approval and certification
• Make sure design is complete with MEP before
  going to DSA
• Constructability review by Project Manager
• DSA doesnt review compatibility between trades

• Coordination between design consultants
• Electrical v. civil drainage issues
• Submittals indicate actual products to be used
• DSA allows limited deferred approval

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Designers Contract (1 of 3)

• Negotiate the fee
• Dont be fooled by CDE rule of thumb
  percentages
• There is a minimum amount of time (and money)
  required for designer to prepare documents
• There is no maximum amount that they will charge
  for said documents

• Compare the costs
• 10M project at 5 500,000 in design fee
• 100M project at 5 5,000,000 in design fee
• Compare the work required by both projects
• Number of plan sheets
• Amount of time to prepare
• Number of people hours
• The work product one is not 10 times that of the
  other
• Designer gets more money with every change order

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Designers Contract (2 of 3)

• Provide incentive/disincentive in contract for
  late delivery
• Carrot and stick approach is fair to both sides
• Dont include incentive for early DSA approval
• Design does not have to be complete to go to DSA
• Dont leave open-ended additional services
  section that can be exploited when base design
  goes over budget

• Suggest one-stop shopping design service
  contract
• Includes all consultants including
  soils/geotechnical designer
• Helps prevent finger pointing between design
  professionals since they all work for the prime
  designer

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Designers Contract (3 of 3)

• Provide Ed Specs and District Standards to
  designer
• Excellent communication tool
• Provides benchmark for level of
  design/construction expected for fee and
  construction price
• Keeps the designer from reducing the quality if
  the project bids are over the budget

• Designer needs to design to budget
• Hold designer to budget with clear language
• Tie budget and delivery schedule so designer
  doesnt make District choose between quality and
  delivery time

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Value Engineering (not!)

• District should get some value from decision
• It is not just whacking scope from an over budget
  project
• Need to weigh changes against Ed Spec and
  District Standards
• Deletions always cost more to include later on!
• Watch schedule easy way to lose scope is to let
  consultants run you out of time to make a
  decision.

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Design to Delivery Method

• Identify key assemblies that cant be broken up
  into smaller pieces
• Make sure designer knows your intended delivery
  method and designs to it
• Need good as-builts from previous work at site
• If multiprime
• Designer should identify bid packages not CM
• Scope gaps belong to designer

• If design-build or lease-lease back
• Hire criteria designer that has
  design-build/lease-lease back experience
• Prepare District standard specifications to
  establish quality of construction
• Include geotechnical design in design-build/lease-
  lease back entitys scope of work
• If general contractor
• Include geotechnical design in designers scope
  of work

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Additional Tips

• (Learned through Hard Lessons)

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Choose Delivery Method Carefully

• Defects caused in part by delivery method
• Window assemblies failure
• Cracked and moving sidewalk

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Educational Specification

• Becoming important to Districts to match CDE
  education requirements to projects not vice
  versa, in order to obtain grant funding
• Include Technology upgrades
• Include new Physical Education requirements
• Need to start early to get this team together

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District Construction Standards

• Work with maintenance department to see what
  works for them
• Provide incentives for maintenance to participate
  like service contracts as part of the
  construction contract
• Make standards a living document
• See water districts for samples

• Standardize as much as possible without being
  proprietary
• Sole source where necessary
• HVAC controls
• Lock sets
• Fire alarm systems
• CYA with Board approval of standards
• Reference PCC 3400 (b)

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Other Cost/Time Saving Tips

• Reuse plans from previous projects
• Pick from successful past construction
• May have to update to new code, but costs should
  be far less then new design
• With previously built plans Districts should be
  able to budget for total life cycle as you
  already know maintenance and energy costs
• Use California Multiple Awards Schedule (CMAS)
• Meets States public contract code
• May have to split procurements due to public
  works limitations, but you will know the quality
  and price for product being installed
• Good for
• Stadium artificial turf and track
• Playground structures and surfaces
• Classroom FFE
• Maintenance equipment and small vehicles (Gator)
• Goal posts, soccer goals, wrestling mats, track
  and field accessories
• Overhead projectors
• Signage
• Insert Caltrans Labor Surcharge and Equipment
  Rental Rates book as a reference in construction
  contracts
• Sets standard prices for equipment and labor
  surcharges across state
• Standardizes change order and force account
  negotiations

• Use offsite or shop fabrication construction
  practices
• Saves on prevailing wages
• Shops or offsite fabrications are usually uniform
  in construction means and methods resulting in
  predictable quality
• Use alternate construction practices
• Tilt-up concrete construction shaves up to a year
  off of gymnasium construction
• Used by Francis Parker School and L.A. Fitness
• Use same type of construction throughout project
• Dont switch from split-face to smooth blocks,
  then to colored blocks, etc.
• Every change of material costs in material and
  labor inefficiencies
• Add maintenance service contracts to construction
  contracts
• Used as a tool for maintenance department to keep
  up with warranty requirements
• Use DSA P.C. (pre-checked) assemblies
• DSA pre-checks items such as
• Relocatable buildings,
• Shade structures,
• Marquees
• These items still need to be site adapted through
  DSA, but the process takes less time and the bulk
  of the work is already approved

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Maintenance

• Make sure design isnt beyond your maintenance
  budget to fix
• Train staff during construction period
• Make sure OM manuals are delivered to
  maintenance with as-builts
• As-builts should include
• Plans
• Specifications
• Shop drawings
• Submittals
• RFIs

• Provide warranty info in binder with POC list
• Provide extended warranty items (longer than the
  one or two years listed in the contract) that are
  provided in manufacturers submittals like
• Motors
• HVAC equipment
• Roofing
• Paint
• Synthetic turf and track
• Provide recommended maintenance schedule so that
  warranty is not lost
• Commonly forgotten maintenance schedule items
  include
• Sealant/caulking inspection
• Lock and hinge greasing

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Owner Controlled Insurance Program (OCIP)

• Safety guys
• Insurance and CM
• GC
• No fault insurance
• Problems if defects occur
• Should have plan to tap into when nobody broke
  something

• Potential problems
• Owner premium escalation if contractor(s) not
  vigilant with material security or safety
• Claims payments on jobs with defects
• Shouldnt be required if using GC type contract

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Change Orders

• Inevitable
• Need to manage number and costs
• Can minimize by
• Limiting direction to construction team to those
  responsible for budget
• Dont multiprime design or construction
• Establish standards of construction
• Constructability review of documents
• Limit unknowns during design phase
• Make quick decisions during construction
• Changes cost more during construction when people
  are waiting for decisions

• Type code as they occur so that you can explain
  and/or recover costs
• Typical coding
• Unforeseen conditions
• Insurance
• Customer requested
• Errors
• Designer (may list each separately)
• Construction manager
• Omissions (scope gaps)
• Designer (may list each separately)
• Construction manager
• Backcharges

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Schedule Timing (1 of 2)

• Most schools work schedule backwards from
  required delivery date
• Most project schedules are fit to schedule
  budget instead of designed to meet requirements
• Districts need to document projects independently
  of hired professionals and contractors using
  project inspector(s)
• Track schedule activities on daily reports
• Include equipment on site on daily reports
• Project photos
• Letters
• E-mails
• Two way communication is better than unilateral
• i.e. meeting minutes are self serving by drafter
• Public notice of anticipated start and completion
  dates gives contractors at cost advantage during
  negotiations
• Design professionals and construction contractors
  do this for a living
• They are better at this than we are
• Districts need on staff professionals equal in
  talent to team delivering the product

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Schedule Timing (2 of 2)

• Require contract team to provide schedule updates
  with monthly progress payments
• Get contractor to provide hardware and software
  for electronic updates
• Look for embedded constraints
• Pay with cost loaded schedule, if possible
• Have a schedule specification section
• Note that no one owns the project float
• Cost loaded, if possible
• Only finish-start activities allowed
• Only one critical path
• Has to include
• Submittal review
• Material procurement delivery
• Built-in Construction delays like concrete cure
  time
• DSA and regulatory inspection
• Add time to non-critical activities as part of
  change orders
• Only add project time to critical path activities
• Understand that the critical path may change
  multiple times during a project
• Document all activities against current schedule
• Compare with contractor monthly

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Plan for Two Bids

• Get Board approval for bid and rebid at same time
• Dont need CM estimate
• CM estimate costs money
• Costs are going to be what they are bid
• CM estimate isnt bonded, so of little use
• If bid is high
• Have designer redesign to budget and rebid
• If bid is ok then award

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Labor Compliance

• Labor Code section 1771.5
• Many ways to accomplish
• Other Municipalities do it with
• in-house clerk (collecting and verifying
  contractor submitted certified payrolls)
• IOR (performing interviews as work progresses)
• by Consultant
• Not difficult to do
• Paperwork intensive

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Cost Savings - Summary

• Prepare District Standards
• Ed specs
• District/Maintenance
• Reuse Plan - Regional standards
• Use DSA PCs
• Use good designs from other districts and
  colleges
• EFSG collects and distributes biannually
• Choose least risky delivery method
• Practice defect avoidance
• Get and maintain performance bonds
• Ensure bid packages are by assembly
• No multi prime contracting or designs
• Get as-builts and warranties
• Dont forget product warranties in submittals and
  product boxes
• Get contractor, consultant and/or designer to
  catalog and make accessible to staff
• Watch the building details
• Door building heights
• Material and texture changes

• Evaluate all firms
• During and at completion
• Make policy to reuse only good firms
• Designers Consultants
• Compete before and during projects
• Task orders
• Multiple awards
• Make policy to select only those that get DSA
  certification
• Dont sign consultant contracts
• Make sure contract doesnt include fee based upon
  of construction contract
• Take and maintain record of project photos
• Get DSA certification the 1st time
• Shift costs as much as possible
• LLB with financing
• Alternative energy projects
• Prop 39 bonds for project staff
• Hire in-house staff

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If You Sell the Kool Aid, You Need to Drink the
Kool Aid
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In Conclusion
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Thank You

• Any Questions?