Construction Delivery Methods

Construction Contract Construction Contract Delivery SystemsDelivery Systems

Mikal Nicholls, P.E.Mikal Nicholls, P.E.Senior DirectorSenior Director

3/11/09 2

““Tools” for Tools” for Construction DeliveryConstruction 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 can’t use it• i.e. LAUSD is authorized to use JOC, but no other school district can

3/11/09 3

Contract Delivery “Tools”Contract Delivery “Tools”Owner’s RiskOwner’s Risk

• 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)

Higher Higher RiskRisk

Lower Lower RiskRisk

CM Multiprime

CM at Risk

GC

D-B

L-LB w/design & financing

CM /GCL-LB w/o design

3/11/09 4

““Tools” Require Proper Tools” Require Proper Supervision and TrainingSupervision 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 doesn’t control the work• Doesn’t overstep contract requirements• No means and methods• Tracks and reports to District for action

– Inspector (IOR) that looks for both DSA and potential problems for the District

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


– Designed to delivery method– Inspector (IOR) that looks for both DSA and

potential problems for the District

3/11/09 5

““Tools” Require Proper Tools” Require Proper Supervision and Training (cont.)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 Owner’s 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– Inspector (IOR) that looks for both DSA and

potential problems for the District

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


– Designed to delivery method– CM that

• Advises District but doesn’t control the work• Doesn’t overstep contract requirements• No means and methods• Tracks and reports to District for action


3/11/09 6

““Tools” Require Proper Tools” Require Proper Supervision and Training (cont.)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

• Experience in design-build and/or lease-leaseback method

• Avoid bridging documents• Prepares RFP for innovation from Lease-Leaseback

team• Fair evaluation criteria in RFQ and RFP• Uses available, approved resources

– District Construction Standards– Education Specifications


Design-Build Contract Needs:– Project value >$10M– 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 aren’t cut

– Criteria Designer• Experience in design-build method• Avoid bridging documents• Prepares RFP for innovation from Design Build Entity• Fair evaluation criteria in RFQ and RFP• Uses available, approved resources

– District Construction Standards– Education Specifications

– Value competition– Inspector (IOR) that looks for both DSA and potential

problems for the District

3/11/09 7

Roles Under Construction Management with Roles Under Construction Management with Multiple Prime ContractingMultiple Prime Contracting

DistrictDistrictProgram/ProjectProgram/Project

ManagerManager


ManagerManager

Prime ContractorPaving

Prime ContractorPaving

Prime ContractorGrading

Prime ContractorGrading

Prime ContractorCarpentry


Prime ContractorElectrical

Prime ContractorElectrical

Prime ContractorMechanical

Prime ContractorMechanical

Prime ContractorConcrete

Prime ContractorConcrete

Prime ContractorEtc….

Prime ContractorEtc….

DesignerDesigner DSA InspectorDSA Inspector

Soils Engineer(could be partof Designer)


LawyerLawyer

ConstructionManager

ConstructionManager

• 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.

Note: Professional Services contracts are above the red line

• 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!

3/11/09 8

Roles Under General ContractingRoles Under General Contracting


ManagerManager


ManagerManager

General ContractorGeneral

Contractor

SubcontractorPaving

SubcontractorPaving

SubcontractorGrading


SubcontractorCarpentry


SubcontractorElectrical


SubcontractorMechanical


SubcontractorConcrete


SubcontractorEtc….





LawyerLawyer

• 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.


• District has risk for the design and soils.

• General Contractor has risk for construction.

3/11/09 9

Roles Under Construction Management with Roles Under Construction Management with General ContractingGeneral Contracting


ManagerManager


ManagerManager

General ContractorGeneral

Contractor

SubcontractorPaving

SubcontractorPaving
















LawyerLawyer

ConstructionManager

ConstructionManager

• 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.


3/11/09 10

Roles Under Construction Roles Under Construction Management at RiskManagement at Risk


ManagerManager


ManagerManager

ConstructionManager

(afterAssignment)

ConstructionManager

(afterAssignment)

Prime Contractor

Paving

Prime Contractor

Paving

Prime Contractor

Grading

Prime Contractor

Grading



PrimeContractorElectrical

PrimeContractorElectrical

PrimeContractorMechanical

PrimeContractorMechanical

PrimeContractorConcrete

PrimeContractorConcrete

PrimeContractor

Etc….

PrimeContractor

Etc….




LawyerLawyer

ConstructionManager

ConstructionManager

• 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!


3/11/09 11

Roles Under Design-Build ContractingRoles Under Design-Build Contracting


ManagerManager


ManagerManager

Design – BuildEntity

Design – BuildEntity

GeneralContractorGeneral

ContractorDesignerDesigner

CriteriaDesignerCriteria

DesignerDSA InspectorDSA Inspector



LawyerLawyer







SubcontractorLandscaping




• 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.


3/11/09 12

Roles Under Lease – Lease Back Roles Under Lease – Lease Back ContractingContracting


ManagerManager


ManagerManager

Lease – LeaseBack Entity

Lease – LeaseBack Entity

GeneralContractorGeneral

Contractor

DSA InspectorDSA Inspector DesignerDesigner

LawyerLawyer











GeneralContractor(Precon)

GeneralContractor(Precon)

Financing Partner

Financing Partner

• 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 E&O 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).


3/11/09 13

Owner’s ComparisonOwner’s 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 can’t 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

3/11/09 14

GC V. Multiprime (1 of 2)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

3/11/09 15

GC V. Multiprime (2 of 2)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• Contractor’s changes can effect other

contractors• District in charge of backcharging

contractors– No usable construction cost data at the

end of the project (cost/sf)

3/11/09 16

Means and MethodsMeans and Methods

• CM without risk contracts:– Only an administrator?– Not responsible for means

and methods (M&M) of the contractors

– However,• CM prepares master

schedule (M&M)• Approves RFIs (M&M)• Signs off on payments

(M&M)• Directs contractor with

Field Instructions (M&M)• Prepares bid packages –

breaks up design and potentially takes designer off the hook (M&M)

• 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

3/11/09 17

Professional ServicesProfessional Services

Indirect “Tools”Indirect “Tools”

3/11/09 18

Program/Project Manager & Program/Project Manager & Construction ManagerConstruction Manager

• Agent for Owner?• Split tasks?

– Different CM & P/PM

• CM with GC = CM & Multiprime?– Scope gaps– Professional services

payments

• Owner’s Supervision

3/11/09 19

DSA Approval = Complete DesignDSA 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 doesn’t 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”

3/11/09 20

Designer’s Contract (1 of 3)Designer’s Contract (1 of 3)

• Negotiate the fee• Don’t 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

3/11/09 21


• Provide incentive/disincentive in contract for late delivery– Carrot and stick approach

is fair to both sides– Don’t include incentive for

early DSA approval• Design does not have to

be complete to go to DSA

– Don’t 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

3/11/09 22


• 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 doesn’t make District choose between quality and delivery time

3/11/09 23

Value Engineering (not!)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.

3/11/09 24

Design to Delivery MethodDesign to Delivery Method

• Identify key assemblies that can’t 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 entity’s scope of work

• If general contractor– Include geotechnical

design in designer’s scope of work

3/11/09 25

Additional TipsAdditional Tips

(Learned (Learned through Hard through Hard

Lessons)Lessons)

3/11/09 26

Choose Delivery Method CarefullyChoose Delivery Method Carefully

Defects caused in part by delivery method

• Window assemblies failure• Cracked and moving

sidewalk

3/11/09 27

Educational SpecificationEducational 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

3/11/09 28

District Construction StandardsDistrict 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)

3/11/09 29

Other Cost/Time Saving TipsOther 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 State’s 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 FF&E• 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

– Don’t 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

3/11/09 30

MaintenanceMaintenance• Make sure design isn’t beyond

your maintenance budget to fix• Train staff during construction

period• Make sure O&M 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

3/11/09 31

Owner Controlled Insurance Owner Controlled Insurance Program (OCIP)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

• Shouldn’t be required if using GC type contract

3/11/09 32

Change OrdersChange Orders• Inevitable• Need to manage number and

costs• Can minimize by:

– Limiting direction to construction team to those responsible for budget

– Don’t 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

3/11/09 33

Schedule & Timing (1 of 2)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

3/11/09 34

Schedule & Timing (2 of 2)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

3/11/09 35

Plan for Two BidsPlan for Two Bids

• Get Board approval for bid and rebid at same time

• Don’t need CM estimate– CM estimate costs money– Costs are going to be what they are bid– CM estimate isn’t bonded, so of little use

• If bid is high– Have designer redesign to budget and rebid

• If bid is ok then award

3/11/09 36

Labor ComplianceLabor 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

3/11/09 37

Cost Savings - SummaryCost 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– Don’t 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

– Don’t sign consultant contracts– Make sure contract doesn’t 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

3/11/09 38

If You Sell the “Kool Aid”, You If You Sell the “Kool Aid”, You Need to Drink the “Kool Aid”Need to Drink the “Kool Aid”

3/11/09 39

In C

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Con

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3/11/09 40

Tha

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Name Department PhoneSally AnsonPlanning Analyst

Facility Planning (858) 292-3598

Joanne BranchCoordinator


John BrownCoordinator

Extension of StaffSweetwater USD

(619) 691-5553

Reba HindAdministrative Assistant II


Mikal NichollsSenior Director


Dana PerrinProgram Business Specialist I


Larry ScottCoordinator

Extension of StaffCoronado USD

(619) 522-8900 x1079

Thomas SilvaCoordinator

Extension of StaffSan Ysidro SD

(619) 428-4476 x3042

mailto:[email protected]



