Construction Management/General Contractor
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1 CM/GC Projects Outline Construction Management/General Contractor CM/GC Guidelines and Experience for Linear Projects Recommended Best Practices for the use of Construction Management/General Contractor on Transit Projects in the Public and Private Sector Prepared by
2 State transit agencies and private authorities are making greater use of alternative contracting methods. Herzog Contracting Corp. (Herzog) recognizes that public and private owners will select the delivery system that best fits their particular needs. Construction Management/General Contracting (CM/GC) has been used for delivery of transit construction projects in Denver, Salt Lake City, Dallas, Kansas City, Boston, Seattle, and Portland. CM/GC is a project delivery system where the design professional and the CM/GC are retained under separate contracts to the owner. The CM/GC is typically retained early in the design phase to provide preconstruction services including: estimating, budgeting, scheduling, constructability reviews, alternate concept reviews, and other construction input. While this is the more commonly used method, a successful alternative that should be considered is to select the CM/GC first and for the owner to seek its input into the selection of the designer. Allowing the CM/GC input into the selection of the designer can increase communications and collaboration early in the process and provide the owner with the constructors assistance in selecting the optimal partner. The CM/GC is then typically retained to construct the project as designed, based on a Guaranteed Maximum Price (GMP). The best practice, suggested for transit projects, is that the CM/GC self-performs a specified percent of the project. This suggested practice for public and private transit projects may differ from the typical CM at-risk model where the CM is not required to self-perform any of the work or only a small percent. Selection Generally the CM/GC should be selected through a competitive Best Value Selection process that uses qualifications and a price component as the determining factor. The price is typically a fee for construction services and a corporate overhead and profit factor that will be applied to construction services. Flexibility in evaluation of qualifications should not be limited to experience with CM/GC but should include projects of similar size and complexity, project management approach, construction approach, bonding capacity, and experience of management staff. Selection Procedures The procedure used to select one contractor/proposal over another should be of the highest integrity. In order to encourage the greatest level on completion from the largest number of proposers, the selection process should be fair and equitable in both perception and practice, consistent, open, competitive and free of political influence. Transparency in the selection and clarity in how qualifications and proposals will be evaluated is essential. Page 2 The following procedures are recommended: Owner s Selection Committee members should: o Be knowledgeable in construction/engineering of similar transit projects. o Be knowledgeable about local market conditions. o Not have conflicting interests. o Be well diversified with members from all stakeholders. Owner s Selection Committee deliberation meeting notes should be supplied to all eligible proposers, before a final decision is made and an opportunity for proposers to respond should be provided. The selection process should allow for a question and answer interview period prior to the selection, to allow the contractor an opportunity to provide additional information about its approach to the project and allow the owner to ask for clarifications to the proposal. The selection process should include a system that eliminates significant anomalies in the scores between different evaluators, with unusually high or low scores being eliminated. The deliberation process should allow each evaluator to independently score the proposal. Exit interviews and debriefings should be made available to the unsuccessful firms. Full disclosure of the scoring documents and methodology used should be provided soon after the successful proposer is selected.
3 RTD West Rail Line LRT startup and testing, a CM/GC project Evaluation Criteria Specific, objective evaluation criteria should be described in the solicitation. All criteria should be listed in the order of importance to selection. Only evaluation criteria listed in the solicitation should be considered in ranking proposals. The weight that is given to the price score versus the technical score should be clearly defined. There are different methodologies that have been successfully used to include price as a selection factor. Here is an example: Two Envelope Process The CM/GC s proposal is submitted in two separate envelopes. Envelope one contains the response to the qualification and technical criteria spelled out in the solicitation. The second envelope contains the fee for construction services (either as a percentage or a lump sum based upon the owner s estimate). The cost for preconstruction services are not included, but negotiated with the successful CM/GC after selection. Technical Evaluation Envelope one is opened first and the merit of each firm is judged based upon how well its submittal addresses the evaluation criteria in the solicitation. Each proposer is awarded a score based on the average of the scores awarded by each of the selection committee members. To help with consistency, panel members should use a scoring matrix to show evaluation score compared to evaluation criteria. The technical evaluation should be done prior to and independently of the review of the CM/GC s price proposal. Following completion of the technical scoring, the second envelope with each proposers fee/price proposal is opened. This can be done publicly on bid day or privately by the selection committee. The price proposal is then combined with the technical score to determine the best value proposal. Page 3
4 Debriefing Within 30 days following selection, the owner should provide unsuccessful proposers with a debriefing giving them feedback as to why the successful proposer was selected and just as importantly why the unsuccessful proposers were not. This should be done in a timely fashion while all of the details of the project are still fresh in the minds of the selection committee and the proposers. Debriefs should show the unsuccessful proposers scores compared to all other proposers including the selected proposer. Unsuccessful proposers should be given access to the other proposals during the debrief. This is important to have a procedure that creates the necessary transparency around a highly subjective process and helps unsuccessful proposers to present a better submittal on the next solicitation. This benefits both the unsuccessful proposers and the owner as well. Value Engineering and Shared Savings Generally, the CM/GC procedure will lead to minimal value engineering change orders as cost-saving ideas should be developed in the preconstruction services period and incorporated into the GMP, where the owner receives full credit. However, there may be circumstances where cost saving ideas are brought forward in the construction phase. If the CM/GC can offer a satisfactory explanation as to why an idea could not have been identified in the preconstruction services phase, then the sharing of the savings should be negotiated. Sharing savings between the owner and the CM/GC can enable the parties to capitalize on performance variables that were unrecognized at the time of contract information. There are numerous ways to structure a shared savings provision, although the owner typically receives the majority of any savings. Examples of such savings are: Cost savings during design - 100% to owner Construction savings by substitutions - 70% to owner, 30% of net (after deducting the redesign cost, if any) to CM/GC Construction cost savings vs. GMP - 70% to owner, 30% to CM/GC Contractor s construction contingency - Negotiated (50% to owner and 50% to CM/GC) General conditions cost - Negotiable depending on contract terms Team and Commitment The following are an integral piece to the CM/GC process: Safety Partnering Organization chart Resumes and position descriptions Management and Construction Plan Systems integration Knowledge of Local Area Where Project is to be Built Local Specialty Contractors and Suppliers The CM/GC could be a joint venture of two general engineering contractors with complementing areas of expertise. The CM/GC should demonstrate knowledge and working relationships with the local suppliers and the local specialty contractor community. If the local community is not able to provide adequate specialty contractors for the project, the CM/GC should describe plans to secure an adequate project workforce. Page 4
5 Government Entities The CM/GC should demonstrate a working relationship with (or knowledge of) the various governmental entities that have jurisdiction over the project. Local Codes and Practices The CM/GC should be familiar with the local interpretation of building codes and should understand how local practice will impact construction. Evaluation of the Responses and From the Interviews Owners expect preconstruction services to provide predictability and objectivity for their decisions. CM/GC services to be provided during preconstruction: Scheduling Value Engineering Analysis System Analysis Constructability Reviews Specification Review Progress Document Reviews Specialty Contractor Involvement and Prequalification Specialty Contractor Bonding Policy Budgeting and Price Guarantees Schematic Documents (SD) Budget Design Development (DD) Budget Construction Documents (CD) Budget Page 5
6 Contingency Contingency can be defined under two categories: the CM/GC s contingency and the owner s contingency. CM/GC s Contingency The CM/GC should submit a Guaranteed Maximum Price (GMP) to the owner at a predetermined stage in the design process (usually when plans are 95% complete). It is advisable to require GMP submittals at various stages of design completion (30%, 60%, and 90%) to allow the owner to keep the project within budget. In some instances it is in the best interest of the project and the owner for the CM/GC to begin construction as early as the 60% stage of the design. A CM/GC contingency fee should be allowed to cover plan risk on the remaining percent of the design not completed at the time construction starts, and to cover quantity overruns, and minor design changes. The CM/GC contingency is available in order to deliver the documented scope within the GMP and within the schedule for completion. The CM/GC contingency is part of the GMP and is not available for ownerdirected design or scope changes. The CM/GC contingency should be negotiated between the CM/GC and the owner and the amount should be identified in the contract. The CM/GC contingency will typically range from 5-10% depending upon the complexity and risk associated with the project. The allowable use of the CM/GC contingency should be defined in the contract documents. The contract documents should also clearly define that unused contingency belongs to the CM/GC, as the contractor takes the risk if costs are higher than the agreed contingency amount. Owner s Contingency An owner contingency should be included to cover scope changes, design errors and omissions, and unforeseen conditions. It is separate from the CM/GC contingency, is controlled by the owner and is transmitted to the CM/GC in the form of a change order, which typically increases the GMP. Appropriate Contingency Level % (+/- Budget) 20% 15% 10% 5% Design Contingency Escalation Construction Contingency 0 Need Identified Concept Schematic Design Design Design Development Project Stage Start Construction Design Complete (Purchasing Complete) Milestones Construction Complete CONTINGENCY Self-Perform The CM/GC should be required to self-perform a minimum of 30% of the construction and there should be no limits placed on the amount of work that is self-performed. Including a self-performance requirement is in keeping with Federal-aid requirements and gives the CM/GC more control over schedule, budget, and quality. Page 6
7 CM/GC process RISK ASSESSMENT Begin Design Advertise SOQ/RFP and select CM/GC Bring on CM/GC at 30% +/- with a preconstruction service agreement Indicative Pricing at 60% and 90% GMP from CM/GC is negotiated at 95% design. Risk is identified, monetized, and assigned CONSTRUCTION PERIOD All parties work to maintain cost and schedule certainty for the owner Complete Project CM/GC projects historically finish with less than 2% cost growth and achieve early completion = cost and schedule certainty Generally finishes earlier than D-B-B Traditional design-bid-build process If a GMP is not negotiated, the owner is able to change to a traditional designbid-build process with a completed procurement package. Low bid and bring on contractor CONSTRUCTION PERIOD Contractor and owner objectives are different. Complete Project Price and schedule at completion usually increases by 10% to 15%. This does not include claims situation or litigation. Protracted contract closeout often leads to claims. Subcontractors The CM/GC should have control over the solicitation, selection and administration of subcontractors in much the same way as subcontractors are selected through traditional Design-Bid-Build procurements based on experience, qualifications, track record and price. Since the CM/GC is at risk for the success of the project, the CM/GC should be given control of subcontractor selection and administration. As public and private transit agencies begin to explore the use of the CM/GC contracting method it is suggested that they consider these recommended best practices as a starting point. Herzog recommends developing procedures through collaboration with the industry for the use and implementation of CM/GC. Each agency and state has its own laws and procedures that must be taken into account when considering the use of CM/GC. Herzog Contracting Corp. Founded in 1969, Herzog has risen from an asphalt company located in St. Joseph, Missouri, to become a nationally ranked contractor in the Engineering News Record (ENR) top contractors in the United States. Herzog provides most of its work through alternative delivery methods including Design-Build and CM/GC work. The following represents CM/GC rail transit projects with values totaling more than $2.3 million. Our firm has completed other informal CM/GC projects for Class 1 Railroads including Burlington Northern Santa Fe, Union Pacific, Canadian Pacific, Canadian National, Norfolk Southern, and CSX. Herzog also offers potential international opportunities in Brazil, the Turks & Caicos Islands, the Middle East, and other exciting ventures. Page 7
8 City of Kansas City Streetcar Kansas City, Missouri Contract value: $85,376,439 4 miles of tracks using 112 tram rail Major utility relocations 18 platform stops, traffic signal and street lighting 4 TPSS substations OCS system and new 3-bay vehicle maintenance facility engineering: $4.8 million Our team developed and priced subcontractor packages during preconstruction to ensure immediate execution of work at notice to proceed. For long-lead items, we used an accelerated material procurement to purchase the rail and special trackwork. These methods will help keep the construction schedule on course. The OCS foundation structures were redesigned on the three bridges saving the owner nearly $300,000. The 670 bridge was originally scheduled to be replaced ahead of the streetcar construction and by working with the owner, we were able to embed the track during bridge construction, instead of retrofitting the new rail to the new bridge deck. DART Green Line LRT CM/GC 3 Dallas, Texas Contract value: $471,406, miles of track of which 5 miles are at-grade 22 road crossings 3 elevated stations and five at-grade stations 3 elevated bridge structures, approximately 42,400 LF (8 miles) of bridge deck Mechanically Stabilized Earth (MSE) retaining walls, parking lots and drainage structures engineering: $32 million Our joint venture successfully used an aggressive preconstruction coordination approach, mitigating more than six months of potential utility delays. A preliminary GMP was developed using sound estimating practices and experience gained on prior projects. We performed detailed take-offs on each incremental item of work, in order to quantify and determine the scope involved for each bid item. Next, equipment requirements, crew size, and established production rates for each activity were gathered. Our team obtained current material pricing from a wide variety of vendors and pricing on recent projects, to obtain the best value for the owner. Page 8
9 RTD West Rail Line Light Rail Denver, Colorado Contract value: $370,000, mile LRT extension Double track system 14 LRT or vehicular bridge structures 115 retaining walls, 67 ballast walls 12 stations, 21 at-grade crossings engineering: $70 million The initial budget challenges posed helped to hone our skills at seeking cost effective solutions during the preconstruction process, which achieved both initial and long-term cost savings, while meeting or exceeding operational performance standards. Through several iterations of collaborative cost savings analysis, RTD, DEA, and DTCG assessed each Project element in detail to determine least cost alternatives. In addition to successfully developing a Project scope which fit within RTD s budgetary guidelines, the joint venture continued to seek cost savings opportunities and returned over $70 million in value engineering savings to RTD. UTA FrontRunner South Commuter Rail Salt Lake City, Utah Contract value: $529,604, miles of single track with passing sidings 22 major canal or irrigation structures 27 bridges, 16 retaining walls 52 grade crossings including new and rehabbed signals 8 stations with park and ride engineering: $15 million During our constructability reviews, our joint venture worked diligently with the owner to develop Quiet Zones throughout the corridor, which is approved by the FRA. We constructed a new commuter rail bridge and reconstructed an existing UPRR bridge. These phasing efforts benefitted the project by avoiding a costly temporary shoofly. Instead, we utilized permanent work to detour the rail traffic. We also used construction forces that were already mobilized to bring efficiency to the work. Page 9
10 UTA FrontRunner North Commuter Rail Salt Lake City, Utah Contract value: $276,236, miles of single track, 5 miles of double track and 5 miles of passing siding track 39 new at-grade crossings Drainage improvements Signal systems including design 8 station platforms and park and ride facilities engineering: $24 million For this project and the subsequent FronRunner South project, we assembled small discipline focus groups, made up of 3-5 individuals from the construction, design, and owners teams with expertise in certain discipline areas, such as structures, track, systems, grading, and drainage. The groups brainstormed for potential design improvements and different approaches to accomplish the work. A cost saving to the project was the ability to use relay material that was salvaged from the project during yard construction. UTA Gateway Intermodal Hub LRT Salt Lake City, Utah Contract value: $36,294, mile extension where track transitions from heavy rail to light rail Cured-in-place pipe (CIPP) lining of a 1,895 LF brick sewer Relocation of 30 foot water line, multiple water and sewer lines 3 stations engineering: $4 million This project involved numerous sizes of water and utility lines, which were critical during early relocation coordination. We were able to avoid impacts to the project schedule and engage the utility owners in advance planning and design, while initiating workarounds where needed. We included the utility owners as integrated team members. We identified critical schedule drivers, while working in a heavily urban downtown area, to keep businesses open and avoid project delays. Page 10
11 DCTA A-Train Denton County, Texas Contract value: $192,768, miles of Class IV single track 3 passing sidings and new rail on newly constructed roadbed 5 new platforms and three park and ride facilities 24 bridges, 43 crossings, an 8-mile bike path 63,000 feet of old track removed engineering: $32 million In the beginning of the project, after the construction set was issued, the project was estimated at $225 million - well above DCTA s budget of $193 million. At which point it was determined that the project would not become a reality unless $32 million was eliminated from the project. The team set forth in a direction that required extensive review of the documents and tracked each value engineering item as it was being analyzed. The process not only evaluated the cost of work, but also took in the time to construct the work and allowed for innovative solutions that wouldn t otherwise be explored by the engineering community. The project was built for less than the final budget. DART CM/GC 1 Dallas, Texas Contract value: $30,900,230 (trackwork) Overall: $423,038,717 3 new line sections, includes ballast track, fixation track, and embedded track 14,550 LF of elevated bridge structures 356,000 SF of retaining walls 9 at-grade stations and two elevated passenger stations Received the Matthew Myles Walsh National Safety Award engineering: $37 million Herzog was a dedicated subcontractor and completed 100% of the trackwork for this large scale LRT project. The managing partners established a histogram of the project s estimated costs of various categories such as; rail, earthwork, retaining/sound walls, utilities, structures, stations, road crossing, and so on. The histogram was sorted from greatest to least costs, focusing the team s attention to the work scope that provided the best opportunities for analysis and value engineering. s were assigned to individuals to analyze and compile a list of alternative solutions. Before any detailed cost analysis was performed, our team met with the owner and their Engineer of Record to discuss the contents and determine which ideas would be feasible to pursue. Page 11
12 Herzog Contracting Corp. 600 South Riverside Road St. Joseph, MO (816)
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