Construction Management at-risk (CMAR)

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1 An Overview of New Project Delivery Methods in the Architectural, Engineering & Construction Industry (AEC) Construction Management at-risk (CMAR) Presented By: The Lemoine Company General Contractors Construction Managers and Coats Rose Adam Lemoine & Brian Grubb 1 of 29

2 Table of Contents Introduction The Shift in LA Legislation from Design-Bid-Build (D-B-B) to Design Build (D-B) What Paved the Way for Construction Manager at Risk (CMAR) What is CMAR? Overview of Project Delivery Methods What is D-B? What is CMAR? How is CMAR Different than D-B-B? Benefits of CMAR as a Delivery Method CMAR Early Involvement Impact Myth: Hard Bid vs. Best Value When to Use CMAR CMAR Project Examples CMAR in Review Conclusion Resources Comments, Questions and Answers 2 of 29

3 Introduction The Secret of Change is to Focus all of your Energy, not on fighting the old, but on building the New. -Socrates The objective of this presentation is to give an overview of the Design Build (D-B) and Construction Management at Risk (CMAR) delivery methods Included is specific education regarding these project delivery methods vs. other methods in the Architectural, Engineering, and Construction (AEC) industry This presentation should effectively inform your team on this project methodology and how it can be used for your future projects which comply with Louisiana Laws LA R.S. 38: (CMAR) LA R.S. 38: (D-B) Public Work: The erection, construction, alteration, improvement, or repair of any public facility or immovable property owned, used or leased by a public entity. La. Rev. Stat. 38:2211(12). 3 of 29

4 The Shift in Louisiana Legislation from Design-Bid- Build to Design-Build Act 373 of the 2007 Regular Session of the Louisiana Legislature La. Rev. Stat Louisiana "No Bidding of Design Professional Services" policy states, It is the policy of the state of Louisiana, its political subdivisions, and agencies to select providers of design professional services on the basis of competence and qualifications for a fair and reasonable price. Neither the state nor any of its political subdivisions or agencies may select providers of design services wherein price or price-related information is a factor in the selection. Act 373 amended La. Rev. Stat. 38: and enacted La. Rev. Stat. 38: to authorize Design-Build contracts by certain public entities (Division of Administration, Recovery School District, Orleans Parish School Board, City of New Orleans, Sewerage and Water Board of New Orleans,. Sheriffs, housing authorities and parish governments in Calcasieu, Cameron, Jefferson, Orleans, Plaquemines, St. Bernard, St. Tammany and Vermilion and the Port of New Orleans in areas damages by Hurricanes Katrina and Rita) for a limited period time. 4 of 29

5 What Paved the Way for CMAR? Act 493 of the 2012 Regular Session of the Louisiana Legislature Law previously prohibited a construction manager, or any other third-party consultant employed by a public entity, from managing a construction project as a general contractor or act in the role of the general contractor to oversee, direct, or coordinate individual trade contractors on behalf of the public entity, or accept bids or itself bid on the public work or components of the public work with respect to which the manager or consultant is employed or contracted to manage or consult. La. Rev. Stat. 38:2212.L(1). Act 493 authorized Construction Management at Risk. It stated, The provisions of [La. Rev. Stat. 38:2212.L.(1)] shall not apply to the initial construction of a hospital, medical facility, or a combination of both, constructed by the Orleans Hospital Service District, but shall apply to the construction of any additions or modifications of a hospital, medical facility, or a combination of both, constructed by the Orleans Hospital Service District following the completion of the initial construction. The provisions of this Paragraph shall not relieve the Orleans Hospital Service District from complying with all other applicable provisions of this Title. La. Rev. Stat. 38:2212L.(2). This legislature paved the way for New Orleans East Hospital and, ultimately The Louis Armstrong International Airport Terminal Expansion Project (Act 119; 2013), all public works projects exceeding $25MM (Act 782; 2014) and, most recently, a 10-project pilot program for projects exceeding $3MM (Act 163; 2015). 5 of 29

6 Overview of Project Delivery Methods Traditional Design-Bid-Build (D-B-B) La. Rev. Stat. 38:2212 [Advertisement and letting to lowest responsible and responsive bidder] All public work working the contract limit [$150,000.00] including labor and material, to be done by a public entity shall be advertised and let by contract to the lowest responsible and responsive bidder who had bid according to the bidding documents as advertised, and no such work shall be done except as provided by this Part. La. Rev. Stat. 38:2212.A.(1). Three phases: Design, Procurement, Construction Disadvantages of D-B-B Linear process equates to longer schedule duration Price not established until bids are received (may require redesign and rebid if exceed budget) Quality/competency of contractor not a factor in contract award No design or constructability input is received from the contractor on planning, budget or estimates Change orders and claims may increase final project cost 6 of 29

7 Overview of Project Delivery Methods Exception to D-B-B in Emergency Situations The formalities of advertising and compliance with La. Rev. Stat. 38:2212 do not apply where an emergency or extreme emergency has been certified to by the public entity and notice of such public emergency has. within ten days thereof, or, in the case of an extreme emergency, as soon as practicable, been published in the official journal of the public entity proposing or declaring such public emergency. La. Rev. Stat. 38:2212.P.(1)(a) and (b). Every contract negotiated by a public entity in response to an emergency or extreme emergency shall be supported by a written determination and findings by the public entity justifying such use. La. Rev. Stat. 38:2212.P.(2)(a). When contract action is taken as a result of an emergency a record shall be established by the public entity containing, at a minimum, the following information of each offer: a description of the work to be performed, the name and address of each offeror, and the performance time and terms of each offer. If quotations lower than the accepted quotation are received, the reasons for their rejection shall be recorded and made a part of the contract case file. Such records shall be retained for a minimum of six years following the purchase or completion of the public work. 7 of 29

8 Overview of Project Delivery Methods Design-Build (D-B) La. Rev. Stat. 38: [Design Build Contracts; authorized use by certain public entities in areas damaged by Hurricane Katrina, Hurricane Rita, or both] La. Rev. Stat. 38: [Design-Build Contracts; authorized by use by any regional transit authority for new ferries on the Mississippi River] Architectural, Engineering, and Construction under one contract Construction Management at Risk (CMAR) La. Rev. Stat. 38:2212.L.(2) authorized construction management at risk for initial construction of New Orleans East Hospital La. Rev. Stat. 38: [Construction Management At Risk] [Limited to use by New Orleans Aviation Board] La. Rev. Stat. 38: [Construction Management At Risk; Public Entity] La. Rev. Stat. 38: A(3) CMAR shall not be used for any project that is estimated to cost less than $25,000,000, except for an project in the Pilot Program. La. Rev. Stat. 38: (3) establishes a state-wide Pilot Program limited to 10 projects valued at $3,000,000 or more. Construction Manager (CM) engaged during development and design in an advisory role Upon start of construction, CM assumes the traditional risks of General Contractor 8 of 29

9 What is Design-Build? Only available for special legislative projects Becoming the preferred method of project delivery in private industry sectors Contractor and architect are hired by the Owner to deliver a complete project A Guaranteed Maximum Price (GMP) is provided by the design builder early in the project based upon design criteria prepared by the owner and moderately developed design by the architect Design Builder develops drawings to fulfill the criteria and complete the design within the GMP Design Builder awards subcontracts to subcontractors Well suited for highly time sensitive projects 9 of 29

10 What is CMAR? The CMAR project delivery method is most similar to the traditional D- B-B method. CMAR is legally committed to the construction performance to deliver the project within a defined schedule and price. Similar to a traditional General Contractor (GC) role, CMAR will hold all trade subcontracts during the construction phase. The added value in using this method is the CMAR also acts in an advisory role to the Owner during development and design phases. Owner Designer CMAR 10 of 29

11 How is CMAR Different than D-B-B? Owner to interview and select CMAR firm based fee, qualifications, experience, and team before detailed design and final construction documents are fully completed CMAR and design team work together to develop and estimate cost of the design throughout the entire design process Schematic, Design Development, and Construction Design Phase This methodology supports a collaborative and integrated relationship with mutual project goals for Owner, Designer, and CMAR This methodology supports fast track project schedules and tight development time frames This methodology brings the team to a Guaranteed Maximum Price (GMP) earlier in the process GMP is sum of the CMAR s fee, overhead, contingencies and direct cost of the construction services, i.e. prime contractors and/or subcontractors Unused contingency reverts back to owner at end of project 11 of 29

12 Benefits of CMAR as a Delivery Method Owner gains valuable knowledge and insight from CMAR early into planning and design Opportunity to Fast Track construction to begin before design is complete Phased Design Packages: Deep Foundation Structure, Critical Systems and Envelope, Interior Finishes Fast Track construction is an industry term for project delivery strategy to start construction before design is complete. The purpose is to shorten the time to project completion. Continuous budget control is possible and the GMP can be determined earlier Because there is more teamwork between design team and CMAR early in the design process, there is greater ability to handle scope changes and potential reduction in Change Orders during the Construction Phase Unlike D-B-B, CMAR provides flexibility for an owner to advance local economic impacts, such as participation of Disadvantaged Business Enterprises (DBE), etc. 12 of 29

13 CMAR Early Involvement Impact The greatest impact on preconstruction success is when a CMAR is incorporated programming conception Early commitment to structured communication not only reduces cost but also allows for an efficient design process The ability to lower cost and streamline design is increased if CMAR participation is implemented early in the design process Impact on Success Programming Schematic Design Design Development Construction Documents Bid Packages Design / Preconstruction Process 13 of 29

14 Myth: Hard Bid vs. Best Value Hard Bid/ D-B-B Best Value/ CMAR Subcontractor Bids A B C Single Point of Low Bid Division 2 - Sitework Low Low Division 3 - Concrete Low Low Division 4 - Masonry Low Low Low Division 5 - Metals Low Low Division 6 - Wood & Plastics Low Low Division 7 - Thermal Protection Low Low Division 8 - Doors & Windows Low Low Division 9 - Finishes Low Low Division 10 - Specialties Low Low Division 11 - Equipment Low Low Division 12 - Special Construction Low Low Division 13 - Special Construction Low Low Division 14 - Conveying Systems Low Low Division 15 - Mechanical Low Low Division 16 - Electrical Low Low Total Lowest Bids of 29

15 When to Use CMAR CMAR is best-suited for: The need for early contractor involvement New, Large, Complex Projects or Renovation Projects Schedule Sensitive Projects, Difficult to define or subject to potential changes Projects that require a high level construction management due to multiple phases, technical complexity, or multi-discipline coordination between design and construction Best Value Selection & Best Qualifications Need to minimize Owner s Risk & Changes during the Construction Phase 15 of 29

16 Schedule Differences Design Team Selected Contractor Selected Design-Bid-Build Schedule 44 Months Project Implementation Master Planning Design Bid Project Construction 6 Months 18 Months 2 Months 24 Months Design Phase Contract Price is Known Construction Phase High Probability Contract Price will Change CMAR Selected Design Team Selected Total Project Cost is Known as IGMP Construction Phase Changes for Design and costs are flexible to Owner needs CMAR Schedule 33 Months Project Implementation Master Planning Design Construction 6 Months 33 Months Design Phase Contract Price is Known as FGMP 16 of 29

17 CMAR Project Examples Patrick F. Taylor Hall, Louisiana State University $100,323, Months Anticipated Completion of 29

18 CMAR Project Examples CMAR will finish $71MM in 14 Months, overcomes weather challenges and will complete project on time. CMAR provided State & LSU with GMP proposal within 45 days. CMAR saves State & LSU $6MM with a GMP Contract. The key to a successful project is selecting the right team. 18 of 29

19 CMAR Project Examples Shell Motiva Convent Multi-Purpose Facility $8,277, Months Completed in of 29

20 CMAR Project Examples South Lafayette High School $62,308, Months Anticipated Completion of 29

21 CMAR Project Examples New Orleans East Hospital $73,640, Months Completed in of 29

22 CMAR Project Examples Our Lady of Lourdes Campus Relocation $149,667, Months Completed in of 29

23 CMAR Project Examples University Medical Center, $1.1B 23 of 29

24 CMAR Project Examples The Louis Armstrong New Orleans International Airport Terminal Expansion, $598 MM 24 of 29

25 CMAR Project Examples Lafourche Parish Correctional Complex, $26 MM 25 of 29

26 CMAR in Review Promotes collaboration which in turn promotes: Early Identification of Challenges Expedited Schedule Early Determination of GMP Early Construction Start Dates, which transfers some Owner risk to CMAR sooner Control in design and scope changes, which reduces Change Orders 26 of 29

27 Conclusion One of the most important Owner decisions is Delivery Method This determines how the project will be designed and constructed Many options for delivery methods and many variations within those options Project Delivery Method Considerations include: Project Size Type of Project Legislative and Regulatory Requirements Tolerance for Risk Schedule Local Market Knowledge Desired Level of Owner Involvement Owner s Resources and Capabilities When these factors are properly evaluated, a good decision can be made on the delivery that fits the goals of the Owner and Project The use of a qualified Construction Manager can greatly help in developing a project and making the decision on project delivery methods 27 of 29

28 Resources CMAR Compliance Summary The CMAR project delivery recommendation, complies with all state agencies as referenced in the documents noted below: State: LA LA R.S. 38: Construction Management at Risk; Public Entity (Effective: August 1, 2014) *RFP Guidelines LA R.S. 38: Part VII-A. Louisiana No Bidding of Design Professional Services Policy (Effective: June 12, 2012) Articles CMAA. (2012). An Owner's Guide to Project Delivery Methods. Retrieved from Final.pdf Getting the best value for our construction dollars: A primer on construction delivery methods. (n.d.). Retrieved from 28 of 29

29 Comments, Questions and Answers The Lemoine Company and Coats Rose Thank You for hosting our educational presentation! 29 of 29

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