penny wise and pound foolish?

CONSTRUCTION MANAGER-AT-RISK: PENNY WISE AND POUND FOOLISH? TASBO 71st Annual Conference March 2, 2017

Presented by: Winnie Dominguez And Elisabeth Nelson

WHERE DID CMAR COME FROM, ANYWAY?

THE 70’S!

WHEN INTERESTS RATES HIGH -- TIME IS MONEY! © WALSH GALLEGOS 2017

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DESIGN-BID-BUILD VS. CMAR CHOOSING THE PROCESS

DESIGN-BID-BUILD  “Traditional” Method Architect Designs Project General Contractor Bids Subcontractors Build  Procured with CSP

School District

Design Professional Architect/Engineer

General Contractor

Subcontractor

© WALSH GALLEGOS 2017

Subcontractor

Subcontractor

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DESIGN-BID-BUILD VS. CMAR CHOOSING THE PROCESS

CONSTRUCTION MANAGER-AT-RISK  Input During Design  Value Engineering - Costs  Schedule Considerations  Constructability Review  CMAR Contracts with Subs  CMAR Shares Financial Risk

 Design and Construction Can Proceed Concurrently © WALSH GALLEGOS 2017

Subcontractor

School District

Construction Manager

Design Professional Architect/Engineer

Subcontractor

Subcontractor

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CMAR CONSIDERATIONS

ADVANTAGES      

Design Phase Consultation Control Of Sub & Vendor Selection Potential Schedule Acceleration Single Source Responsibility Risk Shift Transparency

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CMAR CONSIDERATIONS

DISADVANTAGES       

Potential Conflict – CMAR And Design Professionals Competition/Self-Performed Work – Collusion Potential Single Source Responsibility/Fewer Checks and Balances Transparency/Requires Expertise to Effectively Use Administrative Costs of Oversight Use of Allowances Shift Risk Back Project Delivered at “Actual Cost”??

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VOCABULARY WORDS  “Cost of the Work”  “Fee”  “General Conditions”

 “Guaranteed Maximum Price”  “Buy-Out”/”Buy Out Savings  Contingency/Allowance

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COST OF WORK AND GENERAL CONDITIONS  Cost of The Work includes Everything That Goes Into The Construction of the Project and the Persons Who Put Them There…  e.g. The Bricks and Bricklayer, the Stones and Stone Mason etc.

 General Conditions: The Contractor’s Costs at the Job Site  e.g. Job Site Trailer, toilet facilities and dumping, Superintendent, on site Secretarial, office supplies etc.

 “Other Categories” Graphic Depiction of General Conditions and Cost of the Work In Their Natural State © WALSH GALLEGOS 2017

(a/k/a “Miscellaneous Job Costs” “General Requirements etc.) 7

PROCUREMENT & CONTRACTING BEFORE ISSUING PROCUREMENT DOCUMENTS  Decide If One-step Or Two Step Procurement  Determine Scope Of Work And Rough Budget  Decide If General Conditions Will Be Percentage of Cost Of Work Or Included In Cost of Work  Define GC’s If Not Cost Of Work  Adopt Prevailing Wage Schedule  Establish Procedures For Self-performed Work Bids And Approvals [What Is A Competitive Bid?]  Have Contract Documents Prepared Or Reviewed By Attorney © WALSH GALLEGOS 2017

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PROCUREMENT & CONTRACTING BEFORE ISSUING PROCUREMENT DOCUMENTS  Establish Written Procedures for:

 Approval of Contingency Use and Change Orders  Bidding of Self-Performed Work to Assure Actual Competition; Requirements to Assure “Apples to Apples” Comparison and Transparency Bidding And Project  Bid Review and Performance of “Excluded Tasks” in Bids  Decide on Criteria and Weight of Criteria What are District’s Priorities? What is Required? What Do You Need to Know Specific To this Project?  Use of Savings Realized At Buyout and During Project

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PROCUREMENT & CONTRACTING CMAR PROCUREMENT – TX GOV’T CODE SEC. 2269.251  Complete Construction Documents Not Required  One Or Two Step Procurement  ONE STEP: RFQ With Pricing Requested  GC’s -> Percentage Of Cost Of Work or Monthly Fee  Fee -> Percentage of Cost of Work 

TWO STEP:  Step One: Request For Qualifications - Short List (Optional)  Step Two: Pricing As In One Step

 Publication of Notice in NEWSPAPER Once A Week For At Least Two Weeks © WALSH GALLEGOS 2017

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PROCUREMENT & CONTRACTING CMAR PROCUREMENT – TX GOV’T CODE SEC. 2269.251  Proposals Opened – Names Read Aloud  Proposals Evaluated and Ranking Recommended To Board  Contract Negotiations With First Ranked (As Approved)  If No Contract Reached -> Cut Off In Writing and Move To

Next Ranked – NO BID SHOPPING  Master Contract Signed with Pricing As Proposed  GC Definition and Procedures Incorporated In Contract © WALSH GALLEGOS 2017

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PROCUREMENT & CONTRACTING  Pre-Construction Phase Begins 

Normally Pre-Construction Fee is Part of Construction Phase Unless Construction Does Not Commence

 Public Advertisement For Bids and Evaluation (with Owner)  Guaranteed Maximum Price Proposal     

Detailed Summary Based On Schedule of Values Exclusion and Assumptions (Check for Contract Modifications) List of Drawings and Specifications on Which GMP Based Substantial Completion Date and Liquidated Damages Names of Subs and Self-Performed Work Identified

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GMP PROPOSAL AND AMENDMENT  GMP = Cost of Work + CMAR Fee + General Conditions (if NOT included in Cost of Work

 Written Amendment Signed Establishing the GMP and Incorporating All Information On Which It Is Based

 Construction Phase Does Not Begin Until GMP is Approved and GMP Amendment Signed by All Parties.  Any Procedures Not Included in Master Contract Should Be Added Into GMP Amendment

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MANAGING THE CONSTRUCTION AND COSTS 

Review and Approve Schedule of Values



Review and Approve Monthly Pay Requests and all Documentation – DO THE MATH…

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Review Savings At Buyout and Compare to Subcontracts

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Monitor Contingency, Allowances, and Buyout Expenditures

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Review Schedule Monthly and Take Action If Behind

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At Substantial Completion Assure Punchlist is Complete

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Conduct Final Review (Audit). Outsource if Necessary

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Assure All Savings Returned Via Deductive Change Order

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Review Documents (Warranties etc.) Provided and Store Responsibly

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The information in this presentation was prepared by Walsh Gallegos Treviño Russo & Kyle P.C. It is intended to be used for general information only and is not to be considered specific legal advice. If specific legal advice is sought, consult an attorney.