PWGSC - KOREA 2nd JCC Meeting Canadian Federal Real Property Construction Contracting Presentation by Bruce Fletcher Director General – CASMS - PWGSC November 15, 2006 Seoul, Korea

2 Canadian Federal Government Construction Contracting Objective: to outline and discuss Construction contracting methodologies Qualification & selection of contractors Construction cost estimating Bid prices & negotiation Management of vendor/contractor performance

3 Canadian Federal Real Property Construction Contracting Process Contracting for federal construction requirements carried out in the National Capital Area and at Regional offices across the country Total annual value of PWGSC construction contracts is about $750M across Canada Other key federal government agencies with construction contracting authority: Defence Construction Canada Foreign Affairs Indian & Northern Affairs Royal Canadian Mounted Police

4 Construction Contracting Methods Design-Bid-Build: most commonly used 1.Architect & Engineering Services company hired by PWGSC to: Create design Prepare tender plans and specifications Prepare Cost Estimates 2.PWGSC prepares and publishes public Invitation to Tender to select General Contractor; package comprises: Contract solicitation documents Plans and specifications 3.Successful bidder awarded General Contractor contract Delivers project in accordance with Tender requirements

5 General Contractor Competition 2 Methodologies Public Tender: Open Competition Publicly Advertised Most common for higher value requirements(>$100,00) Invited Tender: Designated Competition: 5 to 8 firms invited to bid via rotational sourcing system Used for lower value requirements or where security is a key consideration Bids Opened Publicly Contract Awarded to Lowest Responsive Bidder

6 Construction Contractor Qualification Two Approaches: 1.Formal Prequalification of Bidders Pre-tender public invitation for prequalification (2 phase) Limited to special situations such as: Complex project with unusual or very complex construction methods (laboratories or other highly specialized space) Heritage buildings requiring specialized experience (specialized copper roofing or heritage masonry) 2.Qualification as part of the Tender (envelopes A and B) Bid price not revealed or evaluated unless bidder evaluated as meeting qualification criteria Most common methodology

7 Qualification Criteria Evidence of key trade expertise Evidence that firm has successfully performed 2 or 3 projects of similar scope and value Evidence of qualifications of key personnel (construction manager, site foreman) References from past clients

8 Construction Cost Estimating Key element in a successful building project Construction tender documents (plans & specifications) are prepared to government standards by private sector architectural & engineering (A&E) firms Construction cost estimates become progressively more refined by the A&E firm during the design phase For very large projects, independent 3 rd party cost consultants review and validate cost estimates prepared by the A&E firm

9 Bid Prices & Negotiation Rely upon open competition to yield best value Award to lowest price responsive bidder Usually no further negotiation Negotiation may be conducted if price exceeds budget Subject to Trade Agreement Thresholds If bid price exceeds budget by 15% or more Review scope of work Re-tender

10 Contract Performance Measures Bid and Contract Security Instruments Risk mitigation tools for construction contracts to ensure: 1.Contractor is financially viable 2.Bidders are serious 3.Entry into contract 4.Contract performance

11 Contractor Performance Bid Security Instruments Bid Bond Security Deposit Contract Security Instruments Performance Bond Labour and Material Payment Bond Security Deposits Payment Progress Payments Holdback 5 – 10% until completion Warranties and Guarantees Minimum 1 Year

12 Contractor Performance Interim Certificate of Completion Issued when the Work is Substantially Complete Complete Inspection of the Work Deficiency Lists prepared Government Retains Sufficient Funds to Complete Work Claim of Payment Must Include a Statutory Declaration Final Certificate of Completion Final Inspection Claim for Payment Must Include a Statutory Declaration All Monies Released to Contractor

13 Contractor Performance Post Contract Evaluation Performance evaluated by Project Manager following contract completion 5 major performance criteria assessed Contractor informed of evaluation results and associated action, if any Warning or possible suspension (rare) Performance generally within acceptable limits Contract management framework Contract security and payment provisions

14 Summary Construction Contracting methods and practices have stood the test of time PWGSC enjoys good relationship with the construction industry PWGSC advocates and practices ongoing consultation with stakeholders: Annual national conference with the Canadian Construction Association (CCA) Quarterly working meetings with the CCA and the National Associations representing Architects,Engineers and Interior Designers Regular meetings within government