Large Public Works Projects and the General Contractor/ Construction Manager (GC/CM) Procedure: A New Way to Save Money, Time and Aggravation

Presenters Dan Chandler, PE Principal Olympic Associates Company Mark Henderson, AIA Associate Principal, Health Care Practice Callison Architecture John Lynch, PE Assistant Director Washington State Department of General Administration Division of Engineering and Architectural Services Dick Goldsmith Director, Legal Services and Health Policy Association of Washington Public Hospital Districts

Topics Setting the stage –Traditional and alternative contracting methods The GC/CM process –Statutory requirements –Contractual arrangements –Contracting steps –The Public Hospital District (PHD) Project Review Board “ The good, the bad & the ugly” –Panel perspectives

Setting the Stage Traditional method: “Design, Bid, Build” Alternative method: GC/CM procedure

Statutory Requirements Determine if the project qualifies for GC/CM procedure –Value: over $10 million Complex scheduling; or Operation of existing facility during construction; or Critical involvement of GC/CM during design phase –Value: between $5 million and $10 million Authority for 10 demonstration projects

Statutory Requirements (cont.) Submit application to Public Hospital District (PHD) Project Review Board for approval Obtain preliminary and final determination from PHD Commissioners (RCW ) –Public review and comment

Designer Public Hospital District GC/CM Sub-contractors Contractual Arrangements

Responsibilities GC/CM –Pre-construction services –Bidding the work –Construction services PHD –Design –Project administration –Financing

Selecting the GC/CM Timing (early in the process) Designing and planning Request for qualifications (RFQ) Pricing –General conditions –Fee only

Setting the Price Guaranteed Contract Cost (GCC) –Specified general conditions –Maximum Allowable construction cost (MACC) –% fee X MACC –GC/CM contingency –Sales tax GCC excludes –Architect/Engineer (A/E) fee –Furnishings, fixtures and equipment (FF&E) costs –Other costs typically borne by Owner

Bidding the Job GC/CM bids out all work Can bid in phases Can self-perform up to 30% of MACC –Low bid –Work customarily performed –Bid opening managed by PHD –Notice of intent to bid in public solicitation

Changing the Work and Owning the Risk Change Order –Owner’s contingency –Increases GCC “Team Change” Funds –GC/CM contingency –GCC unchanged

Rewarding Good Work Incentive Clauses –Up to 5% of the MACC (typically much lower than 5%) –Paid out of contingencies at end –Based on good management by GC/CM

PHD Project Review Board Approval Composition of board Duties Determinations Policies and procedures

Application Information Current project total budget including –Estimated construction costs –Costs for professional services, equipment, and furnishing costs –Off-site costs –Contract administration costs –Other related project costs Anticipated project design and construction schedule Summary of PHD’s construction activity for the past six years

Application Information (cont.) Detailed explanation of why the PHD believes the use of the GC/CM procedure is in the public interest Detailed explanation of why the PHD is qualified to use the GC/CM procedure, including a summary of the relevant experience of the PHD’s management team

An Owner’s Perspective Likes –Qualified contractors –Pre-construction services –Guaranteed MACC –Team approach –Management of project contingencies –GC/CM’s financial stake Dislikes –Higher owner overhead costs –More management staff than with “Design, Bid, Build” –Higher A/E costs –Management of project risks

A Project Manager’s Perspective Likes –Method and project matched –Necessary management skills obtained –RFQ and contract done correctly –Value of GC/CM in pre-construction services maximized –Risks and contingencies managed Dislikes –Incentives can be risky –Advantages lost if not done well

An Architect’s Perspective Likes –Qualified contractors –Real value in pre-construction services –Teamwork reduces disputes Dislikes –Some increase in A/E workload –“Inequality” among GC/CMs

Resources Washington Health Care Facilities Authority John Van Gorkom, Executive Director P.O. Box Olympia, WA (360) Office of the Superintendent of Public Instruction SchFacilities/GCCM.aspx

Legal Sources Contracting process for GC/CM – RCW Composition, duties, determinations and application of PHD Project Review Board – RCW Authorization of demonstration projects – RCW (1)(b)

Legal Sources Public review after PHD Public Review Board approval – RCW Other public works requirements include: –Licensed or registered contractors – RCW Chapter –Bonded contractors – RCW Chapter –Payment of prevailing wages – RCW Chapter –Contract retainage – RCW

Questions ? Comments? Dan Chandler, PE Mark Henderson, AIA (206) John Lynch, PE (360) Dick Goldsmith (206)