Assessment of General Contractor/ Construction Manager Contracting Procedures Preliminary Report Joint Legislative Audit and Review Committee Jill Satran and Isabel Muñoz-Colón May 18, 2005

1 Presentation Overview  Background on GC/CM in Washington State  Design-Bid-Build (DBB) vs. GC/CM Contracting Method  Study Overview  Capital Projects Review Board  Conclusions and Recommendations

2 Background on GC/CM in Washington State  Legislature granted GC/CM authority in 1991  The authorization will expire in 2007  Statutory requirements to use GC/CM –Over $10 million AND Complex scheduling, OR Existing facility has to remain open, OR Early GC/CM involvement is critical to project success  Capital Budget instructs JLARC to review GC/CM in major public works projects. Report Pgs. 1-2, 11

Design-Bid-Build GC/CM PREDESIGNDESIGNCONSTRUCTION Contractor Hired (low bid) Architect Hired Guaranteed Maximum Price (GMP) negotiated Contractor Hired Architect Hired 3 Report Pgs. 6-7

4 Study Overview  How does industry research compare GC/CM to Design-Bid-Build (DBB)?  Who is using GC/CM and on what types of projects?  Where are GC/CM projects located?  Who is awarded GC/CM contracts?  Are performance indicators and benchmarks available to compare DBB and GC/CM?  What is Washington State’s experience with GC/CM?

How Does Industry Research Compare Design-Bid-Build to GC/CM? 5 Traditional Design-Bid-Build Alternative GC/CM Project Complexity Low-moderateHigh Schedule Best suited if reasonable, not a critical factor Best suited if aggressive, fast- tracking possible Compensation Fixed price, low bid contracting Negotiated maximum guaranteed price Risk Primarily ownerSome shared risk Experience Required Moderate High degree of experience required of all participants Team Relationship AdversarialCollaborative Project Cost Lower design and management costs, potential for significant change orders Higher design and management potential for reduced change orders Project Quality Standard quality expectedHigh quality expected Pg. 9

6 Who is using GC/CM? Higher Education State Agencies K-12 Cities Counties Ports Hospital Districts Public Facilities Districts Other Owner Type Project Count $2.7 Billion spent on GC/CM State-level projects $3.8 Billion spent on GC/CM local-level projects Pg. 15

7 …and on what kind of projects? Non-education related projects Education related projects Report Pg. 18

Where Are GC/CM Projects Located? King Snohomish Pierce Report Pg. 168

Who is awarded GC/CM contracts? TBD 6 projects 9 Report Pg. 17

10 Are performance indicators and benchmarks available to compare?  The state does not currently collect consistent reliable state and local-level data to analyze project performance –Cost-per-square-foot –Cost Growth –Time Growth –Quality –Change Orders  To address the lack of data, JLARC: –Compiled an inventory of GC/CM projects –Conducted a survey of those projects –Developed 21 case studies of DBB and GC/CM Report Pgs

What is Washington’s Experience with GC/CM? 11Report Pg. 19 Alternative GC/CM Washington Project Complexity High Partially Present Schedule Best suited if aggressive, fast-tracking possible Present CompensationNegotiated guaranteed maximum pricePresent RiskSome shared riskInconclusive Experience Required High degree of experience required of all participants Partially Present Team Relationship Collaborative Present Project Cost Higher design and management, potential for reduced change orders Inconclusive Project QualityHigher quality design and facilityInconclusive

12 Characteristics Present in Washington  Schedule –GC/CM projects appear to adhere closer to projected schedule than DBB projects.  Negotiated Compensation –Agencies appear to be successfully negotiating their guaranteed contract cost and staying close to their original budget.  Collaborative Team Relationship –GC/CM provides a more collaborative approach in most cases. Report Pgs , 26-27

13 Partially Present in Washington  Project Complexity –Generally agencies are using GC/CM on complex projects. –However, there is some evidence that agencies may be using GC/CM primarily to avoid problems associated with DBB.  Experienced and Involved Owner –Most agencies are investing additional resources in managing GC/CM. –We found a few instances where agencies lacked experience or involvement on the owner’s part. Report Pgs , 25-26

14 Inconclusive – Insufficient Data  Shared Risk –Some owners may believe more risk is being shifted to GC/CM than is occurring.  Project Cost –GC/CM increases preconstruction and, in some cases, management costs. –Impact on change orders, claims and litigation is inconclusive.  Project Quality –It is unclear whether GC/CM contracting methods produce better quality designs or facilities. Report Pgs , 28-30

15 Capital Projects Review Board  Legislature created CPRB in 2005 to develop and recommend: –Criteria to determine effective and feasible use of alternative contracting methods; –Qualification standards for general contractors bidding on alternative public works projects; and –Policies to further enhance the quality, efficiency, and accountability of capital construction projects.  JLARC developed analytical tools that could be used by the Board Report Pgs

16 Conclusions and Recommendation: 1 Conclusion –Some agencies may be using GC/CM to overcome perceived deficiencies in the low-bid process in DBB. Recommendation –The Legislature should further analyze the implications of the low-bid requirement on major capital projects. Report Pg. 35

17 Conclusions and Recommendation: 2 Conclusion –Executive-level oversight is critical to the ongoing development of sound public works contracting policy. Recommendation 2A: The CPRB should be convened quickly to ensure the Board is prepared to provide recommendations to the Legislature before the 2007 termination date of GC/CM. 2B: The CPRB should consider adding to its work plan improving the consistency of GC/CM project documents across projects and jurisdictions. Report Pgs

18 Conclusions and Recommendation: 3 Conclusion –Lack of sound, reliable, and consistent data collection is a major impediment to understanding the impacts of GC/CM. Recommendation 3A: The CPRB should develop standardized statewide performance indicators and benchmarks for all major public works projects. 3B: Project performance data should be collected on state and local projects to form a portfolio of projects. Report Pgs