Recommended Best Practices For The Use Of Construction .

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Recommended Best Practices for the Use of Construction Management/GeneralContractor on Highway and Transportation Projects in the Public SectorApproved March 23, 2011Purpose: While the traditional Design-Bid-Build delivery system is expected to continue to bethe most prevalent contracting method used for the delivery of public transportationconstruction projects, state transportation agencies are, nevertheless, making greater use ofalternative contracting methods. AGC of America recognizes that public owners will select thedelivery systems that best fits their particular needs. Construction Management/GeneralContractor (CM/GC) has been used widely for delivery of vertical construction projects and isnow starting to be used on highway, bridge, transit and other horizontal construction projects.The purpose of this guide is to suggest to public owners “best practices” for the use of CM/GCon public transportation projects. AGC believes that these “best practices” will lead to aselection process that is open, fair, and free of political influence and will ultimately provide theowner with a project that meets its expectations.Definition: CM/GC is a project delivery system where the design professional and the CM/GCare retained under separate contracts to the owner. The CM/GC is typically retained at the startof the design phase to provide preconstruction services including: estimating, budgeting,scheduling, constructability reviews and other construction input. The CM/GC is then typicallyretained to construct the project as designed based on a Guaranteed Maximum Price (GMP).The best practice, suggested for highway and transportation projects, is that the CM/GC selfperform a specified percent of the project (see below). This suggested practice for publictransportation projects may differ from the typical CM at-Risk model where the CM is notrequired to self-perform any of the work or only a small percent.Recommended Best Practices:AGC recommends the following procedures to public transportation agencies when usingCM/GCSelection: Generally the CM/GC should be selected through a competitive Best Value Selectionprocess that uses qualifications and a price component (“Price” is typically fees forpreconstruction services and a corporate overhead and profit factor that will be applied toconstruction services) as the determining factors. Flexibility in evaluation of qualificationsshould not be limited to experience with CM/GC but should include projects of similar size and

complexity, project management approach, bonding capacity, and experience of managementstaff.Designer Selection: The success of the CM/GC model is dependent on the collaborationbetween the designer and the CM/GC as early in the design phase of the project as possible.While the more commonly used method is for the designer to be selected before the CM/GC, asuccessful alternative that should be considered is to select the CM/GC first and for the ownerto seek its input into the selection of the designer. Allowing the CM/GC input into the selectionof the designer can increase communications and collaboration early in the process and providethe owner with the constructors’ assistance in selecting the optimal partner.Selection Procedures: The procedures used to select one contractor/proposer over anothershould be of the highest integrity. In order to encourage the greatest level of competition fromthe largest numbers of proposers, the selection process should be fair and equitable in bothperception and practice, consistent, open, competitive and free of political influence.Transparency in the selection and clarity in how qualifications and proposals will be evaluated isessential.The following procedures are recommended:Owner’s Selection Committee members should:- be knowledgeable in construction/engineering of similar transportation projects.- be knowledgeable about local market conditions.- not have conflicting interests.Owner’s Selection Committee deliberation meeting notes should be supplied to alleligible proposers, before a final decision is made and an opportunity for proposers torespond should be provided.The selection process should allow for a question and answer interview period prior tothe selection to allow the contractor an opportunity to provide additional informationabout its approach to the project.The selection process should include a system that eliminates significant anomalies inthe scores between different evaluators, with unusually high or low scores beingeliminated.The deliberation process should allow each evaluator to independently score theproposal.Exit interviews and debriefings should be made available to the unsuccessful firms.Full disclosure of the scoring documents and methodology used should be providedsoon after the successful proposer is selected.Evaluation Criteria: Very specific, objective evaluation criteria should be described in thesolicitation. All criteria should be listed in the order of importance to selection. Only evaluationcriteria listed in the solicitation should be considered in ranking proposals. The weight that isgiven to the price score versus the technical score should be clearly defined. There are different

methodologies that have been successfully used to include price as a selection factor. Here aretwo examples:Two Envelope Process - The CM/GC’s proposal is submitted in two separate envelopes.Envelope one contains the response to the qualification and technical criteria spelled out in thesolicitation. The second envelope contains the fee for construction services (either as apercentage or a lump sum based upon the owner’s estimate). The costs for preconstructionservices are not included but negotiated with the successful CM/GC after selection.-Technical Evaluation - Envelope one is opened first and the merit of each firm isjudged based upon how well its submittal addresses the evaluation criteria in thesolicitation. Each proposer is awarded a score based on the average of the scoresawarded by each of the selection committee members. To help with consistency,panel members should use a scoring matrix to show evaluation score compared toevaluation criteria. The technical evaluation should be done prior to andindependently of the review of the CM/GC’s price proposal.Following completion of the technical scoring, the second envelope with each proposersfee/price proposal is opened. This can be done publicly on “bid day” or privately by theselection committee. The price proposal is then combined with the technical score todetermine the best value proposal.Unit Price Process - Price is considered part of the technical score. The owner selects certainunit elements of the project that are considered to be integral to the project’s success. TheCM/GC proposal is judged based upon how well its submittal addresses the evaluation criteriain the solicitation and each criterion is given a score. The selected units are assigned a pointvalue which can be 10 to 40 percent of the technical score. When all of the evaluation scoresare added together the proposer with the highest score is selected.A variation on weighting the unit prices can include assigning points based on being the closestto the median price for the units among all of the proposers. The owner may also allow theproposer to explain their approach to pricing the units – including what would make the pricesfluctuate.Debriefing: Within 30 days following selection, the owner should provide unsuccessfulproposers with a debriefing giving them feedback as to why the successful proposer wasselected and just as importantly why the unsuccessful proposers were not. This should be donein a timely fashion while all of the details of the project are still fresh in the minds of theselection committee and the proposers. Debriefs should show the unsuccessful proposersscores compared to all other proposers including the selected proposer. Unsuccessfulproposers should be given access to the other proposals during the debrief. This is important tohave a procedure that creates the necessary transparency around a highly subjective processand helps unsuccessful proposers to present a better submittal on the next solicitation. Thisbenefits both the unsuccessful proposers and the owner as well.

Construction Phase Contingency: The CM/GC should submit a Guaranteed Maximum Price(GMP) to the owner at a predetermined stage in the design process (usually when plans are95% complete). It is advisable to require GMP submittals at various stages of design completion(60%-70%) to allow the owner to keep the project within budget. In some instances it is in thebest interest of the project and the owner for the CM/GC to begin construction as early as the60% stage of the design.A CM/GC contingency feeshould be allowed to coverplan risk on the remainingpercent of the design notcompleted at the timeconstruction starts, and tocover quantity overruns, andminor design changes. TheCM/GC contingency isavailable in order to deliverthe documented scope withinthe GMP and within theschedule for completion. TheCM/GC contingency is part ofthe GMP and is not availablefor owner-directed design or scope changes. The CM/GC contingency should be negotiatedbetween the CM/GC and the owner and the amount should be identified in the contract. TheCM/GC contingency will typically range from 5-10% depending upon the complexity and riskassociated with the project. The allowable use of the CM/GC contingency should be defined inthe contract documents. The contract documents should also clearly define that unusedcontingency belongs to the CM/GC as the contractor takes the risk if costs are higher than theagreed contingency amount.An owner contingency should be included to cover scope changes, design errors and omissions,and unforeseen conditions. It is separate from the CM/GC contingency, is controlled by theowner and is transmitted to the CM/GC in the form of a change order, which typically increasesthe GMP.Self-Perform: The GM/GC should be required to self-perform a minimum of 30% of theconstruction and there should be no limits placed on the amount of work that is selfperformed. Including a self-performance requirement is in keeping with Federal-aid highwayrequirements and gives the CM/GC more control over schedule, budget and quality.Subcontractors: The CM/GC should have control over the solicitation, selection andadministration of subcontractors in much the same way as subcontractors are selected throughtraditional Design-Bid-Build procurements based on experience, qualifications, track record and

price. Since the CM/GC is at risk for the success of the project, the CM/GC should be givencontrol of subcontractor selection and administration.Value Engineering: Generally, the CM/GC procedure will lead to minimal value engineeringchange orders as cost saving ideas should be developed in the preconstruction services andincorporated into the GMP. However there may be circumstances where cost saving ideas arebrought forward in the construction phase. If the CM/GC can offer a satisfactory explanation asto why an idea could not have been identified in the preconstruction services phase, then anequal sharing of the savings should be considered.Additional Resources: CM/GC is a relatively new project delivery system in the transportationarena. It has been used to a far greater extent in the vertical segment of the constructionindustry and there have been many lessons learned there. It is strongly recommended thatbefore a Department of Transportation moves forward in implementing CM/GC in its highwayand bridge program that it work with the local AGC chapter to develop procedures that willensure the greatest amount of competition.As DOTs begin to explore the use of this contracting method it is suggested that they considerthese recommended best practices as a starting point. AGC recommends developingprocedures through collaboration with the industry for the use and implementation of CM/GC.Each state has its own laws and procedures that must be taken into account when consideringuse of CM/GC.Contact:Brian DeerySenior Director, Highway & Transportation DivisionAGC of AmericaPhone: (703) 837-5319Email: [email protected]