Construction Management-at- Risk › downloads › smps_november... · 2014-11-26 · w w w . j a c k s o n k e l l y . c o m 5 CMAR – KRS 45A.030 H“Construction management-at-risk”

Construction Management-at-Risk

The Good, the Bad and the Ugly

John W. Hays Jackson Kelly PLLC

w w w . j a c k s o n k e l l y . c o m

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CMAR

  Construction management-at-risk (“CMAR”) is a popular method for the delivery of construction services in public and private projects.


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CMAR Defined

  Construction Management-at-Risk – a project owner (“Owner”) hires a construction manager (“CM”) to assist with the design and construction of a project.


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CMAR Defined

  The CM is “at risk,” because the CM agrees to build the project for the Owner for an agreed amount within an agreed time.


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CMAR – KRS 45A.030   “Construction management-at-risk” means a

project delivery method in which the purchasing officer enters into a single contract with an offeror that assumes the risk for construction at a contracted guaranteed maximum price as a general contractor, and provides consultation and collaboration regarding the construction during and after design of a capital project. The contract shall be subject to the bonding requirements of KRS 45A.190.


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CMAR Scope

  On projects governed by the Model Procurement Code, the CM may not self-perform some of the construction work, unless a subcontractor fails to perform and the owner agrees that the CM may perform the work.

KRS 45A.183


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CMAR – AOC   Construction Management at-Risk means a

project delivery method in which the Project Development Board awards a single contract to an offeror that assumes the risk for construction at a contracted maximum price as a constructor and that provides consultation and collaboration regarding the construction during and after the design of the Project.


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CMAR Scope

  On projects governed by the Administrative Procedures for the AOC, the CM may self-perform some of the construction work if the CM competitively bids the work and the PDB approves.

AP Part X, Section 8-4


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The Good   Selection Process for Public Projects

  Design Assistance   Scheduling and Coordination

  Insurance Coverage


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Selection Process

  Negotiations vs. Competitive Bid   Relationship


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Design Assistance

  Constructability – Difficulty – Time

  Value Engineering


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Scheduling and Coordination

  Time is Money

  Realistic Scheduling and Coordination


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Insurance

  Professional Negligence Coverage


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The Bad

  Hybrid Relationship – During design/bidding acting as the Owner’s

agent – During construction must protect own

interests   Selecting Trade Contractors


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TThhee UUggllyy   Unrealistic Expectations

– GMP – Time – Design responsibility

  Poor Communications

– Surprise

Questions?

John W. Hays Jackson Kelly PLLC

P3: Public-Private Partnerships

Roger Peterman Dinsmore & Shohl LLP November 21, 2014

Dinsmore & Shohl LLP | P3: Public-Private Partnerships

Understand P3 in 3 Easy Steps


Recognize not every P3 is the same P3 1Understand the Definition of P3 2

Recognize once you’ve seen one P3, you’ve seen one P3. 3

Step #1: Recognize not every P3 is the same P3

The world according to Public-Private Partnerships


ECONOMIC DEVELOPMENT Public Investment + Private Investment Commercial Infrastructure

(Private Enterprise + Targeted Infrastructure) CREATION OF JOBS

STRONG, SUSTAINABLE COMMUNITIES

PUBLIC INFRASTRUCTURE Public Investment + Private Investment Economic Infrastructure FACILITATION OF COMMERCE

Public Investment + Private Investment Social Infrastructure PROMOTION OF HEALTH & WELFARE

Step #2: Understand the Definition of P3

»  Not traditional design-bid-build contract

»  Sliding Scale of P3

Traditional Procurement (Public) Triple Net Leasing

Service Contract Management Contract Design-‐Build Design-‐Build-‐Maintain Design-‐Build-‐Operate Design-‐Build-‐Operate-‐Maintain Design-‐Build-‐Finance-‐Operate-‐Maintain DBFOM-‐Transfer

Privatization


Infrastructure P3 Contracting and Financing Structure


User Fees and Availability Payments

»  Sources of funding are generally user fees + public sector subsidies (often identified in transportation as “Availability Payments”)

»  Availability Payments are payment for performance (irrespective of demand)

»  Prospective concessionaires bid the maximum Availability Payment they would earn for providing availability in a given year – often very long term contracts


Procurement Method

»  Whole-Life Pricing with focus on Value for Money

»  Risk Allocation »  Development, Design & Construction

(bundling of project responsibilities) »  Financing »  Operational Costs »  Maintenance and Replacement Costs »  Termination Value »  Value for Money Study


Why Infrastructure P3?

»  Take advantage of private sector efficiencies in design, construction, or operations and maintenance

»  Capital access for large projects

»  Overcome budget restraints/debt limits

»  Limit public sector cost/risk: risks allocated to party best able to manage or to absorb them.


Why Infrastructure P3?

»  Overcome political limits (public perception of private v. government efficiencies, anti-debt environment, etc.)

»  Budgetary certainty

»  Value for money over life cycle


Why Not Infrastructure P3?

»  Higher cost of capital

»  Loss of public control

»  Impropriety of private sector profit off public good

»  Distorted decision-making (non-competition clauses, contractual liabilities, regulation to benefit P3 over other options & balkanization)

»  Lack of accountability


Louisville/Southern Indiana Bridges Project


Step #3: Recognize once you’ve seen one P3, you’ve seen one P3.

Louisville/Southern Indiana Bridges Project

Kentucky »  Design-Build - vendor

»  Ownership - KYTC

»  Bridge operation - KYTC

»  Tolling operation - vendor

»  Maintenance/replacement –KYTC

»  Source of debt repayment – tolls

»  Bonds rated BBB-

»  TIFIA eligible


Indiana »  Design-Build - vendor

»  Ownership – vendor/state

»  Bridge operation - vendor

»  Tolling operation - vendor

»  Maintenance/replacement –vendor

»  Source of debt repayment/ equity return – availability payments

»  Bonds rated BBB

Roger Peterman Dinsmore & Shohl LLP [email protected]

Dinsmore & Shohl LLP | 8 steps to Starting Your Business in Ohio

Design/Build

The Good, The Badand The Very Ugly

Stephen E. Smith Goldberg Simpson, LLC

“. . . And so began something that had not quite begun and would not soon end, with many people in many places moving off in directions and on missions which they all

mistakenly thought they understood. That was just as well. The future was too fearful for contemplation, and beyond the expected,

illusory finish lines were things fated by the decisions made this morning – and, once

decided, best unseen.” Tom Clancy

Clear and Present Danger

The Mission

Project Performance Drivers

  Attributes of a well performing project1 – Adequate to excellent ability of owner to

make decisions – Adequate to excellent – Excellent team –  contractor pool – High ability to restrain the contractor pool

through

Project Delivery Methods

  Constant Assessment and Management of Risks   Costs should be Borne by Party Best Able to Control Risk   Risks Shift Between Parties During Course of Project   Risk Assessment Begins with Selection of Delivery Method

Stephen E. Smith Goldberg & Simpson, PSC

The Construction Paradox

Which Format To Choose   To help us meet or exceed our clients expectations: – Cost – Scope – Schedule

  Project delivery   Project execution


Design-Build Contract

  Historically, all projects were design-build. –  Legal climate sent designers into retreat

  Both the design of the project and construction of the contract rest in the hands of same “Contractor”

  Single point of responsibility to the Owner


OWNER

GENERAL CONTRACTOR

A/E

FAMILIAR RELATIONSHIPS

SUBCONTRACTOR SUBCONTRACTOR SUBCONTRACTOR

SUBCONTRACTOR SUPPLIER

OWNER

GENERAL CONTRACTOR

A/E

SUBCONTRACTOR SUBCONTRACTOR

SUBCONTRACTOR SUPPLIER

MATERIAL SUPPLIER

SURETY

SURETY

OWNER INSTALLED

WORK

DESIGN-BID-BUILD PROJECT

OWNER

Subcontractor

SUPPLIER

DESIGN-BUILDER

Architect/Engineer Subcontractor

Specialty Sub Sub Sub Sub

DESIGN BUILD CONSTRUCTION

SUPPLIER Sub-Specialty

The Construction Paradox

What Is D/B

  D/B is an alternate project delivery system – Another tool in our tool box – D/B is not a cure all for our project delivery

challenges

Design-Build Contracts

  – Single point responsibility for design and

construction – 

designer – Should produce faster delivery

  Lower overall costs   Earlier access to facility

Goldberg & Simpson, PSC

Design-Build Construction

  Risks – To properly assign performance responsibility

between parties – Contract must be clear in assigning full

responsibility to the contractor  


What Is D/B   D/B contracts are procured using a Request For Proposal, (RFP)   The award of the D/B contract is based on best value - not just price – This means we may or may not award to the

lowest cost proposal

ADVANTAGES/ DISADVANTAGES

WHAT’S GOOD, WHAT’S BAD


Why Use D/B (Cost)

  Cost – Potential for reduced design cost –  (Government) Potential reduced planning and

design funds expenditure – Potential for reduced construction cost – Potential for reduced construction cost growth


Why Use D/B (Cost)

  Reduced design cost – The design only needs enough detail to allow

the contractor to build it – Once the D/B contract is awarded the D/B

contractor can sole source – Roof system design – HVAC design


Why Use D/B (Cost)

  For our Government Owners – Reduced planning and design funds

expenditures – Once the D/B contract is awarded the design

can be funded with construction funds – Planning and Design funds can be reduced

  From 9% to 2-4% for a typical $5-$10 million project


Why Use D/B (Cost)

  Reduced construction cost – The designer and the contractor work together

to select the most cost effective construction methods

– 


Why Use D/B (Cost)

  Reduced cost growth – The number of changes are reduced

    In D-B-B a design error or omission will likely result in cost growth   In D/B a design error or omission will likely not result in cost growth


Why Use D/B (Scope)

  Industry expertise – The owner may not have the expertise to

100%


Why Use D/B (Schedule)

  Reduced project delivery time – Fast tracking (start construction while the

design is still being developed) – 

  Expedite construction contract award – That is important in governmental areas


Strengths of Design-BuildThe Good

  Single Source Accountability   Enhances Project Partnering   Faster Project Delivery   Lower Cost

–  2.2% Cost Growth vs. 4.8% Design-Bid-Build

  Continuity of Teams


Weakness of Design-Build

 Competing – Higher Bids

 Ambiguity/Risk to Construction Teams   Prime Contractor Not Communicating with Subcontractors


Design-BuildWhat it Really Is

  WHEN IS PRICE FIXED TO OWNER   How does Builder involve subcontractors:

–  in Schedule –  In Bidding

  If all subs not involved early, how does DB Contractor guarantee price to Owner.


Design-BuildThe Bad

  What is true contractual relationship between Architect/Engineer and Builder  

–    Is A/E a subcontractor vs. partner


Design-BuildThe Really Ugly

  How do disputes between partners impact the project –  How are design failures addressed (insurance) –  Design failures vs. damages to work

   


Why Use D/B Comparison of U.S. Project delivery systems,

by CII, Konchar and Sanvido of Penn State University – 

design-build was superior to traditional design-bid-build because:


Why Use D/B Results

–  Unit costs were at least 6.1 percent less –  Construction speed was at least 12 percent

faster –  Overall project delivery speed was at least

33.5 percent faster

The complete results are available at - http://www.dbia.org/whitpap.html


Why Use D/B Results

–  Cost growth was at least 5.2 percent less –  Schedule growth was at least 11.4 percent

less –  Quality was equal or better

The complete results are available at - http://www.dbia.org/whitpap.html


The Learning Curve   D/B request for proposals

– Cost more than a traditional D-B-B invitation for bid between issuance and contract award

– Takes longer between issuance of invitation and contract award

– Requires a higher owner involvement during design/construction


  Coordination between the designers and the builders is critical. – You can not design something that the builder

can not afford to build.

The Learning Curve


Why Use D/B   D/B, as any tool, can enhance our project execution when properly applied


“There is no intelligence where there is no change or need for change”. H.G. Wells “ the time machine.”


Questions

INTEGRATED PROJECT DELIVERY

November 19, 2014

Cassidy Rosenthal

Traditional Project

Owner

Designer

Owner

Contractor

CONSTRUCTION MANAGER

(CONSTRUCTOR)

ARCHITECT

OWNER

Integrated Project Delivery

What is Integrated Project Delivery (IPD)?

n  Collaborative process – Owner – Designers – Contractors – Major subcontractors and suppliers

n  Promotes risk sharing, claims suppression and incentives for collaboration and disincentives for claims

Background of IPD n  Used for years in Australia and New Zealand n  Based in principles of Lean Construction

www.leanconstruction.org n  Goal is to eliminate “waste” – scheduling

bottlenecks, out of sequence work, changes, repeatedly stopping and starting, rework, lack of accountability, lack of answers to questions, waiting and conflicting motivations

n  Success stories of significant cost savings & finishing early

Five big ideas of Lean Project Delivery

n  True collaboration among all project participants throughout design, planning and construction;

n  Strengthening and aligning the relationships and interests of the parties to the project;

n  Viewing the Project as a network of commitments by participants to work and schedule that can be relied upon by others, and which drive out waste in the form of RFIs, changes and rework;

n  Focusing on what is best for the project as a whole and not just certain component parts;

n  Seeking constant improvement through continous assessment and implementation of “lessons learned”.

IPD Contract Forms / Multi-Party Agreements: n  AIA A295 “Transitional” IPD form n  AIA C195 True collaborative form n  ConsensusDOCS 300 Tri-Party

Agreement n  Integrated Form of Agreement (Sutter

Health)

AIA A295 IPD Contract Form n  Built on the platform of AIA’s

Construction Management agreement n  Provides for a GMP, similar to other

AIA docs n  Touted as a “transitional” document n  Still has separate owner/architect and

owner/contractor agreements & GCs.

AIA C195 Single Purpose Entity IPD Agreement n  Touted as a true collaborative

contract, with target cost, risk sharing, claims suppression and incentives encouraging collaboration

n  Contemplates formation of a project LLC with project participants as members

ConsensusDOCS 300: The Tri-Party Agreement for Collaborative Project Delivery n  Incentives and Risk Sharing

– Shared savings – Actual cost > Target Cost Estimate – share

the cost or the Owner can agree to bear the cost

– Parties can elect to allocate project risk and release each other from damages resulting from collaboratively made decisions

Specifics of ConsensusDOCS 300 n  Parties perform as a “Collaborative

Project Delivery (CPD)” Team to facilitate design, construction and commissioning

n  Risk allocation of CPD is limited to acts of the parties’ fault or control, with a limit

n  Mutual waiver of consequential damages n  Safe Harbor Decisions: parties agree to

release each other from liability for Mgmt Group decisions

Specifics of ConsensusDOCS 300 n  Management Group: comprised of the

owner, contractor & designer n  Mgmt Group can invite other members n  Decision making body for delivery of the

project n  Decisions by consensus, in the best interest

of the project w/out consideration of self-interests

n  Owner is the tie-breaker

Specifics of ConsensusDOCS 300

n  Mgmt Group meets regularly with CPD Team for overall project planning and scheduling

n  Mgmt Group establishes a communications protocol

n  Collaborative design and preconstruction services may include BIM

n  Designer still responsible for design and Contractor responsible for construction

Specifics of ConsensusDOCS 300 n  Dispute Resolution includes

– Direct discussions – Mitigation with project neutral or DRB – Mediation – Arbitration or Litigation

What are the benefits of IPD? n  Lower cost of performance through

collaborative design and construction ideas n  Lower cost of performance due to reduction

in claims and finger pointing n  Collaborative/team approach allows for

immediate problem solving n  Better design and construction as a result of

collaboration of all design and construction disciplines during the design phase

QUESTIONS???

Cassidy Ruschell Rosenthal ([email protected])

Cassidy Ruschell Rosenthal

n  Stites & Harbison, PLLC, Member

n  Construction Law

Stites & Harbison, PLLC 250 W. Main St., Suite 2300 Lexington, KY 40507 Office: (859) 226-2253 Fax: (859) 425-7939 [email protected]

Documents

Construction Management-at- Risk › downloads › smps_november... · 2014-11-26 · w w w . j a c k s o n k e l l y . c o m 5 CMAR – KRS 45A.030 H“Construction management-at-risk”