Construction Reform 101

7/31/2019 Construction Reform 101

1/60

Construction Reform 101

An Overview of Construction Reform in theCommonwealth of Massachusetts

A New Approach for Public Sector Projects

Division of Capital AssetManagement

David B. Perini

Commissioner

New York City Bar AssociationJanuary 25, 2011


2/60

BACKGROUND

and

OVERVIEW OF KEY PROVISIONS


3/60

Construction Reform - What is it?

The most comprehensive reform of state public

construction laws since the Ward Commission (1981)

Modified several fundamental areas in these laws:

Provides for use ofAlternative Delivery Methodsfor vertical and horizontal construction projects.

Changes thresholds governing general and filed sub-bids.

Requires certification of filed sub-bid subcontractors.

Makes owner prequalification of contractors widelyavailable/mandatory in certain instances (GCs, subs).

Requires Owners Project Manager on certain projects.

Extends MBE/WBE program requirements to statefunded municipal projects


4/60

Construction Reform- Key Changes

Chapter 193 of the Acts of 2004 instituted the following key changes:

Alternative Delivery Methods (CM at Risk and Design-Build)

General Bid & Filed Sub-Bid Threshold Changes

Filed Sub-Bidder & General Bidder Certification

General & Filed Sub-Bidder Prequalification

Owners Project Manager Requirement

Designer Selection Changes

MBE/WBE Affirmative Marketing Program


5/60

Construction Reform - How Did We Finally Get Here?

After years of trying, every major interest group cametogether to hammer out needed legislative change.

Public Owners (DCAM, Massport, Municipalities)

Office of the Inspector General General and Subcontractor groups (AGC, ABC, ASM)

Architect and Engineer groups

Organized Labor

MBE/WBE groups

The Legislature and the Administration


6/60

ALTERNATIVE DELIVERY METHODSCONSTRUCTION MANAGER AT RISK

and

DESIGN-BUILD

(M.G.L. c 149A)


7/60

Overview of CM at Risk - Background

Construction Reform in the Commonwealth createdopportunity for use of alternative delivery methods onpublic projects.

Per M.G.L. c. 149A, effective January 1, 2005, allows CM atRisk.


8/60

Overview of CM at Risk - Background

Delivery method is optional for DCAM (and other public agencies)for building projects $5 million or more.

Inspector General approval required on a case by case basis---exceptions are DCAM, Mass Port, MWRA, and MSCBA (which mustannually submit procedures for projects they choose to procure CMat Risk).

DCAMs procedures approved by IG.

CM at Risk firm must be Certified by DCAM in the Category ofGeneral Building Construction.

Laws governing prevailing wages, direct payment, prompt payment,unforeseen conditions, delays and contractor record keeping are allapplicable.


9/60

Overview of CM at Risk - Why Use CM at Risk?

Advantage - CM has broader scope (than General Contractor)from Pre-Construction to Construction Management Services,including but not limited to:

CM provides cost estimation.

CM provides design consultation.

CM assists in preparation/coordination of bid packages.

CM provides scheduling.


10/60

Overview of CM at Risk - Why Use CM at Risk?

CM assists with cost control - value engineering.

CM assists with prequalification and evaluation of trade/othersubcontractors.

CM acts as general contractor during construction (includesholding trade contracts and other subcontracts).

CM provides management and construction services.


11/60

Overview of CM at Risk - Procurement of CM Firm

Two-phase competitive proposal selection process:

Phase 1 - Prequalification of potential CM firms throughRFQ process.

Phase 2 - RFP to prequalified CM firms.


12/60

Overview of CM at Risk - Procurement of CM Firm

Phase 1 - RFQ Process

Prequalification Committee established (1 rep. from designer, theproject manager, and at least 2 rep. from awarding authority).

RFQ developed by awarding authority.

Public notice of RFQ.

Interested CM firms submit Statement of Qualifications.

Prequalification committee evaluates Statements ofQualifications based solely on criteria set forth in RFQ.

Must prequalify a minimum of 3 CM firms to proceed to RFPPhase(if not, re-advertise or revert to c. 149).


13/60

Overview of CM at Risk - Procurement of CM

Phase 2 - RFP Process

Selection Committee established - 1 rep. from designer, theproject manager, and at least 2 rep. from awarding authority(can be the same as prequalification committee).

RFP sent to prequalified CM firms only.

Fee/cost proposals and technical proposals submitted byprequalified CM firms.

Selection Committee prepares non-price evaluations basedsolely on the criteria set forth in the RFP.

The most advantageous proposal selected considering bothtechnical and price proposals.


14/60

Overview of CM at Risk - Guaranteed Maximum Price (GMP)

GMP is the guaranteed maximum price the awarding authority willpay for the project.

GMP is comprised of the:

Hard cost of the work;

General conditions costs;

Fee payable to the CM firm

CM may benefit from incentive clause for various performanceobjectives of up to 1% of the estimated construction cost.


15/60


GMP Shall:

Be based on design documents (which

are at least 60 percent complete).

Be agreed to as written amendment to

contract with awarding authority.

Be executed before the commencement of major construction

work.


16/60


GMP Shall Include :

Detailed line item cost breakdown by trade.

CM firms contingency, general conditions, and fees.

Listing of all the drawings, specifications and other information onwhich the GMP is based.

Listing of any assumptions or clarifications on which the GMP is

based.

Detailed project schedule on which the GMP is based.

Payment and performance bonds.


17/60

Overview of CM at Risk - Subcontractors

Prequalification of Trade Subcontractors:

Prequalification process utilized to procure sub-bid classes ofwork subject to the filed sub-bid law (M.G.L. c. 149, 44F).

Prequalification Committee established to evaluate TradeContractors (consists of 1 rep. from designer, 1 rep. from CMfirm and 2 reps. from awarding authority).

Public Notice/RFQ issued for trades with ECC > $20,000.

Trade Contractors respond to RFQ with Statement ofQualifications.


18/60


19/60

Overview of CM at Risk - Subcontractors

Prequalification of Other Subcontractors:

Separate selection process for all classes of work > $20,000(which are not subject to the filed sub-bid law).

CM provides awarding authority a minimum of 3subcontractors it believes to be qualified based onrelevant factors including, but not limited to, price, quality ofwork, and MBE and/or WBE participation.

CM requests bids from qualified subcontractors and selectssubcontractor.

Selection of subcontractors subject to approval of awardingauthority.


20/60


21/60

Design Build (for Public Works Projects)

Effective January 1, 2005

Awarding authority contracts with one firm that provides bothdesign and construction

Available to construct public works projects otherwise subject to

G.L. c. 30, sec. 39M, estimated to cost $5 million or more (e.g.,roadwork, site work, site remediation) with prior approval of theInspector General.

A 2 phase selection process is required:

Prequalification via RFQ;

Formal proposals, including separate technical and pricecomponents.

Exempt Agencies procedures are subject to IG review andapproval on an annual basis. Exempt agencies are MHD,MassPort and MWRA.


22/60

GENERAL BID & FILED SUB-BID THRESHOLDS


23/60

Bidding Threshold Changes to Ch. 149Public Buildings

Effective July 19, 2004

General Bids Four categories based upon estimatedconstruction cost (ECC):

3 Less than $10,000

3 $10,000 - $25,000

3 $25,000 - $100,000

3 Over $100,000

Sub-Bids - $20,000 or More


24/60

Bidding Threshold Changes

ECC Less than $10,000 Public Building Project

Seek three or more written quotes from firms customarilyperforming type of work sought.*

Award to responsible firm providing lowest quote.

Agency must keep records of:

Firms that were solicited for quotes;

Quotes submitted; and

Date and amount of each quote.

Awarding Authorities can use Operational Services Division (OSD)Trade Contractor List to identify firms from which to seek quotes.

Not Applicable: DCAM Certification, Filed Sub-Bids or bid deposit.

(*Note this was recently amended by Chapter 188 of the Acts of 2010 to require only use of sound

business practices where ECC


25/60


ECC $10,000 to $25,000 Public Building Project Public notification of scope, defining work and requirements and

time period for completion of work.

Posting two weeks on agency website and Comm-Pass or CentralRegister and conspicuous place in primary office of awarding

authority. Written prices from firms customarily performing type of work

sought.

Award to responsible firm providing lowest price.

Awarding authorities can supplement public notification bynotifying firms on OSD Trade Contractor List or other list of firmscustomarily providing work sought.

Not Applicable DCAM Certification, Filed Sub-Bids or bid deposit.


26/60


ECC $25,000 to $100,000 Public Building Project (formerlyprojects $10,000 - $25,000) M.G.L. c. 30, 39M Process Applies

Advertise two weeks in Central Register & newspaper of generalcirculation, Comm-Pass (recommended)

Bid Deposit Required.

Public Bid Opening.

Award to lowest eligible and responsible bidder (eligible as definedin c. 30, 39M).

Not Applicable: DCAM Certification or Filed Sub-Bids.


27/60


ECC over $100,000 Public Building Project (formerly over$25,000) M.G.L. c. 149, 44A-44H Process Applies

Advertise two weeks in Central Register & newspaper of generalcirculation, Comm-Pass (recommended).

DCAM Certification Required of General Bidders with UpdateStatement.

DCAM Certification of Filed Sub-bidders required with UpdateStatement (effective 1/31/05 - C. 507).

Filed Sub-bid applies for trades in 44F with ECC of $20,000 ormore.


28/60


ECC over $100,000 (continued)

Bid Deposit Required.

Public Bid Opening.

Award to lowest eligible and responsible general bidder.

Pre-qualification of prime and sub-bidders:

Optional for projects with ECC of $100,000 - $10 million,

Mandatory for non-exempt awarding authorities on projectswith ECC of $10 million or more. Certain state agenciesexempt.


29/60


Filed Sub-Bids (effective July 19, 2004)

New filed sub-bid threshold: ECC $20,000 (formerly $10,000).

Same 17 trades listed in M.G.L. c. 149, 44F apply.

Effective December 31, 2005 Filed Sub-bidders must be DCAMcertified in specific trades.


30/60

NEW SUBCONTRACTOR CERTIFICATION

and

UPDATES TO GENERAL CONTRACTOR CERTIFICATION


31/60

Subcontractor Certification - Effective December 31, 2005

Filed Sub-bidders must be certified by DCAM in order to bid onChapter 149 building contract work (Project ECC > $100,000,sub-bid ECC $20,000+).

As of December 31, 2005 a DCAM Certificate of Eligibility &Update Statement will be required with every sub-bid

submitted on a Chapter 149 building contract. (Chapter 507).

DCAM has published an implementation schedule forapplication & certification of the 17+ sub-trades during 2005.

See DCAM Website for up to date

implementation and certification

information and forms -

www.mass.gov/cam


32/60

Subcontractor Certification

Effective December 31, 2005 (Chapter 507, Acts of 2004)

DCAM reviews sub-bidder applications for certification in muchthe same way as prime contractors are certified, includingreview of applicants construction experience and financialcondition.

As of December 31, 2005 every sub-bid for a building contractsubject to the filed sub-bid law (estimated cost of construction>$100,000) must include a copy of a Certificate of Eligibilityissued by DCAM & an Update Statement, containing updatedinformation since sub-bidders last application for certification

including new projects and projects currently under contract.

Sub-bidders must certify under penalties of perjury thetruthfulness and completeness of the information in their sub-bid.


33/60


Effective December 31, 2005 (Chapter 507, Acts of 2004)

Sub-contractor certification is essentially the same as prime contractorcertification except:

Projects evaluated over past 3 years compared to 5 years for

prime contractors.

Certificate of eligibility will not show single project andaggregate limits like the certificate for prime contractors.

Certificate of eligibility will show the number of priorconstruction projects evaluated by DCAM, the averagenumerical value on those projects, and the number ofprojects given scores below the passing score established byDCAM (80%) over last 3 years.


34/60


Effective December 31, 2005 (Chapter 507, Acts of 2004) Subcontractor evaluations and responses to subcontractor

evaluations are public records (this will apply to prime contractorevaluations as well).

Public agencies that fail to submit to DCAM the sub-contractorevaluations forms together with any sub-contractor responses,within 90 days of project completion (certificate of occupancy) risknot being eligible for state funding.

Indemnification of $1 million for representatives of public agenciesproviding sub-contractor evaluations with limited indemnification oflegal fees only, if the person is found to have acted in a willful,wanton or reckless manner in the evaluation (this is same as forprime contractors).


35/60

Changes to General Contractor Certification

Not specifically mandated in Construction Reform legislation.

Making GC Certification regulations more user-friendly byseparating those directed at the contractor from those directed atthe awarding authority.

DCAM has incorporated new factors into numerical rating systemincluding criteria such as: termination, amount of litigation, directpayment claims history, OSHA penalties.

A contractors single project limit will be based on the average ofthe largest two projects, rather than on just the single largestproject.

Single project and aggregate limits reduced to 130% of theaverage of the two largest projects - 180% if the contractor hasdemonstrated the capacity in the opinion of the Commissioner.


36/60

PREQUALIFICATION OVERVIEW

(FOR DESIGN-BID-BUILD PROJECTS)


37/60

Prequalification Overview (Design-Bid-Build Projects)

What is Prequalification?

Prequalification is part of a new two-phased procurementprocess utilized by public awarding authorities (on design-bid-build projects) which enables public awarding authorities to limit

the bidding pool to general bidders and sub-bidders who arequalified to do the work.

The Two-Phase Process:

RFQ Phase the awarding authority issues a RFQ and reviewsinformation submitted to determine qualified bidders.

RFP Phase only prequalified bidders are invited to bid.


38/60

Prequalification Overview

Advantages of Prequalification

Only prequalified contractors are in bidding pool.

Raises the bar for quality of work.

Price not the sole deciding factor.


39/60


When is prequalification required by awarding authority? Mandatory for all non-exempt public awarding authorities to

prequalifiy all general contractors and filed sub-bidders forpublic construction projects with estimated construction costs of$10 million or more.

Discretionary for all non-exempt public awarding authoritiesto prequalify all general contractors and filed sub-bidders whereestimated construction costs are between $100,000 and

$10,000,000.

Discretionary for exempt agencies.

Division of Capital Asset Management,Mass Port Authority, Mass Water ResourceAuthority, Mass State College Building Authority,U Mass Building Authority.


40/60


Prequalification Steps: Prequalification Committee established.

Public notice of RFQ.

Statements of Qualifications submitted by GC and filed subs.

Evaluation of Statements of Qualifications.

Selection of prequalified bidders.

RFP issued to prequalified bidders.


41/60


Composition of Prequalification Committee: 1 representative from design group.

3 representatives from public owner (OPM is 1 of the 3 if OPMrequired).

RFQ Requirements

Public Notice awarding authority must advertise RFQ in thenewspaper, central register and COMPASS system.

Qualification Requirements/Points awarding authoritymust set forth the qualifications and evaluations points in the

public notice.


42/60


Public Notice of RFQ contains:

Time and date for receipt of response; address to whichresponses should be sent; and timeframe that awarding authoritywill respond;

General description of building project;

Evaluation procedure and criteria for prequalification (includingthe point rating system and schedule for evaluation);

Anticipated schedule and estimated cost for the building project;


43/60


44/60


Evaluation Criteria:

Mandatory Requirements

Management Experience (25/50 points required)

References (15/30 points required)

Capacity to Complete Projects (10/20 points required)


45/60


Mandatory Requirements

Commitment letter from bonding company for payment andperformance bonds at 100% of estimated project value. (Onprojects with prequalification both general bidders and filed sub-bidders will be required to provide their own payment and

performance bonds and must carry the cost of the bonds in theirown bid prices); and

DCAM Certificate of Eligibility showing capacity rating sufficientfor project and an Update Statement.


46/60


Management Experience - 25/50 points required Business owners experience

Experience of management personnel

Similar projects

Terminations Legal proceedings

Safety record

MBE/WBE and Workforce compliance records


47/60


References - (15/30 points required) Project references

Credit references

Public project record over last 3 years

Capacity to Complete - (10/20 points required)

Audited financial statements from general contractor for currentfiscal year (filed sub-bidders do not have to submit)

Revenue under contract for next 3 years


48/60


Evaluation Process Statements of Qualifications not opened publicly but opened in

presence of 1 or more witnesses.

Register of Responders prepared for public records.

PQC evaluation based ONLY on criteria set forth in RFQ.

minimum score of 70 required to be prequalified.

minimum of 3 prequalified general contractors and filed sub-bidders in each trade required.


49/60


What if there are less than 3 prequalified general contractorsor filed sub-bidders?

If < 3 prequalified & prequalification is mandatory, thenawarding authority must solicit additional responses to RFQ byreadvertising. After second solicitation if still


50/60


Review of Decision

Upon inquiry, general contractors and filed sub-bidders areentitled to know their score.

Decision of Prequalification Committee final and not subject toappeal (except where evidence of arbitrary, capricious, fraud or

collusion).


51/60


Resources: DCAM Website (www.mass.gov/cam)

810 CMR 9.00 (General Contractor Prequalification Regulations)

810 CMR 10.00 (Subcontractor Prequalification Regulations)

DCAM Guidelines for Prequalification of General Contractors andSubcontractors to Work on Public Building Construction Projects

Office of Inspector General Website (www.mass.gov/ig)

Designing and Constructing Public Facilities (6th ed.)


52/60

OWNERS PROJECT MANAGER


53/60

Improved Project Oversight - Owners Project Manager

Owners Project Manager

Owners Project Manager (OPM) requiredon all projects with ECC of $1.5 millionor more.

OPM Must be a registered Architect or Engineer with five yearsrelevant experience, or if not registered seven years relevantexperience.

Hired before designer, serves as public agencies agent and

consultant throughout planning, design, procurement andconstruction including advice on selection of designer, design,value engineering, scope, estimating, general and subcontractorpre-qualification and selection, scheduling and construction.


54/60

Owners Project Manager (continued)

Agency may assign an employee to serve as owners projectmanager if they meet qualification requirements.

Owners Project Manager must be independent of designer,general contractor and sub-contractor.

Qualifications based selection process required to procure OPM.

Owners Project Manager Guidelines posted on DCAM website.

www.mass.gov/cam


55/60

DESIGNER SELECTION


56/60

Designer Selection Changes

Awarding Authorities may now utilize same designer thatconducted the feasibility study for the project final design withoutmandatory peer review.

Municipalities must use standard designer selection form issued byDesigner Selection Board (DSB).


57/60

AFFIRMATIVE MARKETING PROGRAM

(MBE/WBE)


58/60

MBE/WBE Participation-Affirmative Marketing Program(revision to M.G.L. c. 7, 40N and c. 23A, 44)

MBE/WBE goals set by DCAM

Published in Central Register, currentlyDesign - 8% MBE, 4% WBEConstruction 7.4% MBE, 4% WBE

Apply to all state assisted building projects includes projects bymunicipalities and political subdivisions when costs paid in wholeor in part by Commonwealth.

DCAM and Supplier Diversity Office (formerly SOMWBA) developprocedures for adjustment of goals by awarding authority onindividual projects.


59/60

Affirmative Marketing Program (continued)

DCAM and Supplier Diversity Office develop good faith effortswaiver procedure before award for use by awardingauthorities.

Supplier Diversity Office monitors and reports for politicalsubdivisions Affirmative Marketing Program.

DCAM monitors and reports for DCAMs Affirmative MarketingProgram.

DCAM & MassHousing currently undertaking new disparitystudy.


60/60

QUESTIONS AND ANSWERS

Documents

Construction Reform 101