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Construction Contracting

Construction Contracting

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Construction Contracting

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  1. Construction Contracting What is “construction” defined as or include? Building? Altering ? Repairing? Demolishing? Public Improvements?

  2. CONSTRUCTION CONTRACTING What does “construction” NOT include? • Routine operation • Routine repair • Routine maintenance

  3. CONSTRUCTION CONTRACTING Major Types of Construction Solicitations or Construction Contracts (allowed under A.R.S., Title 34): • Design-Build • Design-Bid-Build • Job-Order-Contracting • Construction Manager at Risk • Simplified Construction (A.R.S. 41-2535)

  4. CONSTRUCTION CONTRACTING • Design-Build • Single contract for design andconstruction • Separate contracts can be used • Preconstruction services • Construction services • Basis of Award: Demonstrated competence and qualifications

  5. CONSTRUCTION CONTRACTING • Design-Build cont. • Advantages • Faster Delivery • Cost Savings • Better Quality • Singular Responsibility • Decreased Administrative Responsibility • Reduced Risk • Reduced Litigation Claims

  6. CONSTRUCTION CONTRACTING • Design-Build cont. • Disadvantage • Loss of Checks and Balances (An “outside” A/E is NOT acting as the contractor watch dog for your agency) D-B most useful for: • Time sensitive projects • Projects with specialized, technically complex scopes of work

  7. CONSTRUCTION CONTRACTING • Design-Bid-Build (“similar” to Invitation for Bid) • Sequential Award (Two Separate Contracts) • Design Contract • Construction Contract • Design and Construction are non-concurrent • D-B-B contracts do not include: • Finance Services (financing for construction services) • Maintenance Services • Operation Services • Good choice for simple projects with small number of change orders

  8. CONSTRUCTION CONTRACTING • Design-Bid-Build cont. • Advantages • Checks and Balances are present • Familiarity to construction firms • Scope/stages of work more easily defined • Owner has greater degree of control • Disadvantages • “Team” environment lacking • Finger pointing • Linear schedule – Slowest method

  9. CONSTRUCTION CONTRACTING • Job Order Contracting Invented by COL Mellon (U.S. Army) for NATO for routine maintenance and alteration of U.S. Army facilities in Europe • IDIQ contract • Multiple contracts for multiple years (5 years max) • Incorporates a “Unit Price Book” (Ex. RS Means or equiv.) and coefficient markup for line items in Unit Price Book • Basis of Award: Most Qualified Firm(s)

  10. CONSTRUCTION CONTRACTING • Job Order Contracting cont. • Advantages • Fast, responsive and time savings • Simplicity (for repetitive types of work) • Longer term relationships with contractor • Disadvantages • Potential reduces contracting opportunities for other contractors • Learning curve implementing JOC • Limited to projects less than $1,000,000 • Possibly more expensive than other alternatives

  11. CONSTRUCTION CONTRACTING • Construction Manager at Risk (CMAR) • Sequential Award (Two separate Contracts) • Design Contract • Construction Contract (Pre-Construction Phase/Construction Phase) • Design and Construction can be concurrent • Construction Manager is brought in early during the design phase and proposes GMP near the end of the Design Development Phase(s) • Used for large, time sensitive, requiring extensive management, multi-trade, technically complex projects • Basis of Award: Contractors demonstrated competence and qualifications

  12. CONSTRUCTION CONTRACTING • Construction Manager at Risk cont. • Advantages • Increased speed (Contractor(s) is/are chosen before design is 100% complete) • Contractor is selected based on demonstrated qualifications • Contractor and A/E work as a team • Separation of duties between contractor and A/E • Greater/enhanced transparency (bids are open to inspection)

  13. CONSTRUCTION CONTRACTING • Construction Manager at Risk cont. • Disadvantages • Difficult to know if lowest bid is achieved (compared to D-B-B process) • CMAR jobs tend to cost more

  14. CONSTRUCTION CONTRACTING • Simplified Construction • Authorized by: • A.R.S. 41-2535 ($100k or less) • A.R.S. 15-213 ($150k or less) – State Board of Education/School • Restricted, if “practicable” to small businesses • Pursuant to rules adopted by “director” • Maricopa County requires 3 written quotes • Vendor list is maintained of “persons” who are interested with additions permitted throughout year • Think of D-B-B and Request for Quotation (for goods/services)

  15. CONSTRUCTION CONTRACTING • Bonds • Three types of Construction Bonds: • Bid Bond - Guarantees the contractor will honor its bid and will sign all contract documents if awarded the bid. • Performance Bond- Guarantees the contractor will complete the contract according to its terms including price and time. • Payment Bond- Guarantees the subcontractors and suppliers will be paid monies that that are due from the contractor.

  16. CONSTRUCTION CONTRACTING • Bond Submittals • Bonds can be submitted as a Surety Bond or • In the form of a certified check or cashiers check in the amount(s) required.

  17. CONSTRUCTION CONTRACTING • Bond Ratings • What type of rating should your agency specify and why? • Bond Rating/Financial Strength: (A.M. Best Ratings)

  18. CONSTRUCTION CONTRACTING • BOND SAMPLE LANGUAGE: All Insurers and Sureties shall have at the time of submission of the proposal an A.M. Best’s Key Rating Guide of “A-” or better as currently listed in the most recent Best Key Guide, published by the A.M. Best Company, payable without condition to the Owner.

  19. CONSTRUCTION CONTRACTING Construction Bond Matrix