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  1. OCR Payment Process Training 01/17/2012

  2. Article 9 – Compensation and Payment • General Conditions – Article 9 • 9.1 Preconstruction Stage Compensation • Preconstruction Fee • Based on Progress • Preconstruction Personnel Costs • Based on hourly basis • May group employees within same category of labor to determine a blended rate

  3. Preconstruction Reimbursable • No mark-up on reimbursable expenses • CM shall obtain the Contracting Authority’s written approval before purchasing tangible property • CM shall maintain a detailed inventory of all tangible property **CM may request to reallocate costs between Personnel costs and reimbursable costs. Contracting Authority and Owner must agree in writing

  4. Preconstruction Invoices • Services must be detailed to identify preconstruction services and additional services • Separately identify Fee, Personnel Costs and Reimbursable Expenses • Identify Personnel or Consultants staff, time spent and related hourly rate(s) • Summarize, but detail by category, reimbursable expenses • Cover only one calendar month ending on the last day of the month

  5. Preconstruction Payment Timing • Owner to pay on a monthly basis within 30 days of receipt of invoice • Disputed invoices • Owner to provide written notice within 25 days • Owner to pay all undisputed amounts • If CM disagrees with the unpaid amounts they shall initiate and prosecute a claim under Article 8 and continue to perform the Contract

  6. Owner’s Right to Withhold Payment in Preconstruction Phase • Damage caused by the CM • Failure to comply with the Applicable Law • Failure to timely make and submittal in the Preconstruction Stage • Failure to carry out the Work in accordance with the Contract Documents

  7. Construction Stage Compensation • GMP Amendment • Contract sum becomes lump-sum/fixed cost • After GMP amendment is finalized any adjustments due to Modifications and Claims will be governed by Article 7 and Article 8 and other applicable provisions of the Contract • GMP amendment will establish the new Contract Sum which consists of: • Sum of CM’s Fee • Estimated Cost of the Work (including Allowances and Unit Price Work) • CM’s Contingency

  8. Fee • CM’s fee is subject to adjustments as provided elsewhere in the Contract • CM’s may request payment of their Fee on a progress basis (percent complete) • CM’s fee must be accounted for separately by a line item in all financial reports, etc.

  9. General Conditions Costs • General Conditions Cost Description will be provided with the GMP and attached to the Contract • Examples of General Conditions items (not all inclusive): • Bond & Insurance • Mobilization • Demobilization • Punch list • Daily Cleaning • Final Cleaning • Coordination Drawings • Project Record Documents • Submittals • Attic Stock • Commissioning/Training • Temporary Heat

  10. General Conditions (con’t) • GC’s are subject to adjustments • Paid on a progress basis (percent complete) • Must be accounted for as separate line item of contract sum in all financial reports, etc. • Detailed inventory log of all Tangible property that is purchased/reimbursed with General Conditions shall be maintained by the CM

  11. CM’s Contingency • Established at the time of the approval of the GMP Amendment • Will be increased by any “buy-out savings,” if any are realized as result of the CM’s estimate • Will be paid to the CM on a cost-reimbursable basis

  12. CM’s Contingency (Con’t) • CM’s Contingency may be used at the discretion of the CM (subject to the concurrence of the Owner and the Contracting Authority) to pay for unexpected events, such as: • Costs over the CM’s estimated cost in the GMP for a particular scope of work (Except when the CM or a CM affiliated entity is performing the work) • Subcontractor’s breach of its Subcontract • Remediation of defective work • Additional costs required to complete the work within the contract times where the CM would not be entitled to a modification

  13. CM’s Contingency • Contingency Review Dates will be at 25%, 50%, and 75% of the contract time and work complete • The amount the contingency is reduced by is multiplied by the CM’s contract Fee and their contract is reduced by that amount (see example page 65 of Article 9 handout) • Before CM’s final pay application is submitted all parties shall execute the Shared Savings Change Order

  14. Allowances • Identified as part of the Contract Sum in the GMP Amendment • Allowances include the cost to the CM (less any applicable trade discounts) of materials and equipment required by the Allowances to be delivered at the site, and all applicable taxes • Unless specifically determined by the Contract, the CM’s Fee and the CM’s cost for unloading and handling on the site, labor, installation costs, and other expenses contemplated for the Allowances are included in the Contract Sum and not in the Allowances • Before final payment, an appropriate change order will be issued to reflect actual amounts due to the CM on account of work covered by allowances, and the Contract Sum will be correspondingly adjusted

  15. Allowance Tracking Sample Form

  16. Unit Prices • Contract Sum will include for all Unit Price Work - an amount equal to the sum of the established Unit Prices for each separately identified item of Unit Price Work times the estimated quantity of each item as indicated in the Contract. • Estimated quantities of unit price work are not guaranteed • Owner will determine actual quantities and classification of unit price work performed by the CM • CM or Owner may initiate and pursue a Change Request for an adjustment of Unit price • If any item quantity differs by more or less than 25% of the Contract

  17. Unit Prices Schedule in Bid Form – Sample

  18. Schedule of Values • CM shall submit a schedule of values • Each line item must be broken down by Labor and Material • Usually approximately 45% Labor and 55% Material (exception may be for large pieces of equipment such as: HVAC Air Handlers, Casework, and Technology equipment) If material allocation for a line item is more than 55% then CM may be asked to submit sufficient information to support higher percentage • Schedule of values breakdown should follow the Construction Schedule line items as closely as possible • Should be broken down by: • General Conditions • Bond & Insurance • Mobilization • Demobilization • Punch list • Daily Cleaning • Final Cleaning • Coordination Drawings • Project Record Documents • Submittals • Attic Stock • Commissioning/Training • Temporary Heat

  19. Schedule of Values (Con’t) • Breakdown of Labor and Material should be broken down by: • Buildings (Renovation or Addition) • Phases • Areas • Floors • Trade or Subcontract • Allowances • Change Orders Note: * Large HVAC and Electrical equipment should be broken out into separate line items * EDGE associated activities of work and supplied material should be notated with an “EDGE” notation so they can be tracked easily

  20. Sample Schedule of Values(General Conditions and EDGE)

  21. Schedule of Values (Con’t) • Pay Applications should be first given to the Criteria Architect to review the line items billed for to confirm the “%’s of work complete” are accurate. This should be done in the field • CA/E should only approve actual % of work complete and not allow projections to be billed • Review and confirmation of stored materials (on or off-site) • Things for the PA to review and watch for: • Only pay for actual work in place, do not allow projections • Do not allow CM to “front load” General Conditions and/or early items of work • Confirm only Executed change orders are being billed for, even if the work is completed (if C.O. has not been signed by all parties they cannot bill for it)

  22. Things for PA to review (Con’t) • Confirm the stored material retainage is calculated correctly and is at 8% • Confirm “previous amount billed” on all sheets are correct • 8% of labor is held as retainage until 50% complete (Example: If invoice #10 is at 49% billed and then invoice #11 is at 58% , the 8% retainage on labor would be held on the entire labor billed through #11 even though it is at 58%) Most contractors will only bill up to the 50% labor mark on the one that gets them there in order to not have additional retainage withheld over the 50% • Once you reach the 8% of retainage to the 50% billing inform the Treasurer they should deposit the retainage into the escrow account set up

  23. Pay Application Summary

  24. Application and Certificate for Payment (Signature Sheet)

  25. Application and Certificate for Payment (Signature Sheet)

  26. Stored Materials being billed for on a pay application • CM is to provide a list of fabricated materials consigned to the Project, giving the place of storage, together with invoices, in order to verify quantity and costs for the stored materials they are billing for on the pay application • CM to prepare a certification of such to the A/E for signature to evidence materials in conformity with Specs and that they have been tagged w/project name and number • CM shall directly reimburse A/E for all costs incurred to visit storage site if other than adjacent to the project site • Owner will pay CM at a rate of 92% of the invoice cost for stored materials or materials delivered to the site • CM may bill for the balance of the value of the material once incorporated into the project.

  27. Stored Materials Off Site Certification

  28. Stored Materials On Site Certification

  29. Construction Phase withholding of payment • A/E may recommend to Contracting Authority that payments be withheld from, or Liquidated Damages be assessed against, a CM Payment Request

  30. Construction Phase withholding of payment • Contracting Authority’s Right to Withhold Payment • Defective work not remedied • Damage caused by the CM • Reasonable evidence that work cannot be completed for the unpaid balance of the contact sum • Reasonable evidence work cannot be completed within contract times and unpaid balance is insufficient to cover delays • Failure to comply with the Applicable Law • Failure to submit EDGE participation reports • Failure to timely approve a Construction Progress Schedule • Failure to carry out the work in accordance of the Contract Documents

  31. Final CM Payment Request • CM shall complete all conditions precedent to execution of the Certification of Contract Completion and to final payment • CM and all Subcontractors must execute a Payment Affidavit to Certify that each have complied with all requirements of ORC Chapter 4115, and have paid all of its subcontractors and material suppliers in full for all work performed and materials furnished • CM must deliver any tangible property, if it has useful life, to the Owner if it was reimbursed to the CM either during preconstruction phase or as a General Conditions cost