Assessment of General Contractor/

Construction Manager Contracting Procedures

Assessment of General Contractor/

Construction Manager Contracting Procedures

Preliminary ReportPreliminary Report

Joint Legislative Audit and Review CommitteeJoint Legislative Audit and Review CommitteeJill Satran and Isabel MuJill Satran and Isabel Muññoz-Coloz-Colóónn

May 18, 2005May 18, 2005

2

Presentation Overview

Background on GC/CM in Washington State

Design-Bid-Build (DBB) vs. GC/CM Contracting Method

Study Overview

Capital Projects Review Board

Conclusions and Recommendations

3

Background on GC/CM in Washington State

Legislature granted GC/CM authority in 1991

The authorization will expire in 2007 Statutory requirements to use GC/CM

– Over $10 million AND• Complex scheduling, OR• Existing facility has to remain open, OR• Early GC/CM involvement is critical to

project success 2003-05 Capital Budget instructs JLARC to

review GC/CM in major public works projects.

Report Pgs. 1-2, 11

Design-Bid-Build

GC/CM

PREDESIGN DESIGN CONSTRUCTION

Contractor Hired(low bid)Architect

Hired

Guaranteed Maximum Price (GMP) negotiated

Contractor Hired

Architect Hired

4Report Pgs. 6-7

5

Study Overview

How does industry research compare GC/CM to Design-Bid-Build (DBB)?

Who is using GC/CM and on what types of projects?

Where are GC/CM projects located?

Who is awarded GC/CM contracts?

Are performance indicators and benchmarks available to compare DBB and GC/CM?

What is Washington State’s experience with GC/CM?

How Does Industry Research Compare

Design-Bid-Build to GC/CM?

6

TraditionalDesign-Bid-Build

AlternativeGC/CM

Project Complexity

Low-moderate High

ScheduleBest suited if reasonable, not a critical factor

Best suited if aggressive, fast-tracking possible

Compensation Fixed price, low bid contractingNegotiated maximum guaranteed price

Risk Primarily owner Some shared risk

Experience Required

ModerateHigh degree of experience required of all participants

Team Relationship

Adversarial Collaborative

Project CostLower design and management costs, potential for significant change orders

Higher design and management potential for reduced change orders

Project Quality

Standard quality expected High quality expected

Pg. 9

7

Who is using GC/CM?

0

5

10

15

20

25

30

35

20

33

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Owner Type

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$2.7 Billion spent on GC/CM State-level projects

$3.8 Billion spent on GC/CM local-level projects

Pg. 15

8

1

3

4

4

5

6

6

6

12

2

5

5

8

11

19

11

0 2 4 6 8 10 12 14 16 18 20

Unclassified

General Classroom

Teaching Lab

Multipurpose

Athletic

Research

Student Services

Prison

Residential

Multipurpose

Hospital

Operational Support

Infrastructure

Performing Arts

Office

Stadium

Bu

ildin

g T

ype

Project Count

…and on what kind of projects?

Non-education related projects

Education related projects

Report Pg. 18

Where Are GC/CM Projects Located?

King

Snohomish

Pierce

Report Pg. 16 8

7 Major Firms

78 projects

Other

24 projects

TBD6 projects

Mortenson, 15

Hoffman, 19

Skanska, 14

Absher, 11

Turner, 8

Lewis , 6

Sellen, 5

Who is awarded GC/CM contracts?

TBD6 projects

10 Report Pg. 17

11

Are performance indicators and benchmarks available to compare?

The state does not currently collect consistent reliable state and local-level data to analyze project performance

– Cost-per-square-foot– Cost Growth– Time Growth– Quality– Change Orders

To address the lack of data, JLARC:– Compiled an inventory of GC/CM projects– Conducted a survey of those projects– Developed 21 case studies of DBB and GC/CM

Report Pgs. 33-34

What is Washington’s Experience with GC/CM?

12Report Pg. 19

Alternative GC/CM

Washington

Project Complexity

HighPartially Present

ScheduleBest suited if aggressive, fast-tracking possible

Present

Compensation Negotiated guaranteed maximum price Present

Risk Some shared risk Inconclusive

Experience Required

High degree of experience required of all participants

Partially Present

Team Relationship

Collaborative Present

Project CostHigher design and management, potential for reduced change orders

Inconclusive

Project Quality Higher quality design and facility Inconclusive

13

Characteristics Present in Washington

Schedule– GC/CM projects appear to adhere closer

to projected schedule than DBB projects.

Negotiated Compensation– Agencies appear to be successfully

negotiating their guaranteed contract cost and staying close to their original budget.

Collaborative Team Relationship– GC/CM provides a more collaborative

approach in most cases.

Report Pgs. 21-22, 26-27

14

Partially Present in Washington

Project Complexity– Generally agencies are using GC/CM on

complex projects.– However, there is some evidence that

agencies may be using GC/CM primarily to avoid problems associated with DBB.

Experienced and Involved Owner– Most agencies are investing additional

resources in managing GC/CM.

– We found a few instances where agencies lacked experience or involvement on the owner’s part.

Report Pgs. 20-21, 25-26

15

Inconclusive – Insufficient Data

Shared Risk– Some owners may believe more risk is being

shifted to GC/CM than is occurring.

Project Cost– GC/CM increases preconstruction and, in

some cases, management costs.

– Impact on change orders, claims and litigation is inconclusive.

Project Quality– It is unclear whether GC/CM contracting

methods produce better quality designs or facilities.

Report Pgs. 23-25, 28-30

16

Capital Projects Review Board

Legislature created CPRB in 2005 to develop and recommend:

– Criteria to determine effective and feasible use of alternative contracting methods;

– Qualification standards for general contractors bidding on alternative public works projects; and

– Policies to further enhance the quality, efficiency, and accountability of capital construction projects.

JLARC developed analytical tools that could be used by the Board

Report Pgs. 33-34

17

Conclusions and Recommendation: 1

Conclusion– Some agencies may be using GC/CM

to overcome perceived deficiencies in the low-bid process in DBB.

Recommendation– The Legislature should further analyze

the implications of the low-bid requirement on major capital projects.

Report Pg. 35

18

Conclusions and Recommendation: 2

Conclusion– Executive-level oversight is critical to the ongoing

development of sound public works contracting policy.

Recommendation2A: The CPRB should be convened quickly to

ensure the Board is prepared to provide recommendations to the Legislature before the 2007 termination date of GC/CM.

2B: The CPRB should consider adding to its work plan improving the consistency of GC/CM project documents across projects and jurisdictions.

Report Pgs. 35-36

19

Conclusions and Recommendation: 3

Conclusion– Lack of sound, reliable, and consistent data

collection is a major impediment to understanding the impacts of GC/CM.

Recommendation3A: The CPRB should develop standardized

statewide performance indicators and benchmarks for all major public works projects.

3B: Project performance data should be collected on state and local projects to form a portfolio of projects.

Report Pgs. 36-37