For the last decade, governmental entities building fire stations have been able to choose from several different methods to award contracts. While the many options offers some amount of flexibility, we have found that fire chiefs and city managers are primarily concerned with one issue: which method provides the most station for the money?
While different methods have their pros and cons, we have found–after working with more than 60 different fire departments–that the two methods which generally offer the best value to our clients are Construction Manager at Risk and Competitive Sealed Proposals. Other methods to consider may include Design Build, Construction Manager Agent, Job Order Contracting (typically for repair and minor renovation) and Competitive Bidding (without consideration of qualifications).
COMPETITIVE SEALED PROPOSALS
Under the Competitive Sealed Proposals method, contracts are awarded based on which contractor’s proposal offers the “best value,” rather than simply the lowest price. In addition to cost, the request for proposal may require a variety of qualifications, including the construction firm’s history, relevant projects, project personnel and their resumes, schedules, and a financial statement. The proposal evaluation criteria must be published with the Instruction to Proposers and are typically weighted by the various criteria.
In many cases, contractor expertise may outweigh the price when ranking responses. This approach is best used in a slow economy to take advantage of the competitive bidding environment, coupled with the ability to select the most qualified contractor.
The chief advantage of the CSP method is the ability to negotiate project scope and cost with the “best value” proposer. If an agreement is not reached with the first selected proposer, negotiations are suspended and re-started with the second selected proposer and so on. The main disadvantage is that the cost of the actual project isn’t known until the proposals are submitted. But with careful cost estimating throughout the design phases by a design team with recent fire station experience, the issue of overbidding is minimized.
CONSTRUCTION MANAGER AT RISK
Under CMAR, the construction manager is typically selected at the same time as the architect. The benefit of this approach is that, as the architect is designing, the contractor is simultaneously reviewing the project for constructability and preparing cost estimates and schedules – all with an eye to keeping the project on budget and on schedule.
In an inflationary economy when the cost of building materials are volatile, it’s wise to have a contractor on board early so that they can, in concert with subcontractors, keep tabs on market fluctuations and prevent a short-term supply shortages from turning into massive cost overruns or missed deadlines.
One of the chief advantages of CMAR is that final pricing by subcontractors to establish or confirm the GMP (Guaranteed Maximum Price) should match previous CMAR pricing, thus reducing the anxiety of unknown cost on bid day. (This approach is best used in a growing economy with inflation.) The GMP may be set at the completion of the Design Development phase or midway through construction documents to “lock in” escalating cost, but this approach usually requires contingencies to cover undesigned elements and requires collaboration between the CMAR and design team to complete the documents within the set budget.
An occasional negative issue with this contracting approach is when the CMAR is too cautious in their early estimates and the deign team reduces the gross building area, it can be quite difficult to add gross area back in, if the project underbids. This risk can be combated by making good decisions early and sticking to them, while discussing realistic contingencies for project scope that isn’t designed.
Because of fluctuations in the economy, there is no one method that will work at all times for all projects. We encourage fire chiefs to be involved in early discussions to examine the pros, cons, and nuances of the various construction delivery methods.
For a more in-depth discussion specific to your situation, please drop Gary DeVries and Ray Holliday a line at firstname.lastname@example.org.