Evening Presentation: Integrated Project Delivery

Integrated Design Promise and Reality: IPD from the Trenches - Seattle Children's Bellevue Clinic

"The need for Integrated Project Delivery is here, fueled by advancing developments in BIM (Building Information Modeling) and increasing demands for true budget and cost accountability. IPD changes the contractual and delivery process, but moreover strongly impacts the design phases, deliverables, roles and responsibilities in order to foster a new context for teamwork."

When: Tuesday, July 14, 2009 (5:00 p.m. to 9:00 p.m.)

Where: Sellen Construction Offices, 227 Westlake Ave. N., 4th Fl., Seattle, WA

Sponsored by: Lean Construction Institute, Cascadia Chapter

Speakers:

• Ted Sive
• Jeff Guizio
• Jack Avery
• Brian Zealler
• Rich Oehmcke

For more information and to register, click here.

Federal Audit Blasts Use of Time-and-Materials Contracts

The federal Government Accountability Office (GAO) recently published a critical audit of the widespread use by federal agencies of time-and-material contracts in procuring a variety of commercial services. "These contracts are risky because the government bears the risk of cost overruns," the audit noted.

Here are a couple of resources related to this audit by GAO:

• GAO Audit Report to Congress (47 pages)
• Summary article on the Audit in FederalTimes.com
  

There are a couple of different models for negotiation and payment of services provided in a contract:

• Time-and-Materials: The public agency pays the provider for the actual cost of materials used and agrees to a negotiated hourly rate for labor. Under this model, there is no incentive for contractors to control costs. The more hours they spend on a project, the more they get paid. It is almost a guaranteed employment program for the contractor. Time-and-Materials are often used on public works construction project change orders where such work is often referred to as "force account" work. What makes this a more controlled process for the public agency is that the agency will have their own inspectors present monitoring the work of the contractor. Even with such monitoring, however, productivity is not defined and a slower, less efficient contractor may end up spending more hours than another contractor would.
  
  
• Time-and-Materials, Not-to-Exceed: This is similar to the pure Time-and-Materials contract, but with one critical distinction: the dollar amount of the work is capped at a maximum. In other words, both parties agree that the scope of work is valued at a certain maximum. The public agency agrees to pay the contractor up to the maximum, based on documented time spent and materials actually purchased for the project. If the project takes fewer hours and materials cost less than estimated, the public agency pays less than the Not-to-Exceed amount.
  
  
• Lump Sum: Lump Sum contracts are generally used on public works construction projects where the contractor bids a lump sum (sometimes based on specific unit prices) to perform the work. They are also used in negotiating other types of contracts. Regardless of how much time or money it takes to perform the scope of work, the public agency agrees to pay the Lump Sum amount. This works well in a competitive bidding situation. In a negotiated bid, the public agency must be savvy on how to negotiate, must have a very clearly defined scope of work, and have the ability to estimate the actual value of the services. On a project that does not have a well defined scope of work, contractors may be reluctant to agree to a Lump Sum price. If a contractor does agree to a Lump Sum amount for a less than clear scope of work, the price may be significantly higher than what the public agency might expect in order for the contractor to cover their risk for the unknown conditions of the project.
  

The different pricing models are really all about which party bears the risk in contracting. Other than in competitive bid situations, it is critical for the public agency to have appropriate skills in negotiating contracts.

NY Court Rejects Bidder Responsibility Protest

A New York State Supreme Court judge rejected the protest of LVI Environmental Services on a $34.1 million asbestos abatement project. LVI claimed that the low bidder Cambria Contracting did not meet the bidder responsibility criteria for experience necessary to perform the project. In ruling against LVI, the judge noted that officials had a "rational basis" for awarding the project to Cambria. LVI is weighing their options on whether to appeal the June 30, 2009 ruling by the court. Other resources:

• DemocratAndChronicle.com article on the court ruling
• My previous blog entry on this dispute.
  

How Effective is Mediation in Resolving Disputes?

For an insightful, thoughtful, and well-written article on the advantages and disadvantages of of using mediation to resolve construction disputes, visit Engineering News-Record.com.

The blog entry is written by Dr. Patricia Galloway, CEO of Pegasus-Global Holdings, Inc., based in Cle Elum, Washington.

Dr. Galloway is also the Vice Chair of the National Science Board, and Past President of the American Society of Civil Engineers.

Detroit Official Accepts Bribe for Support of Contract

Detroit City Councilwoman Monica Conyers admitted in federal court on June 26, 2009 to accepting at least two envelopes filled with $6,000 cash from Synagro Technologies in exchange for her support of a $47 million a year contract for Synagro on a wastewater treatment contract. She may have taken additional money from Synagro as well.

Conyers, the wife of Congressman John Conyers faces up to five years in prison and a $250,000 fine.

She is also under investigation by federal agents for receiving $40,000 of jewelry from a pawn shop for her support to vote against City Council plans to more closely regulate the industry.

For more information about the case, read the following stories:

• Cleveland.com
  
• The Detroit News
  

It is important for public agencies to ensure that its contracting practices are transparent and clear. We read all too often of both elected officials and government employees involved in contracting of accepting bribes and making unethical decisions. When it comes to ethics in public contracting, appearances are also critical and the public contracting process must be above reproach.

Read my other blog entries on ethics by clicking here. I also teach a class on "Ethics in Public Contracting." Contact me if you are interested in finding out more details about the class.

Job Opening: Contract Administrator at KBA

KBA Construction Management of Bellevue, Washington is seeking a Contract Administrator.

The Contract Administrator performs varied contractual, professional, and administrative related duties. The position requires knowledge and experience with contract terms and conditions, contract administration and development, preparation and negotiation.

For more information about the position and to apply, visit KBA's employment website.

Lawsuit on Bidder Responsibility in New York

LVI Environmental Services, Inc., the second low bidder on a massive asbestos abatement project in Rochester, NY, has filed a lawsuit with the New York State Supreme Court alleging that the low bidder, Cambria Contracting, Inc. did not meet the bidder responsibility criteria included in the bidding documents.

The project requires abatement of some five million square feet of asbestos-containing materials in the Midtown Plaza shopping center that will eventually be demolished to make way for a headquarters site for PAETEC Holding Corp.

In order to be determined to be a responsible bidder, the contractor must have removed at least 800,000 square fee of asbestos-containing material in each of the last five years and worked on similar buildings in an urban setting. LVI evaluated the material submitted by Cambria and alleges that Cambria did not meet the 800,000 square feet criteria in all of the past five years. In addition, LVI asserts that Cambria does not have the urban experience required.

The State Supreme Court has scheduled a hearing for June 30, 2009 on LVI's lawsuit.

Cambria's bid was for $34.1 million, while LVI bid $39.9 million.

For more information, visit the website of DemocratAndChronicle.com.

In Washington State, RCW 39.04.350 authorizes public agencies to develop relevant supplemental bidder responsibility criteria for public works projects. The law was adopted in 2007 with support of contractors and public agencies. Many contractors are now expressing concerns about the restrictive manner in which public agencies are establishing bidder responsibility criteria on projects.