Tuesday, January 27, 2015

Should Work Be Bundled Together Into 1 Project or Broken into Separate Projects?

How do you define a public works construction project?  Should work for multiple subcontractor trades be bundled together into one larger project, or should it be broken into smaller separate projects?   

Issues with a bundled project:  There are a number of issues associated with bundling work into one project: 
  • Liability:  The general contractor, instead of the public agency, assumes the liability for performance of the entire project in accordance with the contract documents.
  • Schedule:  The general contractor, instead of the public agency, is responsible for scheduling the work of the subcontractors in an appropriate sequence in order to complete the work on time. 
  • Warranty:  Maintenance and warranty issues are simplified by having the general contractor as the public agency’s single point of contact for resolving warranty issues.
  • Small Businesses:  May negatively impact the use of small, disadvantaged, minority, and women owned businesses who might not be able to bid a larger project. 
Issues with separate projects:  There are a number of issues associated with breaking work down into separate projects: 
  • Schedule:  Managing the schedule for multiple subcontractors takes staff time for public agencies.
  • Expertise:  Managing and overseeing all of subcontractor trades requires a level of expertise that may be beyond that of a government project and construction manager.
  • Time for Managing Subs:  More administrative time is required for the public agency to manage all facets of construction with multiple subcontractors, rather than having the contractor manage it all.
  • Audits:  Multiple contracts may result in more exposure to audits and potential violations of ordinances and policies.
  • Procurement Regulations:  Splitting projects under bidding thresholds may violate procurement regulations, or at the least, give the appearance of inappropriate actions on the part of public agencies.
  • Streamlined Award:  Splitting a project into smaller bids may be a more streamlined process for internal approval of an award, requiring fewer levels of approval.
  • Cheaper:  No markup of subcontractor costs results in reduced direct costs for the public agency.
In the news:  A city manager in Georgia recently separated work out into multiple smaller projects less than $20,000 each in order to avoid obtaining approval of the city council for a larger project.  City of Covington city manager Leigh Anne Knight, also argued that it was done to save money, an argument that is difficult to prove.  The city’s planning director acted as the construction supervisor for the projects, leading the city council and mayor to assert that the planning director’s time would be better spent performing his duties as planning director.  The council will consider defining by ordinance what constitutes a “project.”  For more information about this story, click here.

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