HomeMy WebLinkAbout19 - City Hall - Options for Project DeliveryCITY OF NEWPORT BEACH
CITY COUNCIL STAFF REPORT
Agenda Item No. 19
September 27, 2005
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Public Works Department
Stephen G. Badum, Public Works Director
949 - 644 -3311
sbadum @city.newport- beach.ca.us
SUBJECT: CITY HALL - OPTIONS FOR PROJECT DELIVERY
ISSUE: Should the City consider alternative project delivery methods to
construct a New City Hall and other future building infrastructure
projects?
BACKGROUND:
On February 8, 2005, City Council approved a professional services agreement with
Griffin Structures, Inc. to prepare schematic design' for a replacement City Hall,
replacement Fire Station #2, and parking structure. Since that time, City staff and
Griffin's team have been working with the City Council Building Ad Hoc Committee to
complete the schematic design. Upon completion and presentation of the schematic
design, City Council will deliberate on whether to proceed with the next step in the
process which is to proceed with the final design phases and construct the project. If
the Council elects to proceed with the project, there are several alternatives which can
deliver the completed facility. Alternative project delivery methods are gaining
popularity and have been extensively used in California and nationwide. Most of these
alternatives involve a variation of the Design -Build method. The key factors for
comparison of alternative project delivery methods are: 1) Cost - controlling design and
construction cost growth; 2) Time - meeting or accelerating project schedule; and 3)
Quality — ensuring quality in the completed facility. It is the balance between these
factors that ensures an appropriate public building project which meets public
expectations concerning efficiency and effectiveness. For comparison purposes, this
report will concentrate on the traditional (Design- Bid - Build), Design - Build, and Program
Manager at Risk.
Design- Bid -Build
' In building projects, the design process is broken down to three phases: Schematic Design which
generally includes the basic floor plan layout, dimensions, and preliminary aesthetics of a building; Design
Development which includes functional and aesthetics aspects; and Construction Documents that inciude
the actual plans and specification that will be used for the actual construction.
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Traditionally, the City has used the Design— Bid —Build process which involves:
1) Retaining a design consultant using quality based selection (QBS) procedures
who provides construction plans, specifications, estimates, and bid documents.
2) Soliciting completive bids with a fixed time bid opening when the City Clerk
opens and reads the bids.
3) Awarding a construction contract to the lowest responsible bidder and staff
manages the contract to completion.
This traditional project delivery method is linear with each step in succession. Variations
on this process have included contractor pre - qualification and contract construction
management. The current Mariner's Library project utilized both of these variations.
Advantages of Design- Bid -Build
1) Provides for clear cut checks and balances due to the separation of designer,
builder, and owner.
2) Competitive bidding process.
3) This method is widely applicable with well established and clearly defined roles.
4) We have the most experience with this technique, however, City staff has limited
experience constructing complex building facilities.
Disadvantages of Design- Bid -Build
1) This method often creates an adversarial relationship between Contractor and
City which can lead to costly claims and disputes.
2) Process is linear and therefore more time is required. Each step must be
completed before moving to the next step creating a slower process which is not
suitable for tight deadline projects.
3) Encourages Contractor to detect and exploit potential errors with the contract
plans and specifications. This is especially true if the low bidder has made a
mistake in his bid or improperly interpreted the complexity of the project and has
under bid the project ( "left money on the table "). Change orders are common and
inevitable.
4) The designer may have limited ability to assess real world scheduling and
current and projected cost ramifications because they are insulated from the
contractor.
5) The contractor is not involved in the design process so there are fewer
opportunities to identify constructability issues because he only gets involved at
the completion of design.
6) The City is exposed to contractor claims over design and constructability issues
with limited remedies. Errors and omissions coverage is limited to the damage
caused by an error or omission. For example: if the designer omits a required
item such as fire sprinklers in one of the meeting rooms, the City may be entitled
to recover redesign costs and costs due to delay but not the actual cost of the
missing fire sprinkler. The cost of the missing item will be a change order.
7) Requires close oversight by city staff to ensure quality. Contractor has incentive
to cut corners.
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8) Design problems and unforeseen conditions can lead to costly change orders.
Since change orders are not competitively bid, costs can run above average.
Capital improvement projects typically realize 5 -15% in cost overruns due
adjustment in project conditions and minor changes to the design.
9) Savings due to value engineering or implementation of alternative construction
methods remain with the contractor.
10)Lowest responsible bidder doesn't guarantee the best value.
Design -Build
This project delivery method merges the responsibility for design and construction into
one entity. The Design -Build process starts with the City staff and /or a contract
consultant developing a detailed building program. The typical building program
identifies space needs, functionality requirements, and other basic design criteria such
as architectural style, types of building materials, type of construction, site amenities,
and other key features. The next step involves requesting proposals to identify
potential designer - builders. A quality based selection is performed to identify two or
more of the most qualified potential designer - builders. Those designer - builders are
asked to develop and submit detailed proposals which include design documents and a
cost for construction. A proposal is selected on the basis of the lowest responsible bid.
The City awards the contract and the designer - builder is responsible for constructing
the project per the proposed design and at the construction cost bid. Variations in this
process are possible such as the completion of schematic plans by the City's architect
and those plans being used as the basis for the building program.
Advantages of Design -Build
1) Can reduce project delivery time because construction and design can overlap.
2) Contractor can be involved from the beginning which will improve the
constructability of the project plans which leads to lower costs and higher quality.
3) Single point of contact for the City reduces City management time and cost.
Simplified contract and possible reduction in adversarial relationships.
4) The Designer - Builder assumes the responsibility and risk to deliver the project.
He has a built -in incentive to resolve problems between the designer and
contractor.
Disadvantages of Design -Build
1) The City would have less control over the project. Requires a high level of trust
between the Designer - Builder and the City. Problems with the design or
potentially less costly design alternatives can be hidden from the City.
2) The City would have less involvement and be distanced from the process.
Opportunities for timely input could be lost.
3) Inherent conflict of interest between the architect and contractor (Finger
pointing).
4) The Design -Build firm performs as a "vendor' and adverse relationships can
develop similar to City /contractor relationships under traditional Design- Bid - Build.
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5) Requires a high level of expertise and experience as well as a significant
investment of time during the compilation of the building program. Poor building
program documents are the primary factor in projects that have problems.
6) Design -Build firm receives all of the benefits from cost saving or value
engineering. If they can build it cheaper, they keep the savings. Cost
breakdowns for individual building components are not readily apparent due to
lump sum pricing.
Program Manager at Risk
Program Manager at Risk is a combination of Design -Build and traditional bidding that
reduces some of the pitfalls of both the Design -Build and Design- Bid -Build methods.
This process typically starts with the quality based selection of the Program Manager
and his team. The typical team includes architectural and construction management
services. The Program Manager acts as the City's agent and manages the schematic
design process. Once the schematic plans are completed, the Program Manager
prepares a guaranteed maximum price (GMP) proposal based upon the schematic
plans or Design Development plans and agreed upon building project specifications.
As with the management of the schematic plan process, the Program Manager is paid a
"not to exceed" fixed fee for management services. The Program Manager and his team
proceed with final design and prepare bid packages for the trades such as: heating,
ventilating, and air conditioning; electrical, plumbing, structural systems, roofing
systems, landscaping, and general contracting for miscellaneous items. These bid
packages are reviewed and approved by the City and competitively bid. Bids are
received by the City and the lowest responsible bidders are designated by the City.
The contracts for these bid packages are assigned to the Program Manager who is
responsible for managing the contracts and completing the work. The Program
Manager is responsible for any aggregate increases over the GMP. If there are
aggregate savings, the City receives 100% of those savings.
Advantages of Program Manager at Risk
1. The City will have a Guaranteed Maximum Price and the risk of high bids,
construction overruns, schedule problems, and material cost escalation are
transferred to the Program Manager. The GMP allows the City to avoid the risks
associated with traditional projects which creates a positive public perception of
the project.
2. Most industry studies show this method as superior to Traditional and Design -
Build in controlling construction costs and schedule.
3. The Program Manager, the Architect, and Contractor are involved from the start
which provides the best opportunity to maximize constructability and value
engineering.
4. The combination of quality based selection and competitive bidding provides the
best value. Key management of the project is selected by qualifications with
straightforward single discipline subcontracts bid at competitive market rates.
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5. Like Design - Build, overlapping design and construction phases can save time.
For example: the bid package to build foundations can be bid and awarded
before the lighting design is completed.
6. Single point of contact for the City reduces City management time.
7. Because the program manager, designer and construction manager are on the
same team design problems get resolved quicker and with less cost.
8. Program Manager is paid a not to exceed fee, so there is no incentive to
generate change orders and extra work.
9. The City receives all (100 %) of the benefits of cost savings and value
engineering.
10. All trades are bid publicly and competitively.
Disadvantages of Program Manager At Risk
1. A relatively new process and less common method of project delivery.
2. The City's project may cost more in exchange for risk assumption and
comprehensive project management. However, increases in cost attributable to
project management would be present in all delivery methods based upon the
City's current staff expertise.
3. Requires active City involvement and significant amount of time to develop
schematic plans, specifications, and a GMP.
Other Issues to consider
• With the exception of the depression years, material and labor cost indexes have
historically increased every year (per data from Engineering News Record).
More recently, a construction boom in China and recent natural disasters have
seen material and labor costs continue to rise. Construction experts have
recently estimated that Hurricane Katrina will cause construction costs to rise
over 15 %.
• The cost of money also continues to rise. Recent efforts to curb inflation have
caused the cost of borrowing money to rise from its historic all time low last
spring.
• Current City staff has a limited experience in building complicated buildings.
Most of the past Public Works building projects were park restrooms and
remodeling projects. Contract construction management should be considered
under any scenario.
Alternative Delivery Methods and the Proposed Civic Center Project
The key advantages in using the traditional Design- Bid -Build method to construct the
proposed Civic Center project are that this process is universally understood and
competitive bidding ensures the best price based upon the current construction market.
The key downside of this method is that the process is long. If the City started
preparing construction documents today, we would not have completed plans and bid
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package until summer of 2006. With current market conditions, rising construction
costs, and increasing interest rates, the bid prices will be much higher a year from now
than today's market prices. Another key downside is that complex projects such as
ours, always require changes which ultimately increase the cost of the project 5 to 15 %.
The outward appearance of the completed project is that there is a cost overrun which
critics are quick to emphasize.
The key advantages of Design -Build for the proposed Civic Center project are that we
be able accelerate the schedule, take advantage of lower interest rates, and be able to
lock into lower construction costs sooner than the traditional Design- Bid -Build method.
The design would be substantially improved because of the early involvement of the
contractor. The most significant downside is that the City would have less control over
the project. This would be extremely problematic because of the Council's and staffs
desire to be intimately involved in this project to ensure a cost effective and quality
facility. Another problem for the City on this project would be that the potential start of a
Design -Build project would require significant delay. Staff would need to hire a
consultant to develop a detailed building program before a competitive bid process
could be initiated to hire the Design -Build Team. A prequalification process would also
be required to ensure a quality Design -Build team which may also delay the schedule.
While time will be made up due to the overlapping of the design and construction
phases, the start up time would negate much of that advantage.
The Program Manager at Risk method provides a blend of the two previously described
methods and is superior in controlling cost and schedule. The key advantages are the
shift of risk and responsibility to the Program Manager and the guaranteed maximum
price (GMP). This method allows the City to immediately lock in the construction cost
and minimize financing costs due to the low current rates. The GMP virtually eliminates
cost increases and overruns that are often cited by critics. While the transfer of risk and
the level of project management required does increase the cost, the City would need
to hire a construction management team under the other delivery methods which would
be virtually equivalent in cost. The potential downside of this method is that the City
must commit to moving forward with the project with schematic (20 %) level plans.
How did we get here?
The condensed history is as follows
1. July 2001, Staff proposed several office expansion options including the addition of
office trailers to address current space needs. Council directs staff to pursue more
analysis.
2. August 28, 2001, City Council approved the work scope and directed staff to issue
an RFQ for a Facilities Space Utilization and Needs Analysis. The consensus was
to invite all of the firms that did past work for the City and all Architectural firms that
are in Newport Beach. Staff solicited recommendations from other cities as well.
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3. Eight firms responded. City staff narrowed the field down to three firms; Thirtieth
Street Architects, Dougherty +Dougherty, and Griffin Structures. All three submitted
detailed proposals that were evaluated for completeness, approach, experience,
and quality of personnel. Griffin was selected as the most qualified because of their
extensive experience with municipal buildings and more specifically, City hall
projects. References were checked and all yielded positive comments.
4. January 8 2002, City council approved a PSA with Griffin Structures to perform the
Facilities Space Utilization and Needs Analysis.
5. April 8, 2003, the results of the Facilities Space Utilization and Needs Analysis were
presented.
6. June 10, 2003, Council approved a second PSA with Griffin to prepare schematic
plans for the City Hall project which now includes a replacement Fire Station #2 and
parking garage. However, the contract is not executed due to conflict of interest
concerns.
7. June 24, 2003, City Council forms the Building Ad Hoc Committee consisting of the
Mayor and two Councilpersons.
8. February, 25, 2005, Conflict of interest concerns are resolved; City Council re-
approves a PSA with Griffin Structures to prepare schematic plans for the City Hall
project which now includes a replacement Fire Station #2 and parking garage.
9. Public workshops were held on March 5th and April 2 "d 23rd & 25th
10. May 10, 2005, City Council provided direction to staff to pursue full building
replacement, 350 space parking structure, community room, LEED Certification,
potential lot line adjustment with adjacent property owner, and develop potential
financing for the project.
11.August 9t` and 23rd , 2005, City Council provided direction regarding space
allocation, features, elevations, and various options.
12. September 13, 2005, Staff presented financial options.
What's Next
As stated above, the Griffin Structures team is nearing completion of the Schematic
level plans and the completion of their current contract with the City. City Staff has
asked the Griffin Structures Team to prepare a GMP for City Council consideration at a
future meeting. At that time, the Council may consider moving forward with the project
using alternative project delivery. Council may also want to reaffirm the selection of the
current project team or consider others. An RFQ could be issued and the City could
interview project teams to ensure that we have the best team to shepard the project to
completion. However, such a process would delay the schedule and increase costs
associated with bringing the new project team up to speed under any delivery scenario.
The delay for bringing on a new Program Manager at Risk would be substantially longer
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as the new PM would need time to become intimately familiar with the project to a point
where the PM could be confident with their GMP number. Potential actions are
summarized below:
Design- Bid -Build
1. Request the architect (LPA) from the current design team to prepare a proposal
to provide plans, specifications, estimates and bid documents; or, direct staff to
issue a Request for Proposal (RFP), perform a quality based selection. Retain
LPA or the most qualified firm from the QBS process.
2. Request current Program Manager (Griffin) to prepare separate proposals for
Program Management (Design phase) and Construction Management
(construction phase); or Direct staff to issue a Request for Proposal (RFP),
perform a quality based selection. Retain Griffin or the most qualified firm from
the QBS process.
3. Prequalify potential contractors and bid project.
4. Award to lowest responsible bidder and construct project.
Design -Build
1. Request the architect (LPA) from the current design team to prepare a proposal
for developing a building program; or Direct staff to issue a Request for Proposal
(RFP) and perform a quality based selection. Retain LPA or the most qualified
firm from the QBS process.
2. Request current Program Manager (Griffin) to prepare separate proposals for
Program Management (Design phase) and Construction Management
(construction phase); or Direct staff to issue a Request for Proposal (RFP),
perform a quality based selection. Retain Griffin or the most qualified firm from
the QBS process.
3. Prequalify potential Design -Build Teams and bid project
4. Award to lowest responsible bidder and construct project.
Program Manager at Risk
1. Request Current Program Manager (Griffin) to provide GMP; or Direct staff to
issue a Request for Proposal (RFP), perform a quality based selection, and
request GMP.
2. Prequalify larger trade contractors and bid.
3. Assign trade contracts to PM and construct.
Submitted by:
S . adum
"Public Works Director
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