Many school districts and other public agencies are considering using a special process for capital projects, by engaging the contractor through the construction manager / general contractor (“CM/GC”) method. Use of this procurement method requires several extra steps that are not applicable to the standard bid process. Special care must be taken in its implementation.

Advantages

A key concept behind CM/GC procurement is that the contractor is selected early in the design process, before the scope and price of the project are set. The contractor agrees to participate in development of the design, providing input on such matters as constructability, alternative approaches, and cost estimating, for a set or not-to-exceed fee. When the project scope is established and subcontract bids are available, the price is set through a contract amendment. Because the contractor becomes familiar with the design earlier in the process than through the traditional bid method, its input will provide value in establishing the project parameters, and there may be schedule advantages over use of the traditional process. When guaranteed maximum price contracting is used in conjunction with CM/GC, there is also an opportunity for the agency to realize cost savings if the actual cost of the construction is less than the contracted guaranteed maximum price.

Procurement

Different rules apply to contracting through the CM/GC process than traditional contractor bid procurement. First, exemption from competitive procurement requires the agency to adopt findings justifying the exemption. ORS 279C.335. ORS 279C.337 then provides governing standards for the procurement itself. Among other things, that statute requires the public agency to follow the model contracting rules adopted by the state Attorney General. ORS 279C.337(2)(h). Those rules include detailed standards for when CM/GC contracting is justified, requirements for inclusion in the RFP and construction contract, and the mandatory process for implementation of the contract itself. OAR 137-049-0690. The interplay of the statute and these rules is complex, and has changed over the years. Advance preparation by the agency for compliance with these standards is critical.

Contracting

After the contractor is selected, the agency may, if the procurement documents so state, negotiate the terms of the contract. ORS 279C.405. Early decisions on the contract form and contract terms are critical, to avoid issues after contractor selection has occurred. The contract form may be based either on an industry standard, such as the CM/GC contract form promulgated by the American Institute of Architects, or a form specially developed for the agency. In either case, careful advance review is required to ensure the contract meets the multiple required contracting standards in the statute and rules.

Administration

Agencies anticipating use of CM/GC procurement are required to properly staff the project. Specifically, the Attorney General Rules state “Contracting Agencies shall use this contracting method only with the assistance of legal counsel with substantial experience and necessary expertise in using the CM/GC Method, as well as knowledgeable staff, consultants or both staff and consultants who have a demonstrated capability of managing the CM/GC process in the necessary disciplines of engineering, construction scheduling and cost control, accounting, legal, Public Contracting and project management.” OAR 137-049-0690(1). Careful consideration of the project team will help avoid later problems inherent in participants who have neither experience with or knowledge of the CM/GC process.

Many school districts are moving forward with capital projects large and small in the coming months. At both ends of the spectrum, many districts are hoping to gain financial and logistical benefits by engaging construction managers / general contractors (“CM/GC”) early in the process. This is a great time to discuss some good practices to keep in mind with these types of projects.

Procurement

If the district is involved in the procurement phase of a CM/GC process, you must keep in mind that different rules apply than in the traditional design-bid-build phase. First and foremost, the district should make sure to follow the requirements of Oregon Revised Statute (ORS) 279C.337 to the letter. This statute requires that the school district conduct certain investigations, and that the school board make certain express findings on the record, in order to prepare a CM/GC request for proposals for publication. These include establishing criteria for evaluating proposals, identifying the anticipated savings and efficiencies from employing the CM/GC process, and confirming the rules that the district will follow in the process.

Next, the district should familiarize itself with the model rules adopted by the Attorney General under ORS 279A.065. The district should confirm the rules under Oregon Administrative Rules (OAR) 137-049-0600 and following. Here, there is little room for improvisation. Generally, the district should simply make sure to work its way through all of the detailed requirements of the statutes and rules, and ensure compliance.

Contract stage

After a provider is identified, the district has greater leeway to customize the terms of the work and the relationship between the construction manager / general contractor, as well as the rest of the project team, which may consist of the district, and owner’s representative, an architect, and perhaps other professionals. Here, the district’s priority should be to clearly delineate the responsibilities of each party, and the specific cycle for a project. By taking the time to negotiate a workflow among all of the project team members who guide design and planning squarely through the process, from one professional to the next and back again through the cycle, the district will make sure no party steps on another party’s toes. This not only ensures the orderly flow of feedback and integration into the next iteration of the process, but also ensures that each team member gets to have their rightful say on their respective parts of the project.