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HomeMy WebLinkAbout05/07/2002, 1 - ALTERNATIVE METHODS FOR PUBLIC WORKS CONTRACTING \ L council Mav 7.2002 j acEnaa Rep= CITY OF SAN LUIS OBISPO FROM: Mike McCluskey,Public Works Director Prepared By: Jay D.Walter, City Engineer SUBJECT: ALTERNATIVE METHODS FOR PUBLIC WORKS CONTRACTING CAO RECOMMENDATION 1. Provide conceptual approval to increase Capital Improvement Plan (CIP) productivity by use of Job Order Contracting (JOC) and the Uniform Public Construction Cost Accounting Act(UPCCAA) methods. 2. Provide staff direction to return with language for Council approval in June that would place a charter amendment on the November ballot. REPORT-IN-BRIEF The City's Mission Statement and the Council's budget and fiscal policies both strongly encourage enhancements in productivity, whenever possible, including changing cumbersome procedures when necessary. The current City Charter has very restrictive provisions regarding contracting for construction projects. Any project greater than $5,000 in value must be competitively bid using formal plans and specifications. Because of the high number of CIP projects waiting to be completed, the Public Works Director asked staff to look into currently available alternatives to help increase productivity. Two promising options emerged, currently in use by several public agencies within the county, that the City should consider in order to help eliminate the current backlog of CIP work and provide high productivity in the future. The Uniform Public Construction Cost Accounting Act and Job Order Contracting offer alternative methods for public works agencies to accomplish capital improvement projects. They are particularly beneficial when focusing on smaller, repetitive-type projects that can be accomplished quickly without the need for the same formal plans and specifications that larger more complex projects require. For these alternative methods to be considered, the City Charter must be amended, which itself requires a vote of the people. These two alternative methods offer considerable advantages to the City in being able to increase its productivity for CIP projects. All Department Heads are in favor of pursuing these alternative methods of contracting for construction projects. 1-1 Council Agenda Report—Alternative Methods of Public Works Contracting Page 2 DISCUSSION Background The City Council has an adopted policy related to "Productivity". An excerpt from this policy, which can be found on page B-22 of the 2001-03 Financial Plan, reads as follows: "Ensuring the 'delivery of service with value for cost' is one of the key concepts embodied in the City's Mission Statement (San Luis Obispo Style — Quality With Vision). To this end, the City will constantly monitor and review our methods of operation to ensure that services continue to be delivered in the most cost-effective manner possible." The policy goes on to say that we should "Analyze systems and procedures to idents and remove unnecessary review requirements. " In December 2001, the Director of Public Works authorized staff to research additional methods to accomplish CIP projects. After a review of the existing Public Contract Code and inquiring of several cities and counties it has been determined that at least two alternative methods are in broad use around the state. It appears that these alternative methods could significantly enhance the Engineering Division's ability to deliver CIP projects for the City of San Luis Obispo. The City's current governing capital project regulations are found the City Charter, Municipal Code, Purchasing Resolution, Finance Management Manual and State Contracting Code. The ability of the City to contract for construction projects is very restrictive and follows the provisions set forth below: PUBLIC CONTRACT CODE SECTION 20160-20175 20160. The provisions of this article shall apply to contracts awarded by cities subject to Title 4 (commencing with Section 34000)of the Government Code. 20162. When the expenditure required for a public project exceeds five thousand dollars ($5,000),it shall be contracted for and let to the lowest responsible bidder after notice. CITY CHARTER ARTICLE IX. PUBLIC WORKS AND CONTRACTS SECTION 901.Public Works To Be Done By Contract. (A) Except as provided in subsection (D) of this section, every project involving an expenditure of City monies of more than the amount specified in Section 20162 of the Public Contract Code of the State of California, as the same now exists or may hereafter be amended for the construction or improvement of public buildings, works, drains, sewers, utilities, parks, playgrounds, and streets (exclusive of projects for resurfacing,maintenance, and repair of streets) shall be let by contract to the lowest responsible bidder after notice by publication in the official newspaper by one or more insertions the first of which shall be at least ten (10) calendar days before the time for opening bids. 1-2 Council Agenda Report—Alternative Methods of Public Works Contracting Page 3 Why Does The City Need Alternative Methods For Public Works Contracting? There is a backlog of CIP work in Engineering that has not been started. Some projects remain incomplete from previous budget years. Less than 20% of the projects in Appendix B of the 2001-03 CIP have been assigned to staff engineers and less than that have actually been started. This translates to a very low number of projects that will be completed before July 2003. Not every CIP project needs individual formal bid documents to be completed. Much of the work in the approved CIP consists of repetitive tasks, such as alteration, modernization, rehabilitation or maintenance of existing City facilities and infrastructure. In addition to potential project cost savings, the City could benefit from improved efficiencies in the administration and procurement of building maintenance and construction services if those projects could be completed in less time. The contracting industry would also benefit from an increased number of projects, helping the local economy by providing for jobs and material purchases. Delivery of a CIP project by the formal Plans, Specifications and Estimate method typically takes 6-9 months, from initiation to completion of construction. A project delivered by an alternative method could take as little as 45-60 days from determining the scope of work to completion of construction. These alternative methods greatly enhance the City's flexibility to deal with changing priorities. Decisions could be made quickly about which projects need to move forward and work orders or informal contracts could then be quickly processed. What Alternative Methods are Currently in Place with Other Agencies? Uniform Public Construction Cost Accounting Act(UPCCAA) PUBLIC CONTRACT CODE SECTION 22030-22045 22030. This article applies only to a public agency whose governing board has by resolution elected to become subject to the uniform construction cost accounting procedures set forth in Article 2 (commencing with Section 22010)and which has notified the Controller of that election. In the event of a conflict with any other provision of law relative to bidding procedures,this article shall apply to any public agency which has adopted a resolution and so notified the Controller. The Public Contract Code provides a method to both raise the ceiling on the value of work that the City can perform with its own forces to $25,000 as well as simplifying the procedures for bidding projects of less than $100,000 in value. This method is called the Uniform Public Construction Cost Accounting Act (UPCCAA). The key differences between this method and the existing Public Contract Code Section 21062 are: 1. Construction projects less than $25,000 in value may be performed by employees of the City without bidding. 1-3 I Council Agenda Report—Alternative Methods of Public Works Contracting Page 4 2. Construction projects or Maintenance Workless than$100,000 in value maybe let to contract by informal bidding procedures. 3. Construction projects greater than $100,000 in value shall be let to contract by formal bidding procedures. The informal bid procedure as specified in the Uniform Public Construction Cost Act differs from the formal bidding procedure currently mandated for all projects in excess of$5,000 in the following ways: 1. Informal bid invitations need to be sent only to specialty contractors on a pre-qualified list adopted by the City on an annual basis and to select contractor trade journals. Invitations do not need to be printed in the newspaper. 2. Informal bid invitations need only to be a general description of the work, not as detailed as formal bid packages. For certain types of work, this allows the City to "design/build" smaller projects, saving cost of document preparation by specifying outcome in terms of performance standards rather than design details. On certain projects, such as small park improvements, minor building renovation and street striping and repaving work there could be an advantage to the City if it could follow an informal bidding procedure and save the cost of preparing detailed designs when the work can be adequately specified in terms of performance criteria. The selection of contractors for this work would also be more in the City's control than under the formal bidding procedures, which is open to all contractors with a license. The Cities of Arroyo Grande, Atascadero, Carpinteria as well as the County of San Luis Obispo are among several agencies that have adopted the UPCCAA methods of contracting for construction projects. Generally, these cities report that the UPCCAA method has increased productivity, especially with smaller maintenance-type projects. Procurement time is less, and administrative costs are lower. Contractor lists are updated annually, so that all qualified contractors are allowed the opportunity to bid on projects. Job Order Contracting (JOC) A JOC is a competitively bid, fixed unit price,indefinite quantity contract. Indefinite quantity means that the quantities or units of work required during the term of the contract may vary based on the City's needs. A JOC is used for the accomplishment of repair, alteration, modernization, maintenance, refurbishment, rehabilitation, and repetitive construction work needed for City buildings, structures, or other infrastructure assets. New construction projects are prohibited. The JOC is a fixed term contract that has a maximum dollar value. Job Order Contracts are competitively bid and awarded in the same manner as current City Public Works projects. The JOC system includes a Construction Task Catalog (CTC) and Technical Specifications. The CTC is a comprehensive listing of over 160,000 pre-priced construction tasks. The standard tasks are based on the use of experienced labor with high quality materials. All of the unit task prices 1-4 C Council Agenda Report—Alternative Methods of Public Works Contracting Page 5 are approved by the City and incorporate prevailing State wage and local materials cost data. The Technical Specifications are similar to the City's Standard Specifications in that they specify the quality of materials and workmanship required for each task. When competing for a JOC contract, a contractor's bid is in the form of an adjustment factor, expressed in terms of a percentage of the specified CTC prices such as 115 percent or 125 percent. Contractors generally bid two adjustment factors: one for work performed during normal business hours and another for work performed outside of normal business hours. These factors include profit and overhead costs and apply to all items in the CTC. The contractor with the lowest composite adjustment factor is awarded the Job Order Contract. The CTC, Technical Specifications and the successful contractor's price adjustment factors are incorporated into the awarded contract. There are no actual projects bid;just bids prices of future bid items on future projects. An example of a similar process currently in use within the City is our contract for office supplies. We have guaranteed pricing on items we purchase, but quantities vary with each purchase. After the JOC contract has been awarded and a project selected, the contractor and City staff meet on the project site. A scope of work is jointly developed by both parties and the contractor develops a proposal based upon the CTC and the Technical Specifications. The contractor estimates quantities and what construction tasks are necessary, develops a schedule to perform the work and submits a list of subcontractors who will be hired for the project. If the proposal is acceptable to the City, the contractor can be issued a notice to proceed, and work can begin. Thereafter, as individual building maintenance and construction projects are identified, the City and the prime JOC contractor develop the scope of work for each project as they are identified. All projects must meet the performance criteria defined by the City and included in the Technical Specifications of the JOC contract. City staff is aware of at least seven public agencies (Cities of San Diego and San Francisco, Counties of Contra Costa, Sacramento, Alameda, San Luis Obispo, and Cal Poly through the CSU system) currently using or in the process of awarding a contract for a JOC system. Discussions with staff at SLO County and Cal Poly reveal a high level of satisfaction with the JOC system they have in place. Productivity is up, especially in the facilities area, with a substantial time savings noted from identification of need to actual construction. After initially awarding JOC contracts to firms from out of the area, local contractors have been successful low bidders for both of the recent Cal Poly and SLO County contracts, indicating a high level of understanding of the concept. How Would the City Benefit from Adopting these Alternative Methods? As a general rule, JOC systems in place around the country claim to save from 10% to 15% of the capital costs of the projects. The savings are realized as both direct and indirect costs, typically reduced staff time to develop the projects, and the efficiency of a larger, single contract with fixed costs for the tasks performed. The JOC program implemented by San Luis Obispo County is reporting project cost savings ranging from 7% to 12% when compared to traditional 1-5 Council Agenda Report—Alternative Methods of Public Works Contracting Page 6 procurement and contracting methods. Adoption of the UPCCAA procedures would give the City more options relative to performing or bidding construction projects that would ultimately lead to more cost effective use of public funds. The costs associated with the administrative process that accompanies a bid, including document preparation, public notice, and contract administration, can add significantly to the base construction cost of a small project. Any additional, one time expense of developing and adopting the necessary policies and procedures would be offset by the cost savings resulting from the streamlining of existing processes for performing and bidding construction projects with a value of less than $100,000. For construction projects valued over this amount there would be no change to existing policies and procedures. The following table shows some of the benefits of adopting the JOC and UPCCAA methods: Benefit JOC UPCCAA 1. Flexibility with City CII'priorities Yes Yes 2. Less time for projects to get to construction Yes Yes 3. Lower Administrative costs Yes Yes 4. Lower Design costs Yes Yes 5. Increased CIP productivity Yes I Yes 6. Fewer Contract Change Orders, claims Yes -- 7. Improved Ci /contractor relationship Yes -- 8. Augments City Design forces Yes Yes What is Required by the City to Adopt these Methods? According to the City Attorney, the most appropriate way to adopt these alternative methods is for the City to amend the existing Charter, which requires a vote of the people. As a Charter City however, San Luis Obispo has the flexibility to adopt procedures to enhance their ability to contract for construction projects. Doing so may open the City up to legal challenges, as some agencies have faced. In addition to amending the charter, the City would have to adopt new ordinances for Job Order Contracting as well as informal bidding procedures for the Uniform Public Construction Cost Accounting Act. The JOC system requires the development of a Construction Task Catalog (CTC) and Technical Specifications. Because JOC systems are already in use with San Luis Obispo County and Cal Poly, extensive work has already been done to develop these documents for work to be performed in our local area. The City would need to hire a consultant under a separate agreement to manage the development of a JOC system. The CTC and Technical Specifications both exceed 2,500 pages in length, and would consume months of staff time to develop. The City's current Project Management software could provide project tracking but would need extensive modifications. It would be counter productive to take staff away from working on CIP projects to develop a system that can be purchased for no up-front fee, from the current JOC Administrator for Cal Poly and the County. This is covered in more detail in the Fiscal Impact section. 1-6 Council Agenda Report—Alternative Methods of Public Works Contracting Page 7 For the City to utilize the UPCCAA method, Construction costs associated with projects that are performed by the City's Public Works Maintenance crews would need to be tracked so that all project related expenses are accounted for. This feature is not used often by agencies that have adopted UPCCAA and would have minimal impact. No changes are required to the City's existing accounting system, since project cost tracking can be performed independently of any current accounting procedure, or can be integrated into existing processes. Workload Impacts Currently, there are Public Works employees outside of the Engineering group that complete CIP projects of various types. With the adoption of these alternative methods of contracting, those employees could be redirected to other tasks, most likely to the administration of the JOC contract and development of the UPCCAA informal bid procedures. There will be fewer employees working on plans, specifications and estimate development for formal bid contracts, but the increase in productivity will require the same number of employees overall dedicated to CIP program. CONCURRENCES A presentation of these alternative contracting methods was made to the Department Heads, City Administrative Officer and City Attorney in April, and all of them concur that it will improve the City's productivity in the CIP area. The Executive Director of the SLO County Builders Exchange was supportive of the City's efforts to increase CII' productivity through the adoption of both alternative methods. Two local contractors have been successful bidders on the most recent Cal Poly and SLO County JOC contracts and are optimistic about the opportunities the JOC method could provide. FISCAL IMPACT According to the City Clerk, the costs associated with a ballot measure are minimal. There are sufficient funds set aside in the City Clerk Election Budget to pay for the additional costs of a ballot measure. Those would be costs for staff time to develop the charter language, ordinances and any support material used to educate the voters, and associated printing costs. There is already a scheduled election in November, so no special election needs to be called. Assuming the Charter Amendment is approved in November, the cost to implement the JOC program could range from an on-going percentage fee with minor staff administration to approximately $1,000,000 with a large on-going staff involvement. Most west coast agencies have settled on the former, an "on-going percentage" system. Basically, one consulting firm specializing in this field provides a complete JOC system including document development, procurement support, computer software, customized forms, management procedures, written manuals, training for City and contractor personnel, and follow- up support for a professional services fee of 5% of the first $5,000,000 of work that the City 1-7 Council Agenda Report—Alternative Methods of Public Works Contracting Page 8 authorizes under the JOC system and an additional 1'/2% of any authorized work over $5,000,000. The fee is paid as a percentage of City-authorized work orders on a cumulative basis. If there is no successful construction performed under JOC, the consultant will not be entitled to any payment. The latter alternative, which may work best for extremely large agencies (US Navy, etc) would be to contract for preparation of the basic CTC and Technical Specifications and then run the program with existing staff that can be specially trained to maintain the program. Sacramento County invited eleven firms to submit proposals for implementation of a JOC system and only three firms submitted proposals. Two of the firms required start-up fees of approximately $825,000 and were not able to produce the CTC; Technical Specifications or the comprehensive software system to track projects in a timely manner. Although possible for our City this method of starting and maintaining a JOC program would be time-consuming for staff and more expensive to maintain. There would be staff time required to develop and implement informal bidding procedures for the UPCCAA method. Contractor lists would have to be developed and maintained, and an increased level of effort would be required in Construction to keep up with the projects being built. Potential Charter Amendment Timeline May 2002—City Council approves concept to adopt alternative methods August 2002 — City Council approves language for Charter Amendment on November ballot and associated ordinance changes November 2002—City residents vote on Charter Amendment December 2002—If approved by voters,Amendment takes effect January 2002—First projects let by informal bids,JOC Administrator Contract awarded ALTERNATIVES 1. Contract with another public agency (SLO County or Caltrans) to perform CIP engineering work. Preliminary discussions with Caltrans indicate no extra capacity to perform engineering for City projects. Interagency agreements would be required and funds would need to be budgeted and approved for transfer. The cost to perform_ the work could be as high as$600,000. (20%support) 2. Hire additional engineers. The current budget situation makes this alternative less than feasible. If an additional 5 engineers were hired,it would be more than 6 months for them to be fully productive. The problem is not the need for more staff, but the need for a more efficient way to deliver projects. 3. Use the RFP process to hire consultant engineers. In addition to the reasons stated in item 2 above, the costs for the consultant services would be higher than the cost of additional City staff. The RFP process is effective for those projects that need design services to supplement City staff. 1-8 Council Agenda Report—Alternative Methods of Public Works Contracting Page 9 4. Do nothing. Without additional help to deliver CIP projects, the Engineering Division will fall further behind in the current backlog. City Council goals will not be met, and improvements to the City's infrastructure will not be made in a timely manner, possibly resulting in a higher cost of repair or service outages. GACIP EnhancementVob Order Contracting\CII'Enhancement CAR.doc 1-9 �IIIIIIIIIII�������� IIIIIIII oifficouncit memomnaum ICity of Sari Luis Obis DATE: May 7, 2002 TO: Mayor& Members of the City Council VIA: Ken Hampian, CA FROM: Lee Price, City Clerk SUBJECT: Revisions to the Minu _ r/April , 2002 and April 16, 2002 Please note the following corrections to the Minutes of April 9, 2002: Page 2: 2. EXPANSION OF THE CITY'S CENTRAL COMMERCIAL ZONING DISTRICT AND DOWNTOWN IN-LIEU PARKING FEE BOUNDARY. Deputy Director Community Development Whisenand, Principal Transportation Planner Sanville and Associate Planner Corey presented . . . . . . . . . . Council.Member Mulholland voiced concern about negatively impacting parking as a result of the expansion. She expressed an interest in making the corridor more pedestrian friendly and adding a bit more commercial. Additionally, she suggested that Council consider implementing a policy of mixed uses with shops and retail on the first floor with options for residences and parking on other levels. Please note the following corrections to the Minutes of April 16, 2002: Page 6: 1. WATER AND WASTEWATER IMPACT FEES. Finance Director Statler and Utilities Director Moss presented . . . . . . . Council Member Mulholland indicated that she would 'gree t_., reluctant) , a rove the fees because he believes this Council(or a future Council)will.approve a major water project: Therefore;a,fee iructureshould be in lace for new develo meets to-a 'for it she conclude Corrections to Minutes