HomeMy WebLinkAbout03/06/1990, C-11 - CHANGE IN CONTRACT CONDITIONS FOR THE MARSH STREET PARKING STRUCTURE - CITY PLAN NO. M-41D city of san bw s oBi spo MEETING DATE:
March. 6, 1990
COUNCIL AGENDA REPORT
FROM: David Romero, Public Works Director
SUBJECT: Change in Contract Conditions for the. Marsh Street
Parking Structure - City Plan No. M-41D
CAO RECOMMENDATION:
Adopt resolution changing surcharge and markup
figures for force account work in connection with
the Marsh Street Parking Structure contract
BACKGROUND:
Extra work on a construction contract is paid by a) extension of
quantities, if there is a unit price for the item, b) change
order, if the contractor and City can agree on a fixed price for
the work, or c) force account, if the contractor and City cannot
agree on a fixed price for the work. Contract specifications
spell out in detail how force account payment is to be
calculated, including a figure (surcharge) to be added to the
cost of labor to cover compensation insurance, social security,
and unemployment taxes, and a second figure (markup) for
contractors overhead and profit. Caltrans special provisions
cover a variable surcharge from 27-38% (depending on the nature
of the work) , and standard specifications (1988) allow a 33%
markup for contractors profit.
City specifications for the parking structure referred to the
1988 Standard Specifications in Section 2, Scope of Work.
However in Section 7, Measurement and Payment, the specifications
allowed only 10% surcharge and 15% markup. Engineering staff
preparing these specifications had incorrectly used a 10%
surcharge figure, whereas a correct figure would have allowed 27%
surcharge. The 10% figure specified is insufficient to cover
contractors overhead. The 15% markup for profit of Division of
Architecture specifications compares to the 33% markup of
Division of Highways (Caltrans) specifications and represents
each agency's opinion of what represents a fair profit.
The contractor has complained that this is an "unjust wage rate
restriction" and has asked that it be adjusted to "reflect actual
expenses" (Exhibit A) . In a second letter (Exhibit B) , the
contractor points out his belief that the figures shown are in
error and that the specifications as written do not permit him a.
fair return on force account work.
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AONG@ COUNCIL AGENDA REPORT
Surcharge
Page Two
DISCUSSION:
Method of payment for force account is covered in the
specification which are considered "boilerplate" for most jobs.
With the previous parking structure, and on virtually all past
jobs, the City has followed Caltrans specifications, since most
City jobs relate more to highway type work and less to building
construction. There was no reason for bidders to have expected
this item to have been changed on these specifications, nor did
the City call the bidders attention to the change.
Specifications include surcharge and markup not only to cover all
contractor costs, but to allow him a profit on the force account
work. Thus a contractor is a more willing participant in
conducting the inevitable extra work that comes up on most jobs.
The entire theory behind force account work is that the
contractor is able to fully recover his costs and make some
profit. By failing to specify an amount of surcharge sufficient
to fully cover contractor's costs, the City has failed to follow
the intent of specifications used for guidance in preparing City
specifications.
There is a question of equity in the City following Caltrans
standard specifications and practice on all of its jobs except
this one, which was changed without calling it to the
contractor's attention in the specifications.
Staff is persuaded of the basic soundness of the contractor's
position in this case.
ALTERNATIVES:
1. City could take the position that the contractor bid on this
specification, signed a contract, and must live within its
provisions. Contractor would undoubtedly file a claim if
the City took this position.
FISCAL IMPACT:
If staff recommendation is followed, surcharge would be increased
from the 10% of labor specified to 27-38% of labor which is
Caltrans practice. Overhead and profit would increase from 15%
specified to 33$, which is the amount in the 1988 Caltrans
specifications referred to in the bid documents. These two
changes amount to a total of 35% increase of labor (17% + 18%) .
city of San t s OBISpo
iWMIGN COUNCIL AGENDA REPORT
Surcharge
Page Three
The amount of force account work which will be conducted on this
contract is unknown at this time, but $80, 000 might be a
reasonable estimate. Approximately 65% of force account work is
labor, thus the implication of this change in the contract might
be in the magnitude of $20,000. The entire contract for the
parking structure will be approximately $3 .9 million.
CITY ATTORNEY'S OPPICE:
The City Attorney's office has informed staff that granting
relief from the contract provisions is a policy matter with the
City Council. The Council has the legal authority to grant this
discretionary relief if considered warranted.
STAPP RECOMMENDATION:
Staff believes the City has an obligation to be consistent in its
specification. Staff recommends that we follow Caltrans practice
and specifications calling for 27-38% surcharge and 33% markup
for overhead and profit.
Attachments: Resolution
Exhibit A
Exhibit B
surcharge/dfr#20
I
61-3
RESOLUTION NO. (1990 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS
OBISPO CHANGING SURCHARGE AND MARKUP FIGURES FOR
FORCE ACCOUNT WORK IN CONNECTION WITH THE
MARSH STREET PARKING STRUCTURE
WHEREAS, the City of Sari Luis Obispo has for many years
followed Caltrans practice and specifications, and
WHEREAS, current Caltrans practice and specifications for force
account work is to allow 27%-38% surcharge. and 33% markup, and
WHEREAS, City specifications for this contract called for use
of 1988 Caltrans Specifications but elsewhere in the
specifications listed contractor surcharge at 10% and markup at
15%, and
WHEREAS, these inconsistencies .have created a point of
contention between the contractor and the City, and
WHEREAS, it is the City's desire to be consistent and fair in
its dealings with contractors, and
WHEREAS, the issue can be clarified by a change to exclusive
use of Caltrans practice and specifications on this contract.
THEREFORE BE IT RESOLVED, by the Council of the City of San
Luis Obispo, that it is City intent to use Caltrans figures for
both surcharge and markup and that figures shown in Section 7A of
the specifications for this project are declared null and void.
MAYOR RON DUNIN
ATTEST:
CITY CLERK PAMELA VOGES
ell
Resolution No. (1990 Series)
APPROVED:
City A ministrative Officer
t i' ttpr y
Finance Director
Public Works Director
surchres/dfr#20
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OCT G 1989 1
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SAN L.uS OEISPO, CALIFORNIA 93 3.3g;p
c _.Tc,BER h . 199
Mr . Wayne Peterson
City Engineer
955 Morro Street
San Luis Obispo. CA 93401
Re : MARSH STREET PARKING STRUCTURE
City Plan No. M-41D
Subject : Section 7. . MEASUREMENT ANTI PAYMENT, Item A. 5. of
the. Contract Document
Dear Mr. Peterson :
We are performing the required work for CCO a4, which is to
raise the already installed underground plumbing, under
protest . At issue is the knowingly unjust wage rate
restriction of 10% placed on the contractor by the Citv' s
contract documents. Madonna Construction' s employer
contribution for a man hour is approximately '_5. 64% of- the
hourly rate. which is comparable to the City of San Luis
Obispo' s .. We request that you please review this section of
the. contract documents , and make necessary corrective
adjustments to reflect the actual expenses incurred by
Madonna Construction when perro.rming required extra wort: for
your project .
Sincerely:
William B. Morris
Project Manager
cc:
John Dunn; City A.dministrat,or
Dave Romero. Director of Public Works
Nick Rountree . Project Inspector
�- MADONNA COMPANY
TELEPHONE (805)543-0300 P.O. BOX 3910 _
SAN LUIS OBISPO, CALIFORNIA • 93403-3910
October 27, 1989
Mr. Hick Rountree
Resident Engineer
City of San Luis Obdspo
Engineering Department Re: MARSH STREET PARKING STRUCTURE
P.O. Box 8100 City Plan Number M-41D
San Luis Obispo, CA 93403-8100 Section 7, Measurement 6 Payment
Dear Mr. Rountree:
We have reviewed the contract documents as they relate to Section 7,
Measurement and Payment and the overhead and profit percentages shown
thereon and are convinced that these are in error and that we should be
allowed the Labor Surcharge and Equipment Rental Rates as set forth in
State of California Business, Transportation and Housing Agency, Department
of Transportation, Division of Construction publication effective April 1,
1089 through March 31, 1990 plus markup of 33 percent to the cost of labor,
15 percent to the equipment rental rates and 15 percent to the cost of
materials as provided in Section 9-1.03, Force Account Payment of the
Standard Specifications of the State of California dated January 1988.
This is based on the following sections of the Contract Documents for
the Marsh Street Parking Structure:
Section 2. Scope of Work, Paragraph BB, Specifications, states that.
whereever .specifications or terms shown in this section are used in
the Contract Documents they will be under the provisions of the
Standard Specifications entitled "State of California, Business and
Transportation Agency, Department of Transportation Standard Specifications
January 1988.
This section further states that "in the event of a conflict, the special
provisions (section 12 of these specifications) shall take precedence
over and be used in lieu of the other terms appearing in the Standard
Specifications or these general provisions." As substantiated by the
copy of the. Table of Contents of the Contract Documents, there is no
Section 12 of these documents and Section 12 of the State of California
Standard Specifications covers Construction Area Traffic Control Devices,
therefor this statement would have no validity.
When we bid this job, had we not considered that Section 2 as indicated
above incorporated the State of California Standard Specifications as
being the final authority on this job, we would naturally have. filed a
protest on Section 7 and the markups allowed, as there is no way the -102
of labor could cover the cost of P.L. , P.D. Compensation Insurance,
Social Security as indicated in Item 5 of Section 7 and the other markup
allowances cover overhead, profit and all other costs and expenses.
7910
Page 2 - Mr. Rick� Rountree City of San � Resident Engineer
Luis Obispo October 27, 1989.
Re: MARSH STREET PARKING STRUCTURE
Because of the sections referred
on all claims and extra work bad ooabove we will expect to be compensatedSpecifications
the
tateo y 1988 and ifori of the
Surchargeand Equipment Rental Rates effective State of California
March 31, 1990. April 1, 1989 through
Very truly Yours,
MADONNA CONSTRUCTION COMpANy
A. MADONNA
Encl.
I. Table of Contents, Contract Documents
2. Section 2, Page 1 A 2 Of Contract Documents
.3• Section 7 of Contract Documents
4. Section 9, Measurement and
Standard Specifications Payment of State of California
5. Section 12 of January 1988
ry 1988
January State of California Standard Specifications,
6. State of California Labor Surchar e a
effective April 1
1989 throu h and Equipment Rental Rates
8 March 31, 1990