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OCR for page 41
41 The other unique feature of Dulles Metrorail vis-- or pricing data unless the price was based on adequate vis indeterminate pricing was the use of an innovative price competition, based on established catalog or mar- allowance process for $600 million of what would ordi- ket prices of bulk commercial items sold to the general narily have been lump-sum work. These allowances public, or set by law. were developed because some subcontractors had a In the Portland Mall Segment project, TriMet re- challenge in pricing their work so many years in ad- quired each proposer to identify in its contracting plan vance of their actual work. By taking these items out of any construction trade work that it proposed to com- the fixed price, the owner assumed the risk of subcon- plete by other than low-bid subcontracting. Proposers tractor pricing, but eliminated what would have been were allowed, however, to accomplish work either by substantial contingencies for the affected subcontrac- selecting subcontractors on a best-value basis or tors. Based on reports from the project personnel, the through self-performance. TriMet retained the right, allowance program has been highly successful, and the however, to require competitive bidding for all work, to actual pricing has been, for most items, at values less negotiate firm prices, or to allow all work on a cost- than the allowance prices--and far less than the values reimbursable basis. Any self-performed work was re- that would have been contained in the fixed price. quired to be based on competitive pricing. In the AirTrain JFK case, the Port Authority of New York and New Jersey chose to negotiate a contingency Contract Provisions fund with its selected contractor to segregate elements Overall, the contract provisions in the case studies of the project where potential risks forced escalation of did not provide any substantial surprises with regard to the overall fixed price. In doing so, the Authority estab- ownership of documents, design review, contractor pro- lished a reimbursable payment scheme with a ceiling posed changes, suspension and termination, or inclu- price for these items and provided the contractor incen- sion of DBEs and dispute resolution. Instead, the case tive to minimize costs by sharing 40 percent of any sav- studies confirmed that owners still expect to maintain ings below the ceiling with the contractor. the right to review design documents when DB or In the River Line case, NJ Transit provided propos- DBOM approaches are employed. Likewise, alternative ers with Mandatory and Reference Documents in the dispute resolution mechanisms remain a staple of con- solicitation, with the Reference Documents being for tractual arrangements for these types of projects. Two informational purposes only. As a result, proposers of the case studies coupled partnering/team-building were expected, in developing their prices, to anticipate initiatives with alternative dispute resolution mecha- and verify existing conditions before submitting propos- nisms to encourage participant cooperation. Of note, als. This shifted the risk of pricing incomplete docu- however, were some of the other provisions discovered ments to the design-builder, and based upon the result such as the monetary incentives or damages employed of the litigation, this risk shifting was successful. to motivate contractor safety or schedule performance. In the two CMAR cases, the approaches employed were similar. In each, the owner defined preconstruc- Legal Issues and Disputes tion task orders and the proposers submitted unit pric- Disputes arose in three of the cases studied. Of the es for the items of work. In each, the owner and the remaining four, two cases had yet to reach a point contractor negotiated a GMP for construction services where disclosure of disputes, if any, was possible. Inter- once the scope of the project was more fully defined. In estingly, both DBOM cases had issues related to scope the DART Green Line project, the owner developed a definition and existing conditions. Each of these pro- detailed schedule of anticipated items of construction jects provided a limited functional description of the work, so proposers had to submit unit prices against project in the solicitation documents as well as limited these items as well as an expected not-to-exceed price. or "nonbinding" information regarding existing condi- These prices served as the basis for subsequent GMP tions. In one case, the owner held fast to the conditions negotiations. In the Portland Mall Segment project, of the contract, so the disputes went into litigation. however, the owner requested that the proposers only During litigation, the court tended to hold the contrac- submit a fixed fee for construction period services, tor to the contract conditions and requirements, so a which would be included in the GMP. In the DART large claim was ultimately settled, generally in favor of case, the owner needed to do far more front-end plan- the owner. In the other case, the owner chose to miti- ning and the proposers had to have a reasonable level of gate apparent contingency pricing in the winning pro- confidence in the developed schedule of construction posal by negotiating a contingency fund that would pay items if it was to have any true value to the project. for certain items of work or encountered conditions on a To increase competitive pressure when soliciting bids reimbursable basis up to a maximum price. In addition, from subcontractors, both CMAR arrangements had the owner worked through various issues with the con- procurement provisions for this purpose. In the DART tractor to the point where disputed items of work were case, the RFP required proposers to submit a completed resolved by the completion of construction. In the end, schedule of anticipated subcontractors/subconsultants. both owners obtained the projects they solicited, even Further, before the award of any subcontract or subcon- though the means for handling issues with the contrac- tract modification expected to exceed $100,000, the con- tor were different. tractor was required to submit the subcontractor's cost