Project Management Working Group Construction Management Subgroup FY2014 EFCOG Semi-Annual Meeting Fixed Price Contracting within the DOE Complex Ryan Molen McCarthy Building Companies December 12, 2013 “Achieving Mission and Sustaining Operational Excellence in a Challenging Budget Environment”
Objective …appropriate scoping of the contract to clearly- defined… First, we must always seek to align In accordance with contractor interest to Administration policy, the taxpayer interest. contracting officers will first consider the use of a firm- fixed-price contract to complete work requirements. Second, we must structure contracts so that each party bears responsibility for its This contract type is most appropriate own actions. for services that can be objectively defined in a statement of work and the 2 risks involved can be estimated with an acceptable degree of certainty.
Guidance Project FP Consideration No Yes CR FP 3
Current Model DOE K v M & O K F Sub / GC 4 K = Contract
Current Model Total Project Cost to DOE $ M & O Variable Subcontractor / Fixed GC 5 Variable + Fixed = Variable
Mission Fixed Price Consideration Alignment / Definition Data Collection Analysis Conclusion Report 6
Consideration DOE K F M & O TBD 7
Consideration DOE K F M & O, USACE, GC 8
Consideration Primary = K F Contract = = = K F Scope Budget Price 1. Price determined by contractor (fixed) 2. Who defines scope, sets budget? 9
Consideration 2. Who defines scope, sets budget? DOE • M & O • Other 3 rd Party (such as USACE) • Must happen prior to “fixing” price. 10
Consideration DOE CR FP 11
Contract Form – D/B DBB – Incentives – D/B FP CMr – Incentives – D/B FUP – Incentives 12
Contract Form DB DBB CMr Owner Owner Owner Contractor AE AE Contractor Contractor AE - or - Owner 90% Design 15% Design Single Design- 13 Build Entity
Definitions Firm-Fixed-Price A firm-fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract. This contract type places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss. It provides maximum incentive for the contractor to control costs and perform effectively and imposes a minimum administrative burden upon the contracting parties (FAR Subpart 16.202-1). 14
Definitions Design-Bid-Build A firm-fixed-price contract is one in which the Owner contracts with the Contractor to complete construction of a fully designed project for a fixed contract price that is only subject to change if original scope of work changes or through the identification of previously undisclosed conditions. Typically, award is based solely on price. 15
Definitions Construction Management at Risk (CMr) or Early Contractor Involvement (ECI) A parallel [firm-fixed-price] model where the AE and Contractor are separately contracted to the government during the design phase of the project. AE is selected after a typical qualifications based selection. Contractor is separately selected and contracted, also based on qualifications, but with a pricing component for delivery of the two major phases of the project: Preconstruction and construction services (The Military Engineer – CM at Risk for Federal Projects , Sept/Oct 2011). Both phases of services are awarded as firm-fixed-price contracts. 16
Definitions Fixed Unit Price Involves performing an estimated number of units of work at a firm-fixed- price per unit, with the total payment under the contract determined by the actual number of units delivered. Adjustments under this type on firm- fixed-price contract are typically made under FAR Subpart 11.702 which covers Variations in Quantities. 17
Survey Wide distribution to project management professionals throughout the Complex; Federal, M & O and other. 25% participation Probed key fixed-price considerations: Design, Environment, Price, Quality 18
Survey Technical nature of project Degree to which design is or can be complete prior to price establishment Incremental nature of project funding Project schedule requirements Availability of quality subtier contractors in the geographic area of the project Availability of project management expertise within local DOE site office. Level of Small Business particpation requirement 0.00 1.00 2.00 3.00 4.00 5.00 6.00 19
Contractor FP Considerations "Expectation alignment" for all stakeholders is highly High need for contractor input in startup, turnover, Ability to transition from design to construction on any Possibility of extraordinary audit risk (external LEED or important closeout requirement determination (best practices as nuclear project (10%) environmental audit requirements) incorporated in design documents) Applicability of phasing and early work releases / work High need for cost effective project approach Availability of project management expertise within Project interface requirements - e.g. are other primes packages local DOE site office. responsible for interfacing processes, (utilities) or supplying support (fire protection). Complexity of project drives high level of quality High uncertainty in market / economic conditions Availability of quality subtier contractors in the Project schedule requirements requirements geographic area of the project Emphasis on need for early total price determination Limited capability of Owner resources to solicit and Current construction market pressures Project security i.e. terrorism, sabotage, theft, damage manage end user design input prevention, worker badging Emphasis on need for scope flexibility during Low level of design completeness prior to construction Degree to which design is or can be complete prior to Project Size construction (support Owner driven changes, funding price establishment and contingency releases, etc…) Heavy emphasis placed on collaboration / Low Need for competitive procurement Design Maturity Quality and availability of skilled craft in the area. tolerance of adversarial environment High complexity of design and scope of work Owner need for oversight of sub-tier subcontractor DNFSB impacts Related requirements in M&O contract in place selection High importance of Contractor input during design Prevalence or applicability of mandates / regulatory Existing site conditions. Requirements for project safeguards and security (budgeting, best means and methods, lessons learned, law local customs, labor predictability, etc…) High importance of design control by Owner prior to Project requires that Owner maintain control over Hazard Cat I, II and III Safety Basis requirements Risk associated with capital project location- start of construction means and methods green/brown field location vs. within operating area. High importance on the utilization of Small Business Requirement for Contractor (at risk) support in the Inclusion of contracting mechanism to align Technical nature of project development of funding profile performance incentives with risk of fixed price contract. High level of (or quantity of) project nuances Ability to "freeze" requirements. Incremental nature of project funding Technology Maturity High level of design completeness prior to construction Ability to control the site and work area with minimal Other stake holders in the project. Worker safety and environmental considerations DOE involvement. 20
Breakout Sessions - Definitions + Past Project Survey Group 1 - M&O Considerations Group 2 - Contract Risk Allocation Group 3 21
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