New York Landmarks Conservancy
Common Bond 1992, Vol. 8, No. 2
PART 1: PUTTING THE PROJECT OUT FOR BID
Religious institutions that engage in extensive restoration programs are frequently unprepared for the complexity of administering a major construction project. With a few exceptions, most religious institutions are small operations that rely on volunteers and a few staff members to do most administrative work. Major construction projects, however, are extremely complex and require a level of administrative expertise that goes far beyond that usually required by all but the largest religious institutions. In addition, the construction industry is a tough business. While there are many professional and honest contractors and construction managers, there are also occasional charlatans. This article will address many of the issues involved in managing a major construction project including setting up a project management team, preparing specifications and contract documents and choosing a contractor.
Setting Up Your Management Team
The first step in managing a construction project is to set up a project management team. The project management team is ideally a partnership between the Building Committee, Project Director, and any consultants whose insights are necessary to the successful completion of a project.
The first component of a project management team to be assembled is most often the Building Committee. This Committee is usually appointed by the institution's governing Board to oversee the building project. Typically the Committee is empowered to enter into contracts without the direct approval of the Board, subject to certain stipulations, such as a ceiling on a contract price. Some boards insist that all contracts be approved by the Board before proceeding. This practice should be used with caution. Projects can become hung up in internal bureaucracy if the Board tries to second-guess the decisions of the Committee. Except for very small-scale projects, it is usually not advisable for the governing board to serve as the Building Committee. The amount of time and energy required to manage a project can over whelm the ability of the Board to deal with the ongoing business of the institution.
The members of the Building Committee need not be experts on building construction or restoration, although it is helpful if some members of the Committee have a basic knowledge of building systems and the ability to understand construction specifications and read technical drawings. It is far more important that Committee members be perceptive, professional in attitude and demeanor and good judges of character.
It is also important that none of the members of the Committee have potential conflicts of interests. If a member of the Committee, for example, works for a contractor, that contractor should not be invited to bid on the project as the potential for conflicting loyalties is too great. This could pose serious legal problems for the institution and place an enormous personal burden on the Building Committee member. Of course, no member of the Building Committee who is a contractor should be invited to bid on the project.
Many religious institutions have a rotating system of committees. While such a system has its advantages with regard to program and the normal operation of the church or synagogue, it is not a good idea for a Committee managing a construction project to completely change its composition during the course of the project. Although some change or attrition in a Building Committee is unavoidable, continuity is important in construction projects, and every effort should be made to allow the Committee to see the project through. If a completely new Committee rotates into position every one or two years, new members have to be brought up to speed in the midst of major construction, often just at the time when critical decisions need to be made. Without the history or knowledge of why certain approaches are being taken, the new Committee cannot manage the project and is likely to make unwise decisions.
The first responsibility of the Building Committee is to select a Project Director. This should be a person or firm experienced in building conservation techniques and construction management. Often the Project Director will be an architect or engineer, although this is not a necessary requirement provided he or she has the requisite experience and qualifications. If your Project Director is not an architect or engineer, he or she must retain the services of an architect or structural engineer for any planned structural work. If a condition survey has already been completed, the Project Director should probably be the person who conducted the survey. If not, the new Project Director may find it necessary to either conduct a new survey or extensively revise the one already completed. Many churches and synagogues have found it to be to their advantage to hire the Project Director as part of the institution's staff rather than as an outside consultant, at least for the construction phase of a project. This arrangement has several advantages. First, if a Project Director is paid on either an hourly basis or by salary, he or she will be representing the institution's interests directly as an employee rather than as an outside consultant. In addition, the Project Director is covered by the institution's liability insurance and workman's compensation, thus reducing his or her own overhead costs-a savings that can be passed on to the institution. Architectural and engineering firms will not work under these circumstances because the requirements of their business dictate otherwise.
If you use either an architectural or engineering firm to manage the project, be sure the firm is reputable and has extensive experience managing construction projects of the type being undertaken by your institution. Also be sure that the contractual arrangements are clear. Most architects and engineers will charge a percentage of the construction cost as their fee for planning and managing the project. However, there may be exceptions to this arrangement, such as meetings related to fundraising or other activities not directly associated with construction. Know how much money you are spending before you spend it.
A final note on Project Directors. Most reputable Project Directors will not oversee work according to someone else's specifications. As the construction manager, the Project Director has legal responsibility for the quality of the work executed, and thus, in order to protect his or her own liability, will only implement specifications with which he or she is completely comfortable. To achieve this goal, the Project Director will often ask the Building Committee to retain specialists, such as structural engineers or stained glass conservators, to consult on and write specifications for certain specialized aspects of the project.
Preparing a Master Plan
As stated many times in this publication, a comprehensive condition survey is an absolute prerequisite for any repair or restoration work on an historic building. (See the Winter, 1986 issue of Common Bond for a complete discussion of conditions surveys.) A condition survey encourages a holistic approach to the building so that instead of struggling with a series of unrelated individual problems the owner deals with the entire building as organic system, each part of which has an effect on every other part.
Using the information provided in the condition survey the Project Director develops a master plan. The master plan is a tool that establishes budget guidelines and work categories, and organizes the construction project into a series of sequential contracts. The rationale behind the organization varies from project to project, but is usually based on the following criteria. 1) tackling first those areas of the building in the worst condition or which pose a clear and present danger to the building's occupants and the general public
2) avoiding addressing the same physical area of the building with multiple efforts, thus minimizing redundant costs associated, for example, with erecting and dismounting scaffolding; and 3) grouping the various scopes of work into the fewest number of contracts possible in order to prevent scheduling problems and inconsistencies in the quality of the work. Certain other factors may also be considered, such as the desire of the congregation to execute a highly visible project, even if only of a cosmetic nature, in order to garner publicity and stimulate the institution's fundraiser efforts. However, public safety concerns must always take priority over any other work.
The master plan should also include budget breakdowns for each portion of the work (Figure 1). These breakdowns should be fairly detailed. For example, if one contract includes several different scopes of work, budgets should be established for each scope of work, not just the entire contract. This gives the Building Committee the flexibility to budget for only a portion of a contract if fundraising considerations do not allow the entire contract to be executed at one time or if unexpected problems force the redirecting of energies to another portion of the project.
Besides direct construction costs, budgets need to include contingency allowances and planning and management costs. Restoration projects always have unknown building conditions that can dramatically increase the total cost of a project, no matter how well planned the project or how comprehensive the conditions survey.
Therefore, budgets typically include a contingency allowance of between 15% and 20%. Obviously, the worse the condition of your building, the higher the potential for unknown conditions, and, consequently, the higher this figure is likely to be. Budgets must also include planning and management costs. Costs of between 10% and 15% are typical for repair and restoration work. A figure of much more than 15% is probably excessive.
After the master plan and budget guidelines are completed, an accounting system can be designed with the assistance of an accountant or skilled bookkeeper. The accounting system sets up a series of numbered codes that are used to categorize all income and expenses. It should be as simple as possible and flexible enough to allow new codes and categories to be added as necessary. The categories should relate directly to the information you or potential donors will want to see in reports. Construction expenses are typically broken down by contract, portion of the building being worked on, or construction phases. Direct construction costs and planning and management costs should be separately coded. The institution's fundraising, counsel and campaign administrator should also be consulted when preparing an accounting system so the reports accurately reflect income sources and administrative costs. Further breakdowns are of course possible, but do not get too detailed about this. The purpose of the accounting system is to clarify, not mystify, the finances of the project.
MASTER PLAN SEQUENCE AND ESTIMATED BUDGET GUIDELINES ANALYSIS
1990 CONSTRUCTION SEASON
A. Contract 1
1. Scaffold Nave East elevation and entire Tower exterior to provide access to all exterior areas (erection & one year rent) $120,000
Contract 1 Total: $120,000
B. Contract 2
1. Remove Nave East elevation roof line cornice; reset loose stones & general elevation projecting stones behind cornice area; install temporary spill edge system $ 33,000
2. Install tower roof temporary spill edge system $ 10,000
3. Reset all Tower elevation window surround stones and general elevation projecting stones; ventilate tower masonry interior coatings (upper decks) $180,000
4. Add temporary vents to existing wood-filled windows opening in Tower elevations $ 5,000
Contract 2 Total: $228,000
PHASE 1 TOTALS
1. Direct Construction Costs: $348,000
2. 20% Contingency Allowance: $ 69,600
3.10% Planning and Management: $ 41,750
4.PHASE 1 GRAND TOTAL: $459,350
Figure 1: Sample page from a master plan showing budgets for each contract or portion of a contract. Note that the budgets include a contingency allowance and planning and management costs.
Preparing Contract Documents
Before a project can be put out for bid, contract documents must be prepared. These typically include a standard contract form such as the AIA Standard Form of Agreement (Figure 2), specifications and working drawings, and other information the bidders may be required to submit, depending upon the nature of the project. The standard contract forms outline the basic requirements of the project. These include the duties of the contractor, the duties of the owner, the duties of the Project Director, the beginning and completion dates, the contract price, the manner of payment, and the conditions under which change work orders will be executed. The contract price can be can be figured as a fixed fee [a "stipulated sum"], or it can be figured on a time and materials basis ["Cost of Work Plus a Fee"], usually with a "not-to-exceed" price written into the contract. Each method has its advantages. Stipulated sum contracts are preferable when the scope of work is well defined, and there is little likelihood that any unknown conditions will be encountered during the construction process. For example, in a roof replacement project, most contractors will find it relatively easy to estimate the cost of a new roof based on the square foot area of the roof and the cost of labor to install the roof. Unless the initial condition survey was inadequate, the contractor's standard contingency fee should cover any unexpected conditions encountered during the course of construction. However, when many building conditions are unknown, for example in structural repair projects where the need for repairs has been established by engineering probes but the full extent of the problems cannot be established until construction actually starts, a time and materials contract, with a "not-to exceed" price, has many advantages. First it gives the Project Director and the contractor the flexibility to deal with unexpected problems without having to renegotiate the contract price, provided the work falls within the scope of the specifications. The owner is protected from going over budget by the "not to-exceed" price while the contractor's profits are protected from a "runaway" scope of work since he or she is billing on a time and materials basis. This sort of an arrangement helps enlist the contractor as an ally rather than a potential adversary in the construction process because the contractor's profit margin is not affected by dealing with unknown or unexpected conditions. The two types of contracts can also be combined, with some portions of the scope of work billed on a time and material basis within a stipulated sum contract. This arrangement can be used when most of the planned work is clear-cut and easily budgeted, but some portion of the scope of work has too many unknown conditions to accurately budget.
Abbreviated Form of Agreement Between Owner and Contractor
FOR CONSTRUCTION PR0JECTS OF LIMITED SCOPE WHERE THE BASIS OF PAYMENT IS A STIPULATED SUM
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION
This document includes abbreviated General Conditions and should not be used with other general conditions. It has been approved and been endorsed by The Associated General Contractors of America.
made as of the day of in the year of Nineteen Hundred and Ninety-one.
BETWEEN the 0wner:
(Name and address)
and the Contractor:
(Name and address)
The Project is:
(Name and location)
The Architect is:
(Name and address)
The Owner and Contractor agree as set forth below.
Figure 2: Cover page of a standard contract form published by the American Institute of Architects.
The specifications and working drawings are the basis upon which the contractors make their bid, and this form the heart of the contract documents. Specifications are detailed descriptions of the work to be executed and will typically include working drawings that graphically describe and expand upon the written specifications. The specifications usually are approved by the Building Committee before the remainder of the contract documents are put together.
The actual bid proposal presents the contractor's bid with supporting documentation. The supporting documentation includes the prices for materials, wage rates for the contractor's employees, and cost breakdowns. This information, which is basically the contractor's worksheet for figuring his or her bid, gives the Building Committee the opportunity to analyze the process whereby the contractor arrived at his or her figure.
The contract should also contain basic information on the protocol of the bidding process, including when and how the bids are to be submitted, and any information on special circumstances affecting the project. For example, when restoration work is being done on an historic building, the contract will typically include statements regarding the building's landmark status, information on any special approvals that are required to execute the work, and a statement confirming that the work must comply with The Secretary of the Interior's Standards for Historic Preservation.
Last but not least, have your legal counsel review the contract before the project is put out for bid. This is an essential step. Architects, engineers, and building conservators may have a strong background in construction law, but they are not lawyers and they may not be aware of special conditions affecting your project. Your legal counsel may notice omissions or inconsistencies that could jeopardize the entire project if not corrected. For example, at one church in New York City, the draft of a $400,000 contract listed the Parish Corporation as the owner of the building. However, when reviewing the contract the parish's attorney pointed out that the building owner was actually the Diocese acting through the parish corporation as its agent, not the parish itself. Such an error, if not caught before the contract was signed, could have rendered the entire contract null and void and placed the parish and the Diocese in great financial jeopardy.
Putting the Project out for Bid
The next step is soliciting bids from contractors. It is advisable to invite at least three contractors to bid on a project. More are preferable. The Project Director may suggest the names of several contractors he or she believe are qualified, or you may contact local preservation organizations, such as the New York Landmarks Conservancy, for the names of contractors who are skilled and experienced in the type of work called for in your specifications. In some cases special bidding requirements
may apply. For example, when a restoration project is being funded by government programs, you may need to issue an open invitation to all interested and qualified contractors and select the lowest qualified bidder. In these cases be sure to carefully follow the instructions of the government office with which you are working. Once prospective contractors have received the contract documents and had a chance to review them, the Project Director will usually arrange a walk-through of the site with all the contractors who are bidding on the project as well as any consultants who need to be present, to examine the site and discuss the project. This walk-through tends to be quite formal in its character and most Project Directors will insist that it be tape recorded to form a legal record of the proceedings. Building Committee members do not usually need to be present for this walk-through, although they Certainly may be. After the "Official" walk-through the prospective contractors may request additional visits to the site while they are preparing their bids. This is, of course, perfectly acceptable. However, care must be taken during the bid preparation process that an appearance of collusion is avoided. For example, most any
Project Directors will only accept phone calls from contractors who are bidding on a project at the offices of the owner, and then only in the presence of a witness who co-signs a statement, prepared by the Project Director, affirming the substance of the conversation. It is inappropriate for contractors to call members of the Building Committee directly or to seek to influence the outcome of the bidding process 'in any way other than through the official channels set up in the contract documents. The contract documents and the
Project Director should make clear to the contractors that any attempt to circumvent this process will result in the contractor's disqualification.
The deadline and the method for submitting bids, usually by registered mail, should be outlined in the contract documents. The contract documents should also name the
time and place for the bid opening. Bids that arrive early should not be opened or examined until this time, and then only in the presence of witnesses. These witnesses should include the Project Director, the Chair of the Building Committee, the Chair of the governing Board, and any other individuals with legal responsibility for the project or whom the Project Director or the institution's legal counsel believe are appropriate. The Project Director should make a list of all the bids submitted and the total amount of each bid, along with any alternates, and each of the witnesses should sign the affidavit to form a legal record. If one of the witnesses is a notary, all the better. Copies of all bid documents should then be made available to the members of the Building Committee.
The bids should be evaluated On four criteria: 1) the qualifications of the contractor; 2) the contract price; 3) the ability of the contractor to work well with the other team members; and 4) how well the bid addresses the scope of work. These cannot, of course, be determined from the bid documents alone. The Building Committee needs to arrange interviews with each of the contractors being seriously considered for the project. Contractors who are demonstrably unqualified for the project or whose bids are unreasonably high or low, need not be interviewed by the Committee.
These contractor interviews are where the perceptiveness and discernment of the Building Committee members come into play. Gut feelings are as important, at this stage, as any technical knowledge or expertise. These gut feelings should be trusted. They are usually right. During the contractor interviews, the Project Director,
engineer, and Building Committee members should question the contractor closely on his or her understanding of the project and qualifications to execute the project. The contractor should be able to clearly state how she would handle specific conditions or problems that are anticipated on the project. Beware of vague answers, such as "we'll figure that out when we get to it" or "'Don't worry. We know what we're doing-,, If a contractor cannot answer how certain conditions would be dealt with, he or she must at least be able to discuss how they would determine the best course of action.
Beware also of contractors who use high-profile projects that have little to do with the project you are executing to demonstrate their competence. For example, a contractor with extensive experience in brownstone repair, who flashes dramatic "before and a after" photos of various buildings he or she has worked on, is not necessarily qualified to execute structural repairs or woodwork restoration. Rather, look for contractors who demonstrate significant expertise in the work you need to accomplish. If you are executing structural repairs, check to see if the prospective contractor has structural engineers on his or her staff. If not, did he or she prepare the bid in consultation the services with a structural engineer? Will he or she retain the services of a structural engineer as a project manager while working on your project?
Another sure sign of trouble is a patronizing attitude on the part of the contractor. There is a tendency in the construction industry to mystify the construction process. Some of this is unintentional. Like any field, the construction industry has its own "culture" and its own jargon. However, remember that contractors do not possess some "hidden knowledge" unknown to the rest of the world. If you, as a Building Committee member, have been doing your job properly, you have a far better understanding of the building's condition and what needs to be done in order to repair it than a contractor who has only read the specifications and visited the building two or three times. Don't allow yourself to be intimidated. After all the contractors have been interviewed, the Building Committee needs to make a selection. Any contractor who demonstrated in the interview process that he or she does not have the expertise to do the job should be disqualified, no matter how attractive the bid. It will not be in your institution's interest to go for the lowest bid, and then spend a fortune later on trying to manage an incompetent contractor, correct potentially disastrous errors, or deal with legal problems.
After the unqualified contractors have been eliminated, the remaining bidders should be evaluated for their level of expertise, their contract price, and the "chemistry" between the contractor and the project management team. If the Building Committee is particularly interested in one contractor, but his or her bid is too high, the Committee can always ask the contractor to reconsider the bid. Through careful analysis of the contractor's worksheets, the Project Director may be able to suggest areas where the contractor can cut costs.
Occasionally situations arise where none of the bids are acceptable. Either they are all too high, in which case the original budgets were probably not well conceived, or none of the contractors appears qualified for the job. If all the bids are too high, you may negotiate with the lowest qualified bidder to see if he or she will lower the price. You may also consider reducing the scope of work. If all the bidders were unqualified, you may need to find more qualified contractors to bid on the project.
Once the Building Committee has chosen a contractor, all the contractors who bid on the project should be notified by phone (for courtesy) and by registered mail (for legal purposes) of the decision of the Committee. Any last minute revisions to the contract documents can then be made and the contract signed.
Part 2 of this article, which will appear in the next issue of Common Bond, will deal with the process of managing a construction project, including inspecting work, executing change orders, and devising creative management solutions to difficult problems.