Discussion: Council discussion on current practices and review of past practices, focused on the assignment of contract allowances and contingencies including owners contingencies, contractor contingencies for CMAR and Design-Build, and review of the process of change order allowance.

This F.A.I.R. was introduced to City Council on December 5, 2017, and received the support of two or more Council members.  At this meeting, staff will provide some historical information related to this item. Further consideration and discussion will then require the support of four or more Council members at this meeting.

Staff has provided two City Council Reports (CCR) in relation to this topic, April 7, 2017, and May 11, 2018.  These CCR's are attached for your convenience. The two CCR's refer to a City Employee Directive which was last updated in 2008.  Since that time the Directive was incorporated in the Procurement Policy Manual and adopted by City Council. This is incorporated in Article 25: Change Orders of the manual and is attached. 

The following table represents the various item under discussion:
 

Type of Construction	Contract Allowance	Owner's Contingency	Contractor's Contingency	Change Order Authority
Design/Bid/Build-Invitation for Bids	X			X
CMAR-Request for Statement of Qualifications		X	X	X
Design/Build-Request for Statements of Qualifications		X	X	X

Contract Allowance: A contract allowance of 5%, 7.5% or 10% (based on the value of the contract) will be added to all design and construction contracts based on engineer's estimates to accommodate costs for unanticipated and unforeseen project related issues.

Owner's Contingency: Established by the owner (City) to accommodate costs for unanticipated and unforeseen project-related issues (only used in Alternative Project Delivery Methods).  The amount is negotiated by the City with the contractor.

Contractor's Contingency: established by the contractor to accommodate cost for unanticipated and unforeseen project-related issues (only use in Alternative Project Delivery Methods).  The amount is negotiated by the City with the contractor.

Change Order Authority: established a dollar amount (10% of the contract amount, less the allowance) and it provides the City Manager, on behalf of the City Council, authority to amend the contract amount in response to unforeseen costs that are more than the contract amount. 

Staff has developed a matrix (attached) demonstrating the allocation and usage of allowances, contingencies and change order authority for all construction projects over a two year period. The matrix includes completed construction projects over $250,000 managed by the Capital Improvements, Water Services and Public Works divisions during the two year period of January 1, 2016, through December 31, 2017. Those projects that had expenditures of allocated allowances, contingencies and change order authority have Project Manager's comments that identify the reason for the usage.