Review Standard Contract Language Related to Construction Projects

Construction contract language has been discussed numerous times over the past year, with the main item of contention by the Council being the requirement for prompt remedial action by the contractor.  There is a desire to understand the timing for getting a contractor back on a project should any work be found defective.  Attached is the City's standard general condition language contained within our specifications.  I have highlighted specific items germane to the Council's concern, and feel that the current language is sufficient to resolve timely corrective actions of deficient work.  Additional language could be added to clarify the timelines for contractor response, and staff is looking for feedback from the Council on whether they feel their concerns are satisfactorily addressed in the current language or whether revisions are necessary.

Staff would also like to discuss a couple of other items related to our construction contracts; including contract close out (warranty bonds), and contingency authority.  We have heard from contractors on several occasions that they would like to final projects with minor items remaining, and handle those with the warranty bond that they are required to post following project close out.  There are currently several existing projects in the City where the only remaining item is turf establishment; the seed has been planted but we are awaiting full growth over the entire area.  The contractors are arguing that the warranty bonds should satisfy the security requirement and ensure that any necessary corrective actions (if any) will be addressed should something go wrong.  They state that in some instances they cannot take on additional projects because their bonding capacity has reached its limit; they cannot get additional performance and payment bonds issued until some of their previous projects are released.  They are hopeful that the Council will consider turf establishment similar to road and utility work where we currently require a 1 year warranty following project acceptance.  Under this scenario a project could potentially be accepted for final payment following the installation of seed (or other ground cover) in the fall of the year without knowing whether the turf would actual take (spring growth).

Another item staff is looking for feedback on is whether the Council is comfortable including a standard construction contingency with projects, as a small percentage of the overall contract price.  This would be approved by the Council at the time of award but not included in the overall contract with the contractor; it would be an allowance authority for staff to utilize if site conditions require additional work or a revised approach.  Usually at the onset of construction property owners come forward with concerns that weren't previously identified during the design process that would necessitate a revised approach to the work; including such things as addition of a catch basin and/or storm pipe to address a drainage concern, realigning a sidewalk/trail around a junction box, tree, or private improvement near the construction limits of the project, septic system and/or wells near the construction limits, etc.  Other unknown items could also present themselves during construction; including high water table, poor soils, deteriorated pipes, expanded removal limits, etc.

Staff understands that we must effectively manage projects to keep them on schedule and on budget, but sometimes unknown conditions present themselves.  It's in these instances that it would be nice to have some flexibility at the staff level to effectively construction manage and resolve matters quickly.  This contingency would only be utilized as necessary, and up to a maximum cap – similar to what frequently occurs on larger projects.

Staff recommends that the Public Works Committee recommend to the City Council consideration of construction project close out for minor outstanding items.  All outstanding items would be outlined for the Council at the time of request for final payment, and Council can determine whether it's acceptable for these items to be covered by the warranty bond for the project.

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Staff recommends that the Public Works Committee recommend to the City Council the inclusion of a 3% construction contingency on all projects.  This would give staff the ability to effectively manage projects to account for unforeseen conditions and necessary project revisions.

Based upon discussion.