Title: Tri-Met's Construction Manager/General Contractor Approach

Phase(s): Final Design

Category: Management

Date: N/A

1. Background

Alternatives to traditional low bid procurement are increasingly being pursued by public agencies that want to ensure successful, fast-track implementation of major projects. Next to the RFP process, design-build may be the most common method of negotiated procurement. Tri-Met has used a third method of non-traditional procurement called Construction Manager/General Contractor (CM/GC) to construct light rail facilities. Not as well understood as other methods, it is not as frequently used.

CM/GC is a middle ground negotiated procurement method. Several of the features of Tri-Met’s program help define this contracting approach:

• Contractor is selected during the design process and provides value engineering and constructability reviews; CM/GC contractor is not responsible for final design, however, the selection is based several evaluation criteria, such as technical and management experience; prior performance; safety record; proposed quality control plan; proposed community outreach, including disadvantaged business participation and workforce hiring/training programs; and, maximum percentage fee on construction value. Lowest construction price is not a selection criterion.
• Contractor assumes responsibility for the entire construction package with a dual role as the construction manager for all project work, self-performed and subcontracted, and the general contractor, soliciting bids from and executing contracts with subcontractors. The owner contracts only with the CM/GC contractor.
• Subcontracted work is competitively obtained, primarily as low bid.
• Construction price is negotiated once final design is complete; contractor and owner agree on a Guaranteed Maximum Price (GMP) for the contract package.

Before awarding CM/GC or other non-traditional construction contracts, Tri-Met must demonstrate the rationale for procuring work through non-low bid methods. Under Oregon law, a public hearing must be held. An exemption from competitive bidding is allowed if the public agency finds (a) the contract award would be unbiased and not encourage favoritism and (b) substantial cost savings are likely.

Portland Tri-Met adopted CM/GC extensively to construct its $350 million Interstate MAX light rail line. Approximately $110 million of a $235 million construction program is under CM/GC contracts.

2. The Lesson

Legal authority must exist for agencies to pursue alternative contracting (i.e., non-low bid) methods. In Oregon, existing legislation enables public agencies to procure construction contracts using CM/GC, design-build, and the RFP process basing selection on multiple factors. Tri-Met adopted CM/GC for two major contracts.

Tri-Met’s experience is the CM/GC method fosters teamwork and promotes the formation of non-adversarial relationships. This partnership between the contractor and project owner has intangible benefits. A better understanding of the project scope and objectives should lead to a more flexible, responsive contractor. As a result, the owner can be more responsive to community concerns during the construction period. The level of construction activity can be modified to conform to changing needs. For instance, because a single CM/GC contractor was responsible for the entire section of work in the urbanized portion of Interstate MAX, activity in business districts was avoided or minimized during critical periods (e.g., the peak Christmas shopping season, the primary business hours) and temporarily focused elsewhere.

With a more cooperative working partnership between the owner, the designer and CM/GC contractor—Tri-Met calls these entities the CM/GC team—work quality should improve. The contractor has been selected on factors other than just price, many of which are strong indicators of ability to complete the job successfully. Also, the CM/GC contractor has increased responsibility for quality control over all aspects of the job under this method.

3. Applicability

CM/GC warrants consideration along with design-build and RFP selection when legal and institution frameworks allow negotiated procurement of construction projects and when CM/GC’s advantages can be best realized. The advantages are having a single contractor responsible for a large share of the work, a contractor who can effectively manage a variety of subcontractors on a complex project. The types of projects where CM/GC is most relevant are those with multiple interfaces (agency, public, business) and high public expectations; where contractor input during design would be useful; and where the owner wants to retain control through final design and to have continuing influence during construction. Both traditional design-bid-build and design-build itself are less well suited for procurement under these circumstances.

The owner must be experienced in construction and have the internal resources to check contractor cost proposals and negotiate a contract with confidence that the agreed upon terms are fair and reasonable.

This discussion draws heavily on information provided by Portland Tri-Met. The FTA would like to acknowledge the contributions of Don Iwin, Construction Manager, and Neil McFarlane, Executive Director, Capital Projects and Facilities Division.

4. References

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