CAPITAL CONSTRUCTION PROCESS REVIEW for the STATE OF MARYLAND

Transcription

1 CAPITAL CONSTRUCTION PROCESS REVIEW for the STATE OF MARYLAND Prepared for Maryland Department of General Services 301 West Preston Street Baltimore, MD Prepared by 1800 Washington Blvd. Suite 425 Baltimore, MD (410) November 26, 2008

2 1 Contents 2 EXECUTIVE SUMMARY Overview Findings and Conclusions Recommendations for Further Study TASK Task Background Task Scope Participants METHODOLOGY Documentation and Data Gathering Agency Formal Procedures Agency Pre-Interview Questionnaire Interview Process Analysis Process AGENCY REVIEWS DEPARTMENT OF GENERAL SERVICES Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project November 26, 2008 Page 2-1

3 5.2 MARYLAND DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONAL SERVICES Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project MARYLAND DEPARTMENT OF TRANSPORTATION (SHA ONLY) Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project UNIVERSITY OF MARYLAND COLLEGE PARK Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project UNIVERSITY OF MARYLAND BALTIMORE Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds November 26, 2008 Page 2-2

4 5.5.9 Time Quality Focus Project MORGAN STATE UNIVERSITY Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project ST. MARY S COLLEGE OF MARYLAND Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project MARYLAND ENVIRONMENTAL SERVICE Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project MARYLAND STADIUM AUTHORITY Introduction Documents Received Capital Project Contract Strategies Brief Summary Preliminary Determinations for Capital Projects November 26, 2008 Page 2-3

5 5.9.5 Project Management Organizations and Staffing Procurement Contract Administration Cost Management and Effective Use of Funds Time Quality Focus Project DATA ANALYSIS Agency Policies and Procedures Contract Strategies Individual Agencies Composite - All Agencies Composite - All Agencies (Excluding SHA) Agency-Preferred Contract Strategies Agency Less-Preferred Contract Strategies Agencies Exploring Contract Strategy Options: Risk Management Factors Agency Recommendations Procurement Authority Limitations Professional Service Selection Authority Actions Requiring Board of Public Works Approval FINDINGS AND CONCLUSIONS Adequacy of Agency Policies and Procedures for Managing Projects Use and Effectiveness of Various Construction Contract Procurement Strategies Agency Effectiveness in Managing Construction Projects RECOMMENDATIONS FOR FURTHER STUDY APPENDICES... Appendix A Agency Policies and Procedures for Managing Capital Projects (Matrices)... Appendix B Agency Contract Strategies (Matrices)... Appendix C Risk Management Factors (Matrix)... Appendix D Agency Pre-Interview Questionnaire (Blank Copy)... November 26, 2008 Page 2-4

6 2 EXECUTIVE SUMMARY 2.1 Overview This report is in response to direction from the Maryland State Legislature to both the Department of General Services (DGS) and the Department of Budget and Management (DBM) to undertake a comprehensive review of the capital construction management processes, procedures and controls used by State agencies. This direction was issued pursuant to the Joint Chairman s Report Capital Budget (page 238), of April Using the services of a private consulting firm, (hereafter Alpha ), a review of these processes was conducted of nine (9) State agencies as specified by DGS, including DGS itself. The nine agencies are as follows: Department of General Services Department of Public Safety and Correctional Services Maryland Department of Transportation (State Highway Administration only) University of Maryland - College Park University of Maryland - Baltimore Morgan State University Saint Mary s College of Maryland Maryland Environmental Service Maryland Stadium Authority These particular nine State agencies were specified for this review because they are currently the only ones having been granted either partial or complete autonomous, in-house authority for the design and construction of their capital projects since the State of Maryland began decentralizing this responsibility in For all other State agencies, DGS retains full authority and responsibility for the design and construction of those agencies capital projects, although the agencies themselves are directly and closely involved in the project planning phase. Alpha s review involved three phases: (1) evaluation of the agencies formal capital project procurement and management procedures; (2) personal interviews with key agency individuals involved in the design and construction of their agency s capital project programs and having full authority for same, preceded by their completion of a pre-interview questionnaire and (3) review and analysis of the agencies questionnaire responses, interview discourses and actual procedures and practices. November 26, 2008 Page 2-5

7 2.2 Findings and Conclusions This report describes both jointly and severally the processes used by the specified agencies to effectively manage, in-house, the design and construction of their capital projects. It also includes their experiences and recommendations for successfully managing a challenging capital program given their own unique missions, local parameters, attributes and constraints. Key findings and conclusions are as follows, with a more detailed accounting contained in the Findings and Conclusions section near the end of this report: 1. Adequacy of Agency Policies and Procedures for Managing Projects: All nine of the agencies subject to this review appear to have in force sufficient policy and procedure guidance documents to effectively execute their capital programs. In addition, on the whole, all nine agencies are adhering closely to those guidance documents. A synopsis of each of the nine agencies guidance documents is contained in Appendix A. 2. Use of Standard Construction Contract Procurement Strategies: The agencies are utilizing with excellent success several standard construction contract procurement strategies. These include Design-Build (D/B), Design-Bid-Build (D/B/B) and Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP). The agencies reported that they select the construction contract procurement strategy for the project at hand, generally depending upon its size and complexity. However, given the mix of sizes and types of projects within their differing programs, each of the agencies also acknowledged that, overall, they generally have specific preferences for one contract procurement strategy over the others. Some of the agencies are also currently utilizing or are investigating the utilization of procurement contract strategies that they historically have not utilized before. 3. Optimum Use of Available Funds: With few exceptions, the agencies are making optimum use of available funds in their management and oversight of capital construction projects. 4. Project Scheduling: With few exceptions, the agencies are effectively managing the complex scheduling requirements of their capital construction projects. 5. Optimum Use of Design and Construction Firm Skills: The agencies are effectively making optimum use of the skills of the design and construction firms that they utilize in executing their capital construction projects. 6. Avoidance of Delays: The agencies are effectively minimizing the occasions for incurring delays during the construction phase of their capital projects. 7. Avoidance of Disputes: The agencies are effectively minimizing the occasions for contract disputes during the construction phase of their capital projects. 8. Options for Improving the State s Contracting and Procurement Processes: Some of the agencies recommended the undertaking of limited legislative actions for simplifying and streamlining their management of capital projects. The recommendations all involved relaxing specific constraints on their procurement authorities. These recommendations should be given thorough consideration by those empowered to make changes to the agencies procurement limitations. November 26, 2008 Page 2-6

8 2.3 Recommendations for Further Study Focused recommendations for additional review and evaluation of the agencies capital projects programs are offered in the Recommendations for Further Study section at the end of this report. These are made in the interest of developing, for use by the agencies key decision makers, additional insight and guidance into optimizing their selection of construction contract procurement strategies for the portfolios of projects they manage. November 26, 2008 Page 2-7

9 3 TASK 3.1 Task Background The Maryland General Assembly s April 2008 Joint Chairmen s Report on the Capital Budget (page 238) directed the Department of General Services (DGS), with the assistance of the Department of Budget and Management (DBM) to undertake a comprehensive review of the capital construction management processes, procedures, and controls used by State agencies. On July 29, 2008, DGS issued a request for proposal (RFP) for Project No. B to Alpha, soliciting a cost proposal for conducting the review. Alpha submitted its proposal to DGS on August 15, On September 5, 2008, under Indefinite Contract Agreement No. DGS IQC, Professional Services Agreement to Provide Architectural and Engineering Services for Construction Scheduling and Claims Analysis for Multiple Construction Projects with Fees $300,000 or Less, the DGS issued Task Order 01B to Alpha for Project No. B Task Scope The Department of General Services (DGS), with the assistance of the Department of Budget and Management (DBM) was enlisted by the State Legislature to undertake a comprehensive review of nine State agencies (as identified under Participants, below). This review was focused on those agencies capital construction processes, procedures and controls. The scope of the Task Order was divided into two parts, as follows: Part I The review was focused on the State s abilities in managing its capital construction projects with respect to the following: 1) Procedures used to manage capital projects 2) Staffing used to manage capital projects 3) Construction project oversight requirements 4) Responsibilities used to manage capital projects, including: a. Project documentation b. Inspection c. Testing d. Change Order Authorization November 26, 2008 Page 3-8

10 5) Advantages and potential applicability of the Design-Build delivery method 6) Advantages and potential applicability of the Private Construction Management delivery method 7) Advantages and potential applicability of the Construction Management at Risk delivery method 8) Advantages and potential applicability of the Guaranteed Maximum Price delivery method Part II The review was focused on the State s effectiveness in managing construction projects by reviewing and addressing such factors as: 1) The optimum use of available funds 2) Project scheduling 3) Optimum use of design and construction firm skills 4) Avoidance of delays 5) Avoidance of changes 6) Avoidance of disputes 7) Options for improving the State s contracting and procurement processes 3.3 Participants The nine State agencies participating in this review are: 1. Department of General Services 2. Department of Public Safety and Correctional Services 3. Maryland Department of Transportation (State Highway Administration only) 4. University of Maryland - College Park 5. University of Maryland - Baltimore 6. Morgan State University 7. Saint Mary s College of Maryland 8. Maryland Environmental Service 9. Maryland Stadium Authority November 26, 2008 Page 3-9

11 4 METHODOLOGY 4.1 Documentation and Data Gathering Agency Formal Procedures Pursuant to the Maryland General Assembly s April 2008 Joint Chairman s Report on the Capital Budget (page 238), DGS and DBM formally notified the nine selected agencies of the requirement for the review, and requested they provide their agencies written procedures for procurement of design services and construction services, as well as design phase project management and construction phase construction management procedures and processes. These written procedures were to reflect the processing of and response to Contractor Requests for Information (RFI); the evaluation of Contractor proposed change Orders (PCO) requests; the processing of Change Orders and Contract Modifications; and, the evaluation and approval of monthly progress payments to Architect-Engineering firms as well as to Contractors. Each of the nine agencies submitted to DGS a package containing a range of their written procedures. DGS in turn forwarded these nine packages on to Alpha. Alpha reviewed the written procedures provided by each of the agencies, and for each developed, in matrix format an inventory of the ones relevant to this review. These matrices are included in each agency s respective section of this report. It should be noted that the content of each of these matrices is limited to the contents of the written procedures packages that were provided to DGS by the nine agencies. Many or all of the agencies may have additional relevant written procedures in effect, but because they were not part of their submission packages to DGS they could not be evaluated for purposes of this review Agency Pre-Interview Questionnaire Alpha s review included an interview of key individuals from within the procurement and/or facilities management staffs of each agency, as selected by the agencies themselves. In preparation for these interviews, each agency was, in advance, provided with an Alpha-developed pre-interview questionnaire. The questionnaire was intended to serve two purposes: (1) Obtain procedural data related to capital project management to augment that which was provided in the agencies written procedural packages as submitted to DGS and forwarded to Alpha; and (2) Obtain, in standardized fashion particular information from across the selected nine agencies that could be utilized in responding to all of the concerns and queries presented in the General Assembly s Joint Chairmen s April 2008 Report on the Capital Budget. The pre-interview questionnaire had four focus areas: 1. Capital Project Delivery Vehicles Summary Information November 26, 2008 Page 4-10

12 2. Overview of Processes, Procedures, and Controls 3. Demonstrated Implementation of Management Processes and Procedures 4. Lessons Learned, and Agency Opinions and Recommendations A blank copy of the questionnaire is included in Appendix D of this report. 4.2 Interview Process Each agency was interviewed separately as part of this review. The interviews were conducted at the respective agency offices. Their duration was approximately two hours. The agency individuals interviewed were key participants in their agency s capital project design and construction program and have full procurement authority and/or oversight control of those programs. The primary purpose of the interviews was to discuss with the agencies their responses to the preinterview questionnaire and as necessary, clarify or expound upon those responses with respect to the content of their written procedures. Accordingly, selected pertinent oral comments offered by each of the agencies during the interview process are incorporated into this report. 4.3 Analysis Process The analysis process for each agency was identical. It involved assessments of their written procedures, their written responses to the pre-interview questionnaire, and their oral commentary made as their written responses to the questionnaire were discussed with them. This analysis involved two primary processes: (1) Review of each agency s established formal procedures and policies for executing capital projects; and (2) determine how faithfully they adhere to them. The results of these analyses, for each agency are contained in separate sections of this report. In addition, this report contains analyses for the purposes of ascertaining trends across all agencies that were reviewed. November 26, 2008 Page 4-11

13 5 AGENCY REVIEWS 5.1 DEPARTMENT OF GENERAL SERVICES Introduction The mission of the Maryland Department of General Services (DGS) is to provide leading-edge professional and technical services to keep State and local government working today and in the future. DGS accomplishes this by creating safe and secure work environments; designing, building, leasing, managing and maintaining facilities; leading energy conservation efforts; procuring goods and services; and providing essential functions such as fuel management, disposition of surplus property and records storage. Through its Office Facility Planning, Design & Construction, and on behalf of the State User Agencies that it supports, DGS supervises and coordinates the design and construction of a wide range of state public improvements totaling hundreds of millions of dollars annually. DGS s Division of Procurement and Logistics (P&L) is responsible for the planning, implementation, and coordination of a wide variety of services offered by DGS, including providing professional and technical support services to State and local government agencies, and the central procurement of architectural and engineering services. The professional procurement staff performs specialized contracting, bid/proposal administration, and bid security for all State government users except the University System of Maryland Documents Received Pursuant to this review, DGS submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that DGS may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the DGS formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-12

14 5.1.3 Capital Project Contract Strategies Brief Summary DGS has over the years utilized at least two different contract strategies for managing its capital project program. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 19 $143,000,000 $149,000,000 Design-Build (D/B) 2 $26,000,000 $26,000,000 Professional Construction Management 0 $0 $0 Construction Management at Risk / 0 $0 $0 Guaranteed Maximum Price (CMR/GMP) Totals: 21 $169,000,000 $175,000,000 DGS reports that their preferred contract strategy for the delivery of capital projects is Design-Bid-Build (D/B/B). As can be seen in the above table, D/B/B accounts for 19 of the 21 projects completed over the previous three years, representing 85% of the total funds expended for those 21 projects. DGS reports that they prefer D/B/B because they believe it provides the optimal level of management control during all phases of the project. For this preferred contract strategy, a Low Bid approach, using the competitive sealed bidding process is utilized for the construction stage of the project. For the design phase, selection of the A/E follows a Qualifications-Based Selections Process as prescribed in the COMAR Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: The using agency establishes these parameters during development of their project program. The DGS Project Management and Design Division and the Project Cost Center (both of the Office of Facilities Planning, Engineering & Construction) will then provide their review and comment. 2. Project Contract Strategy: The project contract strategy is determined by DGS, with a strong preference for Design-Bid-Build (D/B/B). If a Using Agency wishes a different contract strategy, then the agency representative responsible for developing capital programs must make a formal request to the DGS Assistant Secretary for Facilities Planning. This formal request must be made in the pre-design phase, at the time the project program is submitted for review. November 26, 2008 Page 5-13

15 3. Project Budget Estimates: The using agency establishes the budget during development of their project program. The DGS Project Management and Design Division and the Project Cost Center (both of the Office of Facilities Planning, Engineering & Construction) will then provide their review and comment. The budget estimate is derived from the concept design phase budget and based on historical factors Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants DGS Office of Procurement and Logistics DGS Project Management and Design Division DGS Project Cost Center DGS Construction Division DGS Project Manager Using Agency Procurement Procurement authority and procedures for DGS are generally as provided for in COMAR Title 21. In addition, procurement authority and procedures specific to DGS are provided for in COMAR A/E Contract Procurement A/E procurement is conducted primarily through two different selection processes, depending upon the anticipated negotiated A/E fee amount: (1) Department of General Services (DGS) Selection Process: Applies to projects with an A/E fee in the range of $25,000 to $200,000. (2) General Professional Services Selection Board (GPSSB) Selection Process: Applies to projects with an A/E fee exceeding $200,000. Both of these processes involve a two-step procedure, where step one entails a review of the respondent firms technical qualifications by a qualifications committee and the preferred firm is identified. In step two, the negotiation committee negotiating an acceptable fee with that firm. November 26, 2008 Page 5-14

16 The primary difference between the two processes is that in the GPSSB selection process, the qualifications committee must submit its findings to the GPSSB for approval and authorization before the negotiation committee can enter into negotiations with the preferred firm. Upon completion of successful negotiations, the negotiations committee will make its recommendation to the GPSSB for approval and subsequent recommendation to the Board of Public Works. In the event that A/E is needed for a small scale effort where the fee is expected to be less than $25,000, there are a number of pre-approved A/E firms available through DGS s Small Business Reserve Program Construction Contract Procurement Design-Bid-Build (D/B/B) construction contracts are normally procured and awarded through a competitive sealed bidding process. In those infrequent instances when the using agency prefers a Design-Build (D/B) approach, the construction contracts is normally procured and awarded through a competitive sealed proposal process Contract Administration Document Management For document management of capital projects, DGS utilizes an AS-400 database system developed for DGS in the 1980 s. A standard filing system common to all projects is not utilized Meetings and Reporting Requirements Design Phase: During the design phase, there are typically four (4) design review meetings that are conducted after receipt of each of the four design submissions from the A/E. If the project is unusually large and/or complex, there may be additional design phase meetings conducted on an interim basis. These meetings are normally attended by the A/E, DGS Project Manager, DGS design team members, DGS Project Cost Center, DGS Construction Division, and using agency planning staff. Construction Phase: During the construction phase, regular progress meetings are conducted every two weeks. During this phase of the project, the Contractor is required to submit daily reports that include work performed, QA/QC actions, conditions affecting work, manpower on site identified by trade, and weather conditions. Progress meeting minutes are required to be prepared and distributed. Monthly progress reports are not required to be prepared. November 26, 2008 Page 5-15

17 Request for Information (RFI) Management A request for information (RFI) log is required to be maintained during the construction phase Change Order Management The DGS Project Manager and DGS Construction Division Regional Manager are authorized to negotiate and settle change orders. The A/E also will review the change orders and make recommendations. A change order log is required to be maintained during the construction phase, which tracks the basis, i.e. necessity for the change. Change orders that either materially change the scope of work or, individually change the amount of the contract by more than $50,000, must be reviewed and approved by the Board of Public Works Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures A/E: The DGS Project Manager is authorized to review the A/E s monthly invoices. Contractor: The DGS Construction Inspector, the DGS Project Manager, the DGS Area Supervisor, the DGS Regional Manager, and the A/E s onsite Construction Administration (CA) representative will review the monthly Contractor s pay applications. Prior to review of the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to provide a CPM schedule update along with the monthly pay application. Prior to review of the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to provide a CPM schedule update along with the monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This Checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items. November 26, 2008 Page 5-16

18 5.1.8 Cost Management and Effective Use of Funds Value Engineering Value engineering (VE) reviews are conducted on those projects with a budget greater than $10,000,000. For these projects, VE workshops are conducted at the schematic design (SD) design development (DD), 50% construction documents (50% CD) and 95% construction documents (95% CD) stages of the design phase Constructability Reviews Constructability reviews are conducted at the design development (DD), 50% construction document (50% CD), and 95% construction document (95% CD) phases of the design process Cost Estimating and Review Cost Estimating Stages: Cost estimates are performed by the A/E s independent cost estimator at the schematic design (SD), design development (DD), 50% construction documents (50% CD), and 95% construction documents (95% CD) stages of the design. Cost Escalation: Cost escalation factors developed by DGS and DBM are used to forecast cost escalation to the project s budget year. In addition, DGS refers to industry-published data, market analyses, and its own in-house historical data files. Cost Contingency: The cost contingency is established by the State Legislature at 5% for new construction projects, and 10% for renovation projects. Life Cycle Costing: Life cycle costing is performed during the design phase so that operations and maintenance (O&M) costs over the life of the facility are considered in addition to the capital acquisition cost Dispute Avoidance DGS has a policy of engaging in an informal partnering process with each project s key stakeholders. The general goal of this process is the timely solving of problems in a mutually satisfactory manner. DGS also reported that at present they do not believe that the time and expense of engaging in a formal partnering process is necessarily justified. November 26, 2008 Page 5-17

19 5.1.9 Time Schedule Management Project Master Schedule: The project master schedule is developed for all projects after their project program is approved. The master schedule is developed by the DGS Project Manager and the DGS Cost Center. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is required to be cost loaded. An updated CPM schedule is required to be submitted with monthly pay applications. The baseline CPM schedule as well as all monthly updates submitted by the Contractor are reviewed by the DGS Construction Representatives, DGS Project Manager, and a third party scheduling consultant Delays and Delay Mitigation Procedures If a Contractor falls behind schedule, the Contractor is required to develop and submit for approval a CPM recovery schedule showing how the Contractor plans to bring the project back on schedule. This CPM recovery schedule is then monitored by DGS representatives Quality Design Phase Reviews Design Phase: During the design phase, there are typically four (4) design review meetings that are conducted after receipt of each of the four design submissions from the A/E. If the project is unusually large and/or complex, there may be additional design phase meeting conducted on an interim basis. Design Review Participants: These design phase meetings are normally attended by the A/E, DGS Project Manager, DGS Design Team members, DGS Project Cost Center, DGS Construction Division, and Using Agency planning staff Construction Inspection and Testing Quality assurance (QA) testing and inspection are normally performed by an independent testing consultant that is retained by the Contractor, with the results provided to DGS. In certain critical areas of the work, DGS will also retain its own independent testing agency to perform additional QA testing and/or inspection to verify the results obtained by the Contractor s testing consultant. November 26, 2008 Page 5-18

20 In addition, DGS has a team of in-house construction inspectors as well as consultant inspectors that may also inspect the work in progress, depending upon the type of project involved Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract. Commissioning is customarily performed by Contractor staff, under the supervision of an independent commissioning authority Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For DGS, the focus project is referred to as New Student Services Building. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Bid-Build (D/B/B) contract strategy. The basic project data is as follows: Design Budget Amount: $ 1,038,747 Actual Design Cost: $ 1,272,760 Construction Contract Budget Amount: $ 8,891,760 Original Construction Contract Award Amount: $12,140,000 Final Construction Contract Amount: $12,287,208 Original Substantial Completion Date: August 28, 2008 Actual Substantial Completion Date: September 24, 2008 Original Final Completion Date: September 27, 2008 Actual Final Completion Date: October 23, Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: The organizations and key staff involved from the start of the project planning phase through construction closeout were the DGS Project Manager, the DGS Construction Supervisor, the DGS Office of Procurement and Logistics, and the using agency November 26, 2008 Page 5-19

21 representatives (i.e., Vice President for Facilities, and the Project Manager for St. Mary s College of Maryland. On Site Services: Organizations and key staff providing onsite services during the construction phase included the A/E who was on site (on a part time basis) to provide construction administration (CA) services. The A/E provided responses to RFI s, reviewed submittals and Contractor pay applications, participated in development of the final inspection punch list, and reviewed the operations and maintenance (O&M) manuals. Opinions: Findings are consistent with DGS s policies and procedures Procurement a. A/E Contract Procurement Findings: The A/E procurement was conducted through a two-step process: (1) technical proposal phase; and (2) price proposal/negotiation phase. Opinions: Findings are consistent with DGS s established policies and procedures. b. Construction Contract Procurement Findings: The contract strategy utilized for the procurement of the construction contract was Design-Bid- Build (D/B/B). The Contractor was procured by a Multi-Step Sealed Bid Process, which required the submission of technical proposals from the prospective Contractors. The technical proposals were reviewed and scored, and those Contractors that were rated as satisfactory were invited to submit sealed bids, with contract award being made to the lowest responsive bidder. Opinions: Findings are consistent with DGS s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: During the construction phase, progress meetings were conducted every two weeks. In attendance were the A/E, DGS Project Manager, DGS Construction Area Supervisor, and representatives of the Using Agency. Meeting minutes were drafted and distributed by the A/E. Monthly construction progress reports were drafted by the DGS Construction Area Supervisor and distributed. The Contractor was not required to submit daily progress reports. Opinions: Findings are consistent with DGS s established policies and procedures, except that the policies and procedures do require the Contractor to submit daily progress reports. November 26, 2008 Page 5-20

22 b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with DGS s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order Log was maintained during construction of the project. The log tracked the basis, i.e., necessity for each change. The Construction Area Supervisor negotiated the change orders, subject to review and sign-off by the DGS Project Manager. Those settlements below $25,000 were approved by the DGS Assistant Secretary for the Office of Facilities Planning. Settlements over $25,000 were approved by the DGS Assistant Secretary for the Office of Facilities Planning, as well as the DGS Office of Procurement, and those over $50,000 also required approval by the Board of Public Works. Opinions: Findings are consistent with DGS s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during construction of the project. Opinions: Findings are consistent with DGS s established policies and procedures. e. Pay Application Review Procedures Findings: A/E Contracts: Monthly pay applications for the A/E were reviewed and approved by the DGS Project Manager. Construction Contracts: Monthly pay applications for the Contractor were reviewed and approved by the A/E, DGS Construction Area Supervisor, and the DGS Project Manager. These approvals were subject to review by the DGS Regional Manager, and the Chief of the DGS Construction Division. Opinions: Findings are consistent with DGS s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering November 26, 2008 Page 5-21

23 Findings: During the design phase, a series of formal Value Engineering (VE) reviews was not conducted because the construction cost estimate during design did not exceed $10,000,000. However, during the bidding process it became evident that the low bid exceeded the project construction estimate, and the low bid Contractor was requested to submit VE proposals to bring the project cost more in line with the budget. The Contractor submitted VE proposals for consideration and acceptance, which resulted in a total credit of $1,229,000, i.e., approximately 10% of the original bid amount. Opinions: The absence of formal VE review during the design phase is consistent with DGS s established policies and procedures. However, although DGS s established policies and procedures do not require VE reviews when the construction estimate is below $10,000,000, had formal VE reviews in fact been conducted during this project s design phase, then the scope reductions necessary to meet the construction budget may have been made more cost-effectively than was possible by making them during the bidding phase with the low-bid Contractor. b. Constructability Reviews Findings: Constructability reviews were conducted by the DGS Project Manager, the A/E Design Team, and the DGS Construction Division and the Using Agency. They were conducted during the schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction document (95% CD), and 100 % construction document (100% CD) phases of the design process. Opinions: Findings are consistent with DGS s established policies and procedures. c. Cost Estimating and Review Findings: Cost estimates were prepared during the schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction document (95% CD), and 100 % construction document (100% CD) phases of the design process. Opinions: Findings are consistent with DGS s established policies and procedures. d. Dispute Avoidance Findings: On this project, there were no disputes between DGS and the Contractor. Therefore, no dispute resolution actions were necessary. There was a history of past experience involving the top management of DGS, the Contractor and the using agency. DGS reported that on this project all three engaged in an informal partnering process which was mutually beneficial in resolving problems in a timely manner. DGS also reported that while they endorse the informal partnering process, they do not believe that the time and expense of engaging in a formal partnering process is necessarily justified. November 26, 2008 Page 5-22

24 Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations between DGS and the Contractor, through an informal partnering process, may have been a significant contributing factor Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding, award, construction and activation/furnishing was developed for this project. Also, a cost-loaded CPM schedule was required for the project, and was provided by the Contractor. Opinions: Findings are consistent with DGS s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: Insofar as this project, having a scheduled construction phase of approximately 16 months finished approximately one month late, there were no excusable delays during the course of the project, and at no time did DGS direct acceleration of the work. Also, the Contractor was not directed to submit a CPM recovery schedule showing how he would get the project back on schedule. No delay claims were received from the Contractor. Opinions: Findings are generally consistent with DGS s established policies and procedures, except that they require that the Contractor submit a CPM recovery schedule if the Contractor falls behind schedule. However, this 16 month project was delivered only about one month late, and there may have been circumstances that made a later-than-planned delivery date acceptable to both DGS and the Using Agency Quality a. Construction Inspection and Testing Findings: Quality assurance (QA) testing and inspection was performed by the Contractor s independent third-party consultant during the project construction phase. DGS indicated that it is their belief that the higher quality that typically results from the QA testing justified its additional expense. For this project, QA testing and inspection was not performed by any DGS representatives. Opinions: Findings are consistent with DGS s established policies and procedures. b. Commissioning Procedures November 26, 2008 Page 5-23

25 Findings: A formal commissioning process of installed systems was performed on this project, utilizing a professional, third party commissioning authority. DGS reported that it is their belief that the enhanced post-construction performance of those systems justifies the additional cost of the formal commissioning process. Opinions: Findings are consistent with DGS s established policies and procedures. November 26, 2008 Page 5-24

26 5.2 MARYLAND DEPARTMENT OF PUBLIC SAFETY AND CORRECTIONAL SERVICES Introduction The Department of Public Safety and Correctional Services (DPSCS) was created in Today, DPSCS has statewide responsibility to supervise and rehabilitate adjudicated individuals who pose a threat to the public. In its creation, DPSCS absorbed the previously autonomous entities of the Division of Correction, Division of Parole and Probation, Maryland State Police, State Civil Defense and Emergency Planning Agency, State Fire Prevention Commission and the State Fire Marshal, Maryland Traffic Safety Commission, and Patuxent Institution, as well as certain advisory boards. The State Civil Defense and Emergency Planning Agency was renamed several times and then transferred to the Military Department in 1989 as the Maryland Emergency Management Agency. In 1994, the State Police became a principal executive department. The DPSCS Division of Capital Construction and Facilities Maintenance (DCCFM) began in 1990 in the Office of the Secretary as the Division of Capital Construction and the Division of Facilities Maintenance. Both divisions combined in 1997 to form the present office. The office prepares capital programs and capital budgets, and procures and manages construction of state correctional facilities, including those of Patuxent Institution, the Police and Correctional Training Commissions and the institutions of the Division of Correction Documents Received Pursuant to this review, DPSCS submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that DPSCS may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the DPSCS formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-25

27 5.2.3 Capital Project Contract Strategies Brief Summary The DPSCS has primarily utilized the Design-Bid-Build (D/B/B) contract strategy for managing its capital project program over the years. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 19 $138,419,249 $145,834,984 Design-Build (D/B) 1 $3,540,472 $3,731,745 Professional Construction Management 0 $0 $0 Construction Management at Risk / 0 $0 $0 Guaranteed Maximum Price (CMR/GMP) Totals: 20 $141,959,721 $149,566,729 The DPSCS reports that their preferred contract strategy for the delivery of capital projects is Design-Bid- Build (D/B/B). They reported that they prefer this strategy because of the degree of control they have in working directly with the A/E and the Contractor. The preferred Contractor selection process is competitive sealed bidding. As can be seen in the above table, D/B/B accounts for 97% of the total funds expended for the twenty (20) projects completed within the reporting period Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are determined during the programming phase by the Assistant Secretary for Capital Programs, division of Correction Commissioner, Division of Pretrial Detention and Services Commissioner, and the Patuxent Institution Director and Wardens. 2. Project Contract Strategy: The project contract strategy is determined by the Procurement Officer during the capital budget request process. 3. Project Budget Estimates: These estimates are determined during the project planning phase by the A/E, who, in accordance with Department of Budget and Management guidelines, prepares a DGS cost estimate worksheet which is submitted and processed through the DGS Budget Office. November 26, 2008 Page 5-26

28 5.2.5 Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants Division of Capital Construction and Facilities Maintenance (DCCFM) staff Wardens Maintenance Supervisors Maryland Correctional Enterprise (MCE) Managers Procurement Procurement authority and procedures for DPSCS are generally as provided for in the COMAR Title A/E Contract Procurement Procurement of A/E consultants needed by DPSCS for the agency s capital projects is performed by DGS in accordance with the DGS procurement process for A/E services. A/E procurement is conducted by DGS primarily through two different selection processes, depending upon the anticipated negotiated A/E fee amount: (1) Department of General Services (DGS) Selection Process: Applies to projects with an A/E fee in the range of $25,000 to $200,000. (2) General Professional Services Selection Board (GPSSB) Selection Process: Applies to projects with an A/E fee exceeding $200,000. Both of these processes involve a two-step procedure, where step one entails a review of the respondent firms technical qualifications by a qualifications committee and the preferred firm is identified for entering into negotiations. In step two, the negotiation committee negotiates an acceptable fee with that firm. The primary difference between the two processes is that in the GPSSB Selection Process, the qualifications committee must submit its findings to the GPSSB for approval and authorization before the negotiation committee can enter into negotiations with the preferred firm. Upon completion of successful negotiations, the negotiations committee will make its recommendation to the GPSSB for approval and subsequent recommendation to the Board of Public Works. Upon approval of the contract award, the A/E services agreement is executed between the A/E and DPSCS, and the A/E contract administration is performed by DPSCS in accordance with DGS s November 26, 2008 Page 5-27

29 Procedure Manual for Professional Services. Modifications to awarded A/E contracts are processed pursuant to authority delegated to DPSCS Construction Contract Procurement Procurement of contractors is performed in accordance with DCCFM Policy and Procedure Numbers 300-4, 300-5, 300-7, and Procurement of construction services is executed by competitive sealed bidding. Procurement for these services is executed in accordance with the COMAR, Title 21. DCCFM Policy and Procedure Number delineates the procedure for determining if the lowest bidder is also a responsible bidder Contract Administration Document Management Software utilized for project document management includes Prolog, Expedition, and Microsoft Access. A filing system that is common to all capital projects is used Meetings and Reporting Requirements Design Phase: Design review meetings are required to be conducted in accordance with the DGS Procedure Manual for Professional Services. This manual requires design review meetings at the end of each major phase in the design, i.e., following the schematic design (SD), design development (DD) and construction documents (CD) phases. Construction Phase: During the construction phase, regular progress meetings are conducted every two weeks. During this phase of the project, the Contractor is required to submit daily reports that include work performed, QA/QC actions, conditions affecting the work, manpower on site identified by trade, weather conditions, and construction equipment. Progress meeting minutes are required to be prepared and distributed. In addition, monthly progress reports are prepared Request for Information (RFI) Management RFI s are required to be sent promptly to the A/E for review and the A/E is required to provide an interpretation within a reasonable period of time, seven (7) days being the maximum. An RFI log is required to be maintained during the construction phase. November 26, 2008 Page 5-28

30 Change Order Management The DPSCS Construction Manager and Building Construction Engineer are authorized to negotiate change orders. The A/E is also required to participate in the review and provide recommendations. A change order log is required to be maintained during the construction phase. The basis, i.e. necessity for the change, is noted on the change order log. Change orders that either materially change the scope of work or, individually change the amount of the contract by more than $50,000, must be reviewed and approved by the Board of Public Works Submittal Process Management Submittals are required to be sent promptly to the A/E consultant for review and the A/E is required to provide comments/approval within a reasonable period of time, seven (7) days being the maximum. A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures A/E: The Division of Capital Construction and Facilities Maintenance (DCCFM) Assistant Director for Design, with input from staff, is authorized to review and reject/approve the A/E s monthly pay applications for work performed during the design phase. During the construction phase, the DCCFM Assistant Director for Construction Operations likewise reviews and approves the A/E s pay applications for construction administration services. Contractor: The DCCFM Assistant Director for Construction Operations, with input from staff, and the Procurement Officer are authorized to review and reject/approve Contractor s monthly pay applications. Prior to review of the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to provide a CPM schedule update along with the monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This Checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items. The development and documentation of Lessons Learned Report by the using Agency for future use is also part of this process. November 26, 2008 Page 5-29

31 5.2.8 Cost Management and Effective Use of Funds The total project budget is established during the planning phase and is prepared in accordance with DBM guidelines. A cost estimate worksheet is prepared and processed through the DGS Budget Office. During the design phase a new cost estimate worksheet is professionally prepared by the A/E consultant Value Engineering Value engineering (VE) is implemented on projects having a cost that exceeds $10,000,000. A VE consultant is procured by DGS and works with the A/E to perform VE during a project s design development phase. DCCFM staff also participate in the VE process. It should be noted that unlike most other types of facilities, the secure nature of correctional facilities mandates that they meet strict minimum design and construction standards. Accordingly, the opportunities for achieving significant savings through the VE process are often rather limited Constructability Reviews Constructability reviews are initiated during the latter stages of design and completed during the 95% construction document (95% CD) stage. These reviews are normally performed by DCCFM staff. However, for large and/or more complex projects, the constructability reviews are outsourced to consultants Cost Estimating and Review Cost Estimating Stages: Cost estimates are performed by the A/E at the schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction document (95% CD), and 100% construction document (100% CD) phases of the project. Cost Escalation: Cost escalation factors developed by DBM are used to forecast cost escalation to the project s budget year. Cost Contingency: The project contingency is initially established during the planning and capital budget request process and adjusted during the design phase. The contingency will normally be set at a maximum of 5%. If hidden site conditions are expected to be encountered, the contingency will be set at 7.5%. Life Cycle Costing: Life cycle costing is performed during the design phase so that operations and maintenance (O&M) costs over the life of the facility are considered in addition to the capital acquisition cost. November 26, 2008 Page 5-30

32 Dispute Avoidance DPSCS has a policy of engaging in an informal partnering process with their A/E s and Contractors. The goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule and minimizing of cost growth, all of which are mutually beneficial to the involved parties Time Schedule Management Project Master Schedule: The project master schedule is developed jointly by the DCCFM Director and DCCFM staff during the early stages of the project s planning phase. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule and the schedule is required to be cost loaded. The baseline CPM schedule and the monthly CPM schedule updates are reviewed and approved by the Assistant Director for Construction with input from the DCCFM Construction Managers and the construction inspection and testing firm (CITF). An updated CPM schedule is required to be submitted with monthly pay applications Delays and Delay Mitigation Procedures The corrective action taken to mitigate schedule delays involves providing the Contractor with a written request to communicate the Contractor s plan for mitigating apparent delays. This corrective action also includes delay mitigation discussions during construction progress meetings Quality Design Phase Reviews Design Phase: During the design phase, regular progress meetings are conducted every two weeks. Design Review Participants: Design review/progress meetings are attended by DCCFM staff, wardens, maintenance supervisors, and correctional enterprise managers from the using agency Construction Inspection and Testing During construction, quality assurance inspections are performed by the construction inspection and testing firm (CITF) at the direction of the DCCFM Assistant Director of Construction. Quality assurance testing is also performed as needed by the CITF. November 26, 2008 Page 5-31

33 Commissioning Procedures Commissioning of installed systems is performed by the Contractor as part of the construction contract. To date, the Commissioning process has not involved a professional commissioning authority. However, DPSCS is planning on using a professional commissioning authority on future projects, to be obtained through DGS Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For the DPSCS, the focus project is referred to as Kitchen Expansion, New Gatehouse, and Perimeter Security Improvements at Patuxent Institution, Jessup, Maryland. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Bid-Build (D/B/B) contract strategy. Bidder prequalification was not required. The basic project data is as follows: Design Budget Amount: $ 1,037,000 Actual Design Cost: $ 1,205,136 Construction Contract Budget Amount: $20,778,000 Original Construction Contract Award Amount: $18,172,000 Final Construction Contract Amount: $19,079,479 Original Substantial Completion Date: July 20, 2004 Actual Substantial Completion Date: June 30, 2005 Original Final Completion Date: August 20, 2004 Actual Final Completion Date: June 30, Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: Organizations and key staff involved from the start of the project planning phase through construction closeout were the Assistant Secretary for Capital Projects, the Director and Wardens for the Patuxent Institution, the Director and Deputy Director of DCCFM, the Capital Budget Planning Manager, Assistant Director of Design and Construction, and the Assistant Director for Engineering and Construction Operations. November 26, 2008 Page 5-32

34 On Site Services: Organizations and key staff providing onsite services during the construction phase included the A/E who provided Construction Administration (CA) services including progress meetings, site visits, non-compliance resolution, project punch-out and final acceptance. Also, the construction testing and inspection firm performed quality assurance inspections and testing for the project. Opinions: Findings are consistent with DPSCS s policies and procedures Procurement a. A/E Contract Procurement Findings: The A/E selection process was managed by DGS on behalf of DPSCS. Upon approval of the contract award, the A/E services agreement was executed between the A/E and DPSCS, and the A/E contract administration is performed by DPSCS in accordance with DGS s Procedure Manual for Professional Services. Modifications to awarded A/E contracts are processed pursuant to authority delegated to DPSCS. Opinions: Findings are consistent with DPSCS s established policies and procedures. b. Construction Contract Procurement Findings: The construction contract was procured by competitive sealed bidding process, in accordance with COMAR, Title 21 and DCCFM Policy and Procedure Number Opinions: Findings are consistent with DPSCS s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: During the construction phase, progress meetings were conducted biweekly. Attendees included the A/E representatives (Principal, Project Administrator), Contractor s representatives (Project Superintendant, Resident Project Manager), Using Agency representatives (Security Chief, Maintenance Supervisor, Project Manager, Building Construction Engineer), and construction inspection and testing firm representatives (Resident Construction Inspector). Meeting minutes were prepared and distributed, in which resolutions to project issues were tracked. The Contractor provided daily progress reports that reflected work performed, trade subcontractors onsite, equipment used, weather conditions, and notable quality control action taken. The project construction managers worked with the Assistant Director for Construction to produce a monthly progress report that was distributed to DPSCS representatives. Opinions: Findings are consistent with DPSCS s established policies and procedures. November 26, 2008 Page 5-33

35 b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with DPSCS s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order Log was maintained during construction reflected the basis for each change item. Change Orders were negotiated and settled by the DCCFM Procurement Officer with input from the DCCFM Construction Manager, the Building Construction Engineer, and the A/E. Change orders were processed by the DPSCS for approval per the established procedures that are covered in the contract general conditions, consistent with the COMAR. Opinions: Findings are consistent with DPSCS s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during construction of the project. Opinions: Findings are consistent with DPSCS s established policies and procedures. e. Pay Application Review Procedures Findings: For A/E services during the design phase, monthly pay applications were reviewed and approved by the DCCFM Assistant Director for Design. For A/E services during construction, monthly pay applications were reviewed and approved by the DCCFM Assistant Director for Construction. For the Contractor s monthly pay applications, review and recommendations were provided by the Building Construction Engineer and A/E. Approval of the pay applications was by the DFFCM Construction Manager and the DCCFM Assistant Director for Construction. Opinions: Findings are consistent with DPSCS s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering Findings: Although the project cost exceeded $10,000,000, value engineering (VE) reviews were not performed for this project. Opinions: Findings are not consistent with DPSCS s established policies and procedures. November 26, 2008 Page 5-34

36 b. Constructability Reviews Findings: Constructability reviews were not conducted for this project. Opinions: Findings are not consistent with DPSCS s established policies and procedures. c. Cost Estimating and Review Findings: Cost estimates were performed by the A/E throughout the design phase of the project. Opinions: Findings are consistent with DPSCS s established policies and procedures. d. Dispute Avoidance Findings: DPSCS reported that there were no disputes with the Contractor on this project. Therefore, no dispute resolution actions were necessary. DPSCS also reported that informal partnering was practiced amongst the project stakeholders and that one positive outcome of this process was completion of the project within budget. Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations between DPSCS and the Contractor, through an informal partnering process, may have been a significant contributing factor Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding, award, construction and activation/furnishing was developed for this project. Also, a CPM schedule was required for the project, and was provided by the Contractor. Opinions: Findings are consistent with DPSCS s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: Although this project finished about ten months late, the Contractor did not submit a formal delay claim on the project. The Contractor was formally directed to submit a recovery schedule when construction progress fell behind schedule. Excusable delays that the project experienced included those due to inclement weather, change orders, and Add Alternate work items being added late in the project due to delays in funding availability. Opinions: It appears that the reasons the work fell behind schedule were due largely to events outside the Contractor s control, although some of the delay may have been within the Contractor s control. In any November 26, 2008 Page 5-35

37 case, the requirement for the Contractor to submit a CPM recovery schedule is consistent with DPSCS s established policies and procedures Quality a. Construction Inspection and Testing Findings: Quality assurance inspections were conducted daily by the construction inspection and testing firm. Daily inspection reports were also prepared in conjunction with the inspections. Quality assurance (QA) testing was also performed by the construction inspection and testing firm. DPSCS indicated that they believe the cost of the QA testing is justified by the added quality expected. Opinions: Findings are consistent with DPSCS s established policies and procedures. b. Commissioning Procedures Findings: Commissioning of installed systems was performed as part of the construction contract. A professional commissioning authority was not utilized on this project. Opinions: Findings are consistent with DPSCS s established policies and procedures. November 26, 2008 Page 5-36

38 5.3 MARYLAND DEPARTMENT OF TRANSPORTATION (SHA ONLY) Introduction The Maryland State Highway Administration (SHA) owns, operates and maintains the Interstate, U.S. and Maryland numbered roads. This infrastructure forms the majority of Maryland s National Highway System that connects local and county roads to major activity centers and other modes of transportation such as mass transit, the port, airports and railroads. SHA roads carry 67% of traffic in the State. SHA is responsible for: preserving the quality of approximately 16,731 lane-miles of road and 2,500 bridges; retaining expertise on staff to perform critical specialized functions such as design quality control and managing traffic during emergencies, especially during snowstorms; performing routine maintenance on roadway features such as pavements, bridges, signs, lights, roadway markings, drainage,and litter pick up. SHA has approximately 3,200 employees, with its headquarters in Baltimore City. There are 14 offices at headquarters that provide central administrative, information technology, financial, planning and engineering functions. SHA s operations offices and the Statewide/Emergency Operations Center are centrally located in Hanover, Maryland near the BWI Thurgood Marshall Airport. SHA has more than 40 facilities around the state, including seven engineering district offices and 28 maintenance shops. The district offices manage all highway and bridge construction contracts; perform maintenance functions such as roadway and equipment repair, snow and ice removal, and roadside management; and are responsible for traffic engineering projects and operations. Financing for SHA activities comes from the State of Maryland s Transportation Trust Fund and from the Federal Highway Administration (FHWA). SHA uses these funds for everything from planning new roads and bridges to building, maintaining and operating existing roads Documents Received Pursuant to this review, SHA submitted to Alpha a number of formal policy and procedures documents governing the procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that SHA may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the SHA formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-37

39 5.3.3 Capital Project Contract Strategies Brief Summary SHA typically utilizes two different procurement strategies for managing its capital project program. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 466 $993,782,302 $1,036,481,524 Design-Build (D/B) 4 $26,722,610 $27,841,504 Professional Construction Management 0 $0 $0 Construction Management at Risk / 0 $0 $0 Guaranteed Maximum Price (CMR/GMP) Totals: 470 $1,020,504,912 $1,064,323,028 SHA reports that their preferred contract strategy for the delivery of capital projects is Design-Bid-Build (D/B/B). As can be seen in the above table, D/B/B accounts for 466 out of 470 projects completed over the previous three years, representing 97% percent of the total funds expended for those 24 projects Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of each project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: The lead office for the funding source normally establishes these parameters. For major projects, these are usually established by the Office of Planning and Preliminary Engineering (OPPE) with input from the Office of Highway Development (OHD) or the Office of Bridge Development (OBD). 2. Project Contract Strategy: The contract strategy is typically selected at the initiation of the design phase, and is selected by the lead design office. Funding availability may influence this decision and any subsequent changes to the funding may result in a reevaluation in methodology during the design process. 3. Project Budget Estimates: Initial budget estimates are based on historical project cost data maintained by SHA, as well as industry cost estimating guides. November 26, 2008 Page 5-38

40 5.3.5 Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: Office of Planning and Preliminary Engineering (OPPE) Director, Office of Highway Development Director, Office of Bridge Development Director, Office of Traffic and Safety Director Office of Real Estate Director, Office of Environmental Design District Engineer Construction Inspection Division Project Engineer (Design) Project Engineer (Construction) Federal Highway Administration (FHWA) Officials (as applicable) A/E and other consultants Procurement Procurement authority and procedures for SHA (as part of the Maryland Department of Transportation) are generally as provided for in COMAR Title 21. In addition, procurement authority and procedures specific to DGS are called out in COMAR A/E Contract Procurement The MDOT Architectural & Engineering Consultant Selection, Internal Guidelines provides procedures for the procurement of A/E services. These procedures provide for two different A/E procurement processes: (1) A/E services in excess of $100,000; and (2) A/E services of $100,000 or less. A/E service contracts in excess of $100,000 require approval of the Transportation Professional Services Selection Board (TPSSB), and TPSSB must certify their selection to the board of public works. In general, SHA selects A/E firms using a multi-step process. Candidate A/E firms are screened based on their qualifications, and a reduced candidate list of firms is developed, from whom technical proposals will be solicited. These technical proposals are then reviewed and ranked, and those firms are then requested to submit price proposals. The price proposals are then reviewed, and best price offers negotiated and selection recommendations made to the transportation agency head. November 26, 2008 Page 5-39

41 Construction Contract Procurement For the Design-Bid-Build (D/B/B) projects, procurement is made using the competitive sealed bidding process. For Design-Build (D/B) projects, procurement is made using the competitive sealed proposals process Contract Administration Document Management ProjectWise is a software tool utilized by SHA for document management. A standard filing system common to all projects is not utilized. SHA s Construction Manual details the requirements for record and documentation management during the construction phase Meetings and Reporting Requirements Design Phase: Design review meetings are typically conducted weekly, monthly, and quarterly. They are normally attended by the A/E, the SHA Lead Division Design Chief, and the SHA Project Manager. Program reviews (i.e., all projects with a funding source) are attended by the SHA Division Chiefs, SHA Office Directors, and SHA Deputy Administrators. Construction Phase: During the construction phase, regular progress meetings are conducted monthly, or more frequently depending upon the size and complexity of the project. Meeting minutes are prepared and distributed. Construction monthly reports are prepared and distributed on a monthly basis. During this phase of the project, the Contractor is required to submit daily reports that include work performed, QA/QC actions, conditions affecting work, manpower on site identified by trade, and weather conditions. In addition, depending upon the type of project the Contractor is required to submit certain other reports, i.e., traffic report, soil and sediment control report, etc Request for Information (RFI) Management An RFI log is maintained during the project construction phase Change Order Management Independent estimates for change orders are prepared by SHA. The A/E participates in the Change Order evaluation and review process. The SHA District Engineer or designated representative (Assistant District Engineer or Area Engineer) negotiates change orders. A Change Order log is also maintained during the construction phase of work, which reflects the basis for each Change. November 26, 2008 Page 5-40

42 The SHA District Engineer (DE) or the DE s designee (i.e., Assistant DE or Area Engineer) is authorized to negotiate and settle change orders, with approval authority up to 10 percent of the contract amount or 50 days/$500,000, whichever is less. The Office of Construction (OOC) Director is required to approve any change that cumulatively exceeds that amount and each $100,000 increment thereafter. The OCC Director also has authority up to 25 percent or 100 days/$750,000, whichever is less. The Deputy Administrator/Chief Engineer for Operations (DA/CEO) is permitted to approve any single authorization over $500,000 and any change that cumulatively exceeds the above and each multiple of $500,000 thereafter. The DA/CEO has authority for authorizations exceeding 25 percent of the contract value or up to 200 days/$1,000,000, whichever is less and any single authorization over $500,000. For all Federal Aid Projects, SHA is required to coordinate with the FHWA during the entire negotiation process. A copy of the complete change order package is forwarded to the Federal Highway Administration (FHWA). Change orders that either materially change the scope of work or, individually change the amount of the contract by more than $50,000 must be reviewed and approved by the Board of Public Works Submittal Process Management A Submittal log is maintained during the project construction phase Pay Applications Review Procedures A/E: A/E pay applications are normally reviewed at the level of Division Chief (or above) within the project s lead office. Contractor: Contractor pay applications are reviewed and approved by the SHA construction Project Engineer. Prior to approving the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to submit monthly an updated CPM schedule along with the monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items. Formal Lessons Learned are not currently produced, however SHA is working on the development of a project review system designed to uncover and correct errors that occurred during the project. November 26, 2008 Page 5-41

43 5.3.8 Cost Management and Effective Use of Funds Value Engineering Value engineering (VE) reviews are required by the Federal Highway Administration (FHWA) for Federal Aid projects over $25,000,000. The VE review is generally conducted in conjunction with the 30% construction document (30% CD) and 90% construction document (90% CD) stages of the design Constructability Reviews Constructability reviews are currently conducted at the 100% construction document (100% CD) stage of the design. SHA is developing a new constructability review process that would require reviews at increased intervals during the design phase. These additional intervals would include the 30% construction document (30% CD) stage, 65% construction document (65% CD) stage, and the 95% construction document (95% CD) stage. This new process would also incorporate a cross-functional team approach Cost Estimating and Review The SHA Project Planning and Highway Design Divisions have developed a cost estimate program to assist in the development of construction cost estimates, especially for Consolidated Transportation Program (CTP) project cost updates. Cost Estimating Stages: The A/E normally prepares cost estimates at each of the project design stages. SHA does not normally perform any independent cost estimating, unless it is in conjunction with a value engineering review. Cost Escalation: Cost escalation factors are applied to the project cost estimate annually as part of the Consolidated Transportation Program (CTP) development process. Cost Contingency: The cost contingency is standardized by project type as outlined in SHA s Cost Estimating Manual. This manual is updated annually incorporating bid result data for all SHA projects. Life Cycle Costing: Life cycle costing is performed during the design phase so that operation and maintenance (O&M) costs over the life of the work (particularly for pavements and culverts) are considered in additional to the capital acquisition cost. November 26, 2008 Page 5-42

44 Dispute Avoidance A formal partnering process is mandatory on all SHA projects that are executed via the Design-Build (D/B) contract strategy. SHA reported that they believe that open communication by all project stakeholders is critical, particularly given the complicated design parameters of most SHA projects, coupled with the complex nature of the permitting process. SHA strongly recommends partnering to other agencies Time Schedule Management Project Master Schedule: A project master schedule is developed for all projects by the lead office. This schedule is developed by the SHA Project Manager, with input from the entire design team. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is not required to be cost loaded. An updated CPM schedule is required to be submitted with the Contractor s monthly pay applications. The baseline CPM schedule as well as all monthly updates submitted by the Contractor are reviewed by the SHA District Office staff and their consultants Delays and Delay Mitigation Procedures If a Contractor falls behind schedule, the Contractor is required to develop and submit for approval a CPM recovery schedule showing how the Contractor will bring the project back on schedule. This CPM recovery schedule is monitored by SHA representatives Quality Design Phase Reviews Design Phase: Design review meetings are typically conducted weekly, monthly, and quarterly. Design Review Participants: These design phase meetings are normally attended by the A/E, SHA Lead Division Design Chief, and the SHA Project Manager, Program reviews (i.e., all projects with a funding source) are attended by the SHA Division Chiefs, SHA Office Directors, and SHA Deputy Administrators. November 26, 2008 Page 5-43

45 Construction Inspection and Testing The SHA Office of Construction, Inspection Division provides quality assurance (QA) inspection and testing services using in-house and consultant staff. SHA maintains a number of directives that establish the types of QA inspections and tests needed and their frequency, depending upon the scope of the project. Specialty inspections associated with the QA process, e.g., Erosion & Sediment Control inspections for projects involving earthwork are performed at least bi-weekly Commissioning Procedures Commissioning of installed systems is not applicable to the types of projects managed by SHA Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For SHA, the focus project is referred to as US 113 from Market Street to North of MD 365 (Public Landing Road). The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Bid-Build (D/B/B) contract strategy. The basic project data is as follows: Design Budget Amount: $1,110,360 Actual Design Cost: $1,519,665 Construction Contract Budget Amount: $14,300,390 Original Construction Contract Award Amount: $15,427,400 Final Construction Contract Amount: $15,839,160 Original Substantial Completion Date: N/A Actual Substantial Completion Date: December 2006 Original Final Completion Date: May 25, 2007 Actual Final Completion Date: May 25, 2007 November 26, 2008 Page 5-44

46 Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: SHA key staff members involved in project management from the early planning/conceptual phases through project closeout were the SHA Project Engineer (Design) and the SHA Project Engineer (Construction). On Site Services: The A/E was not on site during the construction phase of the project. Daily quality assurance (QA) inspections and testing of the work were performed. Opinions: Findings are consistent with SHA s established policies and procedures Procurement Findings: The contract strategy utilized for the procurement of the construction contract was Design- Build (D/B), using a two-step competitive sealed proposal process. During the first step the prospective D/B Contractors were invited to submit their technical qualifications. After these were reviewed by SHA, those Contractors that were determined to be qualified were invited to submit their cost proposals. Opinions: Findings are consistent with SHA s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: During the construction phase, progress meetings were conducted monthly. They were chaired by the SHA Project Engineer (Construction) and attended by the various stakeholders as deemed necessary by the agenda. Minutes were taken but not always published. The Contractor did not submit daily progress reports. Opinions: Findings are consistent with SHA s established policies and procedures, except that the established policies and procedures do require the Contractor to submit daily progress reports. b. Request for Information (RFI) Management Findings: Due to the Design/Build (D/B) nature of this project, a RFI log was not maintained during construction by SHA. Opinions: SHA s established policies and procedures are not clear on this issue. It is not clear if for D/B projects that SHA will maintain an RFI log. November 26, 2008 Page 5-45

47 c. Change Order Management Findings: A Contractor s proposed change order Log was maintained during construction of the project. The log tracked the basis, i.e., necessity for each change. The SHA Assistant District Engineer of Construction was authorized to negotiate and approve change orders. Opinions: Findings are consistent with SHA s established policies and procedures. d. Submittal Process Management Findings: A submittal log was not maintained by SHA during construction of this Design/Build (D/B) project. Opinions: SHA s established policies and procedures are not clear on this issue. It is not clear if for D/B projects that SHA will maintain a submittal log. e. CPM Scheduling Findings: A CPM schedule was not developed for the project. Opinions: Findings do not appear to be consistent with SHA s established policies and procedures. f. Pay Application Review Procedures Findings: A/E Contracts: Monthly pay applications for the A/E were reviewed by the SHA Project Engineer (Design), and approved by the Division Chief (Design). Construction Contracts: The Contractor s monthly pay applications were reviewed against an approved cost breakdown that was established at the beginning of the project, and payment was made based on estimated progress made for each work item. Opinions: Findings are consistent with SHA s established policies and procedures, except that SHA did not indicate who was authorized to review and approve the Contractor s pay applications for this project Cost Management and Effective Use of Funds a. Value Engineering Findings: Value engineering (VE) reviews were not performed for this project. The Contractor did not submit any VE proposals during the construction phase. November 26, 2008 Page 5-46

48 Opinions: SHA requires VE reviews only for those projects exceeding $25,000,000. Accordingly, the findings are consistent with SHA s established policies and procedures. b. Constructability Reviews Findings: Constructability reviews were not performed for this project. Opinions: Findings do not appear to be consistent with SHA s established policies and procedures. c. Cost Estimating and Review Findings: It is not clear if SHA performed any cost estimating during the design phase of this project. Opinions: It is not clear if the findings are consistent with SHA s established policies and procedures, which require that cost estimates be performed during the design phase. d. Dispute Avoidance Findings: On this project, there were no disputes between SHA and the Contractor. Therefore, no dispute resolution actions were necessary. It should be noted that formal partnering process was utilized on this project. Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations between SHA and the Contractor, made possible through a formal partnering process, may have been a significant contributing factor Time a. Schedule Management: Findings: A CPM schedule was not submitted. Opinions: Findings are not consistent with SHA s established policies and procedures, which require that the Contractor prepare and submit to SHA a CPM schedule. b. Delays and Delay Mitigation Procedures Findings: The project finished by the scheduled completion date. There were no delay claims or disputes and delay mitigation procedures were not necessary. Opinions: The good working relations between SHA and the Contractor, made possible through a formal partnering process as noted above, may have been a significant contributing factor. November 26, 2008 Page 5-47

49 Quality a. Construction Inspection and Testing Findings: Quality assurance (QA) inspections and tests were performed during the construction phase. Opinions: Findings are consistent with SHA s established policies and procedures. b. Commissioning Procedures Findings: Commissioning procedures were not applicable to this of project. Opinions: Road construction projects do not normally have any installed systems that are conducive to a commissioning process. November 26, 2008 Page 5-48

50 5.4 UNIVERSITY OF MARYLAND COLLEGE PARK Introduction University of Maryland, College Park (UMCP) was founded in 1856 with the chartering of the Maryland Agricultural College. In 1858, 420 acres of land were acquired, and the Maryland Agricultural College was completed and dedicated in Today, by way of greatly expanded facilities, UMCP offers 127 undergraduate degrees and 112 graduate degrees in 13 different colleges and schools, which include: College of Arts and Humanities, College of Education College of Computer, Mathematical, and Physical Sciences College of Journalism, College of Agriculture and Natural Resources; College of Chemical and Life Science, School of Business, College of Behavioral and Social Sciences; School of Engineering, College of Informational Studies, School of Public Policy, School of Architecture, Planning & Preservation, and School of Public Health. Annual enrollment is approximately 36,000 students. In addition to managing its own capital construction projects at the UMCP campus, through a Service Center UMCP also manages capital projects for ten (10) other institutions within the University System of Maryland (USM). These client institutions are: Bowie State University Frostburg State University Salisbury University University of Maryland Eastern Shore University of Maryland University College University of Maryland Biotechnology Institute (Rockville area only) University of Maryland Center for Environmental Science Universities at Shady Grove University System of Maryland at Hagerstown University System of Maryland Office On average, the capital improvement program at UMCP itself represents, in terms of annual dollar value approximately 50% of the UMCP service center s total capital project workload, with the remaining 50% distributed over the other ten USM institutions Documents Received Pursuant to this review, UMCP submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, November 26, 2008 Page 5-49

51 and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that UMCP may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the UMCP s formal policies and procedures should be withheld pending a more exhaustive submission and review process Capital Project Contract Strategies Brief Summary UMCP has over the years utilized a number of different contract strategies for managing its capital project program. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 24 $115,000,000 $134,000,000 Design-Build (D/B) 1 $6,000,000 $6,000,000 Professional Construction Management 0 $0 $0 Construction Management at Risk / 13 $223,000,000 $243,000,000 Guaranteed Maximum Price (CMR/GMP) Totals: 38 $344,000,000 $383,000,000 UMCP reports that their preferred contract strategy for the delivery of capital projects is Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP). As can be seen in the above table, CMR/GMP accounts for 13 of the 38 projects completed over the previous three years, representing 63% of the total funds expended for those 38 projects. For this preferred strategy, a best value approach is utilized, where the various proposers technical qualifications and past performance are weighed against their proposed cost, with contract award being made to the one that offers the best value amongst all of these factors Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are determined during the project planning (i.e., pre-design) phase, with the Department of Facilities Planning taking the lead. Other key participants are the Client departments in collaboration with UMCP technical subject November 26, 2008 Page 5-50

52 matter experts, and then after vetting these parameters are submitted for University Presidential and Board of Regents approval. 2. Project Contract Strategy: The project contract strategy is determined during the project planning (i.e., Pre-Design) phase by the Director of the Department of Architecture, Engineering and Construction (AEC), the Department of Procurement and Supply and, depending upon the specific project, other major stakeholders. If the contract strategy involves either Design-Build or Construction Manager at Risk (CMR), then the Board of Public Works must grant their prior approval. 3. Project Budget Estimates: These estimates are determined during the project planning (i.e., predesign) phase by the Client departments in collaboration with UMCP technical subject matter experts, and then after vetting submitted for University Presidential and Board of Regents approval. Projects over $1,000,000 require approval by the USM Board of Regents Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants Director, UMCP Department of Procurement and Supply Director, Architecture, Engineering and Construction (AEC), UMCP Office of Facilities Management Department of Facilities Planning President, UMCP USM Board of Regents Client Departments For capital projects executed managed by UMCP on behalf of their client institutions within University System of Maryland, the client institution is responsible for all project programming and planning, and UMCP executes only the design and construction phases Procurement As an institution belonging to the University System of Maryland, per COMAR A(24), UMCP is exempt from COMAR 21, as set forth in COMAR Procurement activities for capital projects at UMCP are governed by the University System of Maryland Procurement Policies and Procedures approved by the University System of Maryland Board of Regents September 28, 1988; Amended December 3, 1999, and approved by the Board of Public Works on February 9, The Board of Regents delegated to the Chancellor of the University System of November 26, 2008 Page 5-51

53 Maryland the authority to implement and to delegate, as appropriate, to the presidents of the constituent institutions, to the extent permitted by Board of Regents policy, authority to implement those policies and procedures. Pursuant to COMAR E, prior to entering into a contract for services that exceed $500,000 or a contract for capital improvements with a value that exceeds $500,000, UMCP shall obtain the review and approval of the Board of Public Works by submitting an Action Agenda Item pursuant to COMAR A A/E Contract Procurement The procurement management of A/E services is pursuant to authority granted to UMCP as a USM Service Center by the Board of Regents. Procedures for the procurement of A/E services are contained in Section V, Subsection I of the University System of Maryland Procurement Policies and Procedures. A/E procurement is conducted through a two-step process: (1) technical proposal phase; and (2) price proposal/negotiation phase. Upon completion of the price proposal/negotiation phase, the UMCP Procurement Officer will review the final fee negotiations with the USM Service Center Executive Group, consisting of a public member, representatives of the USM client institution, and a minimum of two executive management staff from the UMCP Service Center. Should the A/E award amount exceed $500,000, the UMCP Procurement Officer forwards the award recommendation to the Board of Public Works for approval. A/E responsibilities for capital projects are standardized and delineated in UMCP s Standard Form of Agreement with Architects and Engineers Construction Contract Procurement Procedures for the procurement of construction contracts are contained in Section V of the University System of Maryland Procurement Policies and Procedures. Subsection B of Section V outlines procedures for competitive sealed bids, and Subsection C of Section V outlines procedures for competitive sealed proposals. Over the previous three years, UMCP has utilized the competitive sealed bids approach for twenty-four (24) projects procured under the Design-Bid-Build (D/B/B) contract strategy. During this same period, UMCP has also utilized the competitive sealed proposals approach for one (1) project executed under the Design-Build contract strategy, and thirteen (13) projects executed under the Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) contract strategy. November 26, 2008 Page 5-52

54 UMCP prefers the CMR/GMP contract strategy because they believe it enables them to maintain tight control of the project during the design phase by incorporating, through the at-risk construction manager (CMR), constructability reviews, scheduling, cost estimating and Value Engineering prior to award of the construction contract. Moreover, the Board of Regents of the University System of Maryland (USM) through their bylaws encourages the use of CM at Risk (CMR) and Design-Build contract strategies. The following is an excerpt from USM BOR By-Law VIII-10.30, Policy on Authority Concerning Certain Capital Improvement Projects. This By Law was approved by the Board of Regents on May 6, 1994, and amended February 4, 2000: The Board of Regents desires that the processes employed for the design and construction of capital improvements under its authority make use of the best available management strategies for the implementation of these capital improvements, to ensure a timely and economical result. For projects exceeding $10 million in construction cost (and for smaller projects where schedules or circumstances may dictate) the Chancellor, in exercising the authority delegated by the Board of Regents, shall require from each president, after consultation with one of the established service centers to whom the authority to manage capital improvements is delegated, an implementation plan to meet the established schedule and budget. The Board prefers that a construction manager be utilized (via contract) to administer these projects. The Board also desires that the service centers employ alternative project delivery systems, such as design/build, where it is reasonable and practical to do so. Should the construction contract award amount exceed $500,000, the Procurement Officer forwards the award recommendation to the Board of Public Works for approval Contract Administration Contract administration is the responsibility of the Procurement Officer, in conjunction with the Office of Facilities Management Document Management For document management of capital projects, UMCP utilizes a number of computer software applications. These include Primavera Project Planner (P3) for CPM scheduling; ProjectTalk (a webenabled application powered by Prolog) for construction-phase change order proposals; MS Excel for cost estimating, design review commentary, RFI tracking, Quality assurance (QA) tracking and punch list management; and, an in-house developed data management system that interfaces with the UMCP accounting system. Depending upon the project, other software applications, such as Prolog and Constructware may be utilized to enhance and facilitate communication amongst the various project team members. November 26, 2008 Page 5-53

55 A standard filing system common to all projects is utilized Meetings and Reporting Requirements Design Phase: During the design phase, regular progress meetings are conducted every two weeks. These meetings are attended by the primary project stakeholders and key team members, including the A/E and other consultants; UMCP Department of Procurement and Supply; UMCP Department of Architecture, Engineering and Construction (AEC) - Office of Facilities, and the Client. Construction Phase: During the construction phase, regular progress meetings are conducted every two weeks. During this phase of the project, the Contractor is required to submit daily reports that include descriptions of work performed, QA/QC actions, conditions affecting work, manpower on site identified by trade, and weather conditions. Progress meeting minutes are required to be prepared and distributed. In addition, monthly progress reports are prepared by the Contractor Request for Information (RFI) Management A request for information (RFI) log is required to be maintained during the construction phase Change Order Management The AEC Project Manager and Project Executives, pursuant to authority delegated by the UMCP Department of Procurement & Supply, are authorized to negotiate change orders. The A/E also will review them and make recommendations. Agency-prepared independent estimates are required to be prepared for comparison. A change order log is required to be maintained during the construction phase, which tracks the basis, i.e. necessity for each change order. Change orders exceeding $500,000 for capital improvement project contracts shall be reported to the Board of Regents through the Vice Chancellor for Administration and Finance Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures The UMCP Project Manager, UMCP Project Executive, and UMCP Accounting Department are authorized to review and approve the A/E s and Contractor s monthly Pay Applications. For the Contractor s pay applications, the A/E will review them prior to the UMCP review. November 26, 2008 Page 5-54

56 Prior to review of the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to provide a CPM schedule update along with each monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This Checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items Cost Management and Effective Use of Funds Value Engineering Value Engineering (VE) reviews are conducted as a matter of course at all of the various stages of the project design phase. Participants in the VE process are the A/E, project stakeholders, and the CMR staff Constructability Reviews Constructability reviews are conducted at the schematic design (SD) and design development (DD) phases of the design process. Key participants are the A/E, project stakeholders, and CMR staff. Also, at the 95% construction document (95% CD) stage, a formal interdisciplinary constructability review is conducted Cost Estimating and Review Cost Estimating Stages: Cost estimates are performed by both the A/E s independent cost estimator and the CMR at the schematic design (SD) and design development (DD) phases of the project, as well as during the construction document (CD) phase. Cost Escalation: Cost escalation factors developed by the State Department of General Services (DGS), and the State Department of Budget and Management (DBM) are used to forecast cost escalation to the project s budget year. Cost Contingency: Cost contingencies are established during the project planning phase and based on historical data. Life Cycle Costing: Life cycle costing is performed during the design phase so that operations and maintenance (O&M) costs over the life of the facility are considered in addition to the capital acquisition cost. November 26, 2008 Page 5-55

57 Dispute Avoidance UMCP has a policy of engaging, in a partnering process, with their A/E s and Contractors. Depending upon the specific project, either a formal or an informal partnering process will be utilized. The general goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule and control of cost growth, all of which are mutually beneficial to the involved parties. UMCP believes that the partnering process is successful for them because early on in the project it brings together the stakeholder organizations key individuals to focus on identifying critical issues and common goals. For UMCP, formal partnering is a recommended Best Practice. However, at a minimum UMCP believes in engaging with their A/E s and Contractors at an informal partnering level if the project size does not justify the cost and time needed for formal partnering Time Schedule Management Project Master Schedule: For the project master schedule, major project milestones are developed during the project planning phase. More detailed milestone and objectives are later developed by the AEC project staff and approved by the AEC Director at the initiation of design services acquisition. The final, detailed master schedule is developed in conjunction with the A/E at the commencement of the design phase. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is required to be cost loaded. The baseline CPM schedule is reviewed and approved by the UMCP Project Manager and UMCP Project Executives. An updated CPM schedule is required to be submitted with each monthly pay application Delays and Delay Mitigation Procedures UMCP s construction contracts contain a Liquidated Damages (LD) clause, intended to ensure timely completion of the work. Nonetheless, if a Contractor falls behind schedule for no apparent cause, UMCP will send the Contractor a Cure Notice or similar notification which requires him to submit a CPM recovery schedule showing how he intends to bring the project back on schedule. November 26, 2008 Page 5-56

58 Quality Design Phase Reviews Design Phase: During the design phase, regular progress meetings are conducted every two weeks. Design Review Participants: The design review participants are the primary project stakeholders and key team members, including the A/E and other consultants; Department of Procurement and Supply; Architecture, Engineering and Construction (AEC), Office of Facilities, and the Client Construction Inspection and Testing UMCP construction inspectors perform Quality assurance (QA) inspection of the work daily during the construction phase. Quality assurance (QA) testing is performed by an independent testing consultant, and monitored by the UMCP Construction Inspectors Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract. Commissioning is customarily performed by the Contractor s forces, under the supervision of an independent commissioning authority Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For UMCP, the focus project is referred to as Van Munching Hall, North Addition. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) contract strategy. The basic project data is as follows: Design Budget Amount: $1,230,000 Actual Design Cost: $1,035,643 November 26, 2008 Page 5-57

59 Construction Contract Budget Amount: $19,033,492 Original Construction Contract Award Amount: $17,639,094 Final Construction Contract Amount: $18,539,572 Original Substantial Completion Date: October 4, 2007 Actual Substantial Completion Date: October 24, 2007 Original Final Completion Date: October 4, 2009* Actual Final Completion Date: October 24, 2009* *Dates for Final Completion Reflect a 2-Year Warranty Period Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: UMCP organizations and key staff involved from the start of the project planning phase through construction closeout were the Procurement Officer, Office of Facilities Planning, Business School Representatives, USM Board of Regents, AEC Project Management Assistant Director, AEC Project Manager, and the AEC On-Site Construction Representative. On Site Services: Organizations and key staff providing onsite services during the construction phase included the A/E who provided construction administration (CA) services. The A/E responded to RFI s, reviewed submittals, change orders and the Contractor s pay applications, and prepared observation reports. Opinions: Findings are consistent with UMCP s policies and procedures Procurement a. A/E Contract Procurement Findings: The A/E procurement was conducted through a two-step process: (1) technical proposal phase; and (2) price proposal/negotiation phase. Opinions: Findings are consistent with UMCP s established policies and procedures. b. Construction Contract Procurement Findings: The contract strategy utilized for the procurement of the construction contract was Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP). Prospective CMR/GMP Contractors were invited to submit their proposals. The basis for the selection process would be best value. The CMR/GMP Contractor was selected and procured on that basis. November 26, 2008 Page 5-58

60 Opinions: Findings are consistent with UMCP s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: During the construction phase, progress meetings were conducted every two weeks. In attendance were the A/E, CMR s representatives. AEC s Project Manager, AEC s Construction Inspectors, and a representative from the Business School (i.e., Client). Meeting minutes were prepared and distributed. The CMR provided daily progress reports which reflected work performed, trade manpower on site, equipment used, and weather conditions. Also, monthly construction progress reports were drafted by the CMR and distributed. Opinions: Findings are consistent with UMCP s established policies and procedures. b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with UMCP s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order log was maintained during construction of the project. The log tracked the basis, i.e., necessity for each change. hose authorized to negotiate and approve change orders included the AEC Project Manager, AEC Project Management Assistant Director, and AEC Director. Opinions: Findings are consistent with UMCP s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during construction of the project. Opinions: Findings are consistent with UMCP s established policies and procedures. e. Pay Application Review Procedures Findings: Monthly pay applications for both the A/E and the CMR were reviewed and approved by the AEC Project Manager, and submitted to the UMCP Accounting Department for their review and approval. For the CMR s monthly pay applications, the A/E reviewed them prior to the UMCP review. November 26, 2008 Page 5-59

61 Opinions: Findings are consistent with UMCP s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering Findings: Value Engineering (VE) was performed at the design development (DD) stage of the project design phase. Opinions: Findings are consistent with UMCP s established policies and procedures b. Constructability Reviews Findings: Constructability reviews were conducted at the 75% construction document (75% CD) and the 95% construction document (95% CD) stages of the project design phase. Opinions: Findings are consistent with UMCP s established policies and procedures. c. Cost Estimating and Review Findings: Cost estimates were performed at the schematic design (SD), design development (DD), and 75% construction document (75% CD) phases of the project. Opinions: Findings are consistent with UMCP s established policies and procedures. d. Dispute Avoidance Findings: On this projects, there were no disputes between UMCP and the CMR. Therefore, no dispute resolution actions were necessary. UMCP reported that on this project they engaged in formal partnering with the A/E and the CMP/GMP Contractor. They believe that this formal partnering process was critical to the success of the project, by bringing together key individuals from the stakeholders early in the project to identify critical issues and common goals. This allowed them to maintain open channels of communication and resolve issues in a timely manner. UMCP advocates formal partnering as Recommended Best Management Practice. Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations between UMCP and the Contractor, through a formal partnering process, may have been a significant contributing factor. November 26, 2008 Page 5-60

62 Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding, award, construction and activation/furnishing was developed for this project. Also, a CPM schedule was required for the project, and was provided by the CMR. Opinions: Findings are consistent with UMCP s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: At one point in the project s construction phase the project fell behind schedule and the CMR was directed to submit a CPM recovery schedule showing how the CMR would get the project back on schedule. The CMR complied with this direction. There were no delay claims received from the CMR. Also, there were no excusable delays, and formallydirected acceleration by UMCP was not needed. Opinions: Findings are consistent with UMCP s established policies and procedures Quality a. Construction Inspection and Testing Findings: Quality assurance inspections were conducted daily by the UMCP Construction Inspectors, who prepared daily QA inspection reports. Also, Quality assurance (QA) testing was performed during the project construction phase. UMCP indicated that it is their belief that the higher quality that typically results from the QA testing justified its additional expense. Opinions: Findings are consistent with UMCP s established policies and procedures. b. Commissioning Procedures Findings: A formal commissioning process of installed systems was performed on this project, utilizing a professional, third party commissioning authority. UMCP reported that it is their belief that the enhanced post-construction performance of those systems justifies the additional cost of the formal commissioning process. Opinions: Findings are consistent with UMCP s established policies and procedures. November 26, 2008 Page 5-61

63 5.5 UNIVERSITY OF MARYLAND BALTIMORE Introduction The University of Maryland, Baltimore (UMB), was founded in It is the original campus of the University System of Maryland. The campus is composed of 58 buildings on 60 acres located near Camden Yards in downtown Baltimore. UMB comprises seven professional schools: Dental School, Graduate School, School of Law, School of Medicine, School of Nursing, School of Pharmacy, School of Public Health, and School of Social Work. In addition to managing its own capital construction projects at the UMB campus, UMB also manages capital projects for five (5) other institutions within the University System of Maryland (USM). These client institutions are: Coppin State University University of Baltimore University of Maryland, Baltimore County Towson University University of Maryland, Biotechnology Institute (Baltimore area only) On average, the capital improvement program at UMB itself represents, in terms of annual dollar value approximately one-third of the UMB service center s total capital project workload, with the remaining two-thirds distributed over the other five USM institutions Documents Received Pursuant to this review, UMB submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that UMB may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the UMB s formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-62

64 5.5.3 Capital Project Contract Strategies Brief Summary UMB has over the years utilized a number of different contract strategies for managing its capital project program. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 3 6,314,280 $7,958,660 Design-Build (D/B) 1 26,300,467 $26,443,129 Professional Construction Management 0 $0 $0 Construction Management at Risk / 20 $291,751,242 $311,672,336 Guaranteed Maximum Price (CMR/GMP) Totals: 24 $324,365,989 $346,074,125 UMB reports that their preferred contract strategy for the delivery of capital projects is Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP). As can be seen in the above table, CMR/GMP accounts for 20 of the 24 projects completed over the previous three years, representing 90% of the total funds expended for those 24 projects Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are determined during the programming phase, by the Office of Architecture, Engineering and Construction (AEC) working closely with the Procurement Officer and, as appropriate the client institutions planning offices. Final decisions on recommended alternatives are made by the President, Dean, or Administrative Vice President. 2. Project Contract Strategy: The project contract strategy is determined by the Office of Procurement Services, in consultation with the Office of Architecture, Engineering and Construction (AEC). The Director or Assistant Director of the Office of Procurement and the assigned Contract Specialist will consult with the Director or Associate Director of AEC and their Project Manager. 3. Project Budget Estimates: These budgets are determined during the programming phase, by the Office of Architecture, Engineering and Construction (AEC) working closely with the Procurement Officer and, as appropriate the client institutions planning offices. November 26, 2008 Page 5-63

65 5.5.5 Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and Other consultants Director, UMB Office of Procurement Services Assistant Director (Construction), UMB Office of Procurement Services Director, Architecture, Engineering and Construction, UMB Office of Facilities Management Associate Director, Architecture, Engineering and Construction, UMB Office of Facilities Management Project Manager, UMB Office of Facilities Management President, UMB Dean and/or Assistant Dean of the appropriate UMB Academic Component Administrative Vice President, UMB Director of Capital Planning, UMB For capital projects executed by UMB on behalf of their client institutions within University System of Maryland, the client institution is responsible for all project programming and planning, and UMB executes only the design and construction phases Procurement As an institution belonging to the University System of Maryland, per COMAR A(24), UMB is exempt from COMAR 21, as set forth in COMAR Procurement activities for capital projects at UMB are governed by the University System of Maryland Procurement Policies and Procedures approved by the University System of Maryland Board of Regents September 28, 1988; Amended December 3, 1999, and approved by the Board of Public Works on February 9, The Board of Regents delegated to the Chancellor of the University System of Maryland the authority to implement and to delegate, as appropriate, to the presidents of the constituent institutions, to the extent permitted by Board of Regents policy, authority to implement those policies and procedures. Pursuant to COMAR E, prior to entering into a contract for services that exceed $500,000 or a contract for capital improvements with a value that exceeds $500,000, UMB shall obtain the review and approval of the Board of Public Works by submitting an Action Agenda Item pursuant to COMAR A. November 26, 2008 Page 5-64

66 A/E Contract Procurement The procurement management of A/E services is pursuant to authority granted to UMB as a USM Service Center by the Board of Regents. Procedures for the procurement of A/E services are contained in Section V, Subsection I of the University System of Maryland Procurement Policies and Procedures. A/E procurement is conducted through a two-step process: (1) technical proposal phase; and (2) price proposal/negotiation phase. Upon completion of the price proposal/negotiation phase, the Procurement Officer will review the final fee negotiations with the USM Service Center Executive Group, consisting of a public member, representatives of the USM client institution, and a minimum of two executive management staff from the Service Center. Should the A/E award amount exceed $500,000, the Procurement Officer forwards the award recommendation to the Board of Public Works for approval. A/E responsibilities for capital projects are delineated in UMB s Procedure Manual for Professional Architect/Engineering Services. The design standards to be utilized by A/E s are outlined in UMB s Architectural and Engineering Design Standards manual Construction Contract Procurement Procedures for the procurement of construction contracts are contained in Section V of the University System of Maryland Procurement Policies and Procedures. Subsection B of Section V outlines procedures for competitive sealed bids, and Subsection C of Section V outlines procedures for competitive sealed proposals. Over the previous three years, UMB has utilized the competitive sealed bids approach for three (3) projects procured under the Design-Bid-Build (D/B/B) contract strategy. During this same period, UMB has also utilized the competitive sealed proposals approach for one (1) project executed under the Design- Build contract strategy, and twenty (20) projects executed under the Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) contract strategy. UMB prefers the CMR/GMP contract strategy because they believe it maximizes value received for a fixed construction budget. Because the CMR s fee is a fixed amount, any construction contract cost savings realized in awarding the CMR contract is retained by UMB. Also, during the design phase, the CMR provides cost, constructability and value engineering feedback to UMB and the A/E on a regular basis. Further, they believe that the CMR/GMP strategy allows for award of early construction packages (e.g., site work) thereby permitting an earlier project completion, as well as cost savings (i.e., because the mid-point of the construction phase is earlier, there is less cost escalation). November 26, 2008 Page 5-65

67 Moreover, the Board of Regents (BOR) of the University System of Maryland (USM) through their bylaws encourages the use of CM and Design-Build contracting strategies. Following is an excerpt from USM BOR By-Law VIII-10.30, Policy on Authority Concerning Certain Capital Improvement Projects. This By Law was approved by the Board of Regents on May 6, 1994, and amended February 4, 2000: The Board of Regents desires that the processes employed for the design and construction of capital improvements under its authority make use of the best available management strategies for the implementation of these capital improvements, to ensure a timely and economical result. For projects exceeding $10 million in construction cost (and for smaller projects where schedules or circumstances may dictate) the Chancellor, in exercising the authority delegated by the Board of Regents, shall require from each president, after consultation with one of the established service centers to whom the authority to manage capital improvements is delegated, an implementation plan to meet the established schedule and budget. The Board prefers that a construction manager be utilized (via contract) to administer these projects. The Board also desires that the service centers employ alternative project delivery systems, such as design/build, where it is reasonable and practical to do so. Should the construction contract award amount exceed $500,000, the Procurement Officer forwards the award recommendation to the Board of Public Works for approval Contract Administration Contract administration is the responsibility of the Procurement Officer, in conjunction with the Office of Facilities Management Document Management For document management of capital projects, UMB utilizes MS Excel, MS Access, and occasionally web-based software. A standard filing system common to all projects is utilized Meetings and Reporting Requirements Design Phase: During the design phase, regular progress meetings are conducted every two weeks. However, in-depth, focused meetings are conducted on an as-needed basis for design specialty areas, i.e., engineered systems, lighting systems, interior design, security, etc. These meetings are typically attended by the A/E s Project Manager, the CMR s Project Manager, the AEC s Project Manager, and the Client s representative(s). On an as-needed basis the Procurement Officer and key UMB staff will also attend. Construction Phase: During the construction phase, regular progress meetings are conducted every two weeks. During this phase of the project, the Contractor is required to submit daily reports that include work performed, QA/QC actions, conditions affecting work, manpower on site identified by trade, and November 26, 2008 Page 5-66

68 weather conditions. Progress meeting minutes are required to be prepared and distributed. In addition, monthly progress reports are prepared Request for Information (RFI) Management A Request for Information (RFI) log is required to be maintained during the construction phase Change Order Management The AEC Project Manager, with the approval of the Project Manager s supervisor and the Procurement Officer is authorized to review and negotiate change orders. The A/E also will review them and make recommendations. Agency-prepared independent estimates for comparison are normally not required. A change order log is required to be maintained during the construction phase. The basis, i.e. necessity for the change is noted on the change order document. Change orders exceeding $500,000 for capital improvement project contracts shall be reported to the Board of Regents through the Vice Chancellor for Administration and Finance Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures The AEC Project Manager is authorized to review the A/E s and the Contractor s monthly Pay Applications, subject to higher approval of the Project Manager s supervisor and/or the AEC Associate Director. The Pay Applications are then forwarded to the Client for review and payment. Prior to review of the Contractor s pay application, a walk-through of the jobsite is conducted to assess progress. Also, the Contractor is required to provide a CPM schedule update along with each monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This Checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items. November 26, 2008 Page 5-67

69 5.5.8 Cost Management and Effective Use of Funds The total project budget is established based on historical data in addition to the preliminary cost estimate developed during the design conceptual phase. Bid alternates are included in the construction solicitation package as a measure against potential cost overages in the bid prices/cost proposals Value Engineering Value engineering (VE) reviews are conducted as a matter of course at the various stages of the project design phase. VE is customarily performed at least during schematic design (SD) and design development (DD) phases of the project. In addition, for those projects executed under the Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) contract strategy, the VE process is led by the CMR with full participation of the A/E and UMB representatives Constructability Reviews For CMR/GMP projects, formal constructability reviews are performed by the CMR on each design phase submission. In addition, the AEC technical staff will also review the submissions for constructability issues Cost Estimating and Review Cost Estimating Stages: Cost estimates are performed by both the A/E s independent cost estimator and the CMR at the schematic design (SD) and design development (DD) phases of the project. Also, the CMR performs a cost estimate at the 50% construction document (50% CD) phase, which is provided to the A/E for review. As the design phase progresses, the CMR will perform additional cost estimating on an as-needed basis and, depending upon the circumstances an independent estimate from an outside source may be obtained. Cost Escalation: Cost escalation factors developed by the State Department of Budget and Management (DBM) are used to forecast cost escalation to the project s budget year. Cost Contingency: For State-funded projects, the contingency amount is established at 5% for the year that construction funds are made available. For UMB-funded projects, the contingency amount will vary between 5% and 10%, depending upon the bidding climate. Life Cycle Costing: Life cycle costing is performed during the design phase so that operations and maintenance (O&M) costs over the life of the facility are considered in addition to the capital acquisition cost. November 26, 2008 Page 5-68

70 Dispute Avoidance UMB has a policy of engaging in an informal partnering process with their A/E s and Contractors. The goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule and minimizing of cost growth, all of which are mutually beneficial to the involved parties Time Schedule Management Project Master Schedule: The project master schedule is developed jointly by the Procurement Officer and the Associate Director of AEC, with input from the Client organization. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is not required to be cost loaded, although the Contractor has the option of doing so. The baseline CPM schedule is reviewed and approved by the AEC Project Manager. An updated CPM schedule is required to be submitted with each monthly pay application Delays and Delay Mitigation Procedures If a Contractor gets behind schedule, depending upon the circumstances the work may be accelerated and/or re-sequenced to make up lost time Quality Design Phase Reviews Design Phase: During the design phase, regular progress meetings are conducted every two weeks. However, in-depth, focused meetings are conducted on an as-needed basis for design specialty areas, i.e., engineered systems, lighting systems, interior design, security, etc. Design Review Participants: A/E s Project Manager, the CMR s Project Manager, the AEC s Project Manager, and the Client s representative(s). On an as-needed basis the Procurement Officer and key UMB staff will also attend. November 26, 2008 Page 5-69

71 Construction Inspection and Testing UMB staff (construction inspectors, engineers, fire marshal or operations & maintenance personnel) witness all tests and inspect all systems prior to wall, ceiling or other close-in. The A/E and AEC Project Manager walk the site every two weeks to observe the work in progress. Additionally the Project Manager and inspectors frequently walk the project site, up to several times a week. Independent testing and inspections are required for structural and electrical systems. Quality assurance (QA) testing and inspection is performed by an independent testing consultant Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract. Commissioning is customarily performed by Contractor staff, under the supervision of an independent commissioning authority Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For UMB, the focus project is referred to as New Administration Building. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Build (D/B) contract strategy, with a Guaranteed Maximum Price cost element. The basic project data is as follows: Design Budget Amount: $1,660,000 Actual Design Cost: $1,743,420 Construction Contract Budget Amount: $27,500,000 Original Construction Contract Award Amount: $26,382,669 Final Construction Contract Amount: $26,516,697 Original Substantial Completion Date: October 22, 2008 Actual Substantial Completion Date: August 29, 2008 Original Final Completion Date: August 29, 2008 Actual Final Completion Date: Pending November 26, 2008 Page 5-70

72 Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: Organizations and key staff involved from the start of the project planning phase through construction closeout were the University President, Director of Capital Planning, Director of Procurement, Assistant Director of Procurement for Construction, Director of AEC, Associate Director of AEC, AEC s Project Manager/Structural Engineer, University Architect, AEC s Assistant Director for Architecture and Engineering Services, AEC s Mechanical and Electrical Engineers, the University s Construction Inspectors. On Site Services: Organizations and key staff providing onsite services during the construction phase included the A/E who provided construction administration (CA) services. The A/E was on site at least twice weekly, and performed RFI response, submittal review, participation in the Contractor s coordinated drawings process, preparing observation reports and the final punch list. Opinions: Findings are consistent with UMB s policies and procedures Procurement a. A/E Contract Procurement Findings: The contract strategy utilized for the procurement was Design-Build (D/B). Prospective D/B Contractors were invited to submit their proposals. The basis for selection would be best value. Each of those proposals reflected the A/E that the respective D/B Contractor proposed to use for the design phase. Accordingly, the A/E was selected and procured through the best value selection process when the D/B Contractor was selected and procured. Opinions: Findings are consistent with UMB s established policies and procedures. b. Construction Contract Procurement Findings: For this Design-Build (D/B) project, prospective D/B Contractors were invited to submit their proposals. The basis for the selection process would be best value. The D/B Contractor was selected and procured on that basis. Opinions: Findings are consistent with UMB s established policies and procedures Contract Administration a. Meetings and Reporting Requirements November 26, 2008 Page 5-71

73 Findings: During the construction phase, progress meetings were conducted every two weeks. In attendance were the A/E, the D/B Contractor s representatives. AEC s Project Manager, AEC s Associate Director, AEC s Construction Inspectors, and key UMB programs staff. Primary, recurring discussion topics included the CPM schedule, budget matters, open RFIs and open submittals, and open issues on an as-needed basis. In addition, there were monthly executive-level progress meetings involving the D/B Contractor, A/E, AEC s Project Manager, AEC s Director, AEC s Associate Director, Director of Capital Planning, Assistant Vice President for Facilities Management, University Fire Marshall, Procurement Officer, and Client representatives. Meeting minutes were prepared and distributed. Opinions: Findings are consistent with UMB s established policies and procedures. b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with UMB s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order log as maintained during construction of the project. The AEC Project Manager made recommendations on change order approval to the AEC Project Manager s supervisor. Approvals, based on the Project Manager s recommendations were made by the AEC Supervisor and the Procurement Officer. Opinions: Findings are consistent with UMB s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during construction of the project. Opinions: Findings are consistent with UMB s established policies and procedures. e. Pay Application Review Procedures Findings: Monthly pay applications were reviewed and approved by the AEC Project Manager, and the AEC Associate Director. Opinions: Findings are consistent with UMB s established policies and procedures. November 26, 2008 Page 5-72

74 Cost Management and Effective Use of Funds a. Value Engineering Findings: Value Engineering (VE) was performed at the concept design (CD), schematic design (SD) and design development (DD) phases of the project. Participants included the A/E and its design consultants, AEC Director and Associate Director, AEC Project Manager, Assistant Vice President for Facilities Management, and Director of Capital Planning. A total of $1,675,186 of potential VE savings was identified, of which $1,484,568 was implemented and realized.. Also, during the construction phase of the project, the D/B Contractor identified $226,663 of potential VE savings, of which $87,918 was implemented and realized. It is UMB s belief that VE is a valuable management tool in exercising cost control, and that in conditions of volatile bidding climate it can successfully be utilized to identify bid alternates for inclusion in the bid package. For example, as part of the VE process, an alternate building facing material (i.e., brick instead of cast stone) was included in the bid package as a deductive alternate. It was accepted and implemented, saving $505,000. Opinions: Findings are consistent with UMB s established policies and procedures. b. Constructability Reviews Findings: Constructability reviews were conducted at the schematic design (SD) and design development (DD) phases of the project. Opinions: Findings are consistent with UMB s established policies and procedures. c. Cost Estimating and Review Findings: Cost estimates were performed at the concept design (CD), Schematic design (SD) design development (DD) phases of the project. Opinions: Findings are consistent with UMB s established policies and procedures. d. Dispute Avoidance Findings: On this projects, there were no disputes between UMB and the D/B Contractor. Therefore, no dispute resolution actions were necessary. UMB reported that on this project, because of preexisting favorable relations between the major parties, they were able to practice informal partnering (formal partnering was deemed not necessary) with the D/B Contractor and his A/E. This allowed them to maintain open channels of communication and resolve issues in a timely manner. November 26, 2008 Page 5-73

75 Opinions: Findings are consistent with UMB s established policies and procedures Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding, award, construction and activation/furnishing was developed for this project. Also, a CPM schedule was required for the project, and was provided by the D/B Contractor. Opinions: Findings are consistent with UMB s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: This project reached substantial completion approximately seven (7) weeks ahead of schedule. There were no delay claims received from the Design Build (D/B) Contractor. UMB reported that they practiced informal partnering with the D/B Contractor and A/E on this project, and experienced a good working relationship. Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations between UMB, the Contractor and the A/E, through an informal partnering process, may have been a significant contributing factor Quality a. Construction Inspection and Testing Findings: Quality assurance inspections were conducted daily by the UMB Construction Inspector, who prepared daily QA inspection reports. Also, quality assurance (QA) testing was performed by UMB forces during the project construction phase. UMB indicated that it is their belief that the higher quality that typically results from the QA testing justified its additional expense. Opinions: Findings are consistent with UMB s established policies and procedures. b. Commissioning Procedures Findings: A formal commissioning process was not utilized on this project. This is because UMB believed that the installed building systems were relatively simple and therefore formal commissioning November 26, 2008 Page 5-74

76 was not justified. However, UMB indicates that in lieu of a formal commissioning process, a vigorous startup and testing regimen was instead undertaken for the installed systems. Opinions: UMB s established policies and procedures require a formal commissioning program. Startup and testing procedures are not normally an ample substitute for the more comprehensive systems commissioning process. However, if during the systems startup and testing process satisfactory results were obtained, then it is quite possible that a desired end state similar to that possible with formal commissioning was achieved. November 26, 2008 Page 5-75

77 5.6 MORGAN STATE UNIVERSITY Introduction Founded as a private institution in 1867 as the Centenary Biblical Institute, by the Baltimore Conference of the Methodist Episcopal Church, the original mission of the institution that was to eventually become Morgan State University (MSU) was to train young men in ministry. It subsequently broadened its mission to educate both men and women as teachers. The school was renamed Morgan College in 1890 in honor of the Reverend Lyttleton Morgan, the first chairman of its Board of Trustees, who donated land to the college. Morgan College remained a private institution until That year, the state of Maryland purchased the school in response to a state study that determined that Maryland needed to provide more opportunities for its black citizens. As Maryland's teachers colleges began to broaden their objective, Morgan College and other like institutions were placed into a state college system governed by a Board of Trustees. However, in 1975 the State Legislature re-designated Morgan College as a university, gave it the authority to offer doctorates, and provided for it to once again have its own governing board. In 1988 the campuses in the state college system became part of the University of Maryland System. Morgan State University (MSU) and St. Mary's College of Maryland were the only public baccalaureategranting institutions authorized to have their own governing boards. The legislation also strengthened Morgan's authority to offer advanced programs and designated the campus as Maryland's Public Urban University. Annual enrollment is approximately 6,000 students, enrolled from baccalaureate to doctorate. There are over 40 main buildings on the campus property Documents Received Pursuant to this review, MSU submitted to Alpha a number of formal policy and procedures documents governing the procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that MSU may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the MSU s formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-76

78 5.6.3 Capital Project Contract Strategies Brief Summary MSU has primarily utilized the Design-Bid-Build (D/B/B) contract strategy for executing its capital projects. The following table provides a summary of the contract strategies utilized for capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 8 $67,735,939 $76,732,391 Design-Build (D/B) 0 $0 $0 Professional Construction Management 0 $0 $0 Construction Management at Risk / 0 $0 $0 Guaranteed Maximum Price (CMR/GMP) Totals: 8 $67,735,939 $76,732,391$ MSU reports that the preferred contract strategy for the delivery of capital projects is Design-Bid-Build (D/B/B). MSU prefers this method because it encourages competition and provides the most flexibility in meeting budgetary constraints and design criteria. This preferred selection process involves competitive sealed bidding. As can be seen in the above table, D/B/B accounted for 100% of the total funds expended for the eight projects completed within the reporting period Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are determined during the schematic design phase, with input from the University Planner, State Department of Budget & Management, Director of Design and Construction Management, Procurement Office, Physical Plant, and end users. A master schedule is developed by the University Planner, Director of Design and Construction Management, and the A/E Consultant selected for the project. 2. Project Contract Strategy: The project contract strategy is usually determined at the preconstruction document phase and is selected by the Director of Design and Construction Management. 3. Project Budget Estimates: Initial budget estimates are based on a concept estimate and historical information and are developed by the Offices of Planning, Design and Construction Management, and Procurement. November 26, 2008 Page 5-77

79 5.6.5 Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants Physical Plant Director Police Chief s Representative Information Systems Representative Telecommunication Director s Representative Furniture/Equipment Coordinator Necessary User Group Representatives Director of Design & Construction Management Director of Procurement Manager of Design Services Manager of Construction Administration Comptroller of University Field Inspector Construction Administrator Procurement As an institution belonging to the University System of Maryland (USM), pursuant to COMAR A(24), MSU is exempt from COMAR 21, as set forth in COMAR For the purpose of this review, the source document for all procurements, including capital projects is the Morgan State University Procurement Manual which outlines the process for soliciting architectural services, engineering design services, and construction projects. Pursuant to COMAR E, prior to entering into a contract for services that exceed $500,000 or a contract for capital improvements with a value that exceeds $500,000, MSU shall obtain the review and approval of the Board of Public Works by submitting an Action Agenda Item pursuant to COMAR A A/E Contract Procurement A/E procurement is managed by the MSU Procurement Officer and is conducted through a two-step process: (1) technical proposal phase; and (2) price proposal/negotiation phase. In the technical proposal phase the Procurement Office, with input from the MSU Design and Construction Management office, creates the solicitation package and establishes the solicitation November 26, 2008 Page 5-78

80 schedule. The MSU Procurement Officer conducts a pre-proposal conference and after receipt and review of the technical proposals, establishes a list of firms selected to advance to the negotiation phase. In the price proposal negotiation phase, the MSU Procurement Officer conducts a pre-fee negotiation meeting with the highest ranked firm. After receipt and review of the fee proposal submitted, fee negotiation meetings are conducted as necessary within a thirty (30) day period reaching agreement on fee. Negotiations with the second-highest ranked firm are conducted if negotiations with the highest ranked firm are unsuccessful after the first thirty days. Upon completion of successful negotiations for a fee less than $500,000, the MSU Procurement Officer initiates the award process. Should the A/E award amount exceed $500,000, the MSU Procurement Officer forwards the award recommendation to the Board of Public Works for approval Construction Contract Procurement Construction procurement is executed in a two-phase process. The first phase involves a bidder prequalification process. This process involves advertising the project, generation of a bid list that includes a minimum of 4 MBE s, distribution of the solicitation package to the bidders, review of bidders proposals by a technical review committee, and selection of the firms that are qualified to submit bids. In the second phase all of the bidders determined to be qualified are invited to submit competitive sealed bids. This phase involves distribution of the construction documents and a notice-to-bidders to the firms who have qualified, a pre-bid conference, receipt of bids and identification of a low bidder, and contract approval by the Board of Public Works Contract Administration Document Management For document management of capital projects, MSU utilizes MS Excel software. A standard filing system common to all projects is utilized Meetings and Reporting Requirements Design Phase: During the schematic design (SD) phase meetings are conducted every two-to-three weeks. During the design development (DD) phase meetings are also conducted every two-to-three weeks. During the construction document (CD) phase one meeting is conducted at the 50% complete stage and one meeting is conducted at the 95% complete stage. In addition to the A/E and the user group representatives, meeting attendees include (on an as-needed basis) the Physical Plant Director, Police Chief Representative, Information Systems Representative, Telecommunications Representative, and the Furniture/Equipment Coordinator. November 26, 2008 Page 5-79

81 Construction Phase: During the construction phase, regular progress meetings are conducted every two weeks. During this phase of the project, the Contractor is required to submit daily reports that include work performed, manpower on site identified by trade, and weather conditions. Progress meeting minutes are required to be prepared and distributed. Monthly progress reports are not required Request for Information (RFI) Management A Request for Information (RFI) log is required to be maintained during the construction phase Change Order Management The Director of Design and Construction Management and the Director of Procurement, with input and recommendations from the A/E, are authorized to review and negotiate change orders. MSU does not prepare an independent estimate for comparison during the review process. A change order log is required to be maintained during the construction phase. The basis for each change is noted on the change order log. All change orders must be reviewed by a change order review committee (CORC) comprised of seven (7) MSU officials. The CORC makes its recommendations to the MSU Vice President for Finance and Management (VPFM). The MSU VPFM has final approval authority on all change orders except those exceeding $500,000 which are forwarded to the Board of Public Works for approval Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures A/E: Pay applications are reviewed by the Manager of Design Services during the design phase and the Manager of Construction Administration during the construction phase. Upon approval the application is forwarded to the Manager of Contract Administration who, after reviewing the application and verifying funding, forwards it to the Director of Design and Construction Management for final approval. Payment is processed through the Accounts Payable Office and the State Financial System. Contractor: Pay applications are reviewed by the A/E and MSU s Field Inspector/Construction Administrator. A walk-through is conducted to assess the construction progress associated with the pay application and the Contractor is required to provide a CPM schedule update with the pay request. After coordination with the Contractor and agreement on the justified pay request amount by these parties, the application is forwarded to the Manager of Construction Management for verification of the correctness of services rendered and, upon verification, forwards the application to the Manager of Contract November 26, 2008 Page 5-80

82 Administration. The Manager of Contract Administration, after reviewing and verifying funding, forwards the application to the Director of Design and Construction Management for final approval. Upon final approval, payment is processed through the Accounts Payable Office and the State Financial System Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. This checklist includes operations and maintenance (O&M) manuals, as-built drawings, staff training, and delivery of attic stock items Cost Management and Effective Use of Funds Value Engineering For projects exceeding $10,000,000 in construction cost, Value Engineering reviews are performed at the completion of the schematic design (SD) phase and during the design development (DD) phase Constructability Reviews For projects exceeding $10,000,000 in construction cost, constructability reviews are performed at the 95% construction document (95% CD) stage. Participating in these reviews are the MSU Director of Design and Construction Management, MSU Manager of Design Services, MSU Manger of Construction Administration, the A/E, and the MSU Physical Plant representatives Cost Estimating and Review Cost Estimating Stages: Cost estimates are performed by the A/E s independent cost estimator at the end of the schematic design (SD) phase, the end of the design development (DD) phase, at the 50% construction document (50% CD) stage, and at the 95% construction document (95% CD) stage. Cost Escalation: Cost escalation factors developed by DBM are used to forecast cost escalation to the project s budget year. Cost Contingency: The cost contingency is established at the project funding stage and is usually set at 5% of the estimated construction cost. Life Cycle Costing: Life cycle costing is performed during the design phase so that operations and maintenance (O&M) costs over the life of the facility are considered in addition to the capital acquisition cost. November 26, 2008 Page 5-81

83 Dispute Avoidance MSU has a policy of engaging in an informal partnering process with their A/E s and Contractors. The goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule and minimizing of cost growth, all of which are mutually beneficial to the involved parties Time Schedule Management Project Master Schedule: The project master schedule is developed jointly by the University Planner, Director of Design and Construction Management, and the A/E Consultant selected for the project. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is required to be cost loaded. The baseline CPM schedule is reviewed and approved jointly by the A/E, the MSU Field Inspector/Construction Administrator, the MSU Manager of Construction Administration, and the MSU Director of Design and Construction Management. An updated CPM schedule is required to be submitted with monthly pay applications Delays and Delay Mitigation Procedures If a project falls behind schedule, MSU representatives will work with the Contractor to try to accelerate the remaining work to meet the scheduled completion date. If the project contingency becomes low or is exhausted early in the construction phase, MSU may attempt to reduce the scope of work through deductive change orders Quality Design Phase Reviews Design Phase: Design reviews are conducted during schematic design (SD), design development (DD), and construction document (CD) design phases. Design Review Participants: Those participating in the design reviews are the A/E, end user representatives, MSU Physical Plant Director, MSU Police Chief representative, MSU Information Systems representative, MSU Telecommunications representative, and the MSU Furniture/Equipment Coordinator. November 26, 2008 Page 5-82

84 Construction Inspection and Testing Quality assurance inspections are performed regularly and as often as necessary during construction. The inspections are performed by the A/E, MSU Field Inspectors, and the MSU Manager of Construction Administration. Quality assurance testing is performed by the A/E, the MSU Field Inspectors/Construction Administrator, and the MSU Manager of Construction Administration Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract and involves a professional commissioning authority Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For MSU, the focus project is referred to as New Communication Center. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Bid-Build (D/B/B) contract strategy with all bidders being prequalified. The basic project data is as follows: Design Budget Amount: $ 1,764,000 Actual Design Cost: $ 1,675,261 Construction Contract Budget Amount: $18,414,000 Original Construction Contract Award Amount: $17,920,000 Final Construction Contract Amount: $18,508,000 Original Substantial Completion Date: Not Scheduled Actual Substantial Completion Date: May 17, 2006 Original Final Completion Date: September 21, 2005 Actual Final Completion Date: November 17, Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: Organizations and key staff involved from the start of the Project Planning phase through construction closeout were MSU s Planner, the MSU Manager of November 26, 2008 Page 5-83

85 Design Services, the MSU Field Inspector, the MSU Manager of Construction Administration, the MSU Director of Design and Construction Management, the MSU Director of Procurement, the MSU Director of the Physical Plant, the MSU Comptroller, the MSU Director of Information Services, the MSU Director of Telecommunications, and the MSU Police Chief. On Site Services: Organizations and key staff providing onsite services during the construction phase included the A/E who provided construction administration (CA) services. The A/E was on site every two weeks to perform field inspections, attend progress meetings, and record and distribute meeting minutes. The A/E also participated in processing of requests for information (RFI s), Contractor-proposed change orders, and the Contractor s monthly pay applications. Opinions: Findings are consistent with MSU s policies and procedures Procurement a. A/E Contract Procurement Findings: The contract strategy utilized for the procurement was Design-Bid-Build (D/B/B). The A/E selected for the project was procured through the two-step process which resulted in contracted design services through a negotiated fee. Opinions: Findings are consistent with MSU s established policies and procedures. b. Construction Contract Procurement Findings: The construction contract procurement was executed in a two-phase process. The first phase involved a bidder prequalification procedure. In the second phase, the qualified bidders were invited to submit competitive sealed bids, with award being made to the low bidder. Opinions: Findings are consistent with MSU s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: During the construction phase, progress meetings were conducted every two weeks. In attendance were the A/E, the Contractor s representatives, the MSU Field Inspector, and the MSU Construction Administrator. Meeting minutes were prepared and distributed by the A/E. Opinions: Findings are consistent with MSU s established policies and procedures. b. Request for Information (RFI) Management November 26, 2008 Page 5-84

86 Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with MSU s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order log was maintained during construction of the project and reflected the basis for each change. Those authorized to negotiate and approve change orders included the Manager of Construction Administration, Director of Design and Construction Management, Director of Procurement, and the Vice President of Finance and Management. Opinions: Findings are consistent with MSU s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during construction of the project. Opinions: Findings are consistent with MSU s established policies and procedures. e. Pay Application Review Procedures Findings: Monthly pay applications for the A/E were reviewed and approved by MSU s Manager of Design Services, the MSU Manager of Construction Administration, and the MSU Director of Design and Construction Management. Monthly pay applications for the Contractor were reviewed and approved by the A/E, the MSU Field Inspector/Construction Administrator, the MSU Manager of Construction Administration, and the MSU Director of Design and Construction Management. Opinions: Findings are consistent with MSU s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering Findings: A Value Engineering review was performed at the 95% construction document (95% CD) stage. Those participating in the review included the A/E, the MSU Director of Design and Construction Management, the MSU Manager of Design Services, and the MSU Manager of Construction Administration. Opinions: Findings are consistent with MSU s established policies and procedures. b. Constructability Reviews November 26, 2008 Page 5-85

87 Findings: A constructability review was performed at the 95% construction document (95%) stage. Those participating in the review included the A/E, the MSU Director of Design and Construction Management, the MSU Manager of Design Services, and the MSU Manager of Construction Administration. Opinions: Findings are consistent with MSU s established policies and procedures. c. Cost Estimating and Review Findings: Cost estimates were performed at the 50% construction document stage. Opinions: Findings are consistent with MSU s established policies and procedures. d. Dispute Avoidance Findings: MSU reported that there were multiple disputes on this project. The specifics of the dispute were not reported and the MSU indicates the case is still in litigation. Opinions: Because MSU did not report the nature of the disputes, nor the background behind them, Alpha cannot offer an opinion on what caused them or how they might have been avoided Time a. Schedule Management Findings: A cost-loaded CPM schedule was required for the project and was provided by the Contractor. Opinions: Findings are consistent with MSU s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: MSU reported that there were construction delays on the project and that the Contractor submitted a formal delay claim. The settlement of the claim is currently ongoing and those involved from MSU are the Director of Design and Construction Management and the Director of Procurement. Opinions: Findings are consistent with MSU s established policies and procedures Quality a. Construction Inspection and Testing November 26, 2008 Page 5-86

88 Findings: Quality assurance (QA) inspections were conducted daily by the MSU Construction Inspector, who prepared daily QA inspection reports. Also, quality assurance (QA) testing was performed by MSU forces during the project construction phase. MSU indicated that it is their belief that the higher quality that typically results from the QA testing justified its additional expense. Opinions: Findings are consistent with MSU s established policies and procedures. b. Commissioning Procedures Findings: A formal commissioning process was not utilized on this project. Opinions: Findings are not consistent with MSU s established policies and procedures. November 26, 2008 Page 5-87

89 5.7 ST. MARY S COLLEGE OF MARYLAND Introduction Saint Mary s College of Maryland (SMCM) is a four-year non-sectarian liberal arts college located in St. Mary s City, Maryland. SMCM occupies 47 buildings on a 319 acre campus. Facilities include a multipurpose fine arts center, campus community center, auditorium, NCAAqualifying swimming pool, outdoor track, six tennis courts two gymnasiums, and a riverfront boathouse and dock. Enrollment (fall of 2006) was 1,871 full time and 86 part time students. The 2006 State Legislature granted SMCM new procurement authority that closely parallels the authority provided to the University System of Maryland. SMCM adopted its current procurement policy in January Documents Received Pursuant to this review, SMCM submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that SMCM may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provide to Alpha. Accordingly, any overall judgment as to the adequacy and sufficiency of SMCM s formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-88

90 5.7.3 Capital Project Contract Strategies Brief Summary SMCM has over the years utilized several contract strategies for executing its capital projects. The following table provides a summary of the contract strategies utilized for capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 4 $1,008,000 $1,045,133 Design-Build (D/B) 1 1 $4,188,000 $4,332,141 Professional Construction Management 0 $0 $0 Construction Management at Risk / 1 1 $5,328,560 $5,466,989 Guaranteed Maximum Price (CMR/GMP) Totals: 6 $10,524,560 $10,824,263 Notes: 1 Denotes projects administered under SMCM s previous procurement policy, i.e., prior to the increase in authority granted by the 2006 State Legislature. The above data includes projects over $100,000 only. SMCM is currently in the solicitation phase for both A/E services and Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) for the Anne Arundel Hall replacement project. The total project budget is approximately $32,000,000. The staff at SMCM that are engaged in managing capital projects report that they do not currently have a preferred contract strategy for delivery of capital projects. Instead, they select the most appropriate project delivery method for the project at hand based on the technical complexity of the project, time factors, budget concerns, and any other special factors that would be involved with the project. Also, St. Mary s utilizes both competitive sealed bidding and best value approaches on its procurements, depending upon certain project factors. However, they further report that recently they have been moving more towards the use of the Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) contract strategy for major capital projects, in order to better manage during the design phase the constraints of the construction phase budget. November 26, 2008 Page 5-89

91 5.7.4 Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are reflected in SMCM s tenyear master plan, with input from SMCM s Strategic Planning Committee, SMCM s President s Cabinet, and the SMCM Trustees. Key staff include the SMCM Project Manager, the SMCM Project Building Committee, the SMCM Director of Design and Construction, the SMCM Associate Vice President of Planning and Facilities, the SMCM Assistant VP of Operations, the SMCM Trustees Committee on Buildings and Grounds, and DBM. 2. Project Contract Strategy: The project contract strategy is determined at the commencement of the project programming phase. It is based on recommendations received from the Director of Design and Construction and approved by the Associate Vice President of Planning and Facilities, who is also the Procurement Officer for all capital projects. This strategy is reflected in the master schedule. 3. Project Budget Estimates: These estimates are developed by the SMCM Facilities Office and approved by the SMCM Associate Vice President of Planning and Facilities, the SMCM Vice President for Business and Finance, and the SMCM President. For State-funded capital projects, the SMCM President submits an annual capital budget request to the State. For SMCM-funded projects, the SMCM Board of Trustees approves the budget Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants Project Manager Director of Design and Construction Project Building Committee Associate Vice President of Planning and Facilities Assistant Vice President for Operations Associate Vice President of Planning and Facilities Third-Party Inspectors In addition, the Project Building Committee (comprised of selected SMCM departments, faculty and student representatives) are engaged on an ad hoc basis to provide input for the detailed project November 26, 2008 Page 5-90

92 documents, which are ultimately approved by the SMCM Strategic Planning Committee, the SMCM President s Cabinet, and the SMCM Trustees Procurement As an institution belonging to the University System of Maryland (USM), pursuant to COMAR A(26), SMCM is exempt from COMAR 21, as set forth in COMAR The primary source document for all procurements, including capital projects is the St. Mary s College of Maryland Procurement Policies and Procedures manual. Procurement Officers (Purchasing Agent and Associate Vice President of Facilities) have been established and are authorized to formulate, enter into, or administer contracts and/or make written findings/determinations with respect to contracts. The centralized SMCM Purchasing Office is responsible for preparing contracts and purchase orders within the guidelines of the Procurement Policies and Procedures. The Purchasing Office is also responsible for providing administrative support to all procurements such as advertising, issuing solicitation documents, responding to procurement inquiries, receiving bids/proposals, administering contracts awards, and maintaining official contract files. Levels of signature authority have been established based on the procurement amount. These levels are: Less than $5,000: Budget Manager or Designee $5,000 to $10,000: Senior Buyer or Procurement Officer $10,000 to $25,000: Procurement Officer and Budget Manager $25,000 to $100,000: Procurement Officer and Budget Manager Greater than $100,000: VP for Business & Finance, and Budget Manager Pursuant to COMAR E, and prior to entering into a contract for services that exceed $500,000 or a contract for capital improvements with a value that exceeds $500,000, SMCM shall obtain the review and approval of the Board of Public Works by submitting an Action Agenda Item pursuant to COMAR A A/E Contract Procurement For A/E services over $25,000, procurement is executed through competitive sealed proposals which are evaluated by a Selection Committee composed of appropriate SMCM representatives and affiliated organizations. November 26, 2008 Page 5-91

93 Upon completion of the technical/price proposal evaluation, a ranking of the proposers is provided to the SMCM Procurement Officer who, after approving the ranking, notifies the proposers of the ranking, and notifies the top ranked proposer that they shall proceed to the negotiation phase. Negotiations are conducted by a negotiation committee and upon successful completion of negotiations, the committee forwards its recommendation for contract award to the SMCM Procurement Officer. Failed negotiations with the top-ranked proposer result in either negotiations with the next ranked proposer or readvertisement of the procurement Construction Contract Procurement For projects at the smaller end of the scale, the contract is normally procured though the competitive sealed bidding strategy. For larger projects the strategy may be based on competitive sealed bidding after pre-qualification of prospective contractors, or alternately based on a best value selection process if procured through either a Design/Build (D/B) or Construction Management at Risk/Guaranteed Maximum Price (CMR/GMP) strategy. For projects exceeding $100,000, procurement is executed either through competitive sealed bids or competitive sealed proposals, depending upon the project s contract strategy. The Design/Build (D/B) method has been used in the past for student housing projects and is currently being used for a shoreline restoration project. During solicitation for the D/B method, a schematic design and detailed specifications are provided to the D/B Contractor to help establish the specific scope of work for the project. SMCM reports that this approach has been working well for them. For major capital projects, SMCM has recently been utilizing the Construction Management at Risk (CMR) /Guaranteed Maximum Price (CMR/GMP) strategy. SMCM reports that with this strategy they can better manage the projected construction cost during the design phase. Open competition is ensured by requiring the Construction Manager under contract to obtain a minimum of three (3) competitive bids for each trade contract with award going to the low bidder Contract Administration Contract administration is the responsibility of the SMCM Procurement Officer, who is responsible for the technical and administrative sufficiency of SMCM s contracts and who delegates this responsibility to other SMCM officials, with the approval of the SMCM Vice President for Business and Finance. November 26, 2008 Page 5-92

94 Document Management Microsoft Excel is used for budgeting documents. Microsoft Project is used for CPM scheduling. Microsoft Access is used for project capital and non-capital equipment management. A common filing system is used for all projects with some variations from project-to-project Meetings and Reporting Requirements Design Phase: During the design phase, design review meetings are typically conducted at the end of schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction documents (95% CD), and 100% constructions document (100% CD) stages. The design review meetings are attended by representatives from the A/E and their consultants, SMCM s Project Manager, SMCM s Director of Design and Construction, SMCM s Project Building Committee, SMCM s Associate Vice President of Planning and Facilities, SMCM s Assistant Vice President for Operations, and various SMCM technical staff as required. Construction Phase: During the construction phase, the Contractor is required to provide daily reports that include work performed, QA/QC actions, conditions affecting work, manpower onsite identified by trade, and weather conditions. Progress meetings are required to be conducted every two (2) weeks. Progress meeting minutes are required to be prepared and distributed. SMCM does not require monthly construction reports Request for Information (RFI) Management A request for information (RFI) log is required to be maintained during the construction phase Change Order Management SMCM project management staff, with the assistance of the A/E, will review the proposed cost each change order. If the change order is large or complex, the project manager will evaluate the cost by referring to current cost estimating resources and other historical cost information. The SMCM Project Manager, with oversight provided by the SMCM Director of Design and Construction, is authorized to negotiate change orders, which are then approved by the SMCM Associate Vice President of Planning and Facilities, and the SMCM Vice President of Business and Finance. Any change orders exceeding $500,000 must be approved by the Board of Public Works A change order log is required to be developed and maintained during construction and the log does not reflect the basis for each change. The basis for each change is shown on the change order approval form. November 26, 2008 Page 5-93

95 Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures The SMCM Project Manager is authorized to review and reject/approve A/E and Contractor monthly pay applications. A walk-through by an agency representative to assess construction progress is required to support the review and approval of the Contractor s monthly pay application. The Contractor is required to provide a CPM schedule update along with the monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout Cost Management and Effective Use of Funds The total project budget established is based on professionally developed construction cost estimates, historical information on the cost of design, and other owner expenses. The project budget year is determined by using escalation/inflation factors that are issued by DBM. The project contingency is determined when the project budget request is submitted to DBM. Life cycle costs are considered during the design phase as all of SMCM s projects are to be LEED Silver certified Value Engineering Design-Bid-Build Projects: Value engineering is performed at the various stages of the project design phase. However, particular emphasis is placed on value engineering when the cost estimates performed at any of the design stages indicate that the project s projected construction cost is over budget. Construction Management at Risk Projects: One of the CMR s key role and responsibility is to provide feedback to the owner and A/E regarding the projected construction cost as the design phase is underway. Accordingly, during the design phase value engineering is performed by the CMR on a regular basis Constructability Reviews Design-Bid-Build Projects: SMCM Facilities Office staff and Operations Office staff provide the constructability reviews at each design stage. In particular, the commissioning authority selected for the project performs a constructability review of the mechanical systems. November 26, 2008 Page 5-94

96 Construction Management at Risk Projects: The CMR is required to perform a constructability review at each design stage Cost Estimating and Review Cost Estimating Stages: Cost estimates are prepared at the schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction document (95% CD), and 100% construction document (100% CD) stages. Cost Escalation: Project cost escalation to the project s midpoint of construction is performed based on factors issued by DBM. Cost Contingency: The project cost contingency is determined at the time of final preparation of SMCM s annual budget request to the State. Life Cycle Costing: All projects at SMCM are to be LEEDS Silver certified. Accordingly, life cycle costing is incorporated into the project design Dispute Avoidance SMCM has a policy of engaging in an informal partnering process with their A/E s and Contractors. The goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule, and reduction of cost growth, all of which are mutually beneficial to the involved parties Time Schedule Management Project Master Schedule: The project master schedule is developed by the SMCM Project Manager, with inputs from the specific SMCM project building committee. It is reviewed by the SMCM Director of Design and Construction, and approved by the SMCM Associate Vice President of Planning and Facilities. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is not required to be cost loaded, although the Contractor has the option of doing so. An updated CPM schedule is required to be submitted with monthly pay applications. November 26, 2008 Page 5-95

97 Delays and Delay Mitigation Procedures If the project falls behind schedule, the Contractor is directed by SMCM to produce and submit a CPM recovery schedule showing how the Contractor will bring the project back on schedule Quality Design Phase Reviews Design Phase: Design phase reviews are conducted at the end of schematic design (SD), design development (DD), 50% construction document (50% CD), 95% construction document (95% CD), and 100% construction document (100% CD) stages. Design Review Participants: Participating in the design review process are the A/E and its various consultants, SMCM s Project Manager, SMCM s Director of Design and Construction, SMCM s Project Building Committee, SMCM s Associate VP of Planning and Facilities, SMCM s Assistant Vice President for Operations, and on an ad hoc basis certain SMCM technical staff Construction Inspection and Testing Quality assurance (QA) inspections are required to be performed daily to weekly by either the SMCM Inspector and/or SMCM Project Manager. The SMCM Director of Design and Construction, and the SMCM Associate Vice President of Planning and Facilities provide inspections as needed. The AE inspects the work every two weeks Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract. The commissioning agent is required to be a third party representative Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For SMCM, the focus project is referred to as Waring Commons Phase III. The findings and opinions of this focused assessment are outlined below. November 26, 2008 Page 5-96

98 Contract Strategy This project was executed under a Design-Build (D/B) strategy. Bidders were pre-qualified as part of the first phase of the solicitation process. The basic project data is as follows: Design Budget Amount: N/A (Design Cost Included in the Construction Budget) Actual Design Cost: N/A (Design Cost Included in the Construction Budget) Construction Contract Budget Amount: $4,207,000 Original Construction Contract Award Amount: $4,188,000 Final Construction Contract Amount: $4,332,141 Original Substantial Completion Date: June 18, 2007 Actual Substantial Completion Date: June 18, 2007 Original Final Completion Date: August 10, 2007 Actual Final Completion Date: August 10, Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: Organizations and key staff involved during project planning and alternative selection process through construction closeout were the SMCM Associate Vice President, SMCM Board of Trustees, SMCM Project Manager, and SMCM Associate VP of Planning and Facilities. On Site Services: Organizations and key staff providing onsite services during the construction phase included the Architect, Structural Engineers, and Landscape Architects that were under contract to the Design-Build (D/B) contractor. Opinions: Findings are consistent with SMCM s established policies and procedures Procurement a. A/E Contract Procurement Findings: For this Design-Build (D/B) project, prospective D/B Contractors were invited to submit their proposals. The basis for the selection process would be best value. Each of those proposals reflected the A/E that the respective Contractor proposed to use for the design phase. Accordingly, the A/E was selected and procured through that best value selection process when the D/B Contractor was selected and procured. Opinions: Findings are consistent with SMCM s established policies and procedures. November 26, 2008 Page 5-97

99 b. Construction Contract Procurement Findings: For this design-build project, prospective Design-Build (D/B) Contractors were invited to submit their proposals. The basis for the selection process would be best value. The D/B Contractor was selected and procured on that basis. Opinions: Findings are consistent with SMCM s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: Construction progress meetings were conducted biweekly. Attendees were general construction project managers and superintendent, and SMCM s Project Manager. For this Design Build (D/B) contract, the D/B Contractor s A/E attended some but not all meetings. The SMCM Project Manager prepared monthly reports summarizing the pertinent project information. Opinions: Findings are consistent with SMCM s established policies and procedures. b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with SMCM s established policies and procedures. c. Change Order Management Findings: A Contractor s proposed change order log was maintained during construction of the project. The basis for each change order was indicated on the change order approval form. The SMCM Project Manager was authorized to negotiate and recommend settlement amounts. The SMCM Associate VP of Planning and Facilities and the SMCM VP of Business and Finance were authorized to approve settlements. Opinions: Findings are consistent with SMCM s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during the project construction phase. Opinions: Finding is consistent with SMCM s established policies and procedures. e. Pay Application Review Procedures November 26, 2008 Page 5-98

100 Findings: For this Design-Build (D/B) project, the SMCM Project Manager was authorized to approve progress payment amounts for the D/B Contractor. These progress payments reflected efforts of both the D/B Contractor and the D/B Contractor s A/E. Opinions: Findings are consistent with SMCM s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering Findings: Because this was a Design-Build (D/B) project, a formal value engineering process was not conducted because the D/B Contractor was contractually required to design and construct the project within the contract award amount. Opinions: Findings are consistent with SMCM s established policies and procedures. b. Constructability Reviews Findings: Design reviews were conducted at 50% construction document (50% CD), 75% construction document (75% CD), 95% construction document (95% CD), and 100% construction document (100% CD) stages of the design process. These reviews were performed by SMCM s VP of Planning and Facilities, the SMCM Project Manager, and the SMCM Operations Office staff. Opinions: Findings are consistent with SMCM s established policies and procedures. c. Cost Estimating and Review Findings: Because this was a Design-Build (D/B) project with a firm, fixed price established at the time of contract award, no cost estimates were performed during the design and construction phases. Opinions: Because the D/B Contractor was responsible for completing the work within a firm, fixed price, there was no need for SMCM to perform cost estimating after the D/B contract was awarded. d. Dispute Avoidance Findings: On this project, there were no disputes between SMCM and the D/B Contractor. Therefore, no dispute resolution actions were necessary. SMCM reported that for this project they practiced informal partnering with the D/B Contractor, which they believe is influential in achieving high quality, claims avoidance and adherence to schedule. Opinions: The reason that there were no disputes on this project is not evident. However, the good working relations experienced between SMCM and the D/B Contractor, made possible through an informal partnering process, may have been a significant contributing factor. November 26, 2008 Page 5-99

101 Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding award, construction, and activation/furnishing activities was developed for this project. Also, critical path method schedule was developed for the project by the D/B Contractor. Opinions: Findings are consistent with SMCM s established policies and procedures. b. Delays and Delay Mitigation Procedures Findings: The project was completed on schedule; i.e., there was no slippage to either the substantial completion or final completion dates. Accordingly, there were no excusable delays, no delay claims, and no delay mitigation procedures were necessary. Also, there was no need to accelerate the work during any phase of the project. Opinions: The reason that there were no delays is not evident. However, the good working relations experienced between St. Mary s and the D/B Contractor, made possible through an informal partnering process as noted above, may have been a significant contributing factor Quality a. Construction Inspection and Testing Findings: Quality inspections were conducted and any quality discrepancies were noted in daily reports. Field quality assurance tests were conducted, including sanitary plumbing testing, domestic water main supply pressure testing, and domestic water supply pressure testing within building. Opinions: Findings are consistent with SMCM s established policies and procedures. b. Commissioning Procedures Findings: Commissioning of installed systems was performed as part of the construction contract. A third party professional commissioning authority was utilized on this project. Opinions: Findings are consistent with established policies and procedures. SMCM reports that their commissioning process works well, and they believe that the improved post-completion performance of installed systems justifies the additional cost and effort required for a formal commissioning process. November 26, 2008 Page 5-100

102 5.8 MARYLAND ENVIRONMENTAL SERVICE Introduction Maryland Environmental Service (MES), as an independent agency was created in 1970 with a broad mission of protecting and enhancing the state s air, land and water resources. Mission areas include: environmental compliance; solid waste operations; recycling; the operation of the Eastern Correctional Institutional Co-Generation Plant in Somerset County; engineering services (contracted) for capital improvement projects at water and wastewater treatment facilities, water distribution systems, and sewage collection systems; maintenance and upgrades of over 200 environmental facilities operated by MES; dredging management and restoration; environmental monitoring, and grants and financing assistance for environmental initiatives Documents Received Pursuant to this review, MES submitted to Alpha only a very limited a number of formal policy and procedures documents governing their procurement and management of capital projects. These documents appeared to have been prepared purposely in response to the State Legislature s call for this review. However, MES also reported that a comprehensive policies and procedures manual is currently in the course of being drafted. Alpha has reviewed the documents that MES was able to provide, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that MES may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of the MES formal policies and procedures should be withheld pending a more exhaustive submission and review process. In any case, it should also be noted that as an independent agency, procurement processes for MES are primarily regulated under COMAR 14.27, which contains a number of detailed procurement procedures. Accordingly, pursuant to this effort Alpha also reviewed COMAR November 26, 2008 Page 5-101

103 5.8.3 Capital Project Contract Strategies Brief Summary MES has primarily utilized the Design-Bid-Build (D/B/B) contract strategy for executing its capital projects. The following table provides a summary of the capital projects completed within the previous three (3) years: Contract Strategy Number of Projects Total Cost at Award Total Cost at Completion Design-Bid-Build (D/B/B) 6 $11,749,372 $13,280,409 Design-Build (D/B) 0 $0 $0 Professional Construction Management 0 $0 $0 Construction Management at Risk / 0 $0 $0 Guaranteed Maximum Price (CMR/GMP) Totals: 6 $11,749,372 $13,280,409 MES reports that their preferred contract strategy for the delivery of capital projects is Design-Bid-Build (D/B/B). The preferred selection process is competitive sealed bidding. As can be seen in the above table, D/B/B accounts for 100% of the total funds expended by MES for the six (6) projects completed within the reporting period Preliminary Determinations for Capital Projects Early in a capital project s planning/pre-design phase, there are several major fundamental determinations made by key MES staff members that set the course of the project. These important determinations and the key staff elements that participate in their making are: 1. General Project Scope, Timing, and Location: These factors are developed during the planning phase with input from the Project Engineer, Senior Engineer, Chief of Engineering, Project Manager, Section Head/Senior Engineer, Division Chief, Group Executive Director, Chief of Procurement, Principal Counsel, Deputy Director, and the Maryland Department of the Environment. Internal stakeholders include the Office of Finance, Office of Procurement, Office of the Attorney General (i.e., the Assistant Attorney Generals assigned to the agency), Business Development, the agency Executive Staff, the agency Board of Directors, and the agency s Director. 2. Project Contract Strategy: The project contract strategy is recommended to the Chief of Procurement by the originating Group Executive Director. The recommendation is reviewed by the Chief of Procurement and Contracts and the final determination is made by the Chief of Procurement. For contracts estimated to exceed $250,000, approval is made by the Deputy Director. November 26, 2008 Page 5-102

104 3. Project Budget Estimates: The total project budget is established based on a combination of historical information and estimates prepared upon completion of the schematic design (SD) phase. Projects funded by general obligation debt require both DBM and Department of Legislative Services (on behalf of the State Legislature) review and approval prior to appropriation by the State Legislature; and, approval of the Board of Public Works prior to procurement contract execution Project Management Organizations and Staffing The key organizations and staff that are customarily directly involved with a project during the design and construction phases include: A/E and other consultants Project Manager Senior Engineer/Section Head Environmental Consultant Geotechnical Consultant Construction Inspector Client Other staff positions and organizations that may become involved depending on the contract amount, size and complexity of the project, and/or the funding source are the Deputy Director, Director, Board of Directors, Board of Public Works, Finance Office, Procurement Officer, Procurement Counsel, and the Group Executive Director Procurement Pursuant to COMAR A(21), as an independent agency, MES is exempt from COMAR Title 21, except as provided by the State Finance Procurement Article, Title 14, Subtitle 3, and Titles 16 and 17, Annotated Code of Maryland. Therefore, as an independent agency, procurement procedures for MES are generally regulated under COMAR Title A/E Contract Procurement The preferred source selection method for architectural/engineering design services is competitive sealed proposals. A/E firms are selected for negotiation solely on technical merit. Price is a selection factor considered prior to contract award. The Program Director providing project oversight submits a procurement transmittal (i.e., Request) for A/E services to the MES Procurement Representative who forwards the Request to the Contract Manager for assignment of a contract number and to the Director of Finance for fund certification. The Request is November 26, 2008 Page 5-103

105 then sent to the MES Procurement Officer for approval to advertise. Approval to advertise is required by the MES Deputy Director and the MES Director if the estimated expenditure is greater than $250,000. After approval to advertise, the MES Procurement Office coordinates with the originating MES Project Manager to make any necessary changes and to establish the procurement schedule. The MES Procurement Office then prepares the advertisement and final solicitation package. The request for proposals contains the items specified in COMAR B. Upon completion of evaluation, discussions, and negotiations, the MES Procurement Officer prepares a determination for approval by the MES Director, recommending award of the contract to the responsible proposer whose offer is determined to be the most advantageous to MES. The MES Procurement Officer promptly notifies all proposers of the contract award Construction Contract Procurement Competitive sealed bidding is the source selection method typically utilized to procure construction services. The MES Procurement Office solicits quotations from as many different sources as necessary to assure the most favorable pricing for the services and the equitable treatment of vendors. The MES Program Director providing project oversight submits a procurement transmittal (Request) for construction services to the MES Procurement Representative who forwards the Request to the MES Contract Manager for assignment of a contract number and to the MES Director of Finance for fund certification. The Request is then sent to the MES Procurement Officer for approval to advertise. Approval to advertise is required by the MES Deputy Director and the MES Director if the estimated expenditure is greater than $250,000. After approval to advertise, the Procurement office coordinates with the originating MES Project Manager to make any necessary changes to the specifications and to establish the procurement schedule. The MES Procurement Office then prepares the advertisement and final solicitation package. The request for bids contains the items specified in COMAR B. Contract award is made to the responsible bidder who has submitted the lowest evaluated responsive bid Contract Administration The MES Procurement Division s Contract Administration Section is responsible for the drafting, execution, and administrative control of procurement contracts, including contract amendments and change orders. After award of the design or construction contract the MES Project Manager has the primary responsibility for the technical management of the contract. The MES Project Manager exercises primary technical responsibility for guiding the A/E or Contractor through the work process and for the monitoring of the contract, to assure that the service, product, deliverables, or equipment is acceptable to MES. November 26, 2008 Page 5-104

106 Document Management Typically, the following software is used for project document management: MS Project, MS Excel, MS Access and JD Edwards. Laser-fiche is also available for document storage and retrieval. A filing system common to all project contract and payment information is used, but individual project management filing systems vary between the MES groups and divisions Meetings and Reporting Requirements Design Phase: The following are normally required to attend design review and design progress meetings: MES Project Manager or equivalent, MES Procurement staff, the A/E and its consultants, and environmental or geotechnical specialty subcontractors. Depending on the project, clients and regulatory agencies are invited to attend. Typically, design review meetings are held at the preliminary design stage; at the 50% construction document (50% CD) stage; 75% construction document (75% CD) stage, 90% construction document (90% CD) stage, 99% construction document (99% CD) stage and (100% construction document (100% CD) stage. If feasibility studies are conducted or schematic design plans are required, additional meetings would have taken place prior to design. Construction Phase: Progress meetings are held weekly, biweekly, or monthly depending on size and complexity of project. Progress meeting minutes are required to be prepared and distributed. Depending on the project and client, the inspector's daily reports and the monthly meeting minutes are sufficient instead of a formal monthly report. The Contractor is required to provide daily reports that reflect work performed, QA/QC actions, conditions affecting work, trade manpower on site, weather conditions, and use of equipment Request for Information (RFI) Management A Request for information (RFI) log is required to be maintained during the construction phase Change Order Management The MES Project Manager and/or the MES Engineer identify the need for a potential change and prepare a change order request which includes a change order request form, a change order review submittal form indicating the contract change number, detailed pricing information, complete technical specification/drawing references or line drawings, and if necessary, information relating to Board of Directors and/or Board of Public Works approval. The MES Project Manager forwards the change order package to the MES Contract Administrator for processing. Procurement Division staff provide support as necessary if the MES Project Manager is conducting cost proposal negotiations, verify the information provided submittal to the Board(s). Procurement Division Staff will also evaluate the documentation for completeness and conformity to contract requirements and MES procedures, and ensure that a sufficient November 26, 2008 Page 5-105

107 cost/price analysis has been performed. If no changes or additional information is needed from the MES Project Manager, staff will sign the change order request form, ensure review by the MES Contract Administrator, and manage the execution of the change order by the Contractor. The MES Procurement Officer has the authority to delegate to the MES Project Manager and/or MES Engineer the ability to authorize Field Change Orders with a monetary limit up to $10,000. This authority allows MES to authorize and initiate work of a minor nature in the field in a timely manner. For all other change orders exceeding $10,000, the MES Procurement Officer has final approval authority except for those exceeding $250,000 which must be approved by the Board of Public Works. MES occasionally prepares independent estimates for change orders. The A/E is involved in change order evaluation and review under most conditions. A change order log denoting the basis for each change is maintained during the construction phase Submittal Process Management A submittal log is required to be maintained during the construction phase Pay Applications Review Procedures A/E: Review and approval of the A/E s pay applications begins with the project manager and moves up the chain of command within the Technical Groups, depending on the dollar amount. Finance approval begins with Accounts Payable and moves up the hierarchy within Finance. The Controller submits payment applications for general obligation debt projects to the State Treasurer s office. Contractor: Review and approval of the Contractor s monthly pay applications begins with the MES Inspector, the MES Project Manager and then moves up the chain of command within the Technical Groups, depending on the dollar amount. Finance approval begins with the MES Accounts Payable Office and moves up the hierarchy within MES Finance Office. The Controller submits payment applications for general obligation debt projects to the State Treasurer s office. A walk-through by an agency representative to assess construction progress is required to support the review/approval of the Contractor s monthly pay application. The Contractor is required to provide a CPM schedule update with each monthly pay application Project Closeout Process A project closeout requirements checklist is required to be followed for project closeout. November 26, 2008 Page 5-106

108 5.8.8 Cost Management and Effective Use of Funds The total project budget established is based on cost estimates prepared during conceptual design and historical information on comparable past projects. The size of the project contingency is determined prior to submittal of a proposal to a potential client. For general obligation debt funded projects, cost estimate worksheets are submitted when requesting funding. Cost escalation to reflect the project s budget year is determined by reviewing historical costs on previous projects, as well as by surveying A/E firms and contractors on similar recent projects Value Engineering Value Engineering is utilized and its use is dependent upon the project type and the Group within MES that is implementing the project Constructability Reviews Depending on the nature of the project, geotechnical reviews are held in the planning stages. MES Construction Inspectors also review the project construction documents at the 90% construction document (90% CD) submittal stage Cost Estimating and Review Cost Estimating Stages: Cost estimates are typically performed at the end of the schematic design (SD) phase as well as at the 100% construction document (100% CD) phase. Cost Escalation: Cost escalation to reflect the project s year is determined from an examination of similar past projects or a survey of A/E firms and contractors who may have recently designed similar projects. Cost Contingency: The size of the project cost contingency is determined prior to submittal of a proposal to a potential client. For general obligation debt funded projects, cost estimate worksheets are submitted when requesting funding. Life Cycle Costing: Life cycle costs are considered on those projects having operation and maintenance (O&M) costs after project completion Dispute Avoidance MES has a policy of engaging in an informal partnering process with their A/E s and contractors. The goals of this process are dispute avoidance, high quality in the finished product, adherence to schedule and minimizing of cost growth, all of which are mutually beneficial to the involved parties. November 26, 2008 Page 5-107

109 5.8.9 Time Schedule Management Project Master Schedule: The project master schedule is developed by the MES Project Manager, MES Project Engineer, MES Senior Engineer, MES Section Head, and the MES Division Chief. For larger projects, input is obtained from the MES Procurement Office. Critical Path Method (CPM) Schedule: The Contractor is required to provide and keep up to date a CPM construction schedule. The CPM schedule is not required to be cost loaded. An updated CPM schedule is required to be submitted with each monthly pay application. Those who approve the baseline CPM schedule include MES s Project Manager and Construction Inspector, the Client, and the MES Section Head or MES Senior Engineer. If the Contractor experiences difficulty in keeping the work on schedule, these staff will work closely with the Contractor get the project back on schedule. If the Contractor experiences significant trouble in maintaining progress, then the MES Chief of Procurement and/or the MES Principal Counsel will become involved Delays and Delay Mitigation Procedures Corrective actions include negotiating revised schedules and costs with the Contractor, withholding or reducing progress payments, making notification to the bonding company, or, if necessary termination of the contract for default Quality Design Phase Reviews Design Review Stages: Design reviews are conducted at the end of Preliminary Design stage; at the 50% construction document (50% CD) stage; 75% construction document (75% CD) stage, 90% construction document (90% CD) stage, 99% construction document (99% CD) stage and (100% construction document (100% CD) stage. Design Review Participants: The required attendees for design review and design progress meetings are MES s Project Manager or equivalent, the MES Procurement Staff, the A/E and its consultants, and Environmental and/or Geotechnical consultants. Depending on the project, clients and regulatory agencies may be invited to attend. November 26, 2008 Page 5-108

110 Construction Inspection and Testing Daily quality assurance (QA) inspections are performed by full time MES Construction Inspectors and sometimes also by MES engineers. QA testing is conducted by independent testing firms Commissioning Procedures Commissioning of installed systems is performed as part of the construction contract. The professional commissioning authority is normally the A/E Focus Project The protocol for the capital project process review included a focused assessment of a single, representative project completed by the agency within the previous three years. The purpose of this assessment is to ascertain how well the agency adhered to the formally established policies and procedures contained in their guidance documents. For MES, the focus project is referred to as Construction of Two Spillways at the Cox Creek Dredged Material Containment Facility (DMCF), Anne Arundel County, MD. For this project, the design phase was procured and managed separately by MES s client for the project, the Maryland Port Administration (MPA). MES s own involvement in the project was procurement and management of the construction contract. The findings and opinions of this focused assessment are outlined below Contract Strategy This project was executed under a Design-Bid-Build (D/B/B) contract strategy. Contract award was based on the lowest responsive bid received from a responsive bidder. The basic project data is as follows: Design Budget Amount: N/A Actual Design Cost: $61,899 (MPA s cost) Construction Contract Budget Amount: $1,400,000 Original Construction Contract Award Amount: $1,261,063 Final Construction Contract Amount: $1,371,063 Original Substantial Completion Date: November 9, 2004 Actual Substantial Completion Date: June 10, 2005 Original Final Completion Date: January 11, 2005 Actual Final Completion Date: January 13, 2006 November 26, 2008 Page 5-109

111 Project Management Organization and Staffing Findings: Project Planning, Design and Construction Phases: Organizations and key staff involved from the design concept phase through construction closeout were the following: the MES Project Manager, MES Senior Engineer, MES Construction Inspector, MES Environmental Dredging & Restoration Division (EDRD) Chief, MES EDRD Engineering Section Head, MES Technical Environmental Services Group Executive Director, and the MES Procurement Officer. The following personnel from the client agency (MPA) were involved from the design concept phase through construction closeout: MPA s Project Manager, the Project Manager of MPA s A/E, and MPA s geotechnical consultant. On Site Services: Organizations and key staff providing onsite services during the construction phase included the MES Construction Inspector and the A/E. Opinions: Findings are consistent with MES s established policies and procedures Procurement a. Construction Contract Procurement Findings: This project was executed under a Design-Bid-Build (D/B/B) contract strategy, using competitive sealed bidding. Contract award was made to the lowest responsive bidder. Opinions: Findings are consistent with MES s established policies and procedures Contract Administration a. Meetings and Reporting Requirements Findings: Construction progress meetings were conducted biweekly. Generally, the attendees included the MES Project Manager and Construction Inspector, the A/E s Project Manager and Design Engineer, the geotechnical consultant, and MPA s Project Manager. Meeting minutes were prepared and distributed. Monthly progress reports were also prepared by the MES Project Manager. Opinions: Findings are consistent with MES s established policies and procedures. b. Request for Information (RFI) Management Findings: An RFI log was maintained during construction of the project. Opinions: Findings are consistent with MES s established policies and procedures. November 26, 2008 Page 5-110

112 c. Change Order Management Findings: A Contractor s proposed change order log was maintained during construction of the project and included the basis for each change. The MES Senior Engineer and Project Manager negotiated a final price for the change order on this project assisted by the MES Construction Inspector, the A/E Project Manager, and the Geotechnical consultant. The negotiated price was approved by the MES Environmental Dredging and restoration (EDR) Division Chief and the MES Technical Environmental Services (TES) Group Executive Director. Final Authorization was provided by the MES Procurement Officer with review and approval by the MES Finance Office and the Office of the Attorney General (OAG). Concurrence of the change order amount was provided by the client, MPA. Opinions: Findings are consistent with MES s established policies and procedures. d. Submittal Process Management Findings: A submittal log was maintained during the project construction phase. Opinions: Findings are consistent with MES s established policies and procedures. e. Pay Application Review Procedures Findings: Typically the MES Senior Engineer/Project Manager reviewed and provided recommendation for payment of AE invoices which were then approved by the MES EDR Division Chief and TES Group Executive Director and the MES Finance Department. Typically the MES Senior Engineer or Project Manager, with support as needed from the A/E and MES Construction Inspector, reviewed and provided recommendation for Contractor pay applications which were then approved by the MES EDR Division Chief and TES Group Executive Director and the MES Finance Department. Opinions: Findings are consistent with MES s established policies and procedures Cost Management and Effective Use of Funds a. Value Engineering Findings: Value engineering (VE) reviews were led by project technical staff from the Army Corps of Engineers, Baltimore District together with the Corps independent consultant (Project Management Services, Inc.). Support during the VE process was provided by the Moffat & Nichol Project Manager, E2Si Geotechnical Engineer, MES EDR Division Chief, Project Manager and Project Engineer and MPA Project Manager and Project Planner. The VE review included the overall construction of the Dredged Material Containment Facility (DMCM). For the Spillway Project, approximate $80,000 in implemented savings was achieved with the elimination of the power line to the spillways. MES reported that it was their belief that the potential for cost savings makes the VE process a valuable project management tool. November 26, 2008 Page 5-111

113 Opinions: Findings are consistent with MES s established policies and procedures. b. Constructability Reviews Findings: Constructability reviews were included with typical reviews performed during the design development and included reviews performed by technical staff from MES, the A/E, and the client, MPA. Opinions: Findings are consistent with MES s established policies and procedures. c. Cost Estimating and Review Findings: The detailed cost estimates were developed by the A/E late in the design phase with a final cost estimate prepared immediately before bid advertisement of the construction project. Opinions: Findings are consistent with MES s established policies and procedures. d. Dispute Avoidance Findings: MES reported that there were no disputes with the Contractor on this project. Therefore, no dispute resolution actions were necessary. Opinions: It is not evident why there were no disputes on this project. However, insofar as there were change orders for additional work and the Contractor was granted time extensions for excusable delays, it is apparent that MES and the Contractor reached satisfactory resolutions on all issues involving money and time Time a. Schedule Management Findings: A master schedule incorporating all planning, design, reviews, bidding award, construction, and activation/furnishing activities was developed for this project. It should be noted that this project, which involved the construction of two spillways at a Dredged Material Containment Facility (DMCF) was only one part of a much larger overall project that included reactivation and improvements to the DMCM. CPM Scheduling was used to track and manage the overall larger project (including this spillway project) and included other scope items such as dike construction, maintenance building improvements, construction of an unloading pier construction, and other items managed by MES for the client, MPA. Opinions: Findings are consistent with MES s established policies and procedures. b. Delays and Delay Mitigation Procedures November 26, 2008 Page 5-112

114 Findings: Excusable delays included thirty-six (36) working days for weather delays and nine (9) working days to complete additional work items. Time extensions to the contract were proposed by the MES EDRD Engineering Section Head, approved by the EDR Division Chief and TES Group Executive Director and subsequently approved by the MES Procurement Officer. Opinions: It is apparent that MES and the Contractor reached satisfactory resolutions on all issues involving money and time Quality a. Construction Inspection and Testing Findings: Quality assurance (QA) testing was performed for this project. MES reported their belief that QA testing was indispensible on this project because it disclosed that some of the concrete to be used for the spillway foundation did not meet the requirements of the contract specification. Opinions: Findings are consistent with MES s established policies and procedures. b. Commissioning Procedures Findings: There were no installed systems associated with this project requiring commissioning. Opinions: Because of the nature of the work under this project, commissioning was not applicable. November 26, 2008 Page 5-113

115 5.9 MARYLAND STADIUM AUTHORITY Introduction The Maryland Stadium Authority (MSA) is an independent agency that was established by the State of Maryland General Assembly in 1986, to select a site and develop financing alternatives for baseball and football stadium facilities within the Baltimore area. Since then, MSA has financed and constructed Oriole Park at Camden Yards, constructed an expansion to the Convention Center in Ocean City (Ocean City Center), and designed and constructed the Ravens Stadium at Camden Yards. It has also executed the development and construction of the Montgomery County Conference Center, as well as renovation of the historic Hippodrome Performing Arts Center and the historic Camden Station, both in Baltimore. MSA has also completed other projects in partnership with local governments, universities, and the private sector throughout Maryland. Projects for these clients include museums, theaters, parks, and campus centers in addition to sports arenas Documents Received Pursuant to this review, MSA submitted to Alpha a number of formal policy and procedures documents governing their procurement and management of capital projects. Alpha has reviewed these documents, and Appendix A to this report is a synopsis of the policies and procedures in effect that are relevant to the scope of this review. It should be noted that MSA may have in force other pertinent documents pertaining to their execution of capital projects that for whatever reasons were not provided to Alpha. Accordingly any overall judgment as to the adequacy and sufficiency of MSA s formal policies and procedures should be withheld pending a more exhaustive submission and review process. November 26, 2008 Page 5-114