Going Once, Going Twice … A New Alternative to Design-Bid-Build Contracts

The 2014 Legislative Session brought new possibilities for large construction projects under the Public Contract Law. Generally, a public entity is required to separately hire a design professional to design the project, and let the project out for public bid for the construction work. “Design-build” contracts, in which the public owner contracts with one entity for the design and construction of the facility, are prohibited under Public Contract Law.  However, the Legislature has now given public entities another option under the Public Bid Law: Construction Management at Risk Delivery Method (CMAR).

As a precursor to the new law, the Legislature granted special approval for use of the construction management at risk delivery method for several projects, to include the new airport terminal for the New Orleans Aviation Board at the Armstrong International Airport. This CMAR delivery method required two separate contracts for design and construction, but allowed selection of the construction contractor based on factors other than lowest construction cost. In other words, the design professional was selected in accordance with Public Contract Law, and the owner secured a lead construction firm during the design phase through an evaluation of the contender construction firms’ qualifications, experience and history.

Under a construction management at risk delivery method, the selected lead contracting firm commits to deliver the final project for a maximum price. The owner has the option to award the construction contract to the firm after the design phase. Because the design professionals and the contractor are on the same team during the design phase, many industry leaders believe the construction management at risk method will help public entities control costs by allowing the contractor and designer to work together on scheduling, budgeting and constructability during the design phase. The goal also is to minimize the risk of construction and design disputes through the collaborative effort.

In 2014, via Act 782, the Legislature enacted La. R.S. 2225.2.4 which allows a public entity to use the CMAR method for projects estimated to cost 25 million dollars or more. The statute defines a CMAR contractor as one who is properly licensed, bonded and insured and can provide construction experience to the owner or its design professional and/or contracts with the owner to construct the project for a guaranteed maximum price, thus eliminating the need for a separate bid phase.

Under the statute, the public entity must advertise a request for qualifications to award a contract to a CMAR contractor for preconstruction and construction services in the official journal and website of the public entity. After the responses to the RFQ are received, a selection review committee makes a recommendation to the owner. This committee consists of one design professional not involved in the contract, one licensed contractor not involved in the contract, a representative of the owner and two members from the general public.

Once the CMAR contractor is awarded the contract, the contractor and the design professional are required to furnish the owner with a probable cost of the project at the 60% and 90% design completion phases. The CMAR contractor must provide the public entity a guaranteed maximum price for construction of the project. If the owner agrees with the guaranteed maximum price and the construction phasing and sequencing, the owner can award the construction contract to the CMAR contractor. If the public entity and the CMAR contractor cannot agree, the construction phase of the project will be re-advertised and let out for public bid.

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