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HomeMy WebLinkAboutStaff Report 5.C 01/23/2006CITY OF PETALUMA, CALIFORNIA 5.0 PETALUMA COMMUNITY DEVELOPMENT COMMISS January 23, 2006 AGENDA BILL Agenda Title: Meeting Date: January 23, 2006 Discussion and Action to Adopt a Resolution Authorizing the City Manager/Executive Director to Establish a Construction Contract Meeting Time: ® 3:00 PM Change Order Policy and Adopt a Resolution Authorizing the City ❑ 7:00 PM Manager/Executive Director and Designees of the City Manager Pursuant to Established Change Order Policy to Execute Specified Construction Contract Change Orders Cateeory (check one): ❑ Consent Calendar ❑ Public Hearing ® New Business ❑ Unfinished Business ❑ Presentation Department: Director: Contact Person: Phone Number: Construction Contract Vince Marengo Joyce Clark 776-3674 Change Order Policy Committee DA � Cost of Pronosal: N/A JU Account Number: N/A Amount Budgeted: N/A Name of Fund: N/A Attachments to Agenda Packet Item: 1. Resolution Authorizing the City Manager/Executive Director to Establish a Construction Contract Change Order Policy 2. Resolution Authorizing the City Manager/Executive Director and Designees of the City Manager Pursuant to Established Change Order Policy to Execute Specified Construction Contract Change Orders 3. Draft Construction Contract Change Order Policy Dated January 10, 2006 Summary Statement: Contract change orders (CCO) are a tool for modifying construction contracts, as -needed, to accommodate unforeseen conditions on the construction site and/or make necessary additions or deletions to complete the project work. Construction costs are a significant proportion of the City's expense. Overruns and claims create budget uncertainty and concern for all. Proper project planning and design minimizes the need for changes during the construction phase. Properly and consistently managing change orders, when necessary, reduces uncertainty. City Council requested staff to review and report on the City's change order process. In response, a Construction Contract Change Order Committee was formed to develop and propose a City-wide construction contract change order policy. Recommended Citv Council Action/Suggested Motion: Adopt the resolution authorizing the City Manager/Executive Director to establish a construction contract change order policy and a resolution authorizing the City Manager/Executive Director to execute construction change orders. Reviewed by dmin. Svcs. Dir: Review City Attornev: AuprMd.bv Citv Manager: Date: I(�/"1 ✓ y Date: 11y Date: � W� e Todav's Date: January 10, 2006 Revision # and Date Revised: File Code:J:\PW # ManagementUnitiatives\CCO Policy\Proposed Policy\CCO Policy Agenda Bill 01 10 06 FINAL JC.doc Page 1 CITY OF PETALUMA, CALIFORNIA PETALUMA COMMUNITY DEVELOPMENT COMMISSION JANUARY 23, 2005 AGENDA REPORT FOR DISCUSSION AND ACTION TO ADOPT A RESOLUTION AUTHORIZING THE CITY MANAGER/EXECUTFVE DIRECTOR TO ESTABLISH A CONSTRUCTION CONTRACT CHANGE ORDER POLICY AND ADOPT A RESOLUTION AUTHORIZING THE CITY MANAGER/EXECUTIVE DIRECTOR AND DESIGNEES OF THE CITY MANAGER/EXECUTFVE DIRECTOR PURSUANT TO ESTABLISHED CHANGE ORDER POLICY TO EXECUTE SPECIFIED CONSTRUCTION CONTRACT CHANGE ORDERS 1. EXECUTIVE SUMMARY: Contract change orders (CCO) are a tool for modifying construction contracts as needed to accommodate unforeseen conditions on the construction site and/or make necessary additions or deletions to complete the project work. Construction costs are a significant proportion of the City's expense. Overruns and claims create budget uncertainty and concern for all. Proper project planning and design minimizes the need for changes during the construction phase. Properly and consistently managing change orders, when necessary, reduces uncertainty. City Council requested staff to review and report on the City's change order process. In response, a Construction Contract Change Order Committee was formed to develop and propose a City-wide construction contract change order policy. 2. BACKGROUND: To date, construction change orders have been independently authored and processed by the various departments managing construction projects, without the benefit of consistent, tested contractual language, payment methods and authorizations. Additionally, change orders are currently authorized only by the department responsible for the contract and not consistently reviewed and approved by all departments providing funding. Budget issues resulting from excessive change orders and inconsistent reporting on some recent projects suggest a City-wide construction contract change order policy is appropriate to establish confidence across departments in the construction budgeting and contracting process. A Construction Contract Change Order Policy Committee consisting of the City Manager, the City Attorney and members from Water Resources, Public Works, Parks and Recreation and Administrative Services was formed to develop and recommend an effective and efficient policy. These recommendations take into account best construction management practices and City administrative procedures. The proposed policy was reviewed by the City Attorney and his comments incorporated. Attachment 3 is the draft policy as recommended by the Committee. The Committee additionally developed for the City Council/PCDC a clear and concise project status reporting format which will be used to report to the Council as requested by the City Manager/Executive Director. Page 2 The law requires the City Council/PCDC to execute all contracts on behalf of the City/PCDC unless the City Council/PCDC delegates that authority. Historically, this authority was delegated in the construction contract award process. To support effective implementation of the policy, a resolution to appropriately delegate authority to the City Manager/Executive Director and his designees is part of this package. ALTERNATIVES: A. Authorize the City Manager/Executive Director to Establish a Construction Contract Change Order Policy and to execute construction contract change orders. B. Take no action. 4. FINANCIAL IMPACTS: An improved change order process may reduce overall project costs. 5. CONCLUSION: A construction contract change order policy established by the City Manager/Executive Director will make the construction process more efficient and cost effective and improve coordination between City departments. 6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR COMPLETION: Future construction projects will be managed more efficiently and smoothly, thereby reducing overall project costs and uncertainty. RECOMMENDATION: Adopt the resolution authorizing the City Manager/Executive Director to establish a construction contract change order policy and the resolution authorizing the City Manager/Executive Director to execute certain change orders. Page 3 Attachment 1 RESOLUTION AUTHORIZING THE CITY MANAGER/EXECUTIVE DIRECTOR TO ESTABLISH A CONSTRUCITON CONTRACT CHANGE ORDER POLICY Page 4 RESOLUTIONNO. N.C.S. OF THE CITY OF PETALUMA, CALIFORNIA and the PETALUMA COMMUNITY DEVELOPMENT COMMISSION AUTHORIZING THE CITY MANAGER/EXECUTIVE DIRECTOR TO ESTABLISH A CONSTRUCTION CONTRACT CHANGE ORDER POLICY WHEREAS, the City Council of the City of Petaluma/PCDC desires to establish a City-wide policy for construction contract change orders; and WHEREAS, to date, construction change orders have been independently authored and processed by the various departments managing construction projects; and WHEREAS, establishing a construction contract change order policy may improve construction contract management efficiency, reduce project costs and budget uncertainty. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Petaluma/PCDC authorizes and directs the City Manager/Executive Director to establish a construction contract change order policy. Page 5 Attachment 2 RESOLUTION AUTHORIZING THE CITY MANAGER/EXECUTIVE DIRECTOR AND DESIGNEES OF THE CITY MANAGER PURSUANT TO ESTABLISHED CHANGE ORDER POLICY TO EXECUTE SPECIFIED CONSTRUCTION CONTRACT CHANGE ORDERS Page 6 RESOLUTION NO. N.C.S. OF THE CITY OF PETALUMA, CALIFORNIA and the PETALUMA COMMUNITY DEVELOPMENT COMMISSION RESOLUTION AUTHORIZING THE CITY MANAGER/EXECUTIVE DIRECTOR AND DESIGNEES OF THE CITY MANAGER PURSUANT TO ESTABLISHED CHANGE ORDER POLICY TO EXECUTE SPECIFIED CONSTRUCTION CONTRACT CHANGE •_�_�_ "t - WHEREAS, the City Council of the City of Petaluma/PCDC desires to establish a City-wide policy for construction contract change orders; and WHEREAS, to date, construction change orders have been independently authored and processed by the various departments managing construction projects; and WHEREAS, establishing a construction contract change order policy may improve construction contract management efficiency, reduce project costs and budget uncertainty; and WHEREAS, by Resolution No. —adopted January 23, 2006, the City Council of the City of Petaluma/PCDC has authorized the City Manager/Executive Director to establish a construction contract change order policy; and WHEREAS, a construction contract change order policy has been drafted and presented to the City Council/PCDC for comment and direction by the City Council/PCDC concerning such policy incorporated therein. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Petaluma/PCDC as follows: The City Manager/Executive Director and designees of the City Manager/Executive Director, pursuant to the established construction contract change order policy, are authorized to execute on behalf of the City of Petaluma/PCDC construction contract change orders that, when added to the initial contract amount and the amount of all previous change orders, will not result in the total contract amount exceeding the authorized construction contingency for the project. 2. Such authorization is limited to change orders that, in the best judgment of the City Manager/Executive Director, are in the best interest of the City and its citizens and in conformance with the project as approved by the City Council/PCDC. 3. Construction contract change orders that, when added to the original contract and the amount of prior change orders, would result in the total contract amount exceeding the authorized construction contingency for the project, shall require authorization by the City Council/PCDC. Page 7 Attachment 3 DRAFT CONSTRUCTION CONTRACT CHANGE ORDER POLICY DATED JANUARY 10, 2006 Page 8 City of Petaluma, California Memorandum Department of Public Narks, 11 English Street, Petaluma, CA 94952 (707) 778-4474 Firc (707) 778-3602 DATE: January 10, 2006 TO: Michael Bierman, City Manager FROM: Construction Contract Change Order Policy Committee SUBJECT: Proposed Construction Contract Change Order Policy DRAFT Background & Purpose Contract change orders (CCO) are a tool for modifying construction contracts as needed to accommodate unforeseen conditions on the construction site and/or make necessary additions or deletions to complete the project work. To date, change orders have been independently authored and processed by the various departments managing construction projects, without the benefit of consistent, tested contractual language, payment methods and authorizations. Additionally, change orders are currently authorized only by the department responsible for the contract and not consistently reviewed and approved by all departments providing funding. Information regarding the status of projects relative to changes and total project budget is not consistently reported to upper management. Construction costs are a significant proportion of the City's expense. Overruns and claims create budget uncertainty and concern for all. Proper project planning and design minimizes the need for changes during the construction phase. Properly and consistently managing change orders, when necessary, ensures fiduciary responsibility. A Construction Contract Change Order Policy Committee was established to review and make a policy recommendation. The change order process, as proposed by this Committee, is outlined in the attached flow chart and described herein. This policy establishes this process and procedure for issuing change orders City-wide. Proposed Policy All City construction contracts subject to competitive bidding under Section 68 of the City Charter, and all City contracts awarded using the standard minor construction contract, and all PCDC construction contracts subject to competitive bidding under Section 20688.2 of the Public Contract Code, and all PCDC construction contracts awarded using the standard minor construction contract shall comply with this policy and procedure for preparing, processing and executing change orders. Page 9 Format The attached form, as amended from time to time, shall be used for all change orders and transmittal memos. The following information is to be included in change orders in the spaces provided therefore: Scope of Work: Describe any changes to the project scope of work, specifications, plans, drawings, etc. pursuant to the change order (and attach revised scope of work, specifications, plans, drawings, etc. as necessary) in sufficient detail so that the impact of the change order on the current scope of work, specifications, plans or drawings is clearly and unambiguously documented. Method of Payment: Specify either Lump Sum, Agreed Unit Price, Extra Work at Time and Materials or Other. Time of Completion Adjustments: Clearly specify contract days added or deleted from contract as a result of the impact of the change(s) on the schedule's critical path. Specify days consistent with the contract (i.e., calendar or working). Wherever possible, each change order should include all changes in contract days resulting from that change order and not defer changes in contract days to later in the project. Transmittal Memo: All change orders must be accompanied by a transmittal memo formatted as shown in the attached example. The purpose of the memo is to provide management with a brief justification for the change (e.g., unforeseen conditions, value engineering, etc.) and report on the impact of the change on the budget. Change order transmittal memos are not for distribution to the contractor. Authorization Department directors are authorized to execute change orders of up to $20,000, so long as the change add order, when added to the original contract amount and all prior change orders, does not exceed the amount the approved project contingency. All change orders over $20,000 require City Manager authorization. Change orders that, when added to the original contract amount and all prior change orders, would exceed the current, approved project contingency must be approved by the City Manager and the City Council and/or PCDC. The construction contingency shall be as authorized by City Council/PCDC in the construction project budget established in the construction award resolution. Council/PCDC approval must be obtained for any increases in the contingency above the prior authorized amount. The contractor shall not be directed or authorized to perform any work not covered by authorized and approved budget. All departments providing funding must review and approve change orders utilizing those funds. The construction contract allows the City to issue City -directed change orders. Occasionally, contractors refuse to sign the change order for various reasons. Except for City -directed, unilateral change orders executed in accordance with the construction contract, all change orders shall be signed by an official authorized to bind the contractor prior to obtaining City approvals. In the event of an emergency or extraordinary circumstance as determined by the City Manager, the City Manager may authorize change orders exceeding the approved contingency. The City Manager shall notify the Council/PCDC by memo within one week of the event and recommend adoption of a resolution or order authorizing the additional contingency and ratifying the City Manager's action at the next regularly scheduled Council/PCDC meeting. Distribution Two wet signature copies of all change orders shall be executed. Upon execution, one original is provided to the contractor and one to the City Clerk/Recording Secretary. Page 10 Photocopies and/or electronic copies of the executed change orders will be provided to Administrative Services, the other department(s) providing project funding, and the project records. Council/PCDC Renortine The Council and/or PCDC shall be advised when 80% of the approved construction contingency is expended or if the project is anticipated to exceed the authorized contingency. Financial Impact This policy improves staff efficiency and provides a measure of protection to the City from contractor claims, therefore reducing costs of City projects. The Committee presenting this policy recommendation consists of the following: Citv ManaEer Michael A. Bierman Administrative Services Steven Carmichael, Director Water Resources & Conservation Mike Ban, Director Dean Eckerson, Engineering Manager Public Works Vince Marengo, Director Joyce Clark, CIP Division Manager Parks & Recreation Jim Carr, Director Citv Attomev Eric Danly Page 11 Ul H V 0 19L 0 0 N CD Of a E CD 0 z 07 CD O — 0 v 2 N c c. N G. N N G" 0) N E"'y c c c 0 0 N CD Of a E CD 0 z CD O — 0 0 0 N CD Of a E CD 0 z CITY OF PETALUMA, CALIFORNIA MEMORANDUM Department of Public Works, 11 English Street, Petaluma, CA 94952 (707) 778-4474 Fax (707) 778-3602 DATE: 08/01/05 TO: Vince Marengo, Department Director FROM: Project Manager SUBJECT: Project $ $ Contract Change Order #_ This change order provides for: History/Background: Other Departments/Entities: Financial Impact to Construction Budget: Original Amount of Contract: $ Original Amount of Contingency:$ Supplements to Contingency: $ Total Authorized Budget: $ (If change is only with the terms or conditions, state "terms" in the dollar column) NEW VALUE OF CONTRACT Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Date Change Order # $ $ Time Impact: INTERNAL USE ONLY 1 —1j J:\PW Management\Initiatives\CCO Policy\Proposed Policy\CO Transmit Memo Template Jan 2006.doc CITY OF PETALUMA DEPARTMENT CONTRACT NO. CONTRACT CHANGE ORDER NO. _ SHEET [1] OF [1] SHEETS 17Z0AxNi2r 11iTjI IN To: Contractor Address City, State Zip You are hereby directed to make the herein described changes to the plans and specifications or do the following described work not included in the plans and specifications on this contract. Upon execution by representatives authorized to bind the parties, this Change Order will become a part of the contract. The consideration specified in this Change Order (whether an adjustment of the contract price, an adjustment of time, and/or other consideration) is the full and sole compensation owed to the contractor as a result of the changes and issues described in this Change Order. Such consideration includes, but is not limited to, any and all direct and indirect costs incurred by the contractor as a result of the changes and issues described in this Change Order for any labor, equipment, materials, overhead (additional, extended, Feld and home office), profit, or time adjustments. By signing this Change Order the contractor waives and releases the owner from any and all claims for additional compensation concerning any of the changes and issues specified in this Change Order. NOTE: This Change Order is not effective until approved by the Director. To follow is the description of work to be performed, estimate of quantities and prices to be paid, segregated between additional work at contract price, agreed price and force account. Unless otherwise stated, rates for rental of equipment cover only such time as equipment is actually used and no allowance will be made for idle time. Change requested by (City or contractor) SCOPE OF WORK Describe work here, including any plan sheets (as attachments), defining all material specifications and work standards. METHOD OF PAYMENT: Options: Lump Sum, Extra Work at Force Account, Increase/Decrease Unit Price and/or Agreed Unit Price Estimated Cost: Decrease $ or Increase $ By reason of this order, the time of completion will be adjusted as follows: We, the undersigned contractor, have given careful consideration to the change proposed and hereby agree, if this proposal is approved, that we will provide all equipment, furnish all materials, except as may otherwise be noted above, and perform all services necessary for the work above specified, and will accept as full payment the prices shown above. Accepted: Date: By: Contractor Prepared by: Approval Recommended by: [WR, Parks, other] Funding Authorized by: Approved by (under $20,000): Approved by (over $20,000): Originals: Contractor, City Clerk cc: funding departments, contract file, finance �y Title: Project Manager Date: Division Mgr Date: , [Other Funding Dept] Date: Dept Director Date: City Manager, Date: (�.1 M1..n�..�...H.. ....n1 C..Hi.. r.n\CI.........I\I ......I C..HI......\Trr...I.�n�.• In,n�....� Ctl..n\/11 VC']\!�!1 Tn.�..l..\.. Inn 1I1M1C .I....