Source: https://www.federalregister.gov/documents/2019/12/19/2019-26367/general-services-administration-acquisition-regulation-gsar-adoption-of-construction-project
Timestamp: 2020-01-22 22:53:21
Document Index: 301801749

Matched Legal Cases: ['art 536', 'art 536', 'art 552', 'art 31', 'art 48', 'art 43', 'art 30', 'art 30', 'arts 501', 'art 31']

Federal Register :: General Services Administration Acquisition Regulation (GSAR); Adoption of Construction Project Delivery Method Involving Early Industry Engagement-Construction Manager as Constructor (CMc)
A Rule by the General Services Administration on 12/19/2019
Effective Date: This final rule is effective on January 21, 2020.
69627-69639 (13 pages)
GSA-GSAR-2018-0013
General Services Administration Acquisition Regulation (GSAR); Adoption of Construction Project Delivery Method Involving Early Industry Engagement - Construction Manager as Constructor (CMc) (GSAR Case 2015-G506)
Subpart 536.70—[Reserved]
https://www.federalregister.gov/d/2019-26367 https://www.federalregister.gov/d/2019-26367
Start Preamble Start Printed Page 69627
The General Services Administration (GSA) is issuing a final rule amending the General Services Administration Acquisition Regulation (GSAR) to adopt an additional project delivery method for construction, known as “construction manager as constructor” (CMc). The private sector commonly uses a similar construction project delivery method, which allows for early industry engagement by the construction contractor to enable reduced cost growth, reduced schedule growth, and administrative savings. The current Federal Acquisition Regulation (FAR) lacks coverage of the CMc project delivery method. GSA has previously issued policies on CMc through other means. Incorporating CMc into the GSAR provides centralized guidance to industry and ensures consistent application of construction project principles across GSA. Additionally, integrating these requirements into the GSAR allowed for revision and improvement of the requirements through public comments in the rulemaking process.
Ms. Christina Mullins, General Services Acquisition Policy Division, Procurement Analyst, by email at gsarpolicy@gsa.gov. For information pertaining to status or publication schedules, contact the Regulatory Secretariat Division by mail at 1800 F Street NW, Washington, DC 20405, or by phone at 202-501-4755.
CMc refers to a project management and contracting technique that is one of three predominant methods used for acquiring construction services by GSA. The other two methods are design-bid-build and design-build. The CMc model used by GSA follows many industry best practices and has worked well for numerous GSA construction procurements. While there is ample guidance on traditional and design-build procurements in the FAR, there is no guidance on CMc procurement. By providing specific contracting guidance on CMc, GSA is adopting a major project delivery method that is similar to one commonly used by the private sector and is fundamentally updating the practice of buying construction services within the Federal Government. This move supports the Government's shift toward category management by providing a more robust playbook framework for efficient procurement of construction services. Additionally, incorporating CMc into the GSAR provides centralized guidance to industry that makes it easier to do business with the Government and ensures consistent application of construction project principles across GSA that provides for greater compliance with requirements.
The GSAR Case 2015-G506 proposed rule was published in the Federal Register at 83 FR 55838 on November 8, 2018 and provided details on how GSA is amending the General GSAR to revise sections of GSAR Part 536, Construction and Architect-Engineer Contracts, and corresponding clauses in GSAR Part 552, Solicitation Provisions and Contract Clauses to incorporate CMc contracting. The proposed rule clarified, updated, and incorporated existing CMc guidance previously implemented through internal Public Building Service (PBS) policies.
Bringing this existing CMc policy into the GSAR allows for greater transparency and provided an opportunity for the public to comment on these long-standing procedures. In addition, bringing CMc policies into one location ensures clarity and consistency that will make it easier for companies to do business with the Government and will provide better guidance to contracting officers.
The CMc project delivery method is similar to project delivery models used extensively in the private sector for large complex construction projects. The CMc method engages the construction contractor during the design phase of the project and establishes a ceiling on the eventual construction price (i.e., the guaranteed maximum price (GMP)) before construction documents are prepared. The CMc method emphasizes technical qualifications for contractor selection, and includes price competition of the GMP before initial contract award and provides more detail on the GMP elements. The CMc project delivery method creates value through early collaboration between the architect and constructor. In addition to the benefits of design phase services, which include constructability reviews and cost estimating validation by the constructor, CMc offers the opportunity to begin construction prior to full completion of the design which reduces the total project schedule. GSA also provides a cost incentive through shared savings that are split between the constructor and the Government under CMc contracts which promotes constructor innovation and efficiencies to reduce costs through the construction phase of the project, see GSAR 536.7105-5.
The General Services Administration has reviewed all comments submitted in the development of this final rule.
This final rule makes the following two significant changes from the proposed rule:
The definition at 536.7102 for CCA was revised to include scheduling error costs. The description in 536.7105-2 subparagraph (a)(3)(iii) regarding design errors and omissions has been deleted to more closely align with the definition provided for CCA in 536.7102. The text at 536.7105-2 was also revised to clarify that the CCA may be adjusted through negotiation at the time of GMP option exercise, and to provide additional CCA flexibility up to 5 percent with HCA approval.
The definition at 536.7102 of “Fee” was revised to clarify that this definition encompasses solely profit and home office overhead costs. The description at 536.7105-2 was revised to allow adjustment to the Fee for scope changes and Government-caused delays. Additionally, GSA revised the definition of cost to mean all allowable costs per FAR Part 31, removing the limitation for direct cost only.
A full discussion of all the comments received and the changes made to the rule as a result of those comments is provided below.
GSA received comments on the proposed rule from five respondents. Comments are grouped into categories in order to provide clarification and to better respond to the issues raised.
i. Comment: As a supporting statement, an industry group representing general contractors recognized that many aspects of the Start Printed Page 69628CMc project delivery method are aligned with the private sector, including early collaboration between the construction contractor and the architect, early work packages for things like demolition, and the use of shared savings incentives. The commenter noted that further alignment of CMc to the private sector model can increase interest and competition from the market for Government projects. They further explained that deviations from private sector models, especially those that are punitive in nature, such as audit requirements, can have the opposite effect and outcome.
Response: GSA recognizes that there are differences between CMc and the private sector, and believes that the CMc model as presented in the rule strikes the right balance of adopting industry best practices for construction while adhering to the constraints of Government statutory requirements and ensuring appropriate risk management in the best interests of the Government. No changes were made to the proposed rule as a result of these comments.
ii. Comment: As a supporting statement, an industry group representing general contractors suggested changes to the text to clarify that a reduction in specific sunk costs is attributable to lower costs associated with the solicitation process.
Response: The final rule was revised to clarify that sunk costs associated with price proposal preparation efforts may be lower with CMc as compared with the design-build.
iii. Comment: An industry group representing architects noted that the CMc method as drafted did not take into account the increased time and effort expended by the architect-engineer contractor in design reviews and cost saving option reviews under a CMc project that goes above and beyond “normal” responsibilities.
Response: GSA does not believe that design reviews and cost saving option reviews under a CMc project are beyond normal responsibilities of a typical architect-engineer contract. As such, no additional costs need to be taken into account. Design reviews are not unique to the CMc project delivery method and any early collaboration under CMc should only result in cost saving options being identified earlier in the project when such options are more easily addressed.
i. Comment: A model building code industry respondent provided comments to the proposed rule specifically commenting on building code requirements and application to this rule. The respondent noted that they take no position on the proposed rule language, but make general notes regarding compliance provisions, and whether those provisions should be codified in the CFR.
Response: The GSA PBS P-100 Guide provides considerable details on implementing building code compliance, and is incorporated in GSA construction contracts. Codifying building codes in the CFR is beyond the scope of this rule. No changes were made to the proposed rule as a result of these comments.
ii. Comment: An industry group representing general contractors suggested that GSA should mandate collaboration between the architect-engineer and CMc contractors during the design phase.
Response: The final rule further clarifies the expectation that the architect-engineer and CMc contractor must collaborate during the design phase. The final rule clarifies at GSAR 536.7105-1(d), that “During the design phase, the architect-engineer contractor and the construction contractor shall collaborate on the design and constructability issues”.
iii. Comment: An industry group representing design-build contractors recommends the use of the progressive design-build project delivery method.
Response: The design-build project delivery method is already addressed in the FAR (see FAR 36.3) and is beyond the scope of this rule. No changes were made to the proposed rule as a result of this comment.
iv. Comment: A few other suggestions and comments were made by industry groups representing architects and general contractors, including: 1. Suggestion to allow conversion to FFP after 75 percent versus 100 percent of the construction documents were completed, 2. Comment that the use of alternates across clauses is inconsistent and may be confusing, 3. Comment that the order of precedence is not consistent with typical practice, and 4. Suggestion to review an industry organization's CMc contracts more specifically.
Response: GSA considered allowing conversion to FFP after 75 percent completion of the construction documents, but concluded that to more effectively protect taxpayer dollars, 100 percent as presented in the proposed rule was more appropriate. Prior to 100 percent construction documents, a GMP type contract allocates risk more appropriately between the Government and contractor since the design is not complete and details may still change that materially affect the price, limiting the ability to establish good firm prices. GSA believes the structure of alternates for clauses is appropriate. Andy any differences between industry models or typical practices and the GSA CMc model were driven by unique statutory or regulatory requirements, including the Competition in Contracting Act of 1984 (CICA), 41 U.S.C. 3301. No changes were made to the proposed rule as a result of these comments.
Comment: An industry association representing general contractors provided a comment on value engineering. The comment notes that value engineering is a key component of the CMc contract method. It is the main tool the CMc offers through its design phase owner consultation to assist in aligning the scope with the target ECW. Incorporation of efficiencies, innovation, fast-tracked scheduling and economical materials/systems are critical to the best value approach.
Additionally, an industry group representing general contractors suggested that when exercising the GMP option, if the ECW, CCA and Fee exceed the GMP, then the ECW should be reduced through value engineering and/or scope modifications.
Response: While the CMc may suggest the incorporation of efficiencies, innovation, fast-tracked scheduling and economical materials/systems, value engineering is a formal technique described at FAR Part 48, and is different from the design phase services contracted from a general contractor under CMc. In accordance with FAR 48.202, the clause at FAR 52.248-3 Value Engineering—Construction, shall not be included in incentive-type construction contracts. Accordingly, value engineering shall not apply to the CMc project delivery method described in this subpart. No changes were made to the proposed rule as a result of this comment. Additionally, GSAR 536.7105-2(c)(3) has been revised to state that “If the sum of the final ECW, CCA, and fee for the construction work is greater than the GMP as established at contract award or as adjusted in accordance with FAR Part 43, then the contracting officer should work with the contractor to identify measures to reduce the overall GMP. Such measures may include reducing the CCA, reducing the fee, or as a last resort, reducing the scope of the project.
Comment: An industry group representing general contractors provided comments related to managing risk. They provided suggestions to significantly reduce or eliminate Start Printed Page 69629liquidated damages, to remove reimbursement of certain audit costs, and to remove the ability to withhold 10 percent of payment requests if the contractor fails to comply with GSAR 552.236-80, Accounting Records and Progress Payments. The respondent noted that these elements are not in alignment with this delivery method.
Response: While CMc is viewed more as a partnership between GSA and CMc contractor, GSA maintains that additional audit and accountability risk management measures are appropriate to manage risk or are required by existing laws and regulations. Similar to other government delivery methods, CMc includes these measures to protect the Government and its partners. Liquidated damages and other risk management tools are used to appropriately mitigate issues and concerns that could arise. Similarly, the Government provides remedies for contractors to collect equitable adjustments for changes that could arise. GSA maintains the text at 552.236-80 regarding audits and retainage as appropriate risk management. This clause provides clear details on how the audit and retainage requirements apply.
Comment: Three respondents provided comments regarding procurement timing. An industry group representing general contractors commented that CMc should be procured as early as possible in the design phase, ideally prior to the concept design. A construction industry commenter recommended that GSA require, at a minimum, the programming, schematics and concepts be complete. An industry group representing architects commented that when the CMc is not brought on early enough, the architect is then forced to adjust when the design is over budget. They affirmed that the request for proposal should be issued early in the design phase, preferably during concept design to allow early cost savings suggestions from the CMc.
Response: The rule includes flexible language so that each project can individually balance the goal of early collaboration with the ability to permit meaningful price competition (see GSAR 536.7103(a)).
Comment: An industry group representing architects provided comments related to the role and compensation of the architect/engineer under a CMc project. The respondent commented that CMc increases the time and effort expended by the architect-engineer contractor in design reviews and cost saving options. Also, the respondent noted that clarity is needed to ensure the architect/engineer retains control of the design decision making. The industry group representing architects noted that GSA should inform the architect/engineer of the construction project delivery method prior to design fee negotiations, so that the architect-engineer can prepare appropriately. The industry group representing architects also commented that there is no defined liability for who is responsible for design changes that are due to constructor contractor issues. Additionally, a construction industry commenter recommended that GSA should consider adding a provision requiring the designer to design to the Target ECW that the CMc proposes.
Response: GSA reviewed and appreciates the comments provided. The rule is written to provide sufficient guidance on CMc and coordination with the architect/engineer. GSA believes that informing the architect/engineer of the construction project delivery method prior to design fee negotiations, when possible, is a good practice. GSA believes the existing architect/engineer contract clauses appropriately detail the responsibilities and requirements for changes. The clause at FAR 52.243-1, Changes—Fixed-Price (Alternate III), provides a mechanism for the A/E to request an equitable adjustment, if appropriate. GSA's Design Excellence policy is still applicable and Government personnel should be involved in all design decision making. Lastly, the A/E contract is established prior to CMc offerors proposing a Target ECW. However, the A/E contract already contains the clause at FAR 52.236-22, Design Within Funding Limitations. No changes to the regulatory text were made as a result of these comments.
Comment: An industry group representing general contractors provided comments to adjusting the text at 536.7105-3 Accounting and Auditing Requirements. Several suggestions are provided to revise the GSAR text provided in the proposed rule noting that “Audits are not applicable in this contracting and procurement method. This auditing requirement should be removed from this rule.”
Respon se: GSA did not adopt suggested changes to the text in the proposed rule. GSA maintains that open book accounting and audit requirements are appropriate in this procurement method. For example, the amount, if any, of the shared savings incentive, is determined by the difference between the final GMP and the final cost of performance (see 536.7105-5(a)). To protect the public interest, an audit of the CMc's costs is required before determining the amount of shared savings, if any.
Comment: Two respondents provided a comment on the application of CAS and its applicability to CMc. An industry organization representing general contractors noted that modified CAS should be applied and do away with open book accounting, and an industry construction commenter noted that full CAS should be applied as it is currently noted and referenced in FAR Part 30.
Response: GSA has determined that the application of open book accounting and auditing requirements provides the Government the best flexibility to review and maintain cost elements. The requirements allow for maximum competition amongst all qualified contractors looking to service the Government through CMc contracting. Based on the variation in comments provided, GSA is confident that the requirements in FAR Subpart 30.2 [1] for full CAS compliance for applicable negotiated contracts over $50 million, modified CAS compliance for applicable negotiated contracts below $50 million, and open book accounting practices are appropriate for CMc contracting.
Comment: Two respondents provided comments on performance incentives and the element of shared savings. An industry group representing general contractors provided suggestions for early completion bonuses or successive targets. Both the industry group representing general contractors and an industry group representing architects suggested that GSA include a shared savings incentive for the architect/engineer.
Response: GSA reviewed and appreciates the comments provided. Regarding an early completion bonus for the CMc, the CMc contract already contains a shared savings incentive (see GSAR 536.7105-5). Early completion Start Printed Page 69630may be one way the CMc is able to reduce costs and increase the potential for shared savings. Regarding an incentive for the architect/engineer, GSA does not believe that is necessary to successfully implement and experience the benefits of CMc. No changes to the regulatory text were made as a result of these comments.
Comments: An industry group representing general contractors suggested adjustment to the definition of CCA provided at 536.7102 by including the word “scheduling” as an included cost element. They also suggested that GSA set the minimum CCA at 3 percent. A commenter from the construction industry questioned the CCA's purpose and whether the CCA is meant to be a true “allowance”. This same industry commenter noted that CCAs should not include design errors and omissions.
Response: GSA adopted the suggestion to adjust the definition of CCA at 536.7102. GSA adopted the suggestion for proper alignment with 536.7102 by deleting 536.7105-2(a)(3)(iii) regarding design errors and omissions. GSA also provided additional CCA flexibility up to 5 percent with HCA approval.
i. Comment: Two respondents provided comments on the structure and definition of “Fee for Construction Work”. An industry group representing general contractors noted that the Fee cannot include all of the contractor's indirect costs. Some indirect costs are a function of the ECW as a percentage. Therefore, they fluctuate with increases and decreases in price. They also add, there needs to be a clarification between the industry defined general conditions (staffing related costs) and general requirements (indirect costs such as hoisting, cranes, field engineering, etc.). A construction industry commenter believes that GSA's proposed fee structure raises several issues. First, they note that general conditions typically are not part of a contractor's fee, but instead, are actual costs. Thus, including them as part of the fee will create confusion during an audit. Second, they note that the definition's reference to overhead is unclear as it does not specify whether “overhead” means field office overhead or home office overhead.
Response: GSA has revised the definition of fee to specifically mean profit and home office overhead costs. GSA revised fee guidance to allow adjustment to the fee for scope changes and Government-caused delays. Additionally, GSA revised the definition of cost.
ii. Comment: An industry group representing general contractors noted that the “proposal form typically includes a proposed rate (%) for Overhead (Corp G&A), profit and commission for scope changes. This should be used in all CMc RFP's to establish these rates “up-front”. The price proposal forms used by the Government are not aligned with the mark-up percent provisions of 552.243-71 Equitable Adjustments. Either the pricing form should be changed to include the provisions (especially subparagraph (h)), or the GSAR equitable adjustments mark-ups should be modified to a “flat” rate as currently modeled by the Government's price proposal form.”
Response: The rule provides flexibility by not providing a “required proposal form”, however, GSAR 536.7105-2(a)(4)(iv), notes that “The limitations of GSAR 552.243-71, especially markups, still apply for any changes.”
i. Comment: An industry group representing general contractors and a construction contractor provided comments on the GMP guidance at 536.7105-2. These comments included a suggestion that GSA adjust the language to say GMP “may” be modified downward for deletions during the design phase. They provided further suggested adjustments to the language to allow for an increase to the GMP for “no fault of CMc” issues. Another comment requests GSA provide additional guidance on how the various evaluation criteria must be weighted and expressed concern that the pricing structure effectively incentivizes contractors to submit an artificially low price and further assumes that the lowest price proposal will be selected absent a compelling reason to select a higher priced proposal. Lastly, they noted that the evaluation should consider contractor approach to maximize the project within the GMP.
Response: GSA has reviewed and appreciates the comments provided. GSA has adopted the suggestion to provide greater flexibility for GMP modifications for deletions during the design phase. GSA notes that the GMP is subject to adjustment under various standard contract clauses, including the changes clause, differing site conditions clause, and suspensions clause. GSAR 536.7103(b)(1)(i) provides that the technical evaluation factors, when combined, shall be considered significantly more important than cost or price. The rule provides flexibility by not establishing required technical evaluation factors or specific weights for technical evaluation factors. Additionally, the commenter's assumption that the lowest price proposal will always be selected is not consistent with the flexibility provided by FAR 15.101-1, Tradeoff Process. Regarding the concern that that the pricing structure effectively incentivizes contractors to submit an artificially low price, see GSAR 536.7103(b)(2), which states that a price realism analysis is required “for the purpose of assessing, among others, whether an offeror's price reflects a lack of understanding of the contract requirements or risk inherent in an offeror's proposal.”
ii. Comment: An industry group representing general contractors commented that the target ECW is not bonded and that while the CMc can advise the Owner and its design team on changes to make to adhere the target ECW, the CMc has no control over the outcome, quality, coordination and/or completeness of the design.
Response: As stated in GSAR 536.7105-1(d), “During the design phase, the architect-engineer contractor and the construction contractor shall collaborate on the design and constructability issues. The goal of this collaboration is to establish a final ECW that does not exceed the original target ECW.” No changes to the regulatory text were made as a result of this comment.
iii. Comment: An industry group representing general contractors commented that each of the Owner's contractors should validate program requirements with the project prospectus prior to advancing from one design phase to the next and certainly before exercising the construction phase.
Response: GSA appreciates the comment. Under CMc, the Government has flexibility to adopt appropriate project management techniques. No changes to the regulatory text were made as a result of this comment.
All three predominant construction project delivery methods, Design-Bid-Build (D-B-B), Design/Build (D-B), and Construction Manager as Constructor (CMc), have merit. CMc specifically allows for early industry engagement by the construction contractor that can provide a net economic burden reduction compared with the other project delivery methods. An Economic Impact Analysis (EIA) reflecting the data and benefits of CMc has been prepared Start Printed Page 69631consistent with the principles of OMB Circular A-4 and is summarized as follows:
A study by the Pankow Foundation [2] as well as GSA's own data analysis, further detailed herein, have shown that early engagement by the construction contractor under a CMc project can provide reduced cost growth, reduced schedule growth and administrative savings, resulting in a net economic burden reduction compared with other project delivery methods.
All economic impact estimate calculations were based on discussions with GSA subject matter experts from the PBS Office of Design and Construction and PBS Office of Acquisition Management, and the following data. Historic data was gathered and analyzed from GSA's Electronic Planning Module (ePM),[3] an internal system which was mandated as a project management tool for construction starting in 2009. Historic data was also gathered and analyzed from the Federal Procurement Data System (FPDS),[4] the authoritative source for government wide contract award data.
The results of the analysis showed this rule will provide a net deregulatory savings of 9,405 hours ($659,011), or ($488,710) when annualized at a 7 percent discount. These savings are a result of the following elements:
A. Reduced Schedule Growth: Under a CMc project delivery method, the general contractor (GC) for construction work is engaged through a separate contract during the design phase of the project, sometimes as early as 30 percent design completion. By comparison, under a design-bid-build (D-B-B) project delivery method, the GC is not engaged through a separate contract until the design is 100 percent complete. Under a design-build (D/B) project delivery method, the GC and the architect are part of the same contract with the Government. The early engagement of the GC under CMc may create collaboration between the architect and the GC. This early engagement also offers the opportunity to begin advanced work on certain elements of the project while the design is finalized. For example, an early work package may be definitized to allow for demolition work to be done, which is not typically impacted by the final touches of a design. Similarly, site preparation work to clear the land for a project may be started. This concurrent work while the design is completed can result in meaningful schedule savings. Analysis of the GSA capital construction project data from ePM showed that on average the reduced schedule growth potential for CMc projects is 75 days. This allows for increased efficiency for a senior project manager (PM), senior CO, and journeyman CS. Based on subject matter expertise, the PM would save 6 hours per day, the CO would save 2.5 hours per day, and the CS would save 5 hours per day. Based on the historic ePM data, GSA estimated that 10 capital projects funded annually would use the CMc method. Given this population, the total annual savings to the Government is 10,125 hours ($701,343). Similar savings to the public may be realized and may be reflected as direct cost savings in the contract, but cannot be quantified.
B. Final GMP Proposal: For CMc projects, the contract begins as a fixed price incentive contract type where the guaranteed maximum price (GMP) negotiated at the outset is the price ceiling for the contract. This contract type is necessary because the design is not complete and all the costs for the construction work cannot be determined. However, once the design for a project is completed, the final GMP for the construction work can be established and the contract can be converted to a firm fixed price (FFP) contract type. This may be attractive to both industry and Government. A conversion to FFP allows the contractor to end cost accounting standard (CAS) compliance efforts. Conversion to FFP also allows the Government to further mitigate risk by placing the full responsibility for all costs on the contractor. In order to execute this conversion, the contractor must submit a revised proposal for the final GMP. Based on subject matter expertise within GSA, it is assumed that the contractor will require 40 hours of effort to obtain subcontractor quotes, adjust costs and submit a new proposal for the final GMP element. It is assumed that the Government will require 20 hours of effort to review and negotiate the final GMP. The total annual burden to the public is 400 hours ($22,076) and to the Government is 200 hours ($11,038).
C. Regulation Familiarization: GSA Class Deviation SPE-2012-04-02 has been in place for several years and provides the existing policies and procedures for CMc construction projects. GSAR Case 2015-G506 essentially incorporates these existing policies and procedures. However, there are some clarifications and updates to these policies that reflect on lessons learned and best practices over the years. These changes include: clarification on the level of design development required for CMc procurement competition, further details as to what is included in the fee for construction work, and guidance for establishing separate allowance items. The rule contains minimal changes from existing policies and procedures for CMc methods, and thus, should result in minimal burden to understand new requirements. Based on subject matter expertise within GSA, it is assumed that industry and Government alike will require two additional hours during the solicitation phase to review and understand the differences between the existing policy and this rule in order to provide a representative proposal. Based on the historic FPDS data, GSA estimated that 5 offers would be received for each CMc project. Given this population, the total annual burden to the public is 100 hours ($7,755) and to the Government is 20 hours ($1,464).
D. Unquantified Benefits: There are several economic benefits specific to CMc that are expected to reduce burden that are difficult to quantify. Although not easily quantifiable they collectively represent additional meaningful savings to qualify this rule as deregulatory.
1. Direct cost savings may result from potential reduced schedule growth for CMc projects. Construction projects include general conditions and other costs that are calculated by a daily rate. If a CMc project finishes earlier, the total direct costs will be lower.
2. Early collaboration between the CMc and architect allows for (a) innovation during design that leads to fewer change orders during construction, and (b) identification of conflicts or errors before work investments are made.
3. As compared with design-build projects, CMc projects will reduce sunk costs associated with price proposal preparation efforts and lower barriers to entry for industry to submit proposals and compete in this space. Design-build project solicitations often require a detailed concept level design submission as part of the proposal. Offerors must partner with an architecture-engineering firm at great expense to obtain these design concepts in order to prepare and submit an offer to the Government.
4. Early work packages under CMc allow for advanced execution of certain elements while the design is finalized, such as demolition or site preparation work, which are not typically impacted by the final touches of a design. These early work package elements can be removed from the GMP and converted to separate firm-fixed-price (FFP) line items. Conversion to a FFP may allow the Government to lock-in lower prices and allow the CMc to subcontract labor trades earlier. In a tight labor or material market, this may translate to meaningful cost and schedule savings.
Interested parties may obtain a copy of the complete EIA from the Regulatory Secretariat Division.
Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). E.O. 13563 supplements E.O. 12866 and emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This is a significant regulatory action and, therefore, was subject to review under section 6(b) of E.O. 12866, Regulatory Start Printed Page 69632Planning and Review, dated September 30, 1993. This rule is not a major rule under 5 U.S.C. 804.
This rule is considered an E.O. 13771 deregulatory action. Details on the estimated savings of this final rule can be found in the rule's economic impact analysis detailed in Section III.
This rule has been identified by GSA's Regulatory Reform Task Force as a rule that improves efficiency by eliminating procedures with costs that exceed the benefits as described in Section III.
GSA does not expect this final rule to have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act, at 5 U.S.C. 601, et seq., because the rule will incorporate clauses that are currently in use in GSA construction solicitations and contracts and contractors are familiar with and are currently complying with these practices. However, a Final Regulatory Flexibility Analysis (FRFA) has been prepared. There were no comments submitted in response to the initial regulatory flexibility analysis provided in the proposed rule. The FRFA has been prepared consistent with the criteria of 5 U.S.C. 604 and is summarized as follows:
The final rule amends the General Services Administration Acquisition Regulation (GSAR) coverage on construction contracts, including clauses for solicitations and resultant contracts, to clarify, update, and incorporate existing guidance on the construction manager as constructor (CMc) project delivery method.
There were no comments submitted and therefore no significant issues raised by the public in response to the initial regulatory flexibility analysis provided in the proposed rule.
The final rule changes will apply to approximately 10 GSA construction contracts per year. Of these, approximately 6 (60 percent) contracts may be held by small businesses. The final rule is unlikely to affect small businesses awarded GSA CMc construction contracts as it implements clauses currently in use in CMc solicitations and contracts. The final rule does not pose any new reporting, recordkeeping or other compliance requirements.
The Regulatory Secretariat Division has submitted a copy of the FRFA to the Chief Counsel for Advocacy of the Small Business Administration. Interested parties may obtain a copy of the FRFA from the Regulatory Secretariat Division.
There are two information collection requests associated with this rule.
First, this rule requires contractors to keep all relevant documents for a period of three years after the final payment. This requirement is currently covered by existing OMB Control Number 9000-0034, titled: Examination of Records by Comptroller General and Contract Audit; Sections Affected: FAR 52.215-2; FAR 52.212-5; FAR 52.214-26.
Second, this rule requires contractors to submit revised proposals and negotiate contract modifications during contract administration. OMB has cleared this information collection requirement [5] under OMB Control Number 3090-0320, titled: Construction Manager as Constructor (CMc); GSAR Section Affected: 552.236-79, in the amount of 400 burden hours. No comments were received on the information collection requirement that was provided in the proposed rule; however, due to the use of more current data to calculate the burden, revisions were made to the burden estimate associated with the collection.
Therefore, GSA amends 48 CFR parts 501, 536, and 552 as set forth below:
2. Amend section 501.106 by adding to the table, in numerical order, GSAR references “552.236-79” and “552.236-80” and their corresponding OMB control numbers “3090-0320” and “9000-0034” to read as follows:
4. Amend section 536.515 by—
a. Removing from the introductory text “Use the clause—” and adding “Use the clause:” in its place;
b. Removing from paragraph (a) “will be followed; or” and adding “will be followed.” in its place; and
(b) With its Alternate II when a construction-manager-as-constructor Start Printed Page 69633project delivery method will be followed.
536.7101
536.7102
536.7103
Construction contract solicitation procedures.
536.7104
Construction contract award.
536.7105
536.7105-1
536.7105-2
536.7105-3
536.7105-4
536.7105-5
Shared savings incentive.
536.7105-6
536.7105-7
Early work packages.
536.7105-8
Conversion to firm-fixed-price.
536.7106
Construction contract closeout.
536.7107
(ii) The GMP is established at contract award. The GMP may be established as one option or as multiple options through separate line items, with a separate GMP amount for each line item.Start Printed Page 69634
(2) Payments and Reconciliation. All payments shall be reconciled with the Start Printed Page 69635open book accounting records and the schedule of values adjusted, as appropriate. Reconciliation shall occur each month and should be coordinated with monthly progress payments. The reconciliation shall be documented in the contract file.
Start Printed Page 69636
11. Amend section 552.236-15 by adding Alternate III to read as follows:
12. Amend section 552.236-21 by adding Alternate II to read as follows:
(h) Where drawings show work without specific routing, dimensions, Start Printed Page 69637locations, or position relative to other work or existing conditions, and such information is not specifically defined by reference to specifications or other information supplied in the contract, the Contractor is responsible for routing, dimensioning, and locating such work in coordination with other work or existing conditions in a manner consistent with contract requirements.
Construction-Manager-As-Constructor.
Construction-Manager-as-Constructor (CMc) Contingency Allowance (CCA) means an allowance for the exclusive use of the construction contractor to cover reimbursable costs during construction that are not the basis of a change order. These costs could include estimating, scheduling, and planning errors in the final Estimated Cost of the Work (ECW) or other contractor errors.
Fee for the Construction Work means the amount established for the contractor's profit and home office overhead costs, as described in FAR Part 31, for the construction work.
(D) The Contractor acknowledges that the final ECW and time established for completion shall not be adjusted on account of cost or time attributable to known design errors and omissions disclosed by the Contractor pursuant to paragraph (e)(1)(v)(C) of this clause. Unknown design errors and omissions that form the basis for a change order may still be settled in accordance with GSAR 552.243-71 Equitable Adjustments.
(f) CMc Contingency Allowance. The CCA shall be _ percent of the ECW [Contracting Officer insert percentage amount].
(g) Shared Savings Incentive. The Contractor shall be entitled to _percent of the difference between the final GMP and the final cost of performance [Contracting Officer insert percentage amount].
(2) Establishment of Firm-Fixed-Price. Start Printed Page 69638
Accounting Records and Progress Payments.
(c) The records identified in paragraphs (b) of this clause shall be subject to inspection and audit by the Government or its authorized representative for, but not limited to, evaluating and verifying:
(h) If the Contractor fails to comply with any conditions in this clause, the Contracting Start Printed Page 69639Officer may retain a maximum of 10 percent of the amount of each payment request submitted until such deficiencies are corrected.
1. FAR 30.201 states that “Title 48 CFR 9903.201-1 (FAR Appendix) describes the rules for determining whether a proposed contract or subcontract is exempt from CAS. Negotiated contracts not exempt in accordance with 48 CFR 9903.201-1(b) shall be subject to CAS. A CAS-covered contract may be subject to either full or modified coverage. The rules for determining whether full or modified coverage applies are in 48 CFR 9903.201-2 (FAR Appendix).”
2. Leicht, R.M., Molenaar, K.R., Messner, J.I., Franz, B.W., and Esmaeili, B. (2015). Maximizing Success in Integrated Projects: An Owner's Guide. Version 0.9, May. Available at http://bim.psu.edu/​delivery.
3. A total of 124 GSA capital construction contracts (i.e. over prospectus) were completed between 2009 and 2016. Capital construction contracts were selected as they were determined to be the most likely to be suitable for the CMc project delivery method.
4. A total of 283 construction contracts (i.e. PSC of Y1xx or Z2xx) over the current prospectus threshold of $3M were awarded by GSA between 2009 and 2016. On average 4.4 offers were received for each solicitation. Of the total population, 125 (44%) were large business awards and 158 (56%) were small business awards.
5. The 30-day Federal Register Notice associated with IC 3090-0320 was published at 84 FR 42917 on August 19, 2019.