Benefits and Limitations of the Use of Construction Program Management by Mississippi’s Public Entities
Executive Summary
A common perception is that the current system of managing the construction of public buildings is a failure because facilities may not be completed on time and within budget or may not meet quality requirements. Several management and oversight solutions are available to address such problems and to help insure construction of a quality facility that will meet an entity’s needs and be completed on time, using minimal resources.
For legislatively appropriated building projects, the Bureau of Building represents the interests of the public entity and exercises independent oversight of the constructor team.
The Department of Finance and Administration’s (DFA) Bureau of Building, Grounds, and Real Property Management is responsible for administration, management, and decisionmaking for public building projects constructed with funds appropriated by the Legislature. If a state entity’s construction project is funded with self-generated funds or if the funds have been placed under the direct control of the entity constructing the project, the bureau will provide its services at no charge if the entity requests assistance.
Some public entities hire a construction program management contractor to fulfill this oversight function.
An entity may choose to improve its internal capability to perform this oversight function or contract for external expertise. One possible solution is for public entities to hire a construction program management (CPM) contractor for monitoring and oversight of the construction project. This manager should be independent of the constructor team and should represent the public entity’s interests throughout the construction process.
Public entities have no established standards for using CPM contractors and the state has not established regulatory requirements for governing who is qualified to provide CPM services.
Benefits of using of a CPM contractor may be compromised by weaknesses in public entities’ CPM contracts. PEER found that many local entities lack criteria and standards for using CPM contracts and have deficiencies in their contracting process. Also, because the state has not established regulatory requirements for governing who is qualified to provide CPM services, public entities have no assurance that CPM providers meet minimum competency requirements. Such factors reduce assurance of the protection of the public interest.
The benefits of hiring a CPM contractor through a well-written contract may also be achieved through other methods such as developing internal capabilities or procuring services from other private providers.
Hiring a CPM contractor does not offer any benefits that could not be achieved through other methods available to a public entity. By exercising diligence in procuring the necessary services, state and local public entities are capable of achieving purported CPM contract benefits. An entity’s decision to enter a CPM contract does not afford any additional guarantee of protection of an entity’s interest, or ensure that purported benefits will accrue. Should a public entity choose to use CPM, the entity should recognize that such an agreement is a "buyer beware" proposition which does not reduce risks or assure timely completion of a quality facility except to the extent stipulated in the contractual provisions.
Recommendations for Legislative Action
The Legislature should authorize the Board of Public Contractors to regulate CPM contractors. The board should establish minimum qualifications for education and experience and require applicants to demonstrate competency in CPM specialty areas.
1. The Legislature should amend MISS. CODE ANN. Section 31-3-13 (1972) to vest or grant authority to regulate construction program managers to the Board of Public Contractors and require it to set its certification standards in conjunction with the Department of Finance and Administration’s Bureau of Building. This program should ensure that certified individuals have the knowledge and proficiency to perform various CPM tasks in the four phases of the construction process.
The requirements for certification should include a bachelor’s degree in architecture, engineering, building science, construction management, or construction technology and a minimum of four years’ experience in managing multi-phased, high-cost construction projects. If an individual does not have one of the required degrees, he or she should have five years’ documented experience in performing CPM management of construction projects.
The certification examination should test the applicant’s knowledge and proficiency in CPM issues. Some examples are health, environmental and safety regulations, interpretation of architect and construction contracts, budgeting, constructibility reviews, cost accounting, financing, life cycle costing, planning, programming, scheduling, value engineering, and project administration of construction projects.
2. The Legislature should expand the Board of Public Contractors to include one member who is a program manager and one member who is a construction manager.
3. The Legislature should continue to allow optional use of CPM service contracts since they are one viable method to manage large, complex, and costly projects. However, it should consider prohibiting a CPM contractor from participating in the public bidding for actual construction work on the same project. The CPM firm should be independent of the constructor team in order to represent the public interest and reduce the entity’s risk.
Recommendations for Administrative Action
4. The Department of Finance and Administration should conduct a cost study to determine the benefits of organizing, staffing, and funding its Bureau of Building, Grounds, and Real Property Management to perform the CPM function for public entities (e.g., as does the Florida Department of Management Services). If this study shows that centralized availability of construction program management services would benefit governmental entities in terms of cost, schedule, or construction quality, DFA should propose legislation in the 2000 regular legislative session to accomplish this goal.
5. Upon request, the Director of the Bureau of Building should provide a copy of the DFA Planning and Construction Manual to each public entity as a comprehensive informational resource for completing construction projects and contracts through the state construction process. Published changes to this manual should also be provided to the public entities.
The Bureau of Building should establish standards for determining need for and evaluating the benefits of hiring a CPM contractor. The bureau should also prepare a model CPM contract and establish guidelines for administering a CPM proposal process.
6. The Director of the Bureau of Building should establish objective standards for determining the need for and evaluating the benefits of hiring a CPM contractor. At a minimum, these standards should include an evaluation of existing staff CPM capability, the project’s impact on the existing staff workload, the project’s size and complexity, the number of individual projects and work locations, the anticipated project cost, and the cost/benefit of using a CPM contractor.
7. The Director of the Bureau of Building should prepare a model CPM contract with appropriate services alternatives which will be furnished to each public entity as a comprehensive informational resource for designing CPM contracts. This contract should allow the public entities to select desired tasks in all phases of the construction process.
This model contract should include provisions which:
A. establish performance outcome measures for the contractor in order to measure satisfactory performance. These measures should be tied to the project cost, schedule, and construction quality goals of the public entity.
B. place the contractor at risk for poor performance based on performance outcome measures. Such a provision could prohibit the award of future contracts for a specified period or a financial penalty which reduces the CPM fees.
C. sufficiently answer the questions of what, when, where, how, and how often. The contract should also define the management information system for tracking and reporting which has subsystems for the cost, schedule, financial, and technical parameters.
D. define allowable reimbursable expenses for the contractor.
E. establish a contract performance period which covers the approved completion time for the entire project.
F. establish a compensation method for the contractor which protects the public entity’s interest and reduces its risk of increased cost.
8. The Director of the Bureau of Building should establish guidelines for administering a CPM proposal process including a written request for proposals, the minimum evaluation criteria, and a thorough proposal evaluation process. The request for CPM proposals should cover the following minimum requirements:
A. a project description;
B. the contractor’s project management requirements and other responsibilities such as surveys, soil borings, permits, licenses, inspections, and tests;
C. the organizational relationships between the contracting parties;
D. the required project management and reporting system, as well as the cost control system;
E. the contractor’s quality control responsibilities and other required project support services such as constructibility review, life cycle cost studies, value analysis studies, conceptual cost estimates, and floor plan schematics of completed project;
F. CPM work requirements in sufficient detail answer the What, When, Where, How, How Often, and How Much;
G. insurance requirements;
H. detailed instructions for submitting a CPM cost proposal, including the public entity compensation methodology, allowable reimbursable expenses, and maximum allowable expense;
I. detailed instructions for a letter of interest in which the firm provides information which shows it can and has accomplished project of the type being bid;
J. detailed instructions for submitting an organization and management plan for the project, which includes detailed résumés and work histories for the firm’s project staff; and
K. selection criteria for the proposal process.