GSA Office of Governmentwide Policy

MEMORANDUM FOR GSA CONTRACTING ACTIVITIES

FROM: JEFFREY A. KOSES ~~~~ SENIOR PROCUREMgNi' EX-E!:!UTIVE OFFICE OF ACQUISITION POLICY (MV)

Class Deviation CD-2019-02

SUBJECT: FAR and GSAM Class Deviation -Authority to Use Construction Manager as Constructor (CMc) Project Delivery Method

1. Purpose.

This memorandum approves a class deviation from the Federal Acquisition Regulation (FAR) and the General Services Administration Acquisition Manual (GSAM) to authorize use of the construction-manager-as-constructor (CMc) project delivery method. The CMc delivery method is similar to the fixed price incentive (successive target) contract structure with a guaranteed maximum price (GMP)

In particular, this provides PBS approval for revised CMc procedures, for a new Accounting Clause, and for an updated CMc Clause in lieu of FAR 52.216-17.

This class deviation is issued to immediately implement CMc guidance while the GSAM is updated via the rulemaking process.

2. Background.

CMc refers to a project management and contracting technique that is one of three predominant methods used for acquiring construction services by GSA (i.e. design-bid-build, design-build, and construction-manager-as-constructor). The CMc model used by GSA follows industry best practices that have been commonly used in the private sector for many years, and has worked well for numerous GSA construction procurements.

CMc allows for early industry engagement by the construction contractor. A study by the Pankow Foundation1 as well as GSA's own data analysis have shown that this early engagement can provide reduced cost growth, reduced schedule growth and administrative savings, resulting in a net economic burden reduction compared with the other project delivery methods.

1 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/dellvery

Oct 18, 2018

PBS began to consider CMc contracts as a viable alternative to traditional design-bid-build or design-build delivery methods in 2004, when the GSA Office of Chief Architect assembled a working group of senior project managers, senior contracting officers, and attorneys to develop a strategy for implementing the method. This working group developed an initial CMc clause that was incorporated in CMc contracts from 2006 through 2009 through individual FAR deviations. After the enactment of the American Recovery and Reinvestment Act of 2009 (ARRA), PBS requested a class deviation for a CMc clause that was approved on June 5, 2009.

The enactment of ARRA increased the number of PBS regions utilizing the CMc project delivery method, and highlighted the need for additional guidance. The only guidance for the CMc delivery method at the time was contained in the PBS contract templates. During performance of projects funded by ARRA, the GSA Office of Inspector General (IG) noted some inconsistencies in the application of the delivery method. Specifically, the IG voiced concern that the manner in which CMc contracts were solicited and awarded did not provide adequate competition. The IG did not suggest that the CMc/GMP concept, itself, was problematic, but rather emphasized the importance of providing clear guidance on how the delivery method should be solicited and administered. In response, PBS reviewed the entire CMc program and developed a new comprehensive policy and training requirements that provided clear guidance on competition requirements, established a firm policy on changes to the GMP used for CMc, and addressed the unique administrative requirements of this type of contract. ·

On February 8, 2011, PBS issued a policy on the use of the CMc project delivery method and Procurement Instructional Bulletin (PIB) 11-03, Internal Controls for Construction Manager as Constructor (CMc) Acquisitions, to ensure consistency in CMc implementation. In the implementation of the corrective action plan, PBS also revised its CMc Solicitation and Agreement templates and has developed training modules on the correct use of CMc. On April 12, 2012, a revised class deviation for CMc was approved to reflect on these PBS policies.

GSAR Case 2015-G506 was first opened in 2015 to incorporate the CMc requirements into the GSAM. During ongoing reviews of the current CMc guidance, policies, and clauses, GSA identified several changes that are needed to enhance the CMc project delivery method, which are reflected in this updated deviation.

3. Authority.

This class deviation is issued under the authority of FAR 1.404 and GSAM 501.404.

This class deviation is issued following consultation with the Chair of the Civilian Agency Acquisition Council (CAAC) in accordance with FAR 1.404(a) and GSAM 501.404(a).

4. Deviation.

See Attachment A for the changes in the GSAM/GSAR text as revised by this deviation.

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5. Effective Date.

This deviation is effective immediately and remains in effect until rescinded or incorporated into the GSAM.

6. Cancellation.

Class Deviation SPE-2012-04-12 and Class Deviation SPE-2009-06-05 are hereby cancelled.

7. PBS Guidance.

Upon approval of this deviation, PBS will issue revised policies, contract templates, and training, as appropriate, to align with this deviation.

8. Point of Contact.

Questions regarding this memorandum should be directed to Mr. Tony Hubbard, Senior Policy Advisor, General Services Acquisition Policy Division (MVAC) at Tony.Hubbard@gsa.gov.

Attachment A • GSAM/GSAR Text

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ATTACHMENT A

GSAM/GSAR Text

GSAM Baseline: Change 94 and 95 effective 10/09/2018 • Additions to baseline made by proposed rule are indicated by (bold text in brackets] • Deletions to baseline made by proposed rule are indicated by stril<ethret1ghs • Five asterisks{••••'") indicate that there are no revisions between the preceding and following sections • Three asterisks {* * *) indicate that there are no revisions between the material shown within a subsection

PART 53~_0NSiRUCTION AN~ ~RCflllEOT~NEER CONTRACJS

LSubP,art 5~J;.1~eneral

536.102 Definitions • . . . pco.,.trilction~anae,r-as-COf\~~~pr."1(~r.tc).rge•ns tl\i project deJiveor ~ ~nt dttsfgn and.

construc:tfon aFe co~ C:,onc_urnttitly throµgh two S8P,8nitit ~lj~~ _!11119 ~ se'Mni"~ contractors! U,illk• - -m-~_ltfon-.1 deslgn~ld-bulld deJ!vt!IY ~.9d, y~,.1,J(t e~ de{lvary method, tJ!t Gov!m!i'ie~.\ !'Wiirds·a se~ma c~tra~ to.~ d~lgnar {l!e., ai'cpltect'!8ngLnaer ~ ·an{l,to"a c.orisbu~ con~~o.: {I.e., Cft1c c~tra~~) prior to th, COffl~1!t! ~~ ~lgn ~-. TI-.. ~81'1191!.nJ ~~Jn_s {fie C~c contrac;j9:r ~~ring ~Jgo·to ~ -with the arch~,ejlgJ~r·«;.9~~ pro.vlile ~llty reviews rnct c~t ~lmatlng valfdatlon. ~ Cftlc CO!:lb'act II\CIU~~cti'l)..llffl..phasetse1vlces jtJl_flm,:ffi~~~.~O~~~O ~n!of..o«t~~t.a:e~~..11te~ct ~lm1,1.m_~;]

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[536.103 Methods of Contracting. (a) Except as provided In paragraph (b) of this subsection, although CMc contracts are considered

Incentive-type contracts (see 536,207), contracting officers are authorized to use the CMc project delivery method without completing a determination and finding as required by FAR 16.401(d). Contracting officers shall discuss the CMc project delivery method as part of the acquisition plan (see FAR 7.105).

(b) To the extent the contracting officer incorporates an award-fee component into the CMc (in addition to the shared savings Incentive), then the determination and finding required by FAR 16.401(d) Is required to support any such award-fee.

(c) The contracting officer shall use the tradeoff process, as described In FAR 15.101-1, for selecting a construction contractor under the CMc project delivery method, and select sources In accordance with subpart 536.7103.]

Sul:JP-art 5=!6!..2=5p.-,~lal As~cts oil Coritfa,J;tlng for C=· o=-"=s;;..;;t;.;..;ru=ct=T=o=n ______ _.

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536.203 Government Estimate of Construction Cost. (a) [Preparation of the Government Estimate.] [(1)] A copy of the independent Government estimate [shall] must be submitted to the contracting officer before

the date and time for bid opening or the date for receipt of proposals. (See paragraphs fb:l and :fr:l.) I(2)](b) Before releasing a solicitation amendment that may affect price, a revised Government estimate [shall]

mttSt be provided.

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[(b) Release of the Government Estimate. (1) Prior to award, the Government may disclose budget (e.g. prospectus) information In addition to the

Information required under FAR 36.204 and GSAM 536.204. The overall amount of the Government estimate cannot be disclosed before award.

(2) During negotiations, the Government may disclose specific cost figures, but only to the extent considered necessary for arriving at a fair and reasonable price (also see 536.7103(c} and FAR 15.306(e}(e)).]

(e) TJ.e col'lbacting officer may disclose cost figtues il'I the Go,emment estimate dt:1ring l'legotiatio11, bt:1t ol'IIJ to the extent considered neeessal') for arriving at a fftir a11d 1easonable plice. The o,erall a111ot:1nt of the Oo,emment estin ,ate cannot be disclosed before auard.

[(3)] After award, the contracting officer may reveal the independent Government estimated price, upon request, to those firms or individuals who submitted proposals.

[(c} Use of the Government estimate. The contracting officer shall use the Government estimate] tdt'tfse the Go.ernment estimate to evaluate offers, as a guide in conducting contract negotiations or negotiations of contract modifications, and as a tool for determining the reasonableness [or realism] of prices,

536.204 Disclosure of the Magnitude of Construction Projects. [(a}] For construction projects over $10,000,000, show the magnitude in ranges having increments of $10,000,000

(e.g .• $25,000,000 to $35,000,000). The contracting officer may show the magnitude in ranges using a multiple of $10,000,000 (e.g., $70,000,000 to $100,000,000), but the lower figure {shall] mttSt be at least half of the higher figure.

[(b) For the CMc project delivery method: (1) The range maximum is the maximum price, as described at 536.7103(b)(3}, that the Government

wlll accept, Inclusive of the design phase services, guaranteed maximum price optlon(s), and other separately priced line Items.

(2) Advanced notices and solicitations may state Government budget (e.g. prospectus) Information for the guaranteed maximum price, as described at 536.7102, for construction services.

[536.207 Pricing Fixed-Price Construction Contracts. For the CMc project delivery method, the construction contract Is a variation of the fixed-price incentive

(successive target} contract type, described In FAR 16.403-2, that Is tailored for construction. The profit adjustment formula is accomplished via a shared savings ratio specified In the contract, as described at 536.7105-5.J

[536.208 Concurrent Performance of Firm-Fixed-Price and Other Types of Construction Contracts.

The prohibition at FAR 36.208 does not apply to construction contracts under the CMc project delivery method.]

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[~uijpart 536.70-Rese_rvecfl ___ ~---------------....1

[SY..~P-art 536. 71:....-0onstruction ' an~ger.as..Constryct9r Contracting

536_.7101 $~01>, ofSubf!ai1 • ........ __ ~ tbls_:_~._.~rt,clescn~JP9~..@fit~~s f~ ffit~&IQ..9"tiiP.P.M.~P-f!>J~IY.'t_ry!fn!~,

536.7102 ·eefinltions. ~ ... M~ilri.ffitt. .$M~rj-

Mc C~Jlil8.II.CY/~1ioei; .. ns.e" (CC~) ts1arr " . .- . the -~~N'e Un oJ~ ~ ,~, £..~~ nt!m~ ~ ~~ d_uring ~¥·are not,ffia biJ~._ o:f.~ ~ ~ -~ !P-» ~ "~~estlmdng:aiffl.P~'if.nloDc~.ll'h.tbe fki;il,~Jlm;wJLC~ Mi.tM.Yl.cmt.(E~-Qt..~@~

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EstJ.~C.ost of th:eWOfk,. (ECW),mean_s ,the es~ di~ c~J of the co,15tructk>n ~. ~ -~ :ECW rnc~,it C(HIStnictio'l contfa(:! awarcflls thit1target-ECW. nia flfial !.CW Is ~

~unng Ule~ctqlgn,Pt!i!~~.;1nd.l.1..lrH:~a:cf,ln~.tfte_cQOsro,J;tt~ .~o~Jbrp!'9h.m~ffl~.

Fee for the Constru~n W~" Is a.fi.xJamolJ,nl~fille_d In t!19 cons~ctio,:i ci:f~ for; ,~1rof ~ c_oritriictot's lflctlnict costs, lncl~lpg,c,v~rha~cf ancl p.roflt,<for the co05~9~Jr.Jit!l..:.~.:...m.ay_~ P~ .~ ~phasa.ot.co~m.1.eUo.p~lf~~!LPh.aseJ• .a-~p.-@t!t~~pgon1

!'Guaramaecf,fJl~l"!!ll!liPrl_?" (GMP,) l,!i'the calling price descrltteailn FAR 16.~~-,. At constructlo co~ awir'tl, the'GMP. for the coii.s®~.Qn.~((I ts.BillJ~h~lt~ tfi~L~.~m~ofJbe t@_rge!J:_CW, ffi,...C_~~ •'l~] tl9~.19r~ coJ1.s~.o .. W9.~

536.l~ 05 Construction Contract Administration -

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536. 7105-3 Ac;__cou_nti91g and A.udltln·g .Regul~ements.

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536. 7~ 05;6 Allowances. - -(a) EstabHstilng a se~nite allowance·ln add~n to the CCA li•only permlttecl pyrs~~nt to a~" cle~!riatlon approved by the COf'.l!fi!ictlng di~ suppoi11rjg ~ use ~ ~ny such allowance:··---.....--­

(b) lJ)e·wn,tten de~nnl~~ for'~ ~te-al~!i;p tn acklltl<>!l. to the CCA shall {!O~.i~r ffie fo~lowlng; _ (1) .~l!!JmaJlve cO:,.tra!cffng ~lol~£.P.,_~b..•$~a ~raht G..MP Hne~e.m.9.tl>.t'-~~~l'US

~tt~.f~~ GMP opt!Q_i,, an = ~ . ·- _ . J~) E;n~..Y.tf.og_c;_oof9rmance wtt'1 ~,~PPJ!~ble.lJ.I~ and.~ .ecl!!r.&11»@UogJo_~llqwances, ln.cJu~L FM .. tL:Z.O~.

53~.7105-7 Early Work Packages_. (a) Construction ~ 1for. an ~rly,wc,-''rk~ ~---ka-_gerr:nusJ be within the scope of tfle overall contrac:V

_ (b) Early work-~ riiay ~ ;~rt of the Joltlal ~~enJ·as•a separately pricidi1Jrfe1ltam, or the ~ .vemrti!.nt ana the construction c~ 11!8Y agra,t to develop @11,ea:_ny Work p_a_ct<age·ane~~r.d:

(c) Earty wo,rk packa~ stiall b_e deflnltlve·fiffl)-(IQI:l!f>ricJt,ffne~HemsJln.tta,_~~ (d) E.aJ1y WOitk'P.acjcages Develolfejl After Award~ ~

__ (1) :The ~Hijls shall btlaterally agree to tna scope, schedule, a"nd pnclog .fo.r any such. early w.~ pack~. ai'l£1 ~ ~ctshap §.e ~~ ln,~ccbnl~ri'ce ~ FAR P~rt 431.....-.. ___ _ ___ (2)'1f ~ny '5~ ~arly work package.nijtuces•~ SJ:,~ 'of tile cpnstn!ct.lon se,rvJcas un~r ffie GMe f>Ptlon, the ~c..w •MH:.~ .;_~!,J~li:<f._aifd n,,c;_c;A, .tee mt.ff1tt~c;.ons~...tW:§~. J~-~P!'_f.sJl~PJ>~.1..~djus~ p,c~_gtl1Jrtg1y. ~ -· ....,. -· ___ (3).~ny ~ atl9Jrto the contract fQJ' tn eJIHy wc,~pacltage Is su~eq to tile requl~ft.;>r,..a P:f!!"'9~tion objectives ~ -ilml~ Pn~~Mll~~JM~.lnc;:l®JtjgJ~.r .... artd~u.oMble,prlija i:le.i!lmj!riftl~, P-8' F~ 15,406 ___ _

(a) ,aaray work pac"'~ a.rit n~o ~ •L!J>J•~Ho_o~n..b'®k ~CQUnJfm1,.~.~ha~~Qvlng$.!lncentlva,.or .. th~ ~ 1fotdetetmJrn\~0.9lffrnl.11-.mtmfe_...i.W

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536~7106 Construction Contract Closeojft . • _nless,the ~ has l>een c;.~ to.a stantfanl...:=11==""'nn-ftx-=_-ad-:--~e con~~ (see 536.7105-8~ (a} TNe CQntracting offlc.!.I' s~II ensure~~:~ ~ctor·s,p,-oposal fQr fl~t~ -~ nllti

acc~rate arid ril_l~l)le"{n accorda!1C8 • the open ~ lic~wotJng ~ -(s of tile.con~ _ ) Thtt c~ ciftlC.er s_ ... ,1 obtain ar, l~J?rdent a.~lt- qf .. ttiJtQ.ft~tl'.qc.tlon.c.Qmract~ $~~ -t.._S'"-ti

an auc;tlt.may be_accompUsheclln.~ .orilance~woo~536,7tO~c);

53€.°7107 Contract Clauses. ( a) tn~rt a1~use.st.i~ ~ntlally 4ie·· ...._sa...,....~ ...... IU8.-. --~ ....... the.clause at 55~23,.j§l . ponstructlo~:M!l!:IMlttr-As-Cons!rifctor, In ~l~ ~~ coriti'acts {f ~~ dlsrn_aptf.lrig, or removal of lmP.rovemeht!·t~ .. c~~plated W'Jei'.1 a ~ ~ def}va,-y ~ w1111>e·tpJ~. ~ -c.t.alt$8~nt.__d ~t \tJe cJ'9U~ at F~·5,t216·17 IJiceritlve P.nce R~ ndiu~ce~slve Targets. _ _ (b} 'lnsart a clause s11a.ta_ntl~lly the s_ame as~ cliiuse_at'~ . .236-801•Accou~pg R~ords and Prog•~ Pa~ •• In sojfc)fatl@ J@ricl ~~If~~ ~ ri:UI~, or: removal1of lm~~ nts W contempla~ W~fl a CMc ~ -,.,lverY,~ .. w.ltl ti; fo_llowed ancl C0BJ as couritlng sta!l«!•i'¥ t!o ii.o !!IRRJy, Tills clause Is In 11, u ofth_e clauses at FAR152;2_30-2 Cosl·A~c®ntj!_'lg S*81!(1a,:il_s,, FAR ~2.23:0-3 p1~1os1_:1re a.r,~ iCo~Jste_n~y~ot C~ t ACJ:WOlfJjg~ . :;1£1~.fc.~_,i.210..~.~~mJril~oJ&.o.i AccQUnt)ng ~~rida·rds.]

P.ART 552.......SOblCITATION F?ROV~IQNS AND COttTRACT Ch:AUSES ~---•· ... '* *

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&&2.231 80 (Reser,Y.,e.a

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