A new Missouri law has brought online two additional project delivery methods for use on public improvement projects. For the first time, construction management at-risk (“CM at risk”) and design-build construction are available to all political subdivision’s in Missouri. CM at risk was previously available to metropolitan sewer districts, and to certain cities and counties, but no state-wide statute or regulation permitted use of construction manager at-risk on public projects, and public design-build construction was permitted only on certain MODOT projects and in other very limited circumstances. In this two-part series, we will examine the rules that will govern these project delivery methods. First, construction manager at-risk.
CONSTRUCTION MANAGER AT-RISK
As an initial matter, the legislation for CM at risk project delivery on public projects will be codified under new § 67.5050 of the Missouri Revised Statutes (“RSMo.”). The legislation implicitly amends existing statutes allowing public owners to engage a construction manager advisor (also known as construction management-agency), but that expressly prohibit use of construction management at-risk project delivery.
The new law applies broadly to any civil project in excess of $2,000,000 and to any non-civil project in excess of $3,000,000. The new act will not apply to any metropolitan sewer district, or to certain cities or counties which already have access to CM at risk and/or design-build public procurement methods under § 67.5050.14 and § 67.5060.21, RSMo. As with other public projects, the political subdivision must still engage an architect or engineer to prepare the plans and other construction documents, and the architect or engineer may not act as the construction manager or under contract with the construction manager.
Selection of the At-Risk Construction Manager
Construction manager selection will be conducted under a two-step process. First, the political subdivision must solicit a “Request for Qualifications” by publishing (pursuant to specified publication requirements) a description of the project and a description of the basic qualification requirements of the construction manager. The political subdivision then ranks the applicants based on qualifications. The construction manager’s proposed fee or price shall not be requested or considered during this first step. Second, the political subdivision must solicit proposals from at least two and as many as five of the preselected firms to provide additional information, including the “proposed fee and its price for fulfilling the general conditions” costs. At each step, construction manager submissions must be publically opened and the names of the construction managers read aloud.
Unlike typical design/bid/build procurement, the construction manager is not selected on the basis of the “lowest responsible bidder” or similar standard. Rather, the political subdivision must evaluate and rank the proposals under a formula which requires the public owner to ascribe no less than 40% weight to qualifications and no more than 60% to fee and general conditions cost. The public owner then selects a construction manager which, in the public owner’s discretion, submits the proposal “that offers the best value for the political subdivision based on the published selection criteria and on its ranking evaluation.” The public owner then proceeds to negotiate the contract with the first selected firm. If negotiations are unsuccessful, negotiations move to the next selected firm in the order of the ranking. Notably, the act mentions only the construction manager’s fee and general conditions as part of the step two cost proposal, so it is not clear whether the cost proposal must also include a bid for the actual project construction costs. From the statutory construction, it appears the construction manager is selected and a contract awarded before there is a firm price for the work. In other words, the construction manager’s “risk” is not a bid risk, but a performance risk.
Selection of Trade Contractors to Perform the Work
Project “buy out”, it appears, occurs as part of a final phase when the construction manager solicits proposals from trade contractors through public advertisements under generally applicable, common procedures for competitive bidding. The construction manager may also submit its own sealed bid for a portion of the work, unless the public owner elects to prohibit it from doing so.
The construction manager and public owner review and evaluate the proposals together (except the construction manager does not participate in evaluation of its own proposal for self-performed work). There is no express requirement, however, that the construction manager contract with the trade contractors which submit the lowest responsible bids. The standard again allows the public owner and the construction manager to select the proposal which offers the “best value for the political subdivision.” The public owner may, however, direct the construction manager to award particular subcontracts to certain contractors, but must compensate the construction manager for any “additional cost and risk” to the construction manager.
The new law also contains several subsidiary sections addressing typical payment and performance bond requirements and other miscellaneous matters, such as a default by a trade contractor, in which case the CM may self-perform or select another trade contractor without advertisement. The act additionally contains a 10 year sunset provision that will cause the CM at risk authorization to expire on September 1, 2026.