FOF_Exemption-OLCC_Relocation_CMGC_final.docx

FINDINGS OF FACT SUPPORTING AN EXEMPTION

FROM COMPETITIVE BIDDING REQUIREMENTS

AND THE USE OF THE

CONSTRUCTION MANAGER/GENERAL CONTRACTOR (“CM/GC”)

CONTRACTING METHOD

EXEMPTION # S-10700-00003493

Before the State Chief Procurement Officer of the Department of Administrative Services of the State of Oregon

ORS 279C.300 and 279C.335(1) require, with certain exceptions, that all Public Improvement contracts be based on competitive bidding and, under ORS 279C.375, be awarded to the responsible bidder submitting the lowest responsive bid. However, ORS 279C.335(2) permits the Director of the Department of Administrative Services (“DAS”), as the primary public contract review authority for the State of Oregon (“State”), to grant, under certain conditions, exemptions from the requirement for competitive bidding upon the approval of specified findings. Under OAR 125-246-0170(3)(a)(C) the Director has delegated that exemption authority to the State Chief Procurement Officer of the DAS Procurement Services Section (“DAS PS”).

DAS Enterprise Asset Management Section (“DAS EAM”) is coordinating the delivery of the OLCC Headquarters and Warehouse Relocation project (the “Project”) for the Oregon Liquor and Cannabis Commission (“OLCC”). DAS EAM and OLCC propose to utilize the alternative contracting method of Construction Manager/General Contractor (“CM/GC”) for the Project. DAS PS, who will perform the procurement on behalf of DAS EAM and OLCC, may employ an alternative contracting method, provided that the DAS State Chief Procurement Officer issues an order stating conditions and approving findings that are in compliance with ORS 279C.330, ORS 279C.335(2)(a) and (b), ORS 279C.350 and OAR 125-249-0630. ORS 279C.330(1) defines “findings” as used in ORS 279C.350, ORS 279C.330(2) defines “findings” as used in ORS 279C.335, and ORS 279C.335(2) identifies required findings, factors to be considered and specific information to be provided as part of the agency justification for the exemption. OAR 125-249-0630 and OAR 137-049-0630 also address the required findings.

ORS 279C.335(2) provides that the Director of DAS may exempt a public improvement contract or a class of public improvement contracts from the competitive bidding requirement of ORS 279C.335(1) after the Director approves the findings set forth in ORS 279C.335(2).

Under ORS 279C.335(5), the contracting agency is required to publish a notification of a proposed exemption under ORS 279C.335(2) a minimum of 14 days before the date on which the contracting agency or State agency intends to take action to approve or disapprove the exemption. On May 17, 2022, DAS PS published such a notification. As required by ORS 279C.335(5)(c), the notification stated that in response to a written request, the contracting agency or State agency will hold a public hearing before these findings are finally adopted, allowing the opportunity for all interested parties to comment on the draft findings.

[ALTERNATIVE 1 (if no hearing is requested) - No request for a public hearing was received within the 14-day period following publication of the notice.]

[ALTERNATIVE 2 (if a hearing is requested) - On TBD, DAS PS received a request for a public hearing for review of these findings. The hearing was held on TBD, in the TBD Conference Room, TBD Building, TBD, Salem, Oregon 97301, as published in the public notices section of the Daily Journal of Commerce on May 17, 2022. There were [insert number or “no” as applicable] comments from the public, either oral or written, during this hearing or during the time for comments.]

I

BACKGROUND

Project Description:

In July of 2021, DAS was informed of the OLCC Warehouse and Headquarters Relocation Project, including OLCC’s allocation of capital expenditure appropriation of $90.7 million to purchase land and construct a new distribution facility and administrative office building. This allocation also includes the purchase of a new liquor conveyor system, enterprise modernization of critical information technology solutions and debt servicing costs associated with the funding of this investment. During the 2022 legislative session, OLCC was granted an additional $54.8 million to cover the high inflationary costs of industrial land value, steel, lumber, and other rising construction expenses due to the global pandemic and international supply chain shortages.

OLCC’s need to relocate is from its current location in Milwaukie, Oregon, is driven by the increasingly limited space available to stock spirits inventory and the age and condition of the current facility. Although the OLCC has added on to the current facility and added additional warehouse space with the acquisition of the Milport facility, almost 98% of the current warehouse space is being utilized throughout the year. The current warehouse and headquarters facilities are more than 65 years old. The warehouse requires significant near-term seismic and roofing upgrades. The plumbing and boiler in Headquarters require a major overhaul. Therefore, time is of the essence to construct a new facility to meet the demand of the economic benefit to the State of Oregon.

The new facility will be designed and built to provide warehousing for distribution and headquarters office space for staff and for the public to visit, which may include but are not limited to the following:

· Office space for both the liquor control and cannabis management staff,

· Public Commission Chamber with ability for onsite live streaming capabilities,

· Warehousing and site logistic to support current distribution needs with room for growth for a minimum of 50 years

· Develop a campus that supports movement of large trucks, customers, and staff to move efficiently and parking for staff working at the campus.

The Project must comply with applicable federal, state, and local codes and regulations. Under these requirements, the Project Team, to the maximum possible extent, must utilize the most cost effective and sustainable design approach, accomplish space and energy savings, and encourage other innovative construction features.

Oregon Revised Statutes require that a construction contractor for a public improvement contract be selected based on the lowest responsive bid, unless an exemption from competitive bidding is granted or an exception is available. The standard design/bid/build (“DBB”) approach is typically an acceptable method for public contracting for most construction projects. However, for construction projects that have unique aspects, an alternative contracting method may be more appropriate than the DBB approach.

Therefore, DAS EAM and OLCC, continuously striving to improve project delivery and taking these factors into consideration, proposes to use the CM/GC process as an alternative to the DBB process for the Project. In accordance with the applicable statutes and administrative rules, DAS PS, on behalf of DAS EAM and OLCC, will use a selection process utilizing a single phase Request for Proposals (“RFP”) competitive procurement selection process where price, qualifications, and other non-price evaluation factors will be evaluated.

The planned services and work under the resulting CM/GC contract provided by the selected CM/GC contractor will consist of pre-construction services (including phasing, scheduling and budgeting support), value engineering (“VE”) services, equipment pre-purchasing, construction and relocation services, and all related support services needed to complete the Project (collectively, the “Work”).

ORS 279C.335(2) and 279C.350(1) require certain findings as a part of exempting public improvement contracts or classes of public improvement contracts from competitive bidding. ORS 279C.330(2) provides that “findings,” as used in ORS 279C.335, “means the justification for a conclusion that a contracting agency or State agency, in seeking an exemption from the competitive bidding requirement of ORS 279C.335(1), reaches based on the considerations set forth in ORS 279C.335(2).” ORS 279C.350(1) provides that, with respect to an exemption request regarding a specific public improvement contract, the Director of DAS shall issue an order that sets forth findings, as described in ORS 279C.330(1), supporting the decision to grant or deny the request for the exemption.

Accordingly, DAS EAM and OLCC submit the following findings to support the Director’s decision to use a competitive CM/GC procurement and contracting process for the Project as an alternative to the low-bid DBB method.

II

FINDINGS REGARDING REQUIRED INFORMATION

ORS 279C.330(1) provides that: “As used in ORS 279C.345 and 279C.350, “findings” means the justification for a contracting agency conclusion that includes, but is not limited to, information regarding:

DAS EAM and OLCC find that the information regarding these criteria as set forth below supports the Director’s decision to use the CM/GC contracting method for the Project.

1. Operational, Budget and Financial Data: Funding for this project will be achieved by issuing two separate Article XI-Q General Obligation Bonds which will reduce short-term costs while taking advantage of historically low interest rates. The total estimated project budget at this time is $145.5 million (including purchase of land, project management, Interagency Agreement (“IAA”) costs, and design and construction). The initial estimate of the target Guaranteed Maximum Price (“GMP”) for the construction of the new facility is $98.8 million. If the CM/GC contracting method is available, the CM/GC contractor could assess the scope and phasing of the Work and provide a more detailed cost estimate during the design phase and through the possible use of various work packages. This additional input would allow DAS EAM and OLCC to more accurately determine funding requirements or obtain additional funds as needed. These phased Project budget adjustments cannot be effectively accomplished with a traditional DBB contracting process. DAS EAM and OLCC anticipate a lower overall cost and better value using the CM/GC contracting method, as described more fully in this Section II and in Section IV below.

The CM/GC process will assist in developing a scope of work and construction documents that meet the requirements of the Project with significantly lower risk of cost overruns, particularly with the use of a GMP where most of the risk of unforeseen costs will be absorbed by the CM/GC contractor. The resulting CM/GC contract will establish, within the GMP, the allowable fees, allowances and Project costs of the Work. Under the CM/GC process, any savings in Project costs will remain with the State.

Construction of the new facility is expected to be complete in early 2025. In the interim, distribution center management will take steps to mitigate the impact of storage capacity limitations and aim to meet demand, therefore avoiding loss of revenue. The industry standard for distribution facilities is between 80% and 85% storage utilization. During the peak holiday sales season, the warehouse is near 100% capacity and must limit the number of items in inventory. With the 5% expected annual increase in liquor shipments the current warehouses are expected to run out of storage capacity in 2022 and put future liquor sales and state revenues at risk. Given the amount of revenue at risk over the next decade this investment will pay for itself in a relatively short period of time. Following completion of the new facility, the entire project is estimated to pay for itself in 9.7 months purely from capturing the revenue at risk during that time frame. The investment in a new, build-to-suit facility will allow the OLCC to capture and continue growing for 50+ years revenue, which is currently at risk.

2. Public Benefits: Use of CM/GC as an alternative contracting method will allow construction work to commence relatively rapidly on some portions of the Work while design continues on the remaining portions. This will shorten the overall duration of the construction maintaining both the schedule and the budget of the Project while ensuring the evaluation and incorporation of OLCC needs.

Further, as described in Section IV below, the CM/GC delivery method will benefit the public generally as it will save both time and costs during the construction as well as reducing schedule risks for project delay and significant revenue increase for the State. As the third largest revenue generating agency in Oregon, the State risks $190 million in unrealized revenue if the Project is postponed by six months and risks $700 million in unrealized revenue if the project is postponed by one year. Failing to plan for future distribution needs will constrict growth and profitability for the State of Oregon.

3. Value Engineering: Value Engineering (“VE”) is encouraged by DAS on all DAS projects. VE can be defined as an organized effort directed at analyzing designed building features, systems, equipment, and material selections for the purpose of achieving essential functions at the lowest lifecycle cost consistent with required performance, quality, reliability, and safety. The CM/GC method of project delivery will result in earlier, more reliable, and higher quality VE since a sizable amount of project design and planning will be accomplished with the involvement of and in conjunction with the CM/GC contractor during the design development phase. DAS EAM and OLCC can expect to realize substantial benefits of a lower construction cost and a well-developed scope of work for the Project.

The unique relationship of the owner, construction contractor and the design team under the CM/GC process for Project delivery fosters a team approach, which should result in significant VE benefits. The standard DBB method procures a contractor and pricing only after the design has been fully completed, which does not allow for pertinent input from the construction contractor as to the chosen means and methods. Design plans and specifications that utilize alternative materials and methodology identified by the CM/GC that add value or save costs can be developed during the design phase when using the CM/GC delivery method. Alternative materials or methods identified by the CM/GC could be considered in the pricing before the GMP amendment is executed, reducing the number of change orders during construction of the Project.

4. Specialized Expertise Required: The Project will be challenging because of site logistics and the need to accommodate an extensive conveyance system to accommodate shipping and receiving requirements. The means and methods, phasing plan and equipment integration will require the expertise of a contractor familiar with large-scale construction of a major campus development project. Further, due to the adaptive reuse strategy, the relocation of the facility will include repurposing of OLCC equipment and materials for the new facility.

The Project requires the knowledge, craftsmanship and experience of a contractor team that has worked on complex technical buildings in the past, including complex conveyor systems and the electronic management system to operate the system safely and successfully. Due to these unusual and unique construction details, it is paramount that the Project be delivered by a contractor selected based on price and qualifications and not one based on a low bid. The selected CM/GC contractor and its expert subcontractors will be critical team members for the Project.

5. Public Safety: Safety is a priority for all members of the project delivery team. The CM/GC contractor will be able to provide safe work zones during construction of the Project, providing safe access for CM/GC contractor workers, any other Project contractor or consultant personnel, owner personnel and the general public as needed, while performing the Work in and around the Project sites. Mitigation of public risk concerns requires the inclusion of the required approach, skills and experience as criteria when selecting a qualified contractor through a CM/GC competitive procurement process, rather than the traditional and much more limited DBB process. The CM/GC procurement method would result in the selection of a well-qualified CM/GC contractor capable of delivery of safe and seamless performance of the Project Work.

In addition, OLCC’s net revenue is distributed to the State General Fund, Counties, Incorporated Cities, Unincorporated Cities, and Alcohol and Drug Treatment Services. The CM/GC delivery method, will allow OLCC to complete the project within shorter timeline and safeguard this revenue stream to provide stable funding from the profits of distilled spirits sales to support critical programs like police, first responders, health services, and education.

6. Market Conditions: The general economy and regional construction market is experiencing volatility in commercial construction, which appears to continue to trend higher into2022 and 2023 and is likely to continue with added impacts due to the recovery from the COVID-19 pandemic and world conflicts. DAS EAM and OLCC have reason to believe the current market conditions will result in a large amount of interest in this CM/GC procurement compared to conventional DBB. The bidder pools for most low-bid construction contract awards presently include a number of contractors that are not familiar with the specialized work that is required for a particular project, but will nonetheless bid on this Project in order to secure work. This practice may result in a contract award to a low-bid contractor that is not able to sufficiently perform and is at a higher risk for safety or financial issues on a complex project. Due to these market conditions, the CM/GC procurement process will best allow DAS PS, DAS EAM, and OLCC to control the associated risks by evaluating the qualifications of interested proposers to select a contractor who can successfully deliver this high-impact Project.

The distilled spirits market also faces economic uncertainty of which can affect OLCC’s ability to meet customer needs. Current warehouse capacity limitations reduce the possibility of new products entering the Oregon market and constricting product variety, which directly affects consumer purchase behavior.

7. Technical Complexity: This Project would benefit from a CM/GC contractor with in-depth background knowledge of the technical issues that contribute to the complexity of the Project. The Project involves an extensive technology upgrade that is related to the conveyance system and retail sales inventory control as well as an upgraded Commission facility that will include onsite live streaming capabilities. A CM/GC contractor with specialized skills and expertise will be required to identify and price multiple possible solutions for the critical operational equipment for OLCC incorporating technology with equipment planned, as well as to identify condition of reused equipment that may impact the Project. A high level of communication and coordination among DAS EAM, OLCC, the design professional and the construction contractor as a team is required, which would be facilitated by utilizing the CM/GC approach for the Project. Due to post pandemic changes in the telework environment, technical acumen for building for flexibility will be critical to the Headquarters space to accommodate future fluctuations in the workforce.

8. Funding Sources: The State funding was allocated for the Project in the 2021/23 Biennium. The Project will be paid with General Obligation Bonds, (Article XI). The bonds total $145.5 million, $15 million is dedicated to the conveyor system and the remainder is for the land and building construction. General Obligation Bonds will be repaid from OLCC proceeds.

Funding for this project will be achieved by issuing two separate Article XI-Q General Obligation Bonds which will reduce short-term costs while taking advantage of historically low interest rates.

It will be necessary to have a CM/GC contractor that can help with cash flow projections and other financial models to assist Project Team with timing of funds and possible development of Work phases for the Project.

III

FINDINGS REGARDING COMPETITION

ORS 279C.335(2) requires that an agency make certain findings as a part of exempting public improvement contracts or classes of public improvement contracts from competitive bidding. ORS 279C.335(2)(a) requires an agency to find that: “The exemption is unlikely to encourage favoritism in awarding public improvement contracts or substantially diminish competition for public improvement contracts.”

DAS EAM and OLCC find that granting an exemption from the requirement for competitive bidding to allow for the selection of a CM/GC, as described in this document, is unlikely to encourage favoritism in awarding public improvement contracts or substantially diminish competition for public improvement contracts. This finding is supported by the following:

1. Solicitation Process: DAS EAM and OLCC propose to use the CM/GC process as an alternative to the DBB process for the Project. In accordance with applicable public contracting statutes and administrative rules, DAS PS, on behalf of DAS EAM and OLCC, will use a selection process utilizing a single phase RFP competitive procurement selection process. As required by ORS 279C.335(4)(c) and ORS 279C.337(1), DAS PS will conduct the procurement for CM/GC services in accordance with the applicable Oregon Department of Justice (“DOJ”) model rules. The solicitation and contract forms to be used are DAS documents that were developed in coordination with DOJ. The final solicitation documents will be reviewed and authorized for release by DOJ prior to advertisement, and the resulting CM/GC contract will be reviewed and approved for legal sufficiency by DOJ prior to execution.

2. Solicitation Advertisement: Pursuant to ORS 279C.360, the CM/GC solicitation will be advertised in the Daily Journal of Commerce. In addition, solicitation documents will be available through the automated e-procurement system maintained by DAS PS, OregonBuys. Solicitation documents will not be available in hard copy form.

3. Full Disclosure and Competitive Process: DAS PS will ensure full disclosure of all Project information using a competitive single phase RFP procurement process pursuant to ORS 279C.337 and other applicable provisions of ORS 279C.300 through 279C.875 and the applicable DAS administrative rules and DOJ Model Rules for procurements of CM/GC services. The RFP process will include the following elements:

4. Evaluation and Selection Process: The evaluation and selection process will include the following steps:

5. Growing Pool of Contractors: With the increase in the use of alternative contracting in the construction industry, DAS anticipates an adequate pool of contractors qualified to lead the CM/GC effort. The selection process will be open and available to all qualified contractors

6. Good Competition: An open and competitive solicitation process will provide an opportunity for qualified contractors with experience in the CM/GC method for project delivery and with key qualifications associated with the unique subject matter involved in the Project. It is anticipated that the level of competition will be similar to the satisfactory levels experienced in other State projects of this type and size. The final selection will be made on the basis of price and non-price factors, and thereby expands the basis of competition beyond price alone, to include qualifications, experience, specialized expertise, innovation, and best practices factors.

IV

FINDINGS REGARDING SUBSTANTIAL COST SAVINGS AND OTHER SUBSTANTIAL BENEFITS TO THE PUBLIC CONTRACTING AGENCY

ORS 279C.335(2) requires that a public agency make certain findings as part of exempting public improvement contracts or classes of public improvement contracts from competitive bidding. ORS 279C.335(2)(b) requires, in pertinent part, that an agency find that: “Awarding a public improvement contract under the exemption will likely result in substantial cost savings and other substantial benefits to the contracting agency or the state agency that seeks the exemption…” ORS 279C.335(2)(b) further provides, in pertinent part, that:

“In approving a finding under this paragraph, the Director of the Oregon Department of Administrative Services…shall consider the type, cost and amount of the contract and, to the extent applicable to the particular public improvement contract or class of public improvement contracts, the following:

These factors are further discussed in Section IV.6 below.

DAS EAM and OLCC find that selecting a CM/GC through an exempted selection process will likely result in substantial cost savings and other substantial benefits to the contracting agency. This finding is supported by the following:

1. Fewer Changes at Less Cost: Under a CM/GC contract, the only changes that affect the cost of the new construction to the owner are changes to the scope of work that are made by the owner. Careful project planning that includes a clearly defined scope of work is critical to the success of a CM/GC project by limiting the number of contract change orders. In addition, a GMP for a CM/GC contract provides assurance that risk associated with costs within the scope of work are borne by the CM/GC contractor. The CM/GC method provides the opportunity for a compressed design and construction schedule, with lower change order rates and schedule extensions. A compressed design and construction schedule would provide the benefit of a shorter duration for the project reducing the Project’s general condition costs for both CM/GC and owner.

2. Better Informed Decisions: The unique project team relationship between the design and construction entities in a CM/GC contract provides early input on design decisions that allow for value engineering, which may provide significant cost reductions without affecting the overall schedule. In addition, better informed and timely decisions within the design and construction team facilitates schedule reductions, resulting in substantial cost savings to the State. In past CM/GC projects, cost savings to the State due to the reduction in overall schedule, value engineering construction and value-based design components have reached 10% of the original construction estimate.

3. Matching Budget and Scope: Having the CM/GC as a part of the project team and developing an early GMP helps to ensure that the project scope is aligned with a more refined budget analysis. The RFP process will seek to ensure that the Project incorporates budget-based design constraints and appropriate contingencies. The CM/GC contractor will have to reconcile its budget estimate with an estimate provided by the A&E to establish a GMP for the Project. This process will offer DAS EAM and OLCC an opportunity to maximize its budget value by ensuring that the scope closely matches budget estimates, with the further reduced risk provided by a GMP. Additionally, a more concise cost estimate at the beginning of construction will save costs to the Project by reducing change orders. The CM/GC contract will allow DAS EAM and OLCC to include alternate work packages (such as alternative materials and techniques) so the Project scope can be managed to budget requirements if budget projections change.

Additional cost savings will result from the active involvement of a CM/GC contractor during the design process in the following ways:

· The CM/GC contractor’s input regarding the constructability and cost-effectiveness of various alternatives will guide the design toward the most economical choices;

· Consideration of the specific equipment available to the CM/GC contractor will allow the designer to implement solutions that utilize the capacity of that equipment;

· The CM/GC contractor will be able to provide current and reliable information regarding the cost of materials that are experiencing price volatility and the availability of scarce materials and recommend alternative materials if necessary or more cost effective; and

· The CM/GC contractor will also be able to order materials while design is being completed in order to avoid inflationary price increases and provide the lead-time that may be required for scarce materials.

4. Size and Technical Complexity: The CM/GC project delivery method will provide DAS PS with the opportunity to identify, evaluate and rank CM/GC teams’ proficiency with performing comparable projects in size and technical complexity, which would not be available in the traditional DBB process. This Project requires the expertise of a team that is familiar with complex systems and operations of this size and scale to reduce risks to the State.

5. Value Engineering: The CM/GC project delivery method will provide the opportunity for value engineering at all phases after CM/GC joins the Project team. Such early collaboration would not be available in the traditional DBB process. Past projects administered by DAS using the CM/GC method have resulted in substantial cost savings to the State through utilizing various value engineering components in the selection of construction materials and methods, site layout, pre-construction services, and selection of overall finish elements. The early involvement of the contractor will assist with establishing design methods that will facilitate construction in the field, and establish value-based construction phasing, as well as contractor’s means and methods, early in the design process. Under the traditional DBB approach, the means and methods are established only after a project has been completely designed, creating the potential for significant cost impact.

6. Additional considerations under ORS 279C.335(2)(b):

A. How many persons are available to bid:

See Sections III.5 and III.6. The procurement process has been formulated to encourage competition. Further, the construction contractor and architect and engineering communities recognize that those public agencies that have used the CM/GC model perceive it to be efficient and cost effective, and have been able to demonstrate tangible benefits, including substantial cost savings, other substantial benefits and expedited project completion. These communities therefore have increasingly sought to participate, directly or indirectly, in procurements involving the CM/GC method, to gain industry recognition in this area and to participate with owners in striving for project success.

B. Construction budget and projected operating costs for the completed public improvement:

The target GMP for the Project is initially assessed at $98.8 million, which is supported by State funding allocations. Due to the time critical nature of the Project and for the reasons described in Section II.1 (Operational, Budget and Financial Data), the CM/GC model, when compared with the standard DBB contracting method, may be more appropriate, produce a better project, and reduce the time period during which on-site work is performed. This reduced duration of on-site work will result in reduction of general conditions costs, supervision costs and Project management fees, both for the CM/GC contractor and the owner, over the life of the Project as well as overall cost savings to the State and better management of the construction budget and operating costs.

C. Public benefits that may result from granting the exemption:

The use of the CM/GC solicitation and award process as an alternative contracting method provides a higher level of confidence in completing the Project within the established budget. CM/GC teams have brought certain perspectives to the design and construction process that have proven valuable to the State in projects involving the renovation and new constructions of buildings of local and State significance. See Section II.2 (Public Benefits).

D. Whether value engineering techniques may decrease the cost of the public improvement:

See Section II.3 (Value Engineering). Through the use of the CM/CG project delivery method, DAS expects to significantly reduce the cost to the State for the Project by providing a systematic application of recognized techniques by a multi-disciplined team that identifies the function of a product or service, proves a value for that function, generates alternatives through creative thinking, and provides the needed functions for the lowest overall life-cycle cost.

E. The cost and availability of specialized expertise that is necessary for the public improvement:

See Section II.4 (Specialized Expertise Required). The growing pool of experienced CM/GC contractors should ensure that a high level of expertise is available for the Project. Employment of an open and competitive solicitation process should contribute to lower overall Project costs. The Project will require a CM/GC contractor who possesses a high level of understanding of the complexity involved in this Project, as well as the effects of that complexity on the Project schedule, quality and budget. Design services performed by A&E firms cannot prescribe, in a cost-effective manner, all of the necessary means and methods by which a DBB contractor performs the construction. Therefore, in the traditional DBB approach, the DBB contractor’s means and methods would not be available until the contractor determines them after reviewing the completed construction documents. This Project’s means and methods will have a significant impact on the schedule, quality and budget. The CM/GC process allows the earliest possible input from the CM/GC contractor, reducing the risk of later changes in Project design that can be costly once construction begins. The CM/GC process will assist in quickly developing a scope of work and construction documents that meet the requirements of the Project with significantly lower risk of cost overruns. In addition, with the use of a GMP, most of the risk of unforeseen costs will be absorbed by the CM/GC contractor.

F. Any likely increases in public safety:

See Section II.5 (Public Safety).

G. Whether granting the exemption may reduce the risks to the contracting agency or the public that are related to the public improvement:

See Sections II.2 (Public Benefits), II.5 (Public Safety, IV.1 (Fewer Changes at Less Cost), and IV.2 (Better Informed Decisions). Early involvement and pre-planning by the CM/GC Contractor will mitigate risk to the contracting agency and the public by selection of the best means and methods for the Project using experienced-based proven techniques and systems.

H. Whether granting the exemption will affect the sources of funding for the public improvement:

Granting the exemption will not affect the sources of funding for the Project.

I. Whether granting the exemption will better enable the contracting agency to control the impact that market conditions may have on the cost of and time necessary to complete the public improvement:

See Section II.6 (Market Conditions). The team relationship fostered by the CM/GC approach will allow for early material sourcing and their availability to be reviewed by the A&E, CM/GC contractor, DAS EAM project coordinator and OLCC during the design phase of the Project. This communication allows for the selection, as the design evolves, of the best materials based on cost, availability and long-term value.

J. Whether granting the exemption will better enable the contracting agency to address the size and technical complexity of the public improvement:

See Section II.4 (Specialized Expertise Required) and Section II.7 (Technical Complexity). With the increase in the use of alternative contracting methods, there is a growing pool of contractors qualified to lead the CM/GC effort. The selection process will be open to all qualified contractors who possess relevant experience and an understanding of the complexity involved in a new construction. Complex requirements of structural, conveyor system, mechanical and electrical systems will need to be addressed to ensure overall Project success.

K. Whether the public improvement involves new construction or renovates or remodels an existing structure:

This public improvement contemplated for the Project is for development of a new campus and structure to meet the needs of OLCC.

L. Whether the public improvement will be occupied or unoccupied during construction:

The public improvement is a new facility; thus, it will be unoccupied during the construction of this Project.

M. Whether the public improvement will require a single phase of construction work or multiple phases of construction work to address specific project conditions:

It is currently anticipated that the Project will involve a single phase of construction work.

N. Whether the contracting agency has, or has retained under contract, and will use contracting agency personnel, consultants and legal counsel that have necessary expertise and substantial experience in alternative contracting methods to assist in developing the alternative contracting method that the contracting agency will use to award the public improvement contract and to help negotiate, administer and enforce the terms of the public improvement contract:

DAS’s legal counsel, Oregon DOJ, and DAS’s Project management and procurement team have the necessary expertise, substantial experience and substantial knowledge in using the CM/GC and other alternative procurement and contracting methods to successfully deliver multiple projects varying in scope, size, and complexity within schedule and budget constraints. DOJ will review and authorize for release the final solicitation documents and will review and approve the resulting CM/GC contract for legal sufficiency prior to execution. Furthermore, DOJ will be available to assist in any resulting CM/GC contract negotiations, as well as in the ongoing administration, amendment and enforcement of the resulting CM/GC contract.

DAS EAM and OLCC staff has the experience needed to make this Project a success while utilizing the CM/GC process. DAS EAM will be providing Project coordination throughout the Project. Additionally, OLCC has hired Inici Group, a project management firm with demonstrated expertise in alternate forms of contracting, including the use of the CM/GC delivery method for the past 30 years. Inici Group has completed over two dozen CM/GC projects in the State of Oregon since 1990 when they completed the first CM/GC project in the State of Oregon for OHSU and has managed the successful completion of CM/GC projects totaling of $1b. DAS EAM and OLCC will continue to ensure that all staff assigned to the Project will have the necessary skill set to effectively manage the Project.

7. Post-Project Evaluation: Upon completion of the Project, DAS EAM and OLCC will evaluate the Project in accordance with the requirements of ORS 279C.355 and OAR 137-049-0620(3) and will summarize the evaluation in a public report. The evaluation will include actual Project costs, the GMP amount, the number of Project change orders, a narrative description of the successes and failures during the design, engineering and construction of the Project and an objective assessment of the impact of the CM/GC process as compared to the findings in this exemption request. In its evaluation, DAS EAM and OLCC will also compare the actual CM/GC contracting costs to estimated costs if DAS had used a traditional DBB approach.

V

CONCLUSION

Use of the CM/GC alternative contracting method for the OLCC Warehouse and Headquarters Relocation is an appropriate use of the alternative contracting method for the Project. An exemption from the competitive bidding requirements for the Project is justified under the criteria outlined in ORS 279C.335(2) and ORS 279C.330, and the findings DAS EAM and OLCC has set forth in this request for exemption, which are in compliance with ORS 279C.330 and 279C.335(2). Based upon the findings outlined in this request for exemption, DAS specifically concludes as follows:

A) Following the described competitive selection process, an exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts; and

B) Award of a public improvement contract pursuant to the exemption will likely result in substantial cost savings and other substantial benefits to the public contracting agency.

DAS PS submits that this request meets all of the criteria above and requests approval of this exemption. If you have any questions, please call Yulia Niece, Procurement Contract Specialist 3, at (971) 719-3087.

Sincerely yours, Yulia Niece Procurement Contract Specialist 3 Department of Administrative Services, Procurement Services

Reviewed by Department of Justice: