January 8, 2024 SHA Staff Report - Exemption from Competitive Bidding - Final.pdf

CITY OF SALEM

Staff Report

555 Liberty St SE Salem, OR 97301

File #: 23-452 Date: 1/8/2024 Version: 1 Item #: 4.a.

TO: Chair and Housing Authority Commissioners

THROUGH: Keith Stahley, Executive Director

FROM: Nicole Utz, Housing Administrator

SUBJECT:

Public Hearing - Exemption from the Competitive Bidding Process and Authorization of an Alternative Contracting Method for a Class of Public Improvement Contracts.

Ward(s): All Wards Commissioners(s): All Commissioners Neighborhood(s): All Neighborhoods Result Area(s): Welcome and Livable Neighborhood

SUMMARY:

Affordable housing in Salem has been a desired goal for the past several years. Currently, the

Housing Authority of the City of Salem (SHA) is working on two new affordable housing projects.

This first project is the renovation of Englewood West Apartments. The second project is the renovation of Southview Terrace Apartments.

ISSUE:

Shall the Commission of the Housing Authority of the City of Salem, Oregon (Commission), acting as the Local Contract Review Board, adopt Resolution 2303 approving an exemption from the competitive bidding process and the use of Construction Manager/General Contractor (CM/GC) services for a class of public improvement contracts for the construction of affordable housing property?

RECOMMENDATION:

Adopt Resolution 2303 approving an exemption from the competitive bidding process and the use of CM/GC services for a class of public improvement contracts for the construction of affordable housing property.

FACTS AND FINDINGS:

An exemption to the competitive bidding requirements set forth in Oregon Revised Statutes (ORS)

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File #: 23-452 Date: 1/8/2024 Version: 1 Item #: 4.a.

Chapter 279C and the SHA’s Public Contracting Rules is necessary for these projects to proceed. An exemption is needed to allow the SHA to utilize the expertise of a CM/GC during the design stages of the project to gain as much efficiency as possible in both cost and amenities. The CM/GC would be selected competitively via a request for proposals (RFP) for this project.

The public improvement contract to be awarded for the construction comprises a limited and distinct class of such public improvement contracts. ORS 279C.335 and SHA Public Contracting Rule (PCR)

9.7 allow an identified class of public improvement contracts to be exempted from the competitive bidding process.

Pursuant to ORS 279C.335(2) and PCR 9.7, the Local Contract Review Board may exempt a public improvement contract or a class of public improvement contracts from the competitive bidding requirements if, after a public hearing, the Local Contract Review Board finds that such an exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts, and the exemption will likely result in substantial cost savings and other substantial benefits to the contracting agency or the public.

Findings of Fact demonstrating compliance with the applicable criteria are set forth in Exhibit A to Resolution No. 2303 - Attachment 1.

BACKGROUND:

Affordable housing in Salem has been a desired goal for the past several years. Currently, the

Housing Authority of the City of Salem (SHA) is working on two new affordable housing projects.

This first project is the renovation of Englewood West Apartments. The second project is the renovation of Southview Terrace Apartments.

The first project site, Englewood West apartments, is located at 1068 Park Ave NE, Salem, Oregon 97301. It is surrounded by community businesses, apartments, and single-family residences. It is a 54-unit property located in NE Salem in a three-story building with an elevator. All units are one-bedroom apartments serving the elderly and disabled. The property was built in 1991 and is in critical need of renovation and upgrades to meet current codes and standards.

The second project site, Southview Terrace apartments, is located at 375 Fairview Ave SE, Salem, OR 97302. It is surrounded by businesses, churches, apartments, and single-family residences. It is a 60-unit property located in SE Salem in a three-story building with an elevator. All units are one-bedroom apartments serving the elderly and disabled. The property was built in 1993 and is in critical need of renovation and upgrades to meet current codes and standards.

Upon approval of this exemption, the SHA will issue an RFP for CM/GC for the project. The resulting contract will be reviewed and approved by the SHA’s Executive Director, legal counsel, and the Housing Administrator. The estimated value of the work to be performed by the selected CM/GC will be dependent upon the project and will be part of a financial package prepared by SHA staff and contractors.

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File #: 23-452 Date: 1/8/2024 Version: 1 Item #: 4.a.

Nicole Utz Housing Administrator

Attachments:

1. SHA Resolution 2303

2. Exhibit A - Findings of Fact

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RESOLUTION NO. 2303 Page 1 of 2

RESOLUTION NO. 2303

A RESOLUTION GRANTING AN EXEMPTION FROM COMPETITIVE BIDDING FOR

CONSTUCTION OF THE SOUTHVIEW TERRACE AND ENGLEWOOD WEST

AFFORDABLE HOUSING PROJECT BY MEANS OF A CONSTRUCTION

MANAGER/GENERAL CONTRACTOR (CMGC) AND AUTHORIZING SELECTION BY

REQUEST FOR PROPOSALS (RFP)

WHEREAS, the Commission of the Salem Housing Authority acts as the Local Contract

Review Board for the Housing Authority of the City of Salem (SHA) pursuant to ORS 279A.060 and Public Contracting Rules (PCR) 1.3; and

WHEREAS, ORS 279C.335(2) and PCR 9.7 authorize the Local Contract Review Board to exempt a public improvement contract or a class of public improvement contracts from competitive bidding requirements upon the adoption of certain written findings after a public hearing; and

WHEREAS, the SHA has adopted its own PCR pursuant to Oregon Revised Statutes (ORS)

279A.065; and

WHEREAS, PCR 10.2 authorizes an alternative form of procurement known as the CM/GC contract; and

WHEREAS, a CM/GC contract may be authorized if certain types of benefits resulting from its use are reasonably demonstrated; and

WHEREAS, one primary goal of the SHA, is to provide more affordable housing in the city;

and

WHEREAS, SHA is seeking to construct affordable housing units on two sites owned by the

SHA; and

WHEREAS, construction of the affordable housing units will be financed using Federal Low

Income Housing Tax Credits (LIHTC), grants, and private debt financing; and

WHEREAS, pursuant to ORS 279C.335(5) and PCR 9.7(c), the SHA published notice of the

January 8, 2024, public hearing on the draft findings in the Daily Journal of Commerce, a trade newspaper of general statewide circulation, on December 22, 2023, which date is not less than fourteen days prior to the public hearing;

WHEREAS, the Local Contract Review Board held the duly advertised public hearing on

January 8, 2024; and

RESOLUTION NO. 2303 Page 2 of 2

WHEREAS, the Commission determines that the Southview Terrace and Englewood West project should be constructed by CM/GC.

NOW, THEREFORE, THE COMMISSION OF THE HOUSING AUTHORITY OF THE CITY

OF SALEM, OREGON, ACTING AS THE LOCAL CONTRACT REVIEW BOARD FOR

THE HOUSING AUTHORITY OF THE CITY OF SALEM, OREGON, RESOLVES AS

FOLLOWS:

Section 1. The Commission adopts the Findings set forth in Exhibit A to this Resolution.

Section 2. The exemption of the CM/GC contract from competitive bidding will promote competition and will not encourage favoritism, because the CM/GC will be chosen by a competitive RFP process, and the major portion of the construction work will be performed by subcontractors chosen by competitive bidding.

Section 3. The contract for construction of the Sequoia Crossing project by CM/GC is exempt from competitive bidding, and the CM/GC shall be selected by the RFP process in accordance with the SHA’s public contracting rules and the process described in the Findings.

Section 4. Effective Date. This resolution is effective upon adoption.

ADOPTED by the Commission of the Housing Authority of the City of Salem, Oregon, Oregon, this 8th day of January 2024.

ATTEST:

Recording Secretary

Approved by City Attorney: ________________________

Checked by: N. Utz

EXHIBIT A

FINDINGS OF FACT:

1. The exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts.

The Construction Manager/General Contractor (CMGC) with a Guaranteed Maximum Price (GMP) contractor will be selected through a competitive and open RFP selection process authorized by the SHA.

a. Solicitation Process: The nature of the work required for this class exemption is very specialized due to the layering of tax credit financing with a combination of State and Federal funds. The RFP process will allow competition for the selection of the CM/GC for construction of the project.

2. Awarding a public improvement contract under this exemption will likely result in substantial cost savings and other substantial benefits to the SHA and the public.

a. Substantial cost savings will be realized by the SHA due to the fact that a CM/GC is the expert in constructing and managing projects. The exemption process will allow the CM/GC to use its specialized resources to complete the work. This specialized experience will improve the design of the project and minimize construction risks and cost overruns.

b. The type, cost, and amount of the contract and, to the extent applicable, the following aspects were considered:

(i) How many persons are available to bid: Any qualified firm can respond to the RFP for the project.

(ii) The construction budget and the projected operating costs for the completed public improvement: Substantial cost savings will be realized by the SHA because the CM/GC will be an expert at design and construction of multi-family housing structures. The project will be delivered in a shorter amount of time and at less cost since the CM/GC will be involved from the design phase and will be able to recommend improvements in the plans and processes prior to bidding and the start of the actual construction. GMP change orders cost less and allow SHA to obtain the full savings if the actual costs are below the GMP.

(iii) Public benefits that may result from granting the exemption:

Time Savings: Use of CM/GC as an alternative contracting method allows construction work to commence relatively rapidly on some portions of the work while design continues on the remaining portions. The CM/GC method shortens the overall duration of the construction and provides for completion of the Project by the due date. It is critical to adhere to both the schedule and budget of the Project.

Cost Savings: The Project will benefit from the active involvement of a CM/GC contractor during the design process:

a. CM/GC contractor input regarding the constructability and cost-effectiveness of various alternatives will guide the design toward the most economic choices.

b. Consideration of the specific equipment available to the CM/GC contractor allows the designer to implement solutions that utilize the capacity of that equipment.

c. The CM/GC contractor provides current and reliable information regarding the cost and availability of materials, especially those that are experiencing price volatility and/or scarcity.

d. The CM/GC contractor can order materials while design is being completed, avoiding inflationary price increases and providing the lead-time that may be required for scarce materials.

GMP Establishes a Maximum Price Prior to Completion of Documents: The CM/GC contractor obtains a complete understanding of SHA’s needs, the design intent, the scope of the Project, and the operational needs of the Project by participating in the development of the construction documents. By participating in the design phase, the CM/GC contractor can provide suggestions for improvement and cost reduction. With the benefit of this knowledge, the CM/GC contractor also guarantees a maximum price to be paid by SHA for constructing the Project.

(iv) Whether value engineering techniques may decrease the cost of the public improvement:

CM/GC Process: The CM/GC process offers an opportunity for value engineering ("VE") which is more effective than can be attained through VE during the traditional design-bid-build process. VE is most effective prior to construction and during the design phase by a team consisting of the owner, consultant, and the CM/GC contractor.

When VE is conducted during the design phase led by the CM/GC contractor, the team can render the most comprehensive evaluation of all factors that affect the cost, quality, and schedule of the project prior to construction. Design phase VE minimizes delays and additional administrative costs that would otherwise be a factor with VE during the construction phase on a design-bid-build project.

Design-Bid-Build Process: If SHA uses the traditional design-bid-build process, the contractor would not participate in the VE process until after the design phase was complete. Contractor participation in the VE process during the construction phase tends to be less effective than when it is implemented during design, and it is typically accompanied by delays and additional administrative costs from the review and evaluate of the contractor’s VE proposals. When compared to VE on a CM/GC project, there tends to be less incentive and time for the contractor to investigate and suggest VE options.

(v) The cost and availability of specialized expertise necessary for the public improvement: The CM/GC will be an expert at this type of work and will either self-perform or subcontract construction on the project covered by the RFP. The cost of CM/GC staff will be part of the hourly rates for each staff type and determined in the RFP process. Several of the benefits of CM/GC on this project include:

a. Developing the design documents to reflect the best work plan that accommodates the SHA, design team, and CM/GC contractor;

b. Producing the best grouping of bid packages that will help ensure better trade coverage;

c. Determining the most efficient construction staging area;

d. Coordinating construction with the needs of an active community park and an operating ASR System; and

e. adjusting the work plan as necessary.

(vi) Any likely increases in public safety: Public safety will most likely only be involved during the construction phases. The CM/GC will be responsible for ensuring that the appropriate safety rules be implemented and followed by staff and subcontractors for all work.

(vii) Whether granting the exemption may reduce risks to the SHA or the public that are related to the public improvement: Having the CM/GC involved in the design phase would reduce any risk of unexpected and unplanned changes and costs during construction.

(viii) Whether granting the exemption will affect the sources of funding for the public improvement: Granting this class exemption will not affect the sources of funding for these public improvements. The projects will be funded by sources outside the CM/GC process, but use of a CM/GC will help the funding agencies more accurately project the financing required to successfully complete the project.

(ix) Whether granting the exemption will better enable the SHA to control the impact that market conditions may have on the cost of and time necessary to complete the public improvement: Use of a CM/GC should help speed up the design/construction part of these projects in order to fully utilize any funding from outside agencies.

(x) Whether granting the exemption will better enable the SHA to address the size and technical complexity of the public improvements:

Exempting this project from the competitive bidding requirements and authorizing the use of the CM/GC will enable the SHA to ensure that this project is brought to the community in the most expedient way possible.

Understanding that Salem is facing a homelessness crisis and our belief is that permanent supportive housing properties are a step towards a long-term solution.

(xi) Whether the public improvements involve new construction or the renovation or remodel of an existing structure: The improvements are currently being considered on an existing plat of land owned by SHA and this will be replacement housing for a project that was demolished on the same site (Formerly Orchard Village).

(xii) Whether the public improvements will be occupied or unoccupied during construction: This project is a new development, so the existing land is unoccupied.

(xiii) Whether the public improvements will require a single phase of construction work or multiple phases of construction work to address specific project conditions: The construction will occur in a single phase.

(xiv) Whether the SHA has, or has retained under contract, and will use SHA 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 SHA will use to award the public improvement contracts and to help negotiate, administer and enforce the terms of the public improvement contracts: The SHA has, and will use, staff that has prior experience and expertise in negotiating similar public improvement contracts with a CM/GC. All contracts will be reviewed and approved by the SHA’s legal department, the SHA’s Executive Director, and the Housing Administrator prior to executi1. The requested exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts.

a. The nature of the work required for this class exemption is very specialized due to the layering of tax credit financing with a combination of State and Federal funds. The RFP process will allow competition for the selection of the CM/GC for construction of the project.

2. Awarding a public improvement contract under this class exemption will likely result in substantial cost savings and other substantial benefits to the SHA or the public.

a. Substantial cost savings will be realized by the SHA due to the fact that a

CM/GC is the expert in constructing and managing projects. The exemption process will allow the CM/GC to use its specialized resources to complete the work. This specialized experience will improve the design of the project and minimize construction risks and cost overruns.

b. The type, cost, and amount of the contract and, to the extent applicable, the following aspects were considered:

(i) How many persons are available to bid: Any qualified firm can respond to the RFP for the project.

(ii) The construction budget and the projected operating costs for the completed public improvement: Substantial cost savings will be realized by the SHA because the CM/GC will be an expert at design and construction of multi-family housing structures. The project will be delivered in a shorter amount of time and at less cost since the CM/GC will be involved from the design phase and will be able to recommend improvements in the plans and processes prior to bidding and the start of the actual construction.

(iii) Public benefits that may result from granting the class exemption:

Granting the class exemption will allow the CM/GC to ensure that the project is completed in an efficient timeframe reducing costs while maximizing the quality of the project through cost efficient design.

(iv) Whether value engineering techniques may decrease the cost of the public improvement: The design phase of the project once the CM/GC is in place will allow any value engineering techniques used for the construction of affordable housing to be incorporated early in design.

(v) The cost and availability of specialized expertise necessary for the public improvement: The CM/GC will be an expert at this type of work and will either self-perform or subcontract construction on the project covered by the RFP. The cost of CM/GC staff will be part of the hourly rates for each staff type and determined in the RFP process.

(vi) Any likely increases in public safety: Public safety will most likely only be involved during the construction phases. The CM/GC will be responsible for ensuring that the appropriate safety rules be implemented and followed by staff and subcontractors for all work.

(vii) Whether granting the exemption may reduce risks to the SHA or the public that are related to the public improvement: Having the CM/GC involved in the design phase would reduce any risk of unexpected and unplanned changes and costs during construction.

(viii) Whether granting the exemption will affect the sources of funding for the public improvement: Granting this class exemption will not affect the sources of funding for these public improvements. The projects will be funded by sources outside the CM/GC process, but use of a CM/GC will help the funding agencies more accurately project the financing required to successfully complete the project.

(ix) Whether granting the exemption will better enable the SHA to control the impact that market conditions may have on the cost of and time necessary to complete the public improvement: Use of a CM/GC should help speed up the design/construction part of these projects in order to fully utilize any funding from outside agencies.

(x) Whether granting the exemption will better enable the SHA to address the size and technical complexity of the public improvements:

Exempting this class of public improvement contracts from the competitive bidding requirements and authorizing the use of the CM/GC will enable the SHA to ensure that both projects are successful. Understanding that Salem is facing a homelessness crisis, and our belief is that renovation of these properties is a step towards a long-term solution.

(xi) Whether the public improvements involve new construction or the renovation or remodel of an existing structure: The improvements involve the renovation of existing housing units currently owned, operated and maintained by the Salem Housing Authority. The CM/GC’s knowledge of the facilities from the initial design stage forward will assist in minimizing construction risks and cost overruns.

(xii) Whether the public improvements will be occupied or unoccupied during construction: The improvements will be partially occupied during construction. Temporary tenant relocation may be required during the renovations. The CM/GC will need to work within the restrictions that any relocation requirement places on the construction work.

(xiii) Whether the public improvements will require a single phase of construction work or multiple phases of construction work to address specific project conditions: The renovations will likely occur in a single phase of construction work. There will most likely be some staging involved since there are two sites. The CM/GC’s experience with this type of work will help minimize the length of time each property is under renovation and, thus reduce the amount of time the residents of each property are relocated.

(xiv) Whether the SHA has, or has retained under contract, and will use SHA 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 SHA will use to award the public improvement contracts and to help negotiate, administer and enforce the terms of the public improvement contracts: The SHA has, and will use, staff that has prior experience and expertise in negotiating similar public improvement contracts with a CM/GC.

All contracts will be reviewed and approved by the SHA’s legal department, the SHA’s Executive Director, and the Housing Administrator prior to execution.