Amendment R0003 - Pre Proposal Conf IDaC EPA PLA.pdf

ACQUISITION PLAN/STRATEGY

Integrated Design and Construction (IDaC)

Fixed-Price with Economic Price Adjustment (EPA) Clause

Project Labor Agreement

WHAT IS IDAC?

Integrated Design and Construction (IDaC) is an integrated project delivery method that develops a holistic team consisting of the Government, Designer and Constructor.

"Integrated Design and Construction" means the construction contract type where design and construction are contracted concurrently through two efforts. Specific to this project, the design (i.e., architect-engineer) will be performed in-house (i.e., by the Government), and an award will be made to a construction contractor.

It is not a design contract, a noncompetitive acquisition, a design build contract nor is it a cost reimbursable contract.

Base CLIN: Preconstruction Services; Option CLIN(s): Construction Services.

Government (USACE)

Designer (In-House/AE)

Consultants

IDaC Contractor

Prime-Subcontractor

Stakeholder

INTEGRATED DESIGN & CONSTRUCTION (IDAC)

• IDaC is a design-bid-build delivery method where construction can only commence under a FFP Contract, avoiding a cost reimbursable environment. The contractor is never in a position where they construct at a cost that cannot be supported.

• Focus on the three factors that impact success (AIA & AGC “Integration/Collaboration; Innovation;

Partnering) with an emphasis on Integration and Collaboration.

• The Govt procures the IDAC contractor during design, to work with the DoR, providing pre-construction phase consultation services (at a FFP).

• Pre-construction services is the base scope of work.

• Conversion point: An Option for the construction phase at a maximum binding ceiling price with an Initial Target Cost and Initial Target Profit.

• The construction contractor is incentivized to proactively identify cost saving measures that would bring the Final Target Cost in lower than the Initial Target Cost, resulting in more contractor profit (through shared savings).

• The Ceiling Price is the maximum amount the Government will pay. The Option cannot be exercised if the Final Construction Price is greater than the Ceiling Price. Instead, the contractor is off-ramped and the construction scope can be competed on the open market as a new contract.

• IDaC is executed contractually by adapting the FAR FPIS Clause 52.216-17 (using an authorized deviation) specifically for Army construction projects, resulting in a FFP construction contract with a profit incentive formula.

IDAC PROJECT DELIVERY METHOD

Traditional - DBB

AE Firm-Fixed-Price ConstructionProposal Finish

IDaC

AE

Firm-Fixed-Price Construction FinishPre-Construction ServiceProposal

Traditional FFP Administration

Fixed-Price Incentive Contract

Proposal (Competition) – Initial Target Price (ITP)

Design Progress

Design Milestone (65/80/95/100)

Did Scope Change?

Yes

Negotiate Revision to

Initial Target Cost (ITC)

No

Request Proposal for Firm Target

Cost

(FTC)

Negotiate FTC and apply Profit Adjustment

Agreement

Negotiate FFP using Firm Target as Guide

Agreement

Complete Construction as

FFP

Production Point Reached?

Yes

No

No

Off-Ramp Compete

Design-Bid-Build

No

No

DO NOT Fast Track Construction Prior to

Design Complete

IDAC PROJECT DELIVERY METHOD (CONT)

BEST VALUE TRADEOFF

TECHNICAL /

NON-PRICE

FACTORS

Performance Confidence Technical Approach

• PreCon Services

• Construction Small Business Participation

$ PreCon Services Firm-Fixed-Price $ IDAC Option > Ceiling Price Total Evaluated Price

PRICE

FACTORS

(Best Value Trade-off)

SOURCE SELECTION

PROCESS

FIXED PRICE INCENTIVE CONCEPT

Government point of view As cost decreases, price to the

Government decreases Share the risk of cost increase Ceiling Price limits the

Government’s exposure

Contractor point of view Contractor can increase profit dollars and profit percentage by reducing cost below target cost

Share Ratio above target price provides risk mitigation to the Contractor

IDAC CONTRACT STRUCTURE

Service CLIN

Construction

CLIN

*Total Evaluated Price = CLIN 0001 Firm Fixed Price + CLINs 0002 Ceiling Price **CLIN Price = ITC + ITP; ITC will be evaluated for reasonableness

IDAC CONTRACT STRUCTURE (CONT)

CLIN 0002 Scope of Work Price Breakdown

Item Description Quantity UOM Initial Target Cost 000201 Mobilization and Demobilization 1 JOB $ 000202 Site Improvements 1 JOB $ 000203 Excavation 1 JOB $ 000204 Intake Structure 1 JOB $ 000205 Bulkhead 1 JOB $ 000206 Multi-port Collector 1 JOB $ 000207 Steep Slope Bypass 1 JOB $ 000208 Tower 1 JOB $ 000209 Tunnel 1 JOB $ 000210 Outlet Structure 1 JOB $ 000211 Emergency Mobilization and Demobilization 1 EA $ 000212 Operations and Maintenance (O&M) Manuals 1 JOB $ 500,000 000213 Record Drawings 1 JOB $ 250,000

0002 Initial Target Cost TOTAL $

Design P&S 35% DDR 65% 80% 95% 100%

IDaC Contract Pre-Construction Services Construction

Convert Option

PRECONSTRUCTION SERVICES CLIN

Preconstruction Services include:

Consultation in construction methodology, current market conditions and identification of coordination issues;

Construction cost estimates -to validate designer prepared estimates at each review phase -for alternative designs and materials -for changed market conditions

Cost control When there is a significant difference or the construction estimate exceeds the target, the estimates will be examined to determine the cause for the differences and steps made to correct the Government or contractor estimates

NOTE: The contractor shall not be responsible for any design services.

The responsibility of the design will remain wholly with the Designer of Record.

Preconstruction Services, minimum Key Personnel include:

Pre-Construction Project Manager (PPM) Engineering Manager/Coordinator Construction Superintendent Lead Cost Estimator/Engineer Lead Scheduler

(Reference RFP, Section 00 22 16)

CONSTRUCTION OPTION CLIN

• TARGET COST + TARGET PROFIT = TARGET

PRICE

• CEILING PRICE

• SHARE RATIO AND PROFIT ADJUSTMENT

INCENTIVES

• ONLY EXERCISED BILATERALLY

• CONSTRUCTION MUST BE DEFINITIZED FFP

PRIOR TO EXECUTION.

CONSTRUCTION OPTION CLIN (CONT)

The Offeror proposed a Target Cost of $100 and a Target Profit of $15. Based on the RFP Share Ratio of 60/40 and a proposed Ceiling Price of $130. What will the profit for the Offeror if the actual cost is $110?

EXAMPLE

Cost Variance Target Cost $100

Actual Cost $110= -

-$10

• Cost Variance is the risk associated with cost estimates.

• Cost Variance is divided between the Government and Offeror/Contractor

How do we distribute the risk?

Share Ratio = The Government’s share of risk (%) / Contractor’s Share of risk (%)

RFP Share Ratio of 60/40

Reference RFP Section 00 73 00 - Supplementary Conditions | IDAC CLAUSE 5152.236-XX Integrated Design and Construction Contract. INTEGRATED DESIGN AND CONSTRUCTION CONTRACT (ONE

TIME DEVIATION)

Share Ratio Government 60%

Contractor 40%= /

60% X (-$10) = -$6 40% X (-$10) = -$4/

Based on the example, did the Contractor get a positive or negative incentive?

A negative incentive as the Contractor may not have manage the cost properly.

Actual Price Actual Cost $110

Target Profit $15= +

$121

Contractor’s Share of Risk $4-

Actual Profit Actual Price $121

Actual Cost $110= -

$11

A B C D E

Actual Cost $ Target Cost = $100 Target Profit = $15 Price Ceiling = $130 Share Ratio = 60/40

Cost Variance ($)

[TC – AC]

Contractor's Share of Risk ($)

[Cost Variance X KTR’s Share Risk % [40%]

Actual Price ($)

[AC + TP + KTR’s Share Risk OR

CP]

Actual Profit ($)

[AP – AC]

90 10 4 109 19 95 5 2 112 17

100 0 0 115 15 105 -5 -2 118 13 110 -10 -4 121 11 115 -15 -6 124 9 120 -20 -8 127 7 125 -25 -10 130 5 130 -30 -12 133 0 135 -35 -14 136 -5

140 -40 -16 139 -10 145 -45 -18 142 -15

90 95 100 105 110 115 120 125 130 135 140 145

Actual Price ($)

Actual Price ($)

-20

-15

-10

-5

90 95 100 105 110 115 120 125 130 135 140 145

Actual Profit ($)

Actual Profit ($)

-20 -15 -10

-5

90 95 100 105 110 115 120 125 130 135 140 145

Actual Price ($) Actual Profit ($)

GENERAL EXAMPLE

AWARD CLIN STRUCTURE (EXAMPLE)

Option CLIN – Construction Services

ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT

0001 PRE-CONSTRUCTION SERVICES 1 Job $ 5,000,000.00 $ 5,000,000.00

FFP

This CLIN funds all labor, material, equipment, etc. to perform Pre-Construction Services IAW the HHD FPF IDaC Scope of Work and accepted proposal dated XX Month YYYY

FOB: Destination

PURCHASE REQUEST NUMBER WXXXXXXXXX

PSC CD: R499

ITEM NO SUPPLIES/SERVICES QUANTITY UNIT UNIT PRICE AMOUNT

0002 OPTION CONSTRUCT HHD FPF 1 Job $

FPI

OPTION CONSTRUCT HHD FPF

Proposed Ceiling Price (IDaC) FOB: Destination

PSC CD: Y1AZ

TARGET COST $ 475,000,000.00

TARGET PROFIT $ 19,000,000.00

TOTAL TARGET PRICE $ 494,000,000.00

CEILING PRICE $ 570,000,000.00

SHARE RATO ABOVE TARGET 60/40

SHARE RATIO BELOW TARGET 40/60

Base CLIN – Pre-Construction Services

ECONOMIC PRICE ADJUSTMENT (EPA)

FAR 16.203 “A fixed-price contract with economic price adjustment provides for upward and downward revision of the stated contract price upon the occurrence of specified contingencies.”

• EPA should be used when it is anticipated that risks associated with market instability over the duration of a contract are such that proposed prices would include exceptionally high contingency

• Should take into consideration duration of the contract, market conditions, and industry interest

• Should also consider the impact of those cost elements (labor categories, materials, or end products) that will be considered

Established Prices

• Adjustments are based on published or pre-established pricing (price

• Best fit for basic materials where standard or semi-standard pricing is readily available

• FAR Clause 52.216-2 or -3 applies

Actual Costs

• Adjustments based on actual prices

• Contract cannot include significant design

• Actual costs must be sufficiently documented to establish adjustments

• May disincentivize seeking best pricing

• FAR Clause 52.216-4 applies

Indexes

• Adjustments based on price indexes

• Best when quantities can be reasonably estimated, and indexes are available for identified materials/ commodities

• FAR Clause 52.216-4 or Custom clause language

Reference RFP, Scope of Work Price Breakdown Notes, Paragraph 6:

The price proposal must include a completed CLIN 0002 ECONOMIC PRICE ADJUSTMENT TABLE

a. Labor shall not be adjusted. Only the materials identified for base CLIN 0001 and option CLIN 0002 are subject to Economic Price Adjustment (EPA) in accordance with FAR Clause 52.216-4 Economic Price Adjustment – Labor and Material. Please see the Table below for additional information on the schedule of materials. The EPA Table price per unit of measure shall only account for the actual cost of material and shall not be burdened by other associated costs.

b. This is a not to exceed (NTE) quantity. EPA will be based on actual quantities performed. Contractor is to provide an estimated NTE quantity in the table at the time of bid. When submitted for EPA consideration, the quantity shall be rounded to the nearest unit of measure.

c. The CLIN schedule shall be submitted fully completed and error free. The offeror shall input a two (2) decimal price in the “Unit Price.” All final monetary extensions in two decimal positions only. Example: $0.27, not $0.27458.

Misc.

Steel

Structural Steel

Steel (Rebar)

Stainless Steel

Aggregate (Concrete

& Fill) Fly Ash

Cement

Unit Price CLIN 000202 Site Improvements

CLIN 000203 Excavation CLIN 000204 Intake Structure

CLIN 000205 Bulkhead CLIN 000206 Multi-port Collector CLIN 000207 Steep Slope Bypass

CLIN 000208 Tower CLIN 000209 Tunnel

CLIN 000210 Outlet Structure

*Estimated quantities are strictly for the purpose of administrating this clause. This is not for the purpose of variation of estimated quantities, or any other cost/quantity related data as applies to this contract. However, price adjustments to CLIN 0002 are limited to, at a maximum, the estimated quantities identified here.

Propose $ per/Quantity

Propose $ per/Quantity

PROJECT LABOR AGREEMENT (PLA)

What is PLA?

PLA is defined as a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project and is an agreement described in 29 U.S.C. 158(f))

Note FAR Provision 52.222-33 Notice of Requirement for Project Labor Agreement, and FAR Clause 52.222-34 PLA, for definitions and requirements pertaining to the use of a PLA for this contract.

The Offerors shall submit an offer subject to PLA requirements in accordance with FAR 22.504, General requirements for project labor agreements. Any PLA reached pursuant to the PLA requirements in the Solicitation does not change the terms of the contract or provide for any price adjustment by the Government.

All Offerors are required to submit a complete and signed Project Labor Agreement (PLA) for evaluation by the Contracting Officer.

UAI 5122.503-100(c) “Since USACE is not an employer engaged primarily in the building and construction industry, USACE will neither negotiate nor become signatory to a PLA. See USACE Desk Guide (UDG) 5122.503-1 for PLA Frequently Asked Questions (FAQs).”

The USACE Head of Contracting Activity provides additional guidance for contractors having difficulties in putting together PLAs. The Laborers International Union of North America (LIUNA) will provide assistance at www.liuna.org.

http://www.liuna.org/