Contracting & Procurement
Execute alternative procurement methods to accelerate project implementation at all stages and better forecast project cost
Existing procurement approaches for both design/engineering and construction incur high costs and carry too much uncertainty. Expanded scope is often added after execution of the initial contract, requiring the execution of additional contracts or amendments to add additional funding. Complying with federal regulatory requirements can lead to prolonged project timelines, often extending several years beyond the initial estimates. Moreover, the prevailing procurement methods establish financial thresholds (bonding and insurance) that are prohibitively large, preventing small businesses from securing contracts for green infrastructure projects. These complexities and frequent delays result in substantial financial impacts for firms engaged in the work. This can lead to important companies and firms losing interest and enthusiasm for urban water projects while the public becomes frustrated with the lack of progress.
Background
“There are some [green infrastructure] construction companies who really want to go to the next level, and what's keeping them from doing that is that they are unable to get that bonding they need because they can’t afford it”
- Chuck Morse
“There are a lot of obstacles preventing us growing our small businesses in the urban water world right now”
- Meagan Williams
Insights & Opportunities
Reform public contracting policy, at all necessary jurisdictional levels, to prioritize minimizing timeline gaps that occur during negotiation periods, contract execution, and project execution.
Utilize Construction Manager at Risk (CMAR) and other innovative procurement methods for green infrastructure projects. CMAR can encourage collaboration between the owner, architect, and construction manager from the project's early stages, while providing more transparency in cost estimation and control. CMAR can lead to faster project delivery compared to traditional methods by allowing collaboration between the consultant and the contractor. This collaboration can lead to more informed decision-making, potentially reducing the need for costly changes later in the project.
Develop a public project procurement approach enabling public entities to independently acquire materials ahead of installation, separate from the construction contract. This may preempt material cost inflation caused by delays (and additional delays from material unavailability) and facilitates more comprehensive engagement with suppliers, like growers for contract growing of native plants.
Conduct comprehensive project management planning with the respective governing agencies to help ensure more holistic project development and accurate project cost and timeline estimates.
Budget projects to allow for paying construction workers a competitive wage so small companies can retain employees once trained. Develop a framework to train installers in line with related trades where the title of the installer relates to the amount of hands-on experience and training they have received (i.e., journeyman, master electrician, etc.).
A prolonged timeline, in which a project is completed under a contract, requires companies to spend on unforeseen staff requirements and assume the risks and costs of project scope changes before the municipality executes the renewed contract. This can result in economic losses for those same consultants. Consultants are having to plan 1.5 years+ out to be able to ensure cash flow will cover new hires/costs of business due to such long time to contract lags.
The bonding and insurance prerequisites for contractors, particularly small businesses, are excessively burdensome. The bonding criteria are typically established by the funding body or city, and any necessary adjustments may need to be addressed at this administrative level.
Contracting delays place a substantial financial strain on consultants, especially for small businesses where the speed of contract initiation is crucial. Expenses accumulate on the balance sheets of small enterprises awaiting payment, potentially impacting the business's rapport with investors. Furthermore, operational costs may fluctuate when contracts are held for prolonged periods, and the consultant is rarely compensated for the fluctuations.
Example Projects
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Louisiana Bonding Assistance Program
Louisiana Economic Development’s Bonding Assistance Program provides access to quality bid, payment and performance bonds at reasonable rates from surety companies when bonding capacity is needed on public or private jobs.
