AGENDA #4g
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Amendment to Change Order Policy for Construction Contracts
DATE: April 24, 2006
The attached resolutions [ 2006-04-24/R-4a and 2006-04-24/R-4b ] would amend the Council’s policy authorizing the Town Manager to make changes in construction contracts without action by the Council but within limitations set by the Council, consistent with State law.
The Council’s current policy regarding changes in construction contracts to be executed by the Town Manager without specific Council action was adopted on November 9, 1992 (see Attachment 2). This policy authorizes the Town Manager to execute changes in construction projects which do not cumulatively exceed more than 10 percent of the original contract amount or $50,000, which ever is less, provided that there is an appropriation sufficient for the contract amendment. The $50,000 limit set by the Council at that time was based on the maximum then allowed under State law for Town administrative approval of construction contracts without formal bids and action by the Council. Typically the Town has established internal policies consistent with the limits allowed under State Law unless there are specific reasons to support a distinctly different policy for Chapel Hill.
Current State Law authorizes the Town Manager to award contracts without formal bids or approval by the Council up to a limit of $300,000 for construction contracts and $90,000 for the purchase of supplies, equipment or materials (see Attachment 1 - NC Statute 143-129). Our current practices in awarding contracts are consistent with the Statute.
We believe the ability to approve change orders administratively would be consistent with current approval practices for awarding contracts and the past change order policy of the Council. Allowing administrative approval would also avoid possible conflicts with schedules, such as the summer months when the Council typically does not hold regular business meetings. Some change orders are time sensitive and require timely action to keep work on schedule and in some cases could result in penalties for the Town if we were unable to quickly process an approved change order.
Our approval process for change orders now requires review and approval by the involved department head, Finance Director, Town Attorney, Assistant or Deputy Manager and Town Manager. We would continue this same level of review.
Town Operations Center
On June 20, 2005, the Council adopted revised budgets for the Town Operations Center Project totaling $51,657,460 (Public Works - $29,227,280, Transportation - $22,430,240). Within those budgets were funds for construction of building and facilities for the Public Works and Transportation sections, and for off-site utilities and roadway improvements required under the Special Use Permit approved for this project. Subsequently, contracts were awarded by the Council to D.H. Griffin Construction Company ($36,757,900), Hannah Utilities Inc. ($1,368,440), and Sanford Construction Inc. ($1,933,630) to complete this work. These totaled $40,059,690. Contingency funds totaling $2,026,810 were also included in the project budgets. These funds represented approximately 4.8 percent of the construction contract (D.H. Griffin) and 6.6 percent of the off-site contracts (Hannah and Sanford).
On March 6, 2006, the Council approved a change order for the Hannah Utilities Inc. contract which reallocated $84,919 of the contingency funds. Discussions with the contractors indicate that additional change orders may be required to complete the work. The cost of these changes may individually exceed and will probably cumulatively exceed $50,000 and would therefore require specific Council action under the current Council Policy even with budget contingency funds sufficient to cover foreseeable changes. Some of these changes may occur during July and August when the Council typically does not schedule regular business meetings. The Town’s construction contracts prohibit contractors from completing any changes until the Town formally approves the change. Some upcoming change order work however, may critically affect the overall construction schedule. Untimely delays may result in financial penalties. The schedule for the Town Operations Center is extremely tight due to Town responsibilities to the University under its lease of land at the current Public Works and Transportation sites.
Any Town Operations Center change orders would have the same level of review and approval they now receive and would have to remain within the overall contingency amount for the project.
In order to provide timely decisions for construction contract changes, we recommend that the Council:
ATTACHMENTS