Signed document, PDF (6.44 MB)

1.0 SUBJECT TITLE: Procurement for Capital Projects

2.0 PURPOSE:

2.1 To establish policies overseeing key elements of the procurement process for CAPITAL PROJECTS.

3.0 ORGANIZATIONS AFFECTED:

3.1 All Executive Departments, Offices and Agencies.

4.0 REFERENCES:

4.1 CON 7-13 (AEP) Introduction to Construction Management Policies and Procedures.

4.2 CON 7-9-1 (AEP) Capital Project Planning and Management.

4.3 CON 7-8-1 (AEP) Change Order / Amendment Administration.

4.4 CON 7-14 (AEP) Design Management.

4.5 CON 7-10-1 (AEP) Project Control Officer.

4.6 CON 7-5-1 (AEP) Project Closeout.

4.7 FIN 15-2-1 (AEP) Audits of Construction Management Practices.

5.0 DEFINITIONS:

5.1 See CON 7-13 (AEP) Appendix A "P&P Defined Terminology".

6.0 POLICIES:

6.1 Procurement of CONSTRUCTION SERVICES for County CAPITAL PROJECTS shall be in accordance with the policies and procedures established in the PCSS Procurement Manual. The IA's PROJECT REPRESENTATIVE shall work with the Contract Specialist from PCSS to procure all CONSTRUCTION SERVICES.

6.2 Procurement of PROFESSIONAL SERVICES for County CAPITAL PROJECTS shall be in accordance with the policies and procedures established in the PCSS Procurement Manual. The IA's PROJECT REPRESENTATIVE shall work with the Contract Specialist from PCSS to procure all PROFESSIONAL SERVICES. There are two basic approaches to establishing a fee for PROFESSIONAL SERVICES, both of which are acceptable. They are the COST PLUS FIXED FEE CONTRACT and the LUMP SUM or "fixed price" CONTRACT.

6.2.1 Specific policies to control the cost of PROFESSIONAL SERVICES include the following:

A. The cost negotiating process, including all agreements, shall be documented by the IA;

B. The IA shall complete an ESTIMATE of the level of effort required (i.e. resources required, staffing hours, cost, etc.) for each project prior to receiving the CONSULTANT'S proposal;

C. For PROFESSIONAL SERVICE CONTRACTS with a value greater than $150,000, other than LUMP SUM or per diem billing rate agreements, cost negotiations shall include a Cost/Price Analysis. This process shall be documented by the IA;

D. All CONSULTANTS shall be required to furnish to the County proper DOCUMENTATION to enable a thorough Cost/Price Analysis to be conducted by the IA;

E. All PROFESSIONAL SERVICES CONTRACTS shall include a provision for adequate COST CONTROL, reporting, and invoicing;

F. All PROFESSIONAL SERVICES CONTRACTS shall utilize a PROJECT COST ACCOUNTING SYSTEM for COST CONTROL;

G. CONSULTANTS shall not markup subconsultant costs and OTHER DIRECT COSTS (ODCs);

H. OVERHEAD and PROFIT rates shall be established at a negotiated figure. OVERHEAD and labor rates may be subject to review every 12 months, and ESCALATION may be allowed based upon an appropriate COST INDEX subject to a percentage cap;

I. PROFESSIONAL SERVICE CONTRACT costs to be incurred in future years shall be capped at an amount obtained after ESCALATION by an appropriate COST INDEX, agreed upon by both parties;

J. All PROFESSIONAL SERVICES CONTRACTS involving extended work at a FIELD LOCATION shall be subject to Field OVERHEAD Rates. Such rates shall typically exclude elements of a CONSULTANT'S base OVERHEAD rate such as rent and phone service when such work is performed out of a field office; and

K. When it is anticipated that there will be multiple design phases or future work necessary to complete the project, a description of this work shall be included in the original solicitation of PROFESSIONAL SERVICES.

6.3 Procurement of WORK ORDER CONTRACTS for CONSTRUCTION SERVICES and PROFESSIONAL SERVICES for County CAPITAL PROJECTS shall be in accordance with the policies and procedures established in the PCSS Procurement Manual. The IA's PROJECT REPRESENTATIVE shall work with the Contract Specialist from PCSS to procure all WORK ORDER CONTRACTS.

6.3.1 Specific policies regarding the use of WORK ORDER CONTRACTS include the following:

A. A WORK ORDER CONTRACT is authorized and utilized to meet program needs when:

1. The specific work tasks necessary to meet given project or program objectives cannot be clearly defined in advance to allow normal contracting procedures; and

2. Resources are needed to be available on an "on call" basis to perform the work on schedule.

B. WORK ORDER CONTRACTS are to be procured by a competitive process unless a waiver is obtained.

C. All work authorizations to a CONTRACT'S SCOPE OF WORK shall be documented via an approved WORK ORDER written consistent with the terms set forth forms provided in the CONTRACT.

D. WORK ORDERS may not be used to add work to a CONTRACT that is outside of the CONTRACT'S "General SCOPE OF WORK" unless a PROCUREMENT WAIVER is obtained and a CONTRACT CHANGE ORDER or AMENDMENT is approved prior to initiating the work.

E. The IA is responsible for insuring all WORK ORDERS to the CONTRACT'S SCOPE OF WORK are documented and approved according to these policies and procedures.

6.4 Price/Cost Analyses shall be conducted in accordance with the guidelines established in Appendix B to this P&P, "King County Executive Policies and Procedures Price/Cost Analysis Guidelines for Professional Services".

7.0 PROCEDURES:

8.0 RESPONSIBILITIES:

8.1 IA is responsible for adhering to policies and procedures of the PCSS Procurement Manual.

8.2 Specific responsibilities to control the cost of PROFESSIONAL SERVICES include the following:

8.2.1 IA is responsible for:

A. Conducting and documenting all PROFESSIONAL SERVICE CONTRACT negotiations in accordance with appropriate procedures;

B. Administering the CONTRACT, including cost and schedule control, approving invoices and issuing work directives; and

C. Ensuring that corrective action is taken when CONTRACT provisions are violated.

8.2.2 PCSS is responsible for:

A. Assisting the IA with CONTRACT negotiations as requested;

B. Assisting the IA with the Cost/Price Analysis, as needed;

C. Compiling and routing the CONTRACT for execution;

D. Ensuring that applicable procurement policies and procedures are adhered to; and

E. Maintaining supporting documentation files for Price/Cost Analysis where they are involved.

8.3 Specific responsibilities regarding the use of WORK ORDER CONTRACTS include the following:

8.3.1 The IA is responsible for ensuring that:

A. WORK ORDER DOCUMENTATION meets the minimum requirements set forth in these policies and procedures;

B. The correct WORK ORDER procedure is used for procurement; and

C. Corrective action is taken when violations of these policies and procedures occur.

9.0 APPENDICES:

9.1 Appendix B - King County Executive Policies and Procedures Price/Cost Analysis Guidelines for Professional Services.

Appendix B

Price/Cost Analysis Guidelines for Professional Services

General: As an overriding principle, the County shall perform price/cost analyses in accordance with these guidelines to ensure that negotiated prices for PROFESSIONAL SERVICES CONTRACTS and AMENDMENTS are fair and reasonable for the County.

Applicability: For all PROFESSIONAL SERVICE CONTRACTS or AMENDMENTS with a proposed price greater than $150,000, a price/cost analysis shall be conducted when the price is based on the reimbursement of cost plus OVERHEAD and PROFIT. A price/cost analysis includes completing an internal cost ESTIMATE for the services to be provided, comparing and analyzing CONSULTANT price proposals against cost ESTIMATES, and documenting the justification for any agreed upon prices.

For all PROFESSIONAL SERVICE CONTRACTS or AMENDMENTS with a proposed price greater than $150,000, a price/cost analysis shall be conducted when the price is based on the reimbursement of cost plus OVERHEAD and PROFIT. A price/cost analysis includes completing an internal cost ESTIMATE for the services to be provided, comparing and analyzing CONSULTANT price proposals against cost ESTIMATES, and documenting the justification for any agreed upon prices.

For architectural and engineering PROFESSIONAL SERVICE CONTRACTS with pricing based on the Washington State Office of Financial Management's "guidelines for determining architect/engineer fees for public works building projects" ("Guidelines"), a separate price/cost analysis is not necessary. However, if fee (PROFIT) modifications, as defined in the Guidelines, are used, the PROJECT REPRESENTATIVE will confer with the PCO to determine that the fee modifications are fair and reasonable. For all other PROFESSIONAL SERVICE CONTRACTS, when LUMP SUM prices or per diem billing rate agreements are used, a separate negotiation of costs and PROFIT is not necessary.

Information Sources: The principal source of information to be used in price/cost analysis is DOCUMENTATION to be supplied by the CONSULTANT. Industry data for assessing the reasonableness of the pricing proposed by the CONSULTANT along with pricing data supplied by other offerors may also be used.

Responsibility: It will be the responsibility of the PROJECT REPRESENTATIVE to document the pricing negotiations with the CONSULTANT, including a justification for the price established. This should include references to the price/cost analysis results and justifications for any agreed upon prices exceeding the independent cost ESTIMATES. The guidelines described below along with sound professional judgment shall be used as a basis for documenting the price/cost analysis. Departures from these guidelines must be explained and approved by the Contract Specialist of PCSS.

DIRECT COST

Analysis: DIRECT COSTS consist of directly reimbursable items such as labor, materials, equipment, subconsultant costs, and OTHER DIRECT COSTS. A cost element for each of these items shall be established as part of the independent price ESTIMATE prior to evaluation of the CONSULTANT'S price proposal. The independent price ESTIMATE will be reviewed and approved by the PROJECT REPRESENTATIVE, Contract Specialist, and PCO.

Labor: Labor hours will be estimated by the IA based on an evaluation of the level of effort required to perform the work scope. Labor rates will be estimated by the IA based on experience, industry information and cost estimating guidebooks. Prior to signing the CONTRACT, a pre-CONTRACT audit shall be performed to determine the accuracy of the CONSULTANT'S quoted labor rates based on an audit of the actual labor cost rates including analysis of payroll costs, payroll taxes and fringe benefits.

Materials: Materials costs will be estimated by the IA based on evaluation of the SCOPE OF WORK, experience, industry information, cost estimating guidebooks, and approved price lists.

Equipment: Equipment costs will be estimated by the IA based on evaluation of the SCOPE OF WORK, experience, industry information, cost estimating guidebooks, and/or information from County CONTRACTS for like equipment.

Subconsultants: Subcontract costs will be estimated by the IA based on evaluation of the SCOPE OF WORK, experience, industry information and cost estimating guidebooks.

OTHER DIRECT

COSTS: ODCs will be estimated by the IA based on the project requirements. Examples of ODCs may include, but not be limited to, travel costs, copying costs, office supplies, and other reimbursable costs not included in materials and equipment.

OVERHEAD

Analysis: OVERHEAD consists of cost items common to multiple CONTRACTS. OVERHEAD shall be estimated by the IA based on evaluation of the required work scope. OVERHEAD COSTS will be estimated by the IA based on experience, industry information and cost estimating guidebooks. Prior to signing the CONTRACT, a pre-CONTRACT audit shall be performed to determine the accuracy of the CONSULTANT'S quoted OVERHEAD COSTS. The audited OVERHEAD rate shall be used in the final cost determination used for contracting purposes.

PROFIT

Analysis: PROFIT rates should depend on the level of expertise and resources needed to perform the CONTRACT specifications and the amount of risk assumed by the CONSULTANT and/or County. The negotiated PROFIT shall be established within the range determined from analysis of the following factors and other relevant factors identified during the price/cost analysis:

1. Analysis of PROFIT rates paid by King County for similar work in the past.

2. Analysis of PROFIT rates typically earned in the industry.

3. Level of cost and performance risk assumed by the CONSULTANT.

Price Proposal

Evaluation: The independent price ESTIMATE will be compared to the CONSULTANT'S price ESTIMATE.

Written justification must be documented and supplied to the procurement officer for approval if the proposed price to be accepted is greater than the independent price ESTIMATE.