In recent years, the U.S. Army Corps of Engineers has attempted to employ "innovative" contracting methods but, in doing so, has often limited the number of contractors who have had the opportunity to perform major construction projects. One of the justifications for these “innovative” methods has been that there will be a reduction in the administrative workload resulting in a "savings" for the government. As a result, it seemed as though fewer solicitations were being issued using the sealed bidding procedures in FAR Part 14, with a corresponding increase in the procurement of construction under FAR Part 15, Contracting by Negotiation. Construction contractors began to find that competition was no longer based on price alone, but on subjective factors as well, such as past performance, technical ability, or client satisfaction. Of course, even though these procurements were purportedly “negotiated,” the instances where discussions or negotiations actually occurred were relatively few in number. It was for that reason that we continued to wonder whether the Corps ever actually intended to “negotiate” a negotiated contract. Could the reason possibly be that the Corps wants to be able to use subjective evaluation factors, under the guise of “best value,” as an excuse not to award construction contracts to responsible, bonded, contractors who offer the lowest price?
In a further extension of the use of "Contracting by Negotiation," the Corps has also adopted the Multiple Award Task Order Contracting (“MATOC”) procedures provided under FAR Part 16.5, "Indefinite-Delivery Contracts," to the procurement of major construction projects. We have been involved in on-going legal challenges to the use of MATOC for construction because we believe that the preference for sealed bidding in construction, as expressed in FAR Part 36, is being ignored by the Corps. Through the use of MATOC, the Corps has found a way to limit the competition for the design and construction of facilities in entire regions of the country to only a few of the very largest construction companies.
Just as the shift to large, regional MATOCs has decreased the number of contractors, both large and small, who are able to perform these projects as prime contractors, the adoption of design-build as the favored mechanism for major construction projects has also tended to limit competition. Design-build contracting has permitted the government to shift more and more risk and responsibility to the contracting community, but it seems to be a community that is shrinking in size. Does this make any sense at a time when the country is suffering from rapidly increasing unemployment and the government is planning to spend billions of dollars on improving the infrastructure? There are many small and medium-sized business concerns who have capably performed thousands of federal construction projects over the years under sealed bidding. We continue to wonder why that successful system is being systematically abandoned.
Now the Corps is beginning to issue solicitations for major construction projects under the provisions of FAR Part 16.403, Fixed Price Incentive Contracts, using a project delivery method referred to as "Early Contractor Involvement," or “ECI” for short. Under ECI, the Corps engages the services of a general contractor to provide "preconstruction services" concurrent with the design of a project that is being performed by a design firm. The construction contractor reviews the partially completed design for constructability and biddability. As the design work nears completion, construction is then procured through the exercise of an option under the ECI contract. An ECI procurement requires the construction contractor to compete on both technical and price factors long before the project's design is developed to the point that facilitates meaningful and well-informed cost proposals, however. With so little detailed information on the construction that is being procured, the competition among construction firms has the real possibility of being nothing more than a popularity contest in which the government procurement officials make choices based on who they think they want to work with, rather than the contractor they should be working with based on the technical aspects of a particular project. The competitors also must provide a ceiling price for the project as part of their proposals, long before the design has reached the point where a price estimate is anything more than an educated guess. Although a Corps spokesman, in an article published in Engineering News-Record, indicated that the Corps is turning to ECI for classic reasons, that it is "better, faster, cheaper," we wonder what the basis is for such a bold conclusion.
In a recent press release, the New Orleans District of the Corps reported that it will use Early Contractor Involvement (ECI) to construct the $500 Million Gulf Intracoastal Waterway West Closure Complex project. Colonel Alvin Lee, New Orleans District Commander, indicated that although "the New Orleans District has never used ECI as an acquisition strategy before," the District was "excited about the benefits it brings to this momentous project.” In addition to the West Closure Complex project, the New Orleans District is proposing to employ ECI on a series of levee improvement projects on the Chalmette Loop Levee in St. Bernard Parish, Louisiana. These additional ECI contracts will total between $850 Million and $1.75 Billion.
Other Corps districts have had some experience using a similar method of procurement under a strategy known as "IDBB," or "Integrated-Design-Bid-Build." Two of these IDBB projects are the new Community Hospital and the National Geospatial Intelligence Agency Complex at Fort Belvoir, Virginia. Very recently, other Corps districts have advertised the intention to issue ECI solicitations, notably for the construction of a Replacement Hospital at Fort Riley, Kansas ($250 to $500 Million). Other Federal agencies can be expected to increasingly employ the ECI procurement method; the U.S. Navy already intends to construct a $68 Million Helicopter Maintenance Hanger in San Diego using ECI. In private construction, ECI is called Construction Management (or Manager) at-risk, "CM@R." A joint committee of the AIA and AGC have described CM@R as follows:
Construction management at risk (CM@R) approaches involve a construction manager who takes on the risk of building a project. The architect is hired under a separate contract. The construction manager oversees project management and building technology issues, in which a construction manager typically has particular background and expertise. Such management services may include advice on the time and cost consequences of design and construction decisions, scheduling, cost control, coordination of construction contract negotiations and awards, timely purchasing of critical materials and long-lead-time items, and coordination of construction activities. In CM@R the construction entity, after providing preconstruction services during the design phase, takes on the financial obligation for construction under a specified cost agreement. The construction manager frequently provides a guaranteed maximum price (GMP). CM@R is sometimes referred to as CM/GC because the construction entity becomes a general contractor (GC) through the at-risk agreement. Primer on Project Delivery, AIA/AGC (2004).
A question remains as to whether the government can exercise the flexibility that a private entity can employ to insure that the ECI, or CM@R, process can be successful. Whether or not such flexibility is possible, use of ECI will certainly further diminish the competitive nature of the government procurement of construction projects in the future.