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F I S C A L I M P A C T R E P O R T

SPONSOR SCORC

ORIGINAL DATE

LAST UPDATED

3/6/2007

HB

SHORT TITLE School Construction Manager At Risk Contracts

SB 415/SCORCS

ANALYST Aguilar

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 303

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

The Senate Corporations and Transportation Committee substitute for Senate Bill 415 provides

for construction manager at risk contracts in the construction of educational facilities, enacts the

Construction Manager at Risk Act and establishes procedures for selecting a construction

manager at risk.

SB 415/SCORC declares an emergency.

SIGNIFICANT ISSUES

Provisions contained in the bill allow the Public School Facilities Authority, local school

districts, and state educational institutions to use the “construction manager at risk" method of

procuring design and construction services for their facilities.

Construction manager at risk is defined by the bill as a construction method for an educational

facility where a construction manager provides a range of pre-construction services and

construction management, including cost estimation and consultation regarding the design of the

building project, preparation and coordination of bid packages, scheduling, cost control, value

engineering and, while acting as the general contractor during construction, detailing the trade

contractor scope of work, holding the trade contracts and other subcontracts, pre-qualifying and

Senate Bill 415/SCORCS – Page

2

evaluating trade contractors and subcontractors and providing management and construction

services, all at a guaranteed maximum price for which the construction manager at risk is

financially responsible.

At present, construction managers are only allowed to serve “not-at-risk" and therefore not

responsible to the owner for claims for project delays and extended overhead from

nonperformance of one or multiple prime contractors. Under this scenario, the governing body

enters into contracts with sub-contractors directly and assumes all risk, including any price

escalation that may occur. The construction manager not-at-risk has had mixed results in New

Mexico and have in some cases resulted in higher construction costs than traditional methods. It

appears that an educational facility construction manager at risk may reduce the risks assumed by

public owners through the guaranteed maximum price and delivery schedule. Also, having an

educational facilities manager at risk involved during the design process will also add

“constructability" to the project and reduce expensive change orders.

The bill exempts construction manager at risk contracts from the competitive sealed bid

provision of the Procurement Code, but provides that the competitive sealed proposals "may also

be used" for a "three Step Procedure" if certain requirements are met. SB 415 provides for the

procedures of a "multiphase selection". The governing body is required to form a selection

committee with a minimum of three members with at least one member being an architect or

engineer. It is the selection committee's responsibility to establish an evaluation process

including identifying the procedure as a two- or three- step process. A description of the process

is:

•

The “two-step" procedure, which may be used when the total amount of money available

for a project is less than $500 thousand, requires a request for qualifications and an

interview. If the selection committee (formed by the governing body) uses a “two-step

procedure", it must publish a request for qualifications, rank the qualifying persons, and

interview up to three of the highest ranking offerors. The committee must consider

experience, the management plan, and other qualifications.

•

A “three-step" procedure requires a request for qualifications, a request for proposals, and

an interview. The request for proposals is only sent to those persons deemed qualified by

the selection committee. The selection committee evaluates the proposals and conducts

interviews with up to three of the highest ranked offerors. After interviews are

completed, the selection committee makes its recommendation to the governing body.

The bill provides for the governing body to negotiate a satisfactory contract with the offeror

considered to be the most qualified at a price determined to be fair and reasonable and provides

for negotiations to continue with subsequent qualified offerors in the event negotiations fail.

The bill provides for the selection committee to make the names of all offerors and offerors

selected for interviews available for public inspection after the contract is awarded.

The bill also provides for that bid security be required for construction contracts when the

estimated price is greater than $25,000.

PA/nt