HomeMy WebLinkAbout6/16/2004 - STAFF REPORTS (5) DATE: June 16, 2004
TO: City Council
FROM: Convention Center Project Administrator
CONVENTION CENTER CONSTRUCTION MANAGEMENT CONTRACT-AMENDMENT
NO.3
RECOMMENDATION:
It is recommended that City Council approve Amendment No.3 to Construction Management
Agreement No. 4577, with Turner Construction Company, Convention Center Expansion
Project, to extend the term one month and to accept a voluntary reduction of the "Fee'
portion of the contract.
SUMMARY:
This action would add one month to the term to accommodate an extended steel fabrication
period, and it would result in a savings of over$125,000 due to a Fee reduction offered by
Turner Construction.
BACKGROUND:
The Convention Center Construction Management contract with Turner Construction has a
term of September 30, 2005 and during that term monthly "General Conditions"
compensation is paid at a rate of$64,227.78. The original schedule called for the project to
complete in mid August and the Term thru the end of September would allow some 45 days
for the paperwork closeout that must occur. At the time of bid the City Council was advised
that the new completion date would be September 5,2005 due to extended steel fabrication
period that was needed because of the steel supply problems. The first section of the
Amendment would add a month to the schedule and bring the new Term to October 31, 2005
to allow for the paperwork closeout on the project. The second section of the amendment
adds the compensation of$64,227.78 for the month of October 2005.
The contract also allows for a "Fee" portion of compensation to Turner Construction
Company. That "Fee', per the contract, is to be based upon 2.9% of the final construction
cost for the project. The current Trades that Turner is managing, not including the direct
purchase equipment and the north parking lot, along with the current contingency equals
approximately $32.9 million. Based upon those numbers the "Fee' due Turner would be
approximately $954,100.
Attached is a letter from Turner Construction seeking the month extension of the contract
discussed above and offering to not take advantage of the projects cost escalation due to the
Steel and Drywall Trade Packages. The letter outlines their estimate of escalation and offers
to have the total amount of their "Fee' based upon $28,514,454 or $826,919.64. That
amount is some $126,000 less than the current contract calls for. The third section of the
attached amendment clarifies that their "Fee' compensation is as outlined immediately
above.
1 A
A Minute Order approving Amendment No. 3 is attached for City Council consideration. The
overall increase in the Turner contract will come from the project contingency; that increase
totals $150,842.10 ( $64,227.78 term increase plus $86,614.32 Fee increase).
k
Allen F. Smoot
Convention Center Project Administrator
Approved:-�i�s
City Manageri�
ATTACHMENTS:
1. Minute Order
2. Amendment No.3
3. Turner Letter
AMENDMENT NO. 3
AGREEMENT NO. 4577 - CONSTRUCTION MANAGEMENT SERVICES
PALM SPRINGS CONVENTION CENTER EXPANSION PHASE II
THIS THIRD AMENDMENT to Agreement No. 4577 for contract services, (herein
"Agreement") made and entered into on the day of 2004, by and
between the CITY OF PALM SPRINGS, (herein "City') and TURNER CONSTRUCTION
COMPANY, (herein "Construction Manager") is hereby amended effective
, as follows:
Section 1. Section 3.4 Term is hereby amended to reflect a new ending date of October
31, 2005; a one month extension.
Section 2. Exhibit"C"Schedule of Compensation, General Conditions, Phase II, is hereby
amended by adding an additional month of compensation equal to $64,227.78, to read as
follows:
"Construction & Closeout Expenses Staff Fee
October 2005 $9863.75 $54,364.03 $0"
Section 3. Exhibit "C" Schedule of Compensation, Fee, Phase II, is hereby amended by
deleting all existing reference to Fee and replacing it with the following:
"Fee: The Fee portion of the compensation for Construction Manager's services shall be set
at 2.9% of $28,514,454, for a Fee of $826,919.64. The fee shall be paid to Construction
Manager as delineated in Amendment No. 2 to this contract except that a lump sum of
$86,614.32 shall be paid within 30 days of the signing of this Third Amendment. For any�l
construction valuation in excess of$32,923,868,that is administered by Construction
Manager, a Fee of 2.9% shall be due and payable upon filing of the Notice of
Completion on the project. The total Compensation to Construction Manager following
approval of Sections 2 & 3 of this Third Amendment shall increase from $2,159,304.84 to
$2,310,146.94."
Section 4. Due Execution. The person(s) executing this Amendment on behalf of the
parties hereto warrant that (i) such party is duly organized and existing, (ii) they are duly
authorized to execute and deliver this Amendment on behalf of said party, (iii) by so
executing this Amendment,such party is formally bound to the provisions of this Amendment,
and (iv) the entering this agreement does not violate any provision of any other agreement
to which said party is bound.
Section 5. Full Force and Effect. The parties further agree that, except as specifically
provided in this Amendment,the terms of the Agreement shall remain unchanged and in full
force and effect.
Page 2, Amendment No. 3, Agreement No. 4577
IN WITNESS WHEREOF, the parties hereto have caused these presents to be executed on
the day of , 2004.
"City"
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By:
City Clerk City Manager
REVIEWED AND APPROVED:
City Attorney
"Construction Manager"
TURNER CONSTRUCTION COMPANY
Name:
Title:
Name:
Title:
14
'9iCS/2006 12: 15 FAX 849 223 1180 ALESHIRE & WVNOER, LLP 1a002/002
Page 2, Amendment No. 3, Agreement No. 4577
IN WITNESS WHEREOF,the parties hereto have caused these presentsto be executed
on the_day of , 2004,
"City"
ATTEST; CITY OF PALM SPRINGS, CALIFORNIA
By:
City Clerk City Manager
REVIEWED AND APPROVED:
&&1tyAt#ey &
"Construction Manager"
TURNER CONSTRUCTION COMPANY
Name:
Title:
Name:
Title:
C/4,5'
Turner
May 28, 2004 Turner Construction Company
220 Calle Alvarado
Palm Springs, CA 92262
Allen Smoot phone: 760.327.5810
City of Palm Springs fax: 760.327.5801
3200 E. Tahquita Canyon Way
Palm Springs, CA
Attn: Procurement
Re: Palm Springs Convention Center—Fee Adjustment
Allen:
Turner would like to thank you and the City of Palm springs for the opportunity to
provide Construction Management Services on the Convention Center Project. Now that
the bids are in and the project is moving forward we can begin to do what we all do best,
and that is to build one of the finest buildings that Pahn Springs will ever have in their
community. This is going to be a great project and we are very thankful to be apart of the
team.
In accordance with our existing contract, Turner is entitled to a fee adjustment based
upon the Direct Cost of the Construction. However, Turner does not feel it appropriate
for us to unduly benefit from the unfortunate turn of events in the construction material
pricing that negatively impacted your budget. The following is our proposal to achieve a
fair resolution for our contract adjustment.
As you are aware, Turner expended many additional hours and resources during the
preconstruction period in an effort to make sure we had a project to build at the end of the
day. Our original contract for preconstruction was in the amount of$ 175,000. When
amendment #2 was issued, another $ 87,900 was allocated to our preconstruction budget.
This revised our preconstruction budget to $262,900 and extended the duration for an
additional months.
Now that the bids are in, we have added up the total costs that were expended by Turner
during preconstruction. Through April of 2004, Turner has expended $ 511,925 towards
the preconstruction effort. This is an overrun of$ 249,025 when compared to our revised
preconstruction budget of$ 262,900. There are many reasons as to why this overrun is so
large, but most of it revolved around the many hours that were expended trying to keep
this project within budget.
Our contract with the City entitles Turner to receive 2.9% of the Direct Costs of
Construction as our Fee. Currently,the project budget has been adjusted to reflect the
latest awarded bids with some estimated place holders for some of the smaller trades that
have not been bid out yet. The latest Construction budget for the project that the City
Council is aware of is $ 33,309,323. Adjustment to the final contract amount are as
follows:
J�
Current Contract Amount (5/18/04): $ 33,309,323
General Requirements spent to date: $ 165,723
Revised Contract Amount: $ 33,475,046
<Less the North Parking Lot> $ 553,178
Total Revised Contract Amount $ 32,921,868
Amendment#2 changed the total contract amount from$ 20,000,000 to $ 25,527,753 in
which our Fee was adjusted by$ 160,305, The difference between our new revised
contract amount and the Amendment #2 amount is as follows:
Total Revised Contract Amount (5/18/04): $ 32,921,868
Amendment#2 Contract amount: $ 25,527,753
Adjustment Amount for Fee to date: $ 7,394,115
Our approach is to assign a value to the escalation of the Steel, Metal Studs and Drywall.
If you take those two trades off the table, our construction estimate was about $ 600,000
higher than what the actual bids were. Using this approach, what is the escalation for the
Steel and the Drywall Packages worth?
The Structural Steel package was originally estimated at $ 5,600,000 and came in at
$ 8,500,000. This is due to complexity of the Structure and the escalation in Steel prices.
For sake of argument, lets assume that the entire $ 2,900,000 overrun is due to the
escalation.
The Drywall Package was originally estimated at $ 2,951,912 and the low bid came in at
$ 7,163,000. This had to do with several factors. First was the fact that most of the
subcontractors could not get insurance for EFIS. The second issue involved the
complexity of the framing details. Thirdly, we had to deal with escalation in the metal
studs. After our bids came in and were rejected, we reevaluated the drywall package,
recommend extensive changes to the framing details and adjusted our estimate to
$ 5,600,000. The final number came in at $ 5,970,740. The total spread for drywall
package was $ 3,018,828 based on the final bid numbers and compared to our original
estimate. We do not think this is a fair baseline due to the fact that our original estimate
was based on DD drawings in November of 2003. As you are aware, the final details
were not completed until the day before we went out to bid. We think a fair approach to
assigning escalation costs on this trade is to allocate half of the overrun amount towards
the escalation of the metal studs in the drywall package. Using this method,the value
assigned for the escalation of the metal studs would be $ 1,509,414.
The total value for escalation under this approach is as follows:
Structural Steel: $ 2,900,000
Metal Studs and Drywall: $ , 09,414
Total Escalation $ 4,409,414
We think a fair assessment would be to assign$ 4,409,414 of the total cost of the project
due to material escalation in the Steel market.
The Revised Fee structure would then be based on the following:
Total Revised Contract Amount: $ 32,921,868
<Less Escalation for Stec> $ 4,409,414
Contract Amount Less Escalation $ 28,512,454
<Less Amendment#2> $ 25,527,753
Fee Adjustment Amount $ 2,984,701
Fee @ 2.9% = $ 86,556
The only other adjustment to our contract has to due with the additional month of
construction that was added to the original project duration due to the longer fabrication
time for the structural steel on the project. This was identified during the preconstruction
phase after our contract terms were executed. As you are aware,the structural steel is on
the critical path of this project and this extra month affects our General Conditions on the
project. For simplicity, we can estimate this cost based on the General Conditions
payment schedule in Amendment#2. This will amounts to an additional$ 64,255 that
needs to be added to our contract.
The total between the added Fee of$ 86,556 and General Conditions of$ 64,255 is
$ 150,811. We would like you to submit to the City Council on our behalf a change order
to our contract in the amount $ 150,811. If this meets City Council approval, we would
like to be paid in a lump sum amount for this change order to alleviate our negative cash
flow position that was incurred during preconstruction.
Although this does not cover our total out of pocket costs that were incurred during
preconstruction, Turner is willing to accept this amount of compensation as a fair
compromise. This proposal saves the City $ 127,873 from what our current contract
provides as entitlement. We hope the City looks favorably upon this proposal as a sign of
Turner's continued partnership.
Sincerely,
Turner Construction Company
j SA
�LI
Bill McLaughlin
Project Executive 1 ,18 CC: DMS, Jobsite Staff, File
MINUTE ORDER NO.
APPROVING AMENDMENT NO.3 TO AGREEMENT NO.
4577, WITH TURNER CONSTRUCTION COMPANY,
CONVENTION CENTER EXPANSION, ADDING ONE
MONTH TERM AND ACCEPTING A VOLUNTARY
REDUCTION OF THE FEE PORTION OF
COMPENSATION.
I HEREBY CERTIFY that this Minute Order approving Amendment No.3 to Agreement No.
4577,with Turner Construction Company, Convention Center Expansion,adding one month
to the term and excepting a voluntary reduction of the Fee portion of compensation, was
adopted by the City Council of the City of Palm Springs, California in a meeting thereof held
on the 161" day of June, 2004.
PATRICIA A. SANDERS
City Clerk