PURPOSE
This procedure explains the initial contract activities of the Project Manager (PM) that later aid in monitoring and assessing the Consultant's performance. In addition, this procedure outlines the Project Manager’s role in assessing errors and omissions.
REFERENCES
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RESPONSIBILITIES
Project Manager (PM): The PM is responsible for managing the Consultant's performance; creating the database records for the contract in the Bureau's reporting systems, Personal Services Contract System (PSCS) and Uniform Project Reporting System (UPRS); reporting the performance using the PSCS and UPRS; knowing the status of the work; and informing Consultant of the City's assessment of their performance on an on-going basis. Verify that the Consultant’s Required Insurance document is on file and valid with the City Administrative Office (CAO). In addition, the PM is responsible for tracking the errors and omissions in the design plans and comparing them to the contractual standard of care.
PROCEDURE
Monitoring and Reporting Tools
To aid in the evaluation and to report the planned versus actual performance, the Bureau uses several tools. They are described below.
Contract Schedule: For a project specific contract, during negotiations, the PM and the Consultant should develop a simple bar chart of the planned schedule for the Consultant contract. It should identify the major activities in the contract and for lump sum contracts, the milestone payments associated with them. It should, of course, be in agreement with the overall schedule for the project that the contract will support or assist. It is included in the contract as Exhibit A (see Procedure 6.5).
Proposed Project Cost Breakdown - Expenditure Plan: For a project specific contract, during the final stages of negotiations, the PM and the Consultant should develop the Proposed Project Cost Breakdown. It is the estimate of costs per task in the contract and serves as the back-up details to the total amount of the contract. Along with it, an estimated Consultant payment schedule (cash flow) should be prepared which applies the anticipated costs per task to the Contract Schedule discussed above. This will show the cash flow needs of the contract. It is included in the contract as Exhibit B (see Procedure 6.5).
MBE/WBE/SBE/EBE/DVBE/OBE Utilization Profile: The Consultant needs to develop a time-phased plan for the use of the identified subconsultants during the life of the contract. This plan, known as the MBE/WBE/SBE/EBE/DVBE/OBE Utilization Profile (Attachment 6.8-1), will indicate planned subconsultant usage through the life of the contract by means of an estimated payment schedule (cash flow). This is included in the contract as Exhibit C (see Procedure 6.5).
Personal Services Contract System (PSCS): PSCS is a centralized database of information on all of the personal services contracts awarded by the Bureau. It includes various types of information about the contracts, including the planned rate of expenditure for the entire contract as well as the plan per the MBE/WBE/SBE/EBE/DVBE/OBE Utilization Profile (Attachment 6.8-2). After the contract is executed, the PM opens a database file within PSCS for this contract. Basic information about the contract is entered into the system. The PSCS Section of PAC can provide further assistance.
Following the receipt of each invoice, the PM must add certain invoice information to the PSCS database. Some of the information will come from the Subconsultant Utilization Invoice Attachment. The PM is responsible for the information in PSCS being accurate, current and complete. On a monthly basis, a report is prepared from the data contained in the system and submitted to the Mayor’s Office and the Board of Public Works as well as being distributed to all Program Managers (PSCS Monthly Report Index).
Uniform Project Reporting System (UPRS): UPRS is a database of information on all active physical projects in the Bureau of Engineering. On those personal services contracts that are related to a physical project, information regarding the contract must be included in the project's record in the database (Attachment 6.8- 3). This can be done using the Detailed Project Status field in UPRS. This is the PM's responsibility (see Procedure 5.2). When the UPRS task is performed by a Consultant, the PM is (in essence) reporting the monthly progress of the Consultant through the UPRS update process.
Monitoring Performance and Using the Tools
In monitoring the Consultant's performance, the major focus of the PM needs to be on the professional adequacy of the work being performed and on the contract's budget and schedule.
Assessing the professional adequacy or quality of the work is not a quantitative process, but rather qualitative. Judgment must be applied to their performance in areas such as responsiveness to the City's requests, thoroughness and completeness of work, the exhibition of reasoned, sound decision making processes, and the appropriate weighing of alternatives during the conduct of the work. Simply phrased, are they doing quality work, on time, and on budget?
Regarding budget and schedule performance, the PM is to know the current status of the Consultant's activities and have an understanding of their performance as compared to the Contract Schedule, Proposed Project Cost Breakdown and MBE/WBE/SBE/EBE/DVBE/OBE Utilization Profile contained in the contract. To be able to do this, the PM must know the actual status of the Consultant's work and the costs incurred under the contract. Numerous ways exist to reach this level of knowledge, including:
Working closely with the Consultants in the day-to-day conduct of the work.
Receiving regular written or oral status reports.
Regularly reviewing work products of the Consultant.
Conducting monthly Progress Review meetings.
Reviewing invoices and MBE/WBE/SBE/EBE/DVBE/OBE Utilization information and comparing it to the plans contained in the Exhibits to the contract.
Making informal, unannounced Consultant office visits to observe firsthand the level of activity on the contract.
Verify that their Required Insurance is valid for the life of the contract.
The difficult factor to assess during the course of doing the work is what the Consultant’s actual percentage of completion is on various tasks at any given point in time. While this may be difficult to assess, it is the only reasonable measure of progress and must be weighed against the planned schedule. The costs incurred to date are compared to the planned expenditure rate to assess budget performance.
It must be remembered that the overall cost/schedule performance can only be judged when both elements are simultaneously understood. Being under budget is not good, if the overall progress is even further behind the plan. Likewise, being ahead of schedule is not good if the expenditures are further ahead of plan. The status of both elements must be known if the overall performance is to be assessed accurately.
The information contained in the tools regarding personal services contracts must be updated on a monthly basis. Key information includes, but is not limited to, the following:
PSCS: Enter invoice data and MBE/WBE/SBE/EBE/DVBE/OBE Utilization information (if any invoices were received).
UPRS: Enter % completion for phase of the project. Consultant payments are recorded to the physical project via download from the City’s cost accounting system, FMIS.
Monitoring Errors and Omissions
Errors are defined as actual mistakes made in the design by the Consultant. Omissions are aspects of the project that were either not considered or not adequately considered during design and must now be implemented by change order during construction. Both errors and omissions are tracked as the monetary value of their change order cost. The PM is responsible to monitor the combined Consultant designed errors and omissions as a percentage of the award amount of the contract.
It is generally unwise for an Owner to establish a goal of having zero change orders caused by errors and omissions. The problem is that more and more money must be spent to find ever smaller errors and omissions in the contract documents. A point can be reached where more money is being spent on QA/QC than the value of the errors and omissions that is being corrected. There is usually an optimum point where further QA/QC is no longer cost-effective. Judgment and experience suggest that this point is between 1% and 3% of the construction value (CV) or less for change orders caused by errors and omissions. If the lower 1% benchmark is met, it is usually assumed that the designer met the standard of care in the industry. On the other hand, situations could arise where an egregious error occurred, but the total remained below the 1% benchmark.
Exceeding the upper 3% benchmark does not necessarily mean that the designer failed to meet the standard of care. However, the Bureau has adopted a policy that if at the end of the project the combined errors and omissions exceed 3% of the CV, there should be an analysis of whether the designer met the contractual standard of care. A first step in this analysis is to separate each “error and omission” change order into those caused by errors and those caused by omissions. Next, each change order should be reviewed to determine if it was correctly categorized as either an error or omission. The PM should be aware that some change orders are difficult to categorize between errors and omissions, unforeseen conditions, and change in scope. The PM should consult with the Construction Manager (CM) if there are questions in such areas because the CM made the initial categorization and should be closer to the actual field work. Next, each individual error and omission should be reviewed relative to the standard of care typically expected from a design professional. The PM may also want to review the total volume of errors and omissions relative to the standard of care.
Evaluation criteria to consider in assessing the Consultant’s performance relative to the standard of care include the following. First, if the cause was an error, did the design Consultant have all the information and requirements available to perform the design correctly? For example, placing a piece of process equipment directly in the path of a structural beam is an error that should be avoidable, particularly with today’s 3D CADD imaging capabilities. Second, if the cause was an omission; should the design Consultant reasonably be expected to know that the omission was essential to a successful project? Case law may have to be consulted in such matters. For example, an architect designed an elementary school but omitted a bell system to announce the change in classes. The Owner sued. A jury found that an architect conversant in design of school systems should have known that a bell system was needed and found for the Owner.
Regardless of the outcome of the analysis, the PM should take the preliminary finding of the analysis to the Program Manager for review. Following that, the City Engineer should be briefed on the outcome. A finding of errors and omissions is extremely sensitive and the final determination must be made at the level of the City Engineer. Should the finding be upheld, the next question is the damages owed to the City. In some cases, the Consultant is expected to provide any redesign at their cost. In extreme cases, the Consultant might be held liable for the full cost of redesign plus the actual change order costs. One thing to consider in the latter case is the actual net increase in cost to the City. For example, if an omission is corrected by change order, it might be reasonable to assume that the costs would have been reflected in the original bid price had the omission not been made. In such a case, the Owner might conclude that the Consultant is responsible only for redesign costs because the Owner would have born the cost of the construction work in either case.
The analysis discussed above for errors and omissions exceeding 3% of CV occurs after the project is completed. The question arises what do to about an obvious error or omission that requires rework during construction? The PM or CM may feel that the error or omission is beyond the standard of care and may be reluctant to pay the Consultant to redesign the necessary fixes. In this case, they should consult with the Program Manager. The Program Manager can authorize them to direct the Consultant to redesign at the Consultant’s cost. Should such action be taken during construction, the more detailed analysis of errors and omissions discussed above should be undertaken at the end of construction even if the combined errors and omissions do not exceed 3% of the CV. The purpose of this analysis is to determine if additional damages are due to the City beyond the cost of redesign. For example, the redesign may have delayed the contractor, thus exposing the City to extended overhead costs. Had the error or omission been corrected during design, the Owner might have paid for the construction work anyway in the bid price. But the Owner would not have paid extended overhead costs and might be owed such damages. However, this usually cannot be determined until after construction is complete.
Contract Termination
In the event there is a substantial failure in the Consultant’s performance, the City is authorized to terminate the contract. The City must provide the Consultant ten days written notice as well as the opportunity to consult with the City prior to the termination. If the contract is terminated, the Consultant must discontinue all work (unless directed otherwise) and return all materials and contents accumulated in the performance of the contract to the City. This applies regardless of the status of completion of the items in question. The Consultant is entitled to an adjusted payment including the cost of expenses and an appropriate profit for the work performed. The City may deduct the cost of any expenses incurred as a result of the Consultant’s default.
To ensure compliance with the City’s standard contract language, the PM should first refer to Article 8 of the Consultant’s contract and contact the City Attorney’s Office for counsel before initiating the process. Any questions regarding Article 8 may be referred to the Division Engineer of PAC.
RELATED PROCEDURES
Links / Attachments
Links
PSCS Monthly Report index (City Staff only)
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