July 25, 2012
Augusta, GA
**Editor's Note: Orange Text Links to supporting documents referenced in this article**
Augusta Today member Dean Klopotic submitted a Georgia Open
Records Request seeking the R.W. Allen LLC (RWA) billings for the Tee Center
related contracts they are performing. The Law Department of the city of
Augusta issued
a response which included RWA invoice number 24 representing costs through
March 31, 2012. Our investigating team has since obtained RWA invoice
number 26 from other sources in city government and turned the documents
over to cost recovery accounting specialist Al Gray for analysis and review.
RWA boasts of having an “Open Books Policy”
but their Tee Center project manager Jim Cely declined to allow us to visit
their offices to view supporting documents to the billings obtained through the
Georgia Open Records Request. RWA CEO
Rick W. Allen, currently a candidate
for Georgia's 12th Congressional District, had previously pledged to
allow Mr. Gray access to the billing detail records. Despite being assured they
would cooperate we were not allowed to see the documents and instead, Cely gave
instructions to direct inquiries to Augusta Administrator Fred Russell....the same Fred Russell who has displayed a pattern of withholding VITAL information from Augusta Commissioners on the TEE Center and its companion parking deck across the street.
The Tee Center Contract
with R.W. Allen LLC is a Construction Manager at Risk guaranteed maximum
price (GMP) contract. Under a fast track, a cost plus contract with a GMP, the
Construction Manager sets its fee, general conditions (overhead) expenses, and
other costs necessary to construct a total facility. These contracts are or can be comprised of
multiple subcontracts and work with the CM (RWA in this case) self-performing
portions as if they had been subcontracted. In other words, they can hire
themselves to do certain parts of the job as the Construction Manager.
Once the drawings and design work is 75%
complete the GMP
was officially set at a price of $29,700,000 and accepted
by the Augusta Commission. There have been two change orders (“change
orders” are contract modifications which usually are increases in the cost of
the fixed price cap due to unforeseen “changes” that affect the construction
itself) executed which bring the total price to $30,113,215. So as you can see, the agreed upon price of
the TEE Center construction was $29,700,000.00 but due to the two “change
orders” the final projected price tag (there could be more change orders before
it is completed so I say “projected”) is now a cool $30,113,215.
Since the more detailed supporting documents for RWA’s
invoices (which are pretty vague) are not likely to be in the possession of the
Augusta government and therefore open records accessible and the honcho over at
RWA, 12th District candidate R.W. Allen, has already broken his
pledge to allow us access to the documents (a politician breaking a pledge to
the tax payer? SAY IT ISN’T SO!); here are the questions we would pose to Mr.
Russell and to Program Manager Heery International to find out the details of
these invoices for us, the lowly tax payer footing the entire bill of $30mil
and change.
Has there been
Double Billing of General Conditions Costs?
Let’s be clear here, these are complicated contracts but the
billing is not if you are willing to bear with me and see the questions we are asking.
Article 7.4.1 sets out the components of the contract price and these are repeated in Exhibit A in the contract. to be paid by Augusta, so a cost has to fall into one of those two categories and be authorized by the terms of the contract to be billed. To cover the contractor’s overhead costs, called “General Conditions” in construction language, RWA put in a General Conditions Guaranteed Maximum cost of $1,082,670 in the contract and in Exhibit G.
Article 7.4.1 sets out the components of the contract price and these are repeated in Exhibit A in the contract. to be paid by Augusta, so a cost has to fall into one of those two categories and be authorized by the terms of the contract to be billed. To cover the contractor’s overhead costs, called “General Conditions” in construction language, RWA put in a General Conditions Guaranteed Maximum cost of $1,082,670 in the contract and in Exhibit G.
The capped GC cost is described this way on page 56: Items that are
included within the General Conditions Costs for which the Construction Manager
is entitled to no additional compensation include without limitation:.....viii
"That
portion of insurance GL and Auto Builders Risk and P&P bond premiums that
can be directly attributed to this Contract for Construction".....ix. Fees and
assessments for the building permit and for other permits licensesand inspections
for which the Construction Manager is required by theContract for Construction
to pay.
Looking at the latest payment application
available, on line 2 of the Form G703 appearing on page 2,
we find an amount listed for General Conditions costs of
$1,082,475, which is only $195 less than the stated limit in the contract.
Augusta is making progress payments, which total $697,917 (less 5% retained by
Augusta) through this invoice, based upon component invoicing and RWA labor
charges. In addition to the GC costs, we found $167,585 charged on page 2, line
19 of the G703 schedule for P&P Bonds.
Based upon the contract having capped GC costs to INCLUDE the P&P bonds, separate invoicing in this manner appears to be a duplicate charge, especially since the contract also says this: “The overhead and profit component for any change includes the cost of bonds and insurance"which seems to preclude the additional billing of P&P bonds separately in this manner. The P&P bonds for the subcontractors are in their OWN costs.
Based upon the contract having capped GC costs to INCLUDE the P&P bonds, separate invoicing in this manner appears to be a duplicate charge, especially since the contract also says this: “The overhead and profit component for any change includes the cost of bonds and insurance"which seems to preclude the additional billing of P&P bonds separately in this manner. The P&P bonds for the subcontractors are in their OWN costs.
Besides the P&P bond issue, there is the same issue with
the $48,961 of permit costs on line 18
of the payment request.
These two issues relating to costs billed separately that
appear to be already covered by capped General Conditions total $216,546. It is
recommended that these costs be reallocated against the capped GC costs of
$1,082,670, or line 2 on the G703 billing schedule of values.
Extension of
General Conditions without Required Change Order?
Accompanying payment request number 24 was a document
entitled “Augusta TEE Center Contingency Log” which includes a $16,393 item
labeled “extended builders risk cost due to delays. There was an invoice
supplied showing the builder's risk policy was being extended to October 2012. ”The contract says this - All adjustments in
compensation or extensions of time shall be by change order (page 38)"
No change order was found to extend the duration of the
project, so shouldn't this charge be covered by the capped General Conditions
that includes builder's risk insurance?
A much more important and broader issue, is whether RWA
intends to collect extended general conditions for the approximately 6 months
greater time until completion of the project to include the more costly GC
costs, like supervision. The project duration in the contract was set at 24
months, yet the project is on the 26th monthly billing.
Does the charging of builder's risk premiums for project
delays mean that there will be a costly claim for extended General Conditions
at the end of the project? Will extension costs be continued to be charged
against the contract contingency, instead of being authorized by change order,
as the contract apparently requires?
Lack of Pricing
Details limits Change Order Price Analysis?
Augusta Today and City Stink contributor Lori Davis
submitted a Georgia Open Records Request on another matter concerning the TEE
center kitchen equipment that was added to the RWA contract as Change Order 1
to increase the Contract Price to a total of $29,276,987. Included
in the information provided was the
pricing from the subcontractor, itemized by equipment price, but unsupported by
cost versus overhead and profit analysis of the pricing.
The contract says this in Article 15:"If
and to the extent the change involves work of one or more subcontractors the
overhead andprofit component for subcontractors shall be fifteen percent 15 and
theoverhead and profit component for the Construction Manager shall be seven
percent 7 of the amount allocable for subcontracted work."
Unless there is additional analysis not presented with the
City's response to the GORA request, how can RWA tell whether the 15% limitation
on overhead and profit has been met with respect to Change Order 1? Is
sufficient cost information being obtained on other project changes to meet the
contract limitations on combined overhead and profit?
Construction
Equipment Rentals in Steel Costs?
Within the supporting backup for Payment Application 24 for
the steel cost category was
an invoice to RWA for construction equipment rental. The contract has this inclusion within the
definition of General Conditions costs: "xviii Rental
charges for temporary facilities and for machinery equipment and tools not
customarily owned by construction workers"
Since the equipment rentals seem to be within General
Conditions (Overhead), wouldn't such costs be covered by the allowed 15%
overhead and profit markup allowed on work self-performed by the Contractor?
Summary
1.
Aren't $216,546 of bond and permit costs
separately billed also within the capped General Conditions expense in this
contract?
2.
Did the billing of $16,393 for extending
insurance coverage to October 2012 presage a claim for an additional number of
months of general conditions expense, including Contractor Supervisory labor,
and unforeseen costs.? Without a change order, should this item have been
charged to contingency?
3.
Is there sufficient cost detail provided by
subcontractors to assure that contract limitations on maximum, combined overhead
and profit can be verified?
4.
Are construction equipment rentals separately
billable from overhead and profit markups?
5.
Will Augusta review the contract to assure that
all contingency and allowances are recaptured by the city at project completion
on this major contract? Others?
We expect that the Mayor and the City Commission will assure
that these questions are answered.***
B.O.
**Augusta Today members Al Gray, Lori Davis, and Dean Klopnik also contributed to this report**
**Augusta Today members Al Gray, Lori Davis, and Dean Klopnik also contributed to this report**
**Below is the GMP Construction Contract between RW Allen Construction on the city of Augusta for the TEE Center:
RWA GMP Contract
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