January 2008 - Use of Zones for Construction Contracts
posted by Larry J Smith
Submitted by James W. Cumper, P.E.
Introduction
The July 2006 Article of the Month submitted by J. Barry Morley, P.E. introduced "The Green Zone" as a "team effort" for focusing on timely project completion from beginning to end of the construction phase.
PURPOSE:
The purpose of this article is to outline the possible use of zones (Green, Yellow and Red) during project acquisition in order to be proactive during all phases, and to ensure that the contractor catches our enthusiasm and knows that we are serious about our milestones and contract requirements. The Green Zone must begin prior to contract award. Part of the intent is that we must make sure qualified personnel are available (if not on-site) to ensure that all post award review and approval activities will not be delayed. The key concept of Green Zone is that if a contract is started correctly, from both a contractual and schedule perspective, then the follow-on activities should be free of corrective or catch-up issues. Hence the Yellow and Red Zones should be easier to control.
BACKGROUND:
The Corps of Engineers has a history of not meeting it’s metrics for timely completion and cost growth. There are many reasons for this inadequacy; however, it has never been satisfactorily addressed and resolved. This memorandum will draw heavily on the work of Barry Morley (TAC), Ken Weaver (NWS), Larry Smith (SPK), and the U. S. Air Force, Air Combat Command. This memorandum will attempt to illustrate that through the use of a Green Zone (0 – 10%), a Yellow Zone (11 – 79%), and a Red Zone (80 – 100%), we can and must lead the project delivery team (PDT - contractor, customer, contracting, project management, resource management and engineering and construction personnel) to more reasonable project cost and time growth statistics. A Corps White Paper (Circa 1988) compared actual on-site staffing with projected or needed staff requirements. What they found was that at the start of a construction contract we needed a significant number of personnel to conduct the reviews, set up the office, process all required paperwork etc. At the end of a contract we needed personnel to ensure as-builts, warranty issues, transfer documentation, packing and transporting all contract required files, etc, and this required a significant staff and not necessarily the same staff. In between, if we start and end correctly, we need only the necessary staff to conduct follow-up phase checks, and ensure safety. However, what do we normally find in a field office? First without S&A (limited or no placement) we cannot justify the initial staff necessary without HQUSACE RM approval of an S&A loan (or checkbook usage). Second, at the end of a typical contract, all the staff are either gone or are on their way out to the next project that is already underway and not staffed. Three we have our maximum staff during the Yellow Zone, and most likely they are consumed trying to catch-up.
GENERAL DISCUSSION:
This section of the document poses a number of questions and provides some ideas for consideration in applying the Zone concept to the Northwestern Division and all of USACE.
a. HOW CAN THE PDT PERFORM BETTER DURING THE GREEN ZONE? The motivation for timely contract completion for some contractors appears to be directly related to the motivation for timely completion demonstrated by the government representatives (i.e., government PDT members performing proactive project/contract management). There are a number of ways in which the PDT could enable improved performance:
(1) Take necessary actions at the earliest possible time. Each member of the team must be proactive and convey to the contractor that the completion schedule is of prime importance to us. Hopefully, this will assist in finding creative solutions and exploring and analyzing new ideas and risk taking. If the PDT does not do this, we potentially aid the contractor’s claims of government delay. One of our major failings is not getting a resource loaded Network Analysis System (NAS) from the contractor prior to start of construction. We rationalize (incorrectly) that a non resource loaded initial schedule will help the contractor get going. Not forcing the contractor to face up to the contract he signed simply allows him to build a case for delay. Good, professional, and capable, contractors will have put together most of their schedule prior to bid in order to truly figure out their projected costs. Some contractors claim to have prepared their schedule even before the site visit, and refine it just prior to bid. Post award their schedule is one of the first submittals made. However, contractors that are not professional, typically do not want to provide their resource loaded schedule as the Government immediately has a tool that could (and will) be used to trim down their exorbitant change proposals or claims. The NAS, resource loaded, is one of our greatest tools, however, we need field personnel to be trained in reading and evaluating the data, something severely lacking at present.
(2) Set the proper tone. The PDT must take prompt action to make the contractor comply with all early contract requirements. If we fail to do this, the contractor does not feel compelled to comply with any other requirements. Additionally, history indicates that if a contractor falls behind schedule early, he tends to remain behind schedule throughout the contract. The contractor will normally perform up to the level of our expectations, so our expectations must be high. The contracting officer, ACO, and COR must all present the same face to the contractor, and as this is seldom accomplished, the contractors know how to play us against ourselves.
(3) Assure aggressive schedule and quality management. An early approved resource loaded schedule is critical to implementing the work. Critical milestones for buildings haven’t really changed and are related to the percent of completion, so a complete, resource loaded schedule is not difficult. These activities will assure full implementation of the PMBP through the use of the PDT, and schedule and quality management will become fully integrated into the total PMBP as a means to eliminate delays in accomplishing contract requirements.
(4) Focus on an expanded team and then team efforts on ensuring contract compliance. All PDT members need to remain focused and communicate contract compliance to the contractor from the first meeting to final acceptance. If the contractor fails to comply with the contract requirements, there are contract remedies available to deal with that, and they MUST be pursued (e.g., no contract payment for work not performed, or work not performed in accordance with the contract). However, even these seemingly simple items must be agreed to by all players in the system (PM, RM, OC, CT, EN, CO, etc). The use of an expanded team here realizes that this is an effort that begins pre-contract. Thus, NWD will approve the use of S&A funds from the MSC checkbook to staff up to the requirements approved in the District e-IMD. This approval is dependent on the project budget for S&A being balanced (i.e. the advanced S&A funds being repaid through lower rates during construction) at the end of the contract.
(5) Maintain consistent answers to the contractor. Many times, on repetitive issues, the contractor will receive different answers that require the schedule to be redone. This is a costly delay and should not occur. Contractors are very adept at learning how to get around us based on exactly what we state. Somehow we need a uniform face from all offices and all personnel. This is perhaps the greatest challenge we have.
(6) Avoid misunderstandings and duplication. There are instances in the contract when the government asks for a site plan eight different times (design drawings, storm water permit, fugitive dust plan, environmental protection, safety, temporary utilities, demolition, and preparatory phase on general conditions). These are dutifully prepared and submitted by the contractor as required. It is also too easy for the Corps to stamp submittals with “revise and resubmit” when a short mutual understanding meeting could be held to resolve minor differences and obtain approval.
b. HOW CAN THE PDT PERFORM BETTER DURING THE YELLOW ZONE? The information under a. above does not change even after the contract has progressed beyond the initial ten percent. Additionally, there are still a number of ways in which the PDT could enable continuous improved performance:
(1) Take necessary action to meet monthly or bi-monthly (as appropriate), and communicate-communicate-communicate. Each member of the team must remain proactive and be willing to commit time for meetings to examine project progress. The team kick off meeting could be the initial Partnering session. Perhaps a supplemental Partnering meeting would be necessary at the beginning of the construction phase of a Design-Build contract. Minutes of each meeting should be taken, published and distributed. If possible, an installation representative should co-chair these meetings in order to serve as the installation focal point/filter. If meetings are conducted on-site, field tours could be arranged to gather first-hand knowledge of construction activities/problems. A documented field tour should be conducted at the 50% complete phase to ensure there are no show stoppers. If the PDT does not do these things, they will lose focus and the project will suffer as a result.
(2) Continue to assure aggressive schedule and quality management. Second priority after safety is obtaining an approved resource loaded construction schedule. This is critical to completing the work, and must be accepted (we should not appear to own the schedule, only ensure that the contractor knows what he/she is doing) as soon as possible. Possible exceptions should be made for small project teams, Performance Oriented Contract Activity (POCA) contracts, etc. Continual monitoring and strict compliance with the schedule still serves as the means to eliminate delays in accomplishing contract requirements for completion, facility activation, and financial closeout. Confirming that the contractor’s scheduled resources were applied, and that they also completed within the time estimated, builds confidence in their ability to finish on time. Confirming their failure to complete with applied resources and/or on time gives us advance notification of their failures, and opportunities to have them revise their schedule, and correct the resources before major delays occur. The 2007 NWD Memo on Aggressive Schedule Management shall be used to evaluate and correct contracts which fall behind schedule.
(3) Continue to focus team efforts on ensuring contract compliance. All PDT members remain focused and communicate contract compliance to the contractor at every meeting. Continue to avoid inconsistent government responses to the contractor, and certainly continue to avoid misunderstandings and duplication that cause extra effort for the contractor.
c. HOW CAN THE PDT PERFORM BETTER DURING THE RED ZONE? The Red Zone may be able to be minimized in the future through proper application of the Green and Yellow Zones described above. However, at present, the information under a. and b. above does not change even after the contract has progressed beyond seventy-nine percent. As with the Yellow Zone, there are still ways in which the PDT could enable continuous performance improvement:
(1) Take necessary action to meet monthly, and communicate-communicate-communicate. The established Red Zone process requires monthly meetings of the PDT (and possibly others) beginning at 80% or 60 – 90 days prior to the Beneficial Occupancy Date (BOD). I believe the importance of these activities cannot be over emphasized. However, it really takes a different team focus to transition from field activities back to the paper trail of as-builts, warranties, 1354s, O&M manuals, training issues etc.
(2) Ensure that all parties understand what is required to complete the project. The participants must all understand what is necessary to them to accomplish in order to successfully complete the contract requirements to physically and fiscally closeout the contract.
(3) Keep the focus on the project until the project/contract is closed out. The new Enterprise Business Process for Project Closeout should go a long way toward improving the closeout process. The process goes into detail concerning who does what and when, and keeps the PDT focused on the end results – a quality project completed on time and within budget.
d. HOW WOULD THE ZONE CONCEPT CHANGE THE CORPS’ CULTURE? This concept represents a change in the Corps’ culture as PDT members are required to stay engaged and focused on the project throughout its duration. This is a concept that gives team members individual ownership for their actions, and increases the responsibility of PDT members. The customer would receive funds in excess of project requirements more expeditiously, and the installation can more quickly begin to request maintenance funds for the projects completed. Conversely, we need to be able to get advance funding in order to fully satisfy the Green and Yellow Zone teams and their activities, and conceivably, last minute contract modifications during the Red Zone. Finally, the possible trimming of personnel during the Yellow Zone to actual need levels may provide enough S&A return to cover the higher personnel needs of the Green and Red Zones.
RECOMMENDATION:
That Northwestern Division prepares a plan of action and implementing instructions to test this concept. If the concept is successful, then recommend that Northwestern Division propose the concept to USACE for adoption Corps-wide.
COMMENTS:
Comments regarding this recommendation for preparing an action plan and implementing instructions to test the "zones for construction contracts" concept throughout NWD and if successful throughout USACE are invited on the DOK Forums Contract Administration Forum.