Revised October 2017. This document applies to all NIH grants and cooperative agreements for budget periods beginning on or after October 1, 2017.
10.3 Contracting Methods
The traditional three-phase project delivery method in which the recipient contracts with separate entities for each the design and construction phase of a project. It begins with a project design phase, followed by the construction bid phase (including solicitation and selection of a construction contractor), and then the active construction phase.
10.3.2 Alternate Contracting Methods
The use of a contracting method other than Design-Bid-Build, including the use of construction management services or design-build services as described below, may be authorized by NIH when cost, time, and quality benefits will result. In making such determinations, NIH will consider the scope of the project, estimated cost, and other factors deemed relevant. NIH approval must be received before the recipient begins the process of using an alternate contracting method.
If a construction management firm is currently employed, the recipient may choose to authorize that firm to perform the construction work. Such authorization requires NIH prior approval and the price for the work involved must not exceed the GMP also approved by NIH.
10.3.2.1 Construction Manager
10.3.2.1.1 Construction Manager as Agent
Use of construction management services, under which the recipient contracts for technical consultation during the design stage of a project and for organization and general project oversight of construction activities during the construction phase, is considered professional services and, therefore, may be procured on a negotiated basis rather than by formal advertising. However, the services of CMs may be procured by formal advertising in those cases where State or local governments prohibit the award of construction management contracts on a negotiated basis. Where bids are invited, the bidders should be pre-qualified. Under this procedure, the CM, operating as a member of a recipient-architect-CM team, is responsible for cost estimates during the design and construction as well as cost control, review of design(s) with a view toward value engineering, consultation on construction techniques, construction coordination and scheduling, and oversight of all construction activities. The CM's fee is considered an eligible cost for the purpose of determining the total eligible cost of the project.
10.3.2.1.2 Construction Manager-at-Risk
A CM-at-Risk is considered a sole proprietorship, partnership, corporation, or other legal entity that assumes the financial risk for construction, rehabilitation, alteration, or repair of a facility at a GMP (see Construction-Alternate Contracting Methods-Guaranteed Maximum Price). The CM-at-Risk serves as a general contractor and provides consultation to the client during the design of the facility and through construction. The terms of the CM's employment must be such as to preclude any conflict of interest. The recipient may authorize the CM as Agent to become the CM-at-Risk to perform the construction services when authorized by NIH.
Under this procedure:
- The construction management contract must place total financial responsibility on the CM to complete construction of the project at or below a GMP. The CM is required to provide 100 percent performance and payment bonds to ensure that the facility can be completed with the amount of funds available.
- The GMP must be obtained from the CM before NIH will authorize the award of the first construction contract. This requirement applies whether or not phased construction techniques are employed. Each portion of the work for which a separate contract is expected shall be separately priced as an individual line item in the GMP contract.
10.3.2.2 Design-Build Services
Design-build is a method of project delivery in which one entity works under a single contract with the project owner to provide design and construction services. In design-build contracting, construction firms respond to a request for proposals by submitting building designs that meet the recipient's performance requirements within a GMP (see Construction-Alternate Contracting Methods-Guaranteed Maximum Price) covering all architectural, engineering, and construction services required. The design-build firm must be selected in a manner that will allow maximum feasible competition. Because of the nature of design-build contracting, the following departures from formal advertising are authorized:
- Cost will be treated as a competitive factor although the recipient may insert in the request for proposals a specified maximum permissible figure.
- A contract may be awarded regardless of the number of proposals received or the number of firms determined to have met qualification standards.
- The recipient may negotiate cost or design with one or any number of firms.
The selection of a design-build firm must be accomplished by a process that includes the following activities:
- Preparation of a RFP describing the recipient's design requirements, cost requirements, standards for qualifying firms, and the criteria on which proposals will be judged.
- Public announcement of the RFP.
- Consideration of all proposals from firms that are determined to be qualified.
- Selection of that firm that, in the recipient's judgment, represents the best offer considering both the firm's qualifications and satisfaction of the criteria in the RFP.
On all design-build projects, the recipient must:
- Ensure a firm total cost by including in the contract a provision that extra costs resulting from errors or omissions in the drawings or estimates will be the design-build firm's responsibility.
- Justify cost on the basis of comparability with similar construction.
10.3.2.3 Guaranteed Maximum Price
Under this procedure:
- The Guaranteed Maximum Price (GMP) contracting method can be used in either Construction Manager at Risk contracts or as part of Design-Build Services contracts. In either case, the project must be completed at or below the GMP.
- The recipient must transmit all GMP bids to the GMO, with its recommendation for award to the lowest responsive, responsible bidder.
- The GMP must be completely itemized, by trade, to include a separation of labor and materials, all markups, and no contingency other than that which will cover change orders as approved by the recipient.
- After approval of the GMP, all GMP subcontracts must be competed, and there must be at least three bidders to allow for an award.
- Issue a "sources sought" announcement describing the nature of the construction work required, the separate contracts to be awarded, and the standards for prequalification. It must also describe the complete scope of work with sufficient specificity to ensure response from all interested sources.
- Pre-qualify all firms that respond to the announcement who are determined by the recipient to meet the prequalification standards.
- Establish bidder's lists for each of the invitations to bid. The lists must include all firms qualified on the basis of responses to the "sources sought" announcement and may also include other qualified firms known to the recipient.
- By written invitation, solicit bids from all firms on the bidders list.
- Consider bids from any contractor who requests permission to bid and who is determined by the recipient to meet the prequalification standards.
- If three bids cannot be obtained, the recipient must submit, in writing, to the GMO a detailed explanation of why the GMP contractor is unable to comply, along with supporting documentation for NIH consideration and approval of another alternate contracting method.
- Funds unexpended, due to lower construction costs than estimated in the GMP, must be refunded or credited to the recipient by the contractor and by the recipient to NIH. All costs in excess of the GMP are the responsibility of the GMP contractor.
- All subcontract prices must be approved by the GMO before making individual awards. The awards shall be made to the lowest-priced responsible, responsive bidders.