Public Works

Wisconsin Debates Expanding the Menu on Project Delivery

by Kathy Bergstrom

Wisconsin building officials are investigating whether state agencies, including the University of Wisconsin system, should have more flexibility to use alternative delivery methods such as construction management or design-build on construction projects.

Proponents say expanding the menu of options would allow for more accurate cost estimates and foster better coordination, particularly for complex projects.

But others say the current requirement for multiple prime contractors provides cost savings because of the open bidding process and is fairer than the alternatives.

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The Existing Law

Current law calls for the use of multiple prime contractors on the state’s projects. The state’s annual capital budget is about $1.2 billion.

Agencies can request a waiver to use an alternative method, such as a single-prime contractor or construction manager, but it must be in the public interest and approved by the Wisconsin Building Commission.

A report prepared by commission secretary David Helbach shows that since 1997, the commission has granted waivers for 154 of 1,641 projects, or about 9.4%. The number of waivers granted has remained fairly steady with the exception of 2002 when 23 waivers were granted, representing 15.5% of projects.

Current projects using alternative delivery methods include the $87 million University of Wisconsin Student Union South project in Madison, for which C.G. Schmidt of Milwaukee is the construction manager.

The $29.5 million Jarvis Hall remodeling and expansion project at the University of Wisconsin-Stout will be built using a single prime contractor, Shaw/Lundquist of Hudson, Wis.

Only six other states—Illinois, New York, North Carolina, North Dakota, Ohio and Pennsylvania—use multiple prime contractors for more than 75% of their projects, and Helbach says some of those states are looking at changing their laws. Most state projects are bid using the conventional design-bid-build approach.

In the case of a construction manager approach, the manager is hired at the beginning and can provide input on design. In some cases the construction manager might hire the architect, Helbach says. The construction manager then hires the project subcontractors.

The single-prime approach still uses the design-bid-build approach, but there is only one contract for construction, and the single prime contractor hires the subcontractors.

The building commission is getting more requests for alternative delivery methods and is concerned because current law does not define public interest, Helbach says.

The commission asked the Department of Administration to develop a recommendation for changing the law. Helbach is the administrator of the Division of State Facilities within the department, and he says that potential changes could include creating language on when waivers should be granted, allowing state agencies to decide on project delivery methods themselves or something in between.

He adds that he hopes to present a recommendation to the commission by late fall or early winter.

Some Against, Some for Change

Jerry Deschane, lobbyist for the Madison Mechanical Contractors Association, says his organization supports the current law and objects to the excessive use of waivers. The use of multiple prime contactors saves an average of 5% of project cost, he says.

“We would much rather have a prime-contractor relationship with the state than have to work through a third party,” Deschane says.

Contractors believe they will have more of a fair shake to get the job because of the open-bidding process, he says. When the job is under way, the contractors also have clearer lines of communication with the project owner, he adds.

Providence, R.I.-based Gilbane Building Co. supports the construction-manager-at-risk concept, says Gary Grunau, senior vice president and regional manager for the contracting firm in Milwaukee.

Most university projects in other states are built with that approach, Grunau says. It allows schools to have better control on budget, value management and schedule, he says.

The approach is not necessary for all projects but works better for larger, more complex projects, Grunau says.

“I would hope that we can convince the Legislature to give the authority to the division of state facilities to select which of the delivery processes it would like to see,” he says.
Mike Abuls, chief operating officer for C.G. Schmidt, calls construction manager at risk a preferable delivery method.

“We think it allows the builder to provide input into the design process so that the design can be optimized for best value,” he says.

With a multiple-prime bidding system, “you get an exact price for an exact scope of work,” Abuls adds. “You’ll never really know that.”

David Miller, associate vice president of capital planning for the University of Wisconsin system, says the university believes agencies should be able to select from a menu of delivery options.

“We’re in favor of a menu that includes multiple prime,” he says.

Miller predicted a majority of projects would best fit the single-prime approach, a few would fit construction manager and fewer still would fit design-build. And some projects would continue to fit multiple prime, he says.

“We always want to ensure as a public institution that whatever process is used is first fair and competitive,” he says.

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