The Methuen High School Project

Back in January of 2012 I posted the below as a summary of the Methuen High School project as I left office. With a year gone by I thought a re-post would be appropriate. I would only add a few things to it here.

1) The construction contract that was designed by our team was outstanding, and allowed us a clean sever from the original contractor, Dimeo Construction. We worked very hard on that contract, and unlike other projects we involved the OPM in the development of contract language that ended up saving Methuen millions of dollars. The Dimeo team were outstanding builders, but during the course of 2011 we simply could not agree with them on price, and we mutually agreed to go our separate ways. There were no lawsuits, and the process was managed seamlessly in 2011.

2) The Building Committee choice of the 149A process, Construction Manager at Risk, was a wise one. After the 2011 sever from Dimeo we chose to move forward under 149A, and explored two critical issues.

a) Whether the two “lower rated” candidates (Gilbane Construction and Consigli Construction) were willing to honor their original submissions. That process started in 2011.

b) The designation of either required close attention and adherence to the statutory requirement that only the 2nd rated “candidate” could be offered the job under the 149A CM at Risk law. We worked with Attorney General Coakley’s office to ensure that our process complied with the law, and had essentially settled this matter in 2011, since Gilbane Company, in correspondence to me as Mayor, refused to stand by their original proposal. A failure to manage that process correctly would have forced us to go to “design, bid build”, (149 without the A)and would have harmed the calendar immeasurably. That left us with Consigli, who was formally selected in 2012.

So the bottom line is that as I left office in 2011 our budget remained intact. Consigli was indeed chosen, and submitted a GMP (Guaranteed Maximum Price) in 2012 that met the budgetary number that we had laid out originally. In doing so the dispute that had led some critics to say that our budget number was wrong was settled in the City of Methuen’s favor. Rather than give in to the demand by the original contractor for an additional $6 million of taxpayer money I refused, and chose to potentially give up some time on our construction schedule in order to save the $6 million. That decision has been vindicated, despite the fact that people with political motivations tried to paint it in an unfavorable light.

Finally, in the Consigli submission of 2012, the construction calendar was shortened in such a way as to put the project back onto the original schedule. Mayor Zanni and the Building Committee, and the professional team working for the City of Methuen, deserve great credit for maintaining the schedule, and keeping the process on budget. That budget was developed and brought to the community through a very long process that started in 2006. I am proud of the fact that it was maintained through a difficult period, and very happy that I left the project on budget when I left office in December of 2011. Below is my original post:

The Methuen High School project has seen its construction schedule slip by a yet undetermined amount of time. This schedule slippage is due solely to the desire of myself, as the former Mayor, and the Building Committee, to hold the line on the construction budget. The facts involved in this delay point to a desire to protect the taxpayers of the City, and of the Commonwealth of Massachusetts. Let us start from the begining.

Methuen, in 2006, applied for funding from the Massachusetts School Building Authority, receiving approval immediately after the Commonwealth of Massachusetts lifted the moratorium on school building assistance. We were one of the first High Schools approved, having completed the process known as the “statement of interest” in 2006.

After approval Methuen constituted the “Building Committee”, which has been chaired superbly by Suzanne Lamoureux, who is an educator in Methuen, as well as an engineer who has worked in the construction field. The Building Committee selected the Owners Project Manager, which is required on Massachusetts Building projects with a total value of over $1.5 million. We then began the process. Our design team was selected by the Designer Selection panel of the Massachusetts School Building Authority, with some input from our Building Committee.

Our Building Committee determined that we would proceed with this process under a relatively new (to the public sector) process known as “Construction Manager at Risk”. The CM at Risk process brings on a Construction Manager substantially earlier in the process, on the theory that collaboration between CM, Design, and OPM teams will produce a construction process that has less problems, both financially and from a construction standpoint. This process requires the Construction Manager to provide to the City what is called a “Guaranteed Maximum Price”, or GMP, which would bind the Construction Manager to honor that price, and hence become “at risk”. This process is of course substantially different than “design, bid, build”, the standard for public construction in Massachusetts. Methuen received additional reimbursement points from the Massachusetts School Building Authority for the adoption of the CM at Risk methodology.

With the adoption of the CM-at Risk methodology and the hiring of the mentioned staff Methuen’s Building Committee went to work on design. Our project received a reimburesement rate of 68% after the completition of feasibility and schematic design. Our City entered into a Project Finance Agreement with the MSBA that codified this rate, as well as codifying the construction costs for this project based on schematic and preliminary drawings. That cost, for construction, was approximately $75.9 million.

The City, after a competitive selection process, picked Dimeo Construction of Providence to be the Construction Manager for this project last year. Dimeo was brought in with the design at 60% of completion. At that point, after review, the Construction Manager indicated that it was their view that the project, as drawn, could not be completed for the budget price. We apprised the MSBA of their view, and began the process of “value engineering’ on the project. The design team presented the Building Committee with options, which were adopted, which reduced project scope by over $6 million. We continued to work with the Design team and the Construction Manager to achieve budgetary balance, and we achieved budgetary reconciliation between the CM and the Design team at 90% of drawings. That is a critical point, and one that shows that the project, at 90% of drawings, had met our construction budget. Inexplicably, when the Construction Manager filed his GMP proposal it was over $6 million over the number, despite the reconciliation at 90%. At this point the City began to work with the CM, to understand the reason for the overage. These discussions led to a further reduction in the GMP proposal of over $1 million, but obviously it left us well over the construction budget. Without a further ability to reconcile with the Construction Manager the Building Committee severed its relationship with Dimeo Construction. So where does that leave us?

The Building Committee wisely determined that the project would be split into phases. Our contractual relationship with Dimeo was restricted to pre-construction services and the “enabling” work. Our contract allowed us to separate for convenience if agreement could not be reached on GMP. We have started and completed the enabling work. We completed the work on the Central School 9th grade campus on time and slightly under budget. So now we are faced with schedule slippage on the main project, but it should be clear: we are NOT over budget, nor is the project in disarray. We have stopped because of the differences with the Construction Manager over the budget.

So the City explores staying within the 149a process and hiring a new construction manager. If that is not possible the City will move to a 149 process, “design, bid, build.” That is what is being determined by the Building Committee. The main issue is the one identified by the Eagle Tribune in its editorial:

One serious question remains to be answered. That is whether Methuen officials are realistic in their expectation that the construction can be done for $75.9 million. An experienced construction firm would not agree to do it for that price. Will Methuen be able to find one that will?

It has been our belief, even after the GMP submission by Dimeo, that Methuen can hit that number. If additional value engineering is required to do so it has been the consensus opinion that the Building Committee would be supportive of such an effort. As we move forward it is now a matter of selecting the process (149a vs 149), selecting the new CM (if 149A), or preparing the documents for “design bid build” (149) if the City moves in that direction. This process is delayed, and the delay is unfortunate, but the building committee has made the prudent choice in defending its budget, and protecting the taxpayers of Methuen and of the Commonwealth of Massachusetts. For those that are confused by the process that confusion, in light of the complexities involved, is understandable. But the Building Committee has largely been unanimous in its decision making up to this point. Our professional staff has been outstanding, and has shielded the City of Methuen from the potential budgetary problems inherent in public construction. The process is ready to be moved forward, but will require much additional work. The Methuen High School project will become a reality.

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