ESTABLISHING THE GUARANTEED MAXIMUM PRICE (GMP)

Alliance was required by the CMAR Scope of Service contract to provide its preliminary pricing by September 3, 2013. An initial preliminary price in the amount of $15,046,062 (no contingency) was provided.  This price far exceeded the project budget of $12,000,000. Alliance’s pricing was based upon square footage costs for various portions of the work based on Alliance’s knowledge from similar past projects.


Project drawings were further developed by ICON in an effort to provide more detailed specifications and a revised preliminary price estimate was able to be provided by Alliance on September 11, 2013 in the amount of $15,370,768 (no contingency). Though based on more accurate detail, the revised pricing was still based on square footage costs for various portions of the work based on Alliance’s knowledge from similar past projects.


In an effort to further convert square footage pricing to more realistic estimates, Alliance worked with local contractors for pricing consultation.  Gene Ray Electric and Knights Mechanical assisted in providing information for preliminary pricing. In addition, Superior Steel and Padgett Steel were sent structural steel drawings to further refine preliminary pricing.


On October 20, 2013, Alliance presented a revised preliminary pricing estimate of $14,832,134. This new preliminary pricing estimate remained in excess of acceptable pricing.


To discover additional opportunities for decreased pricing, ICON and Alliance sought out competitive bids.  The Project was divided into twenty (20) distinct bid packages for the various portions of the project.  Alliance set up a process to accept sealed bids by hand delivery and by e-mail. The flexibility of Alliance permitting e-mailed bids in this circumstance was due to the CMAR, Alliance, acting in its own capacity, rather than on behalf of the Owner (Hardin County Government).


The ability of Alliance, as CMAR, to fine-tune costs through its own bidding process provided an advantage to Hardin County.  In this “at risk” role, the Construction Manager (Alliance) itself holds the contracts for the individual bid packages and it is Alliance that is obligated to take on any risk that the actual cost exceeds the Guaranteed Maximum Price (GMP) it provides to Hardin County.  This process eliminates any risk of over-budget costs being passed on to Hardin County.  The CMAR is therefore able to derive its GMP in its own manner rather than to be confined to a specific procurement process.  As a result of this process, a Guaranteed Maximum Price was established by Alliance.


Similar to a government bid process, the process by which Alliance arrived at its Guaranteed Maximum Price included:


An Invitation for Bid notification – More than 367 contractors were contacted by Alliance. In addition, the Invitation for Bid was posted on the Dodge and DataFax Service sites, which provide contractors notification of available bid opportunities. Click on this link (Bid Group A) to see the bid notification and a listing of contractors contacted by Alliance for the Group A bid. Click on this link (Bid Group B) to see the bid notification and a listing of contractors contacted by Alliance for the Group B bid.

All contractors were treated fairly regardless of their location. As would have been in the case of a government bid process, in this case, the low bidder was awarded a contract unless there was a specific reason it could not be considered the best bid (e.g. past performance).


The final result of this extensive bid process and value engineering resulted in Alliance providing a  Guaranteed Maximum Price to Fiscal Court in the amount of $13,165,929 (no contingency). ICON and Alliance recommended Hardin County set aside an additional $500,000 as a contingency for any unforeseen costs the might occur. This contingency is maintained by Hardin County and not held by Alliance.