2021-09-15 City Council Item No. 12.5 Standard Contingency to Construction and Professional Services Agreements Presentation Regular MEETING - Additional Meeting MaterialsDiscussion Item 12.5
Standard Contingency to
Construction and Professional
Services Agreements
Nick Fidler
Public Works Director/City Engineer
September 15, 2021
“Any change order with a total cost in the amount of $25,000 or less may be approved by the Purchasing Officer; provided, the aggregate amount of all changes to a particular contract, including the change
order under consideration, does not exceed 10% of the original
contract cost. Any change order in an amount greater than $25,000 or any change order which, when considered with the aggregate amount of all other changes to a contract, exceeds 10% of the original contract cost, shall be approved by the City Council.”
Menifee Municipal Code 3.12.090
Menifee Municipal Code 3.12.090
Change Orders
Less than $25,000
Greater than
$25,000 Greater than
10%
Approval allowed if within 10% of original
contract amount
City Council Approval
requiredOR
Example 1:
Construction Contract Amount
$100,000
Change Order #1
$6,000
Change Order #2
$3,000
Change Order #3
$1,500
Requires Council approval as the sum of change
orders exceed 10% of original contract amount.
Example 2:
Construction Contract Amount
$300,000
Change Order #1
$26,000
Change Order #2
$2,000
Requires Council approval as the change order is
over $25,000. Total change order costs still within
10% of contract amount.
Responding City Standard Contingency Used *Other Contingency Used
Wildomar 10%5% and 7.5%
Lake Elsinore 10%15%
Moreno Valley 10%5% and 20%
Temecula 10%"Can be higher"
Torrance 5%10%
Ventura 10%"Can be higher"
Menlo Park 10%15%
El Cajon 10%5% and 15%
•Received Responses from eight cities on contingency practices.
•Typical practice is 10% contingency assignment to construction
agreements.
•*Other contingencies used can vary depending on the scope,
complexity, and length of a project.
Industry Best Practices
•Compliance with Menifee Municipal Code §3.12.090
•Typical assignment of 10% contingency to construction contracts
•Average use of 4.8% contingency in FY 2020-2021
Current Contingency Practices
FY 20-21 Projects Utilizing
Contingency
12
Average Contingency Used
Per Project
4.8%
•FY 2020-2021-12 projects
utilizing contingency had a
combined construction cost of
$7,148,790.98.
•Construction contingency used
in FY 2020-2021 totaled
$195,175
•Representing 2.81% of the
total cost$6,953,615.98
$195,175.00
Fiscal Year 2020-2021 Total Construction Contingency Cost
Original Cost Contingency Cost
Current Contingency Practices cont’d
Options:Construction Contingency
Continue Current Practices
Request Council approval of 10% contingency at time of award
for every construction contract
Use Municipal Code Administrative Authority
City Manager Authority of Change Orders
Revise Municipal Code §3.12.090
City Manager executes change orders administratively in increments
of up to $25,000, but not exceeding 10% of contract amount.
Request council approval when contingency exceeds administrative
authority established in Municipal Code (construction projects over
$250,000).
Update Municipal Code §3.12.090 to authorize City Manager to
execute change orders in increments of up to $50,000 and, in the
aggregate, within 10% of contract amount.
Options: Professional Services Agreements
Use Municipal
Code
Administrative
Authority
City Manager authority to administratively approve change orders
(agreement amendments) in increments of up to $25,000, but not
exceeding 10% of agreement amount.
City Manager
Authority of
Change Orders
City Manager authorization to approve contingencies up to 10% of
professional services agreement amounts, and in increments
greater than $25,000, only for projects recommended by the
Department Head and City Manager with time sensitive
constraints or anticipated unforeseen conditions.
Recommendation:
Construction Contingency
Continue Current Practices
Use Municipal Code Administrative Authority
City Manager Authority of Change Orders
Revise Municipal Code §3.12.090
Professional Services
Agreements
Use Municipal
Code
Administrative
Authority
City Manager
Authority of
Change Orders
•Discuss the proposed
options and provide
direction to staff.