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Mayor Fahey and Members of the City Council <br />April 6, 1990 <br />Page 2 <br />* This process is not financially feasible in all projects. <br />In the private sector, I have been told that a project needs <br />to be at least $500,000 in size to make utilization of this <br />process cost effective. <br />* Administrative time for the City's staff will be higher in <br />order to properly oversee all parties to this agreement. <br />The benefits of construction management are as follows: <br />* Enables us to take advantage of the sales tax exemption on <br />the purchase of materials. <br />* Allows the City to avoid the mark -up on materials and <br />subcontractor's bids that may occur with a general <br />contractor. <br />* Enables the City to obtain the lowest qualified bid on all <br />subcontracts. <br />Utilization of value engineering during design phase allows <br />for proper evaluation of cost alternatives for project <br />construction. <br />* Provides an additional check on architectural design to <br />eliminate potential problems of overdesign and oversight. <br />* Provides better administration of change order negotiations <br />with an increased emphasis on cost control. <br />* Improved field supervision of construction. <br />* Improved pre- construction planning through increased <br />interaction of professional and project users. <br />In summary, the benefits should allow us not only to save enough <br />money to pay for the utilization of the construction manager, but <br />possibly an additional 10% of project costs. Combining the cost <br />saving features of the process with the ability to have more direct <br />control in the timing and scheduling of the project should enable the <br />City to achieve a project that comes in on time and with the desired <br />level of quality. <br />It has been stated to us in the past, the size of the fire station <br />and city hall projects may not allow the utilization of construction <br />management. However, in my conversations with various construction <br />managers, each has indicated that the projects are of sufficient size <br />to warrant utilization of this process. My conversations have <br />occurred with out -state firms as well as major metropolitan <br />construction management companies. <br />• <br />Page 75 <br />