Your Capital Project Toolbox: Avoiding Scope Creep

At the planning stage (Schematic Design, Design Development, and Construction Documents) and the Construction Administration stage of a capital construction project, there are pressures to expand the scope of the work being planned or performed. Here are tools to add to your toolbox so that the scope of the completed project is intentional, deliberately determined, and not the result of “scope creep.”

Like any toolbox, selection of the correct capital project tool is dependent on the job at hand. Each of the following capital project tools has its place. Used properly and in concert with a well-functioning project communication structure (i.e., regular recurring Owner, Architect, Construction Manager meetings “OACM”) that periodically includes your fiscal advisor and legal counsel, will help produce the intended capital project outcome.

Alternates. An excellent tool you should discuss with your architect and construction manager is the use of Alternates in describing various scopes of work for the bid solicitation. By defining discrete portions of the project as Alternates, you retain flexibility in determining the final scope and cost of the project after bids are received. Alternates may be styled as additions or reductions in the work, either way, they provide you with the discretion to expand or contract the work under a contract. That allows you to prioritize the allocation of a limited number of project dollars after the contractors in your marketplace have defined the parameters of the project cost. Importantly, they also help prevent a bid outcome that limits you to a result that exceeds the authorized project funding, requiring a re-bid or abandonment of the project.

Allowances. A contract contingency allowance is developed during the project planning stage which gives you authority to select an item, finish, or other material project details that were not fully known at the time the project scope was determined, but the total amount of the cost was estimated, explicitly listed, and included in the contract price. Be thoughtful with the Allowances you include in the project. Examples of Allowances are carpet quality/design, floor tile selection, paint color, or other quantitative or qualitative components of the project. The amount of the Allowance not used during the project is returned to the District as a contract credit.

During the project, you will be required to expeditiously review requests to use Allowance dollars and provide an Allowance Authorization that accepts the recommendation from the contractor, the project architect and construction manager, or respond with revisions. The amount of each Allowance, not used during the project, is returned to the District. Use your Allowance dollars wisely and for their intended purposes. The dollars are discretionary and should be deployed thoughtfully.

Bid Addenda. During the bid stage of a capital construction project, the core elements of the scope and schedule of the project may be clarified and/or adjusted by Addendum, as long as the changes are covered by the approved project scope. The project architect and construction manager will respond to contractor inquiries or Requests for Information (“RFIs”) and clarify the scope and schedule of the work of the project to ensure the bid submissions fully take into account the project’s plans and specifications. The key tool for clarification of the project at the bid stage is one or more Addenda to the bid solicitation documents. Be sure you understand the impact of bid Addenda.

Post Bid Contractor Interviews. Your construction manager and/or architect will interview (or “de-scope”) the low bidders to be sure their bids accurately and comprehensively include the scope of work and the project schedule, including the required completion date. If you accept a faulty bid, that will guarantee costly Change Orders during the construction stage. It will also cause delay and potentially claims and litigation. Be sure to discuss the outcome of those interviews with your construction manager and/or architect.

Change Orders. A Change Order is a change to, or amendment of, a signed prime contractor contract for work to be performed, which requires Board approval and must be signed by the Board president, the project architect, and the contractor.
After the contracts are signed and the work of the project is in process, there are a number of reasons a Change Order becomes necessary, for example: you direct changes to the scope or schedule of the project; unanticipated or concealed conditions are discovered; there are delays requiring an adjustment to the contract schedule; and errors/omissions in the Contract Documents are discovered. Most Change Orders increase the contract price and as a result, the total project cost. Additionally, they are negotiated with a single prime contractor under an existing contract without the benefit of competitive bidding. Consequently, you do not receive the benefit of competitive bidding over the cost of the work. The cause and cost for each Change Order should be reviewed by your project delivery team during its regular OACM meetings and a concise explanation developed for presentation to the Board. The project budget includes contingency dollars in anticipation of Change Orders, but those dollars are limited, they are estimates and do not reflect the actual cost of the Change Orders, and any unspent contingency dollars are available to add to an expansion of the project.

Total Change Orders may not exceed the scope, or the funds authorized for the project. In addition, if the amount of an individual Change Order is greater than $35,000, the work must be competitively bid, unless there is an exception or justification for the use of a Change Order rather than the normally applicable competitive bidding process. In addition, you must follow any applicable District policies and procedures or Board directives that apply to Change Orders.

Bonus Tidd Bit:
If you are completing an ESSER III funded capital project, as long as you have “Obligated” the approved funds by September 30, 2024, for work to be done under the project, you have four months after September 30th to complete and pay for the work. If you will not be able to complete and pay for the work within the four-month period, there is a NYSED process to apply for an extension of that deadline to maintain the grant funding for the work.
For more information about this article, please contact Dave Tinker, Jeff Lewis, or Joe Shields at Ferrara Fiorenza PC, 315.437.7600.