TO: Mayor and City Council
THROUGH: Krishna Namburi, City Manager
FROM: Brian D. Martin, PE, Public Works Director
SUBJECT:
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Exemption from Competitive Bidding Process and Authorization of an Alternative Contracting Method for the Franzen Reservoir Liner and Cover Replacement
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Good Governance; Safe, Reliable and Efficient Infrastructure.
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SUMMARY:
summary
The Current City of Salem Budget and Five-Year Capital Improvement Plan (CIP) allocates funding for the Franzen Reservoir Liner and Cover Replacement Project (Project). Staff recommends a Construction Manager At Risk (CMAR) alternative contracting method for this Project. The CMAR approach allows contractor involvement during the design phase to provide critical input on cost, schedule, material procurement, and constructability elements that will improve the design. The CMAR will be selected competitively via a Request for Proposal (RFP) process.
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ISSUE:
Shall City Council, acting as the Local Contract Review Board, adopt Resolution No. 2026-8 in support of an exemption from the competitive bidding process and use of a CMAR contracting method for the Franzen Reservoir Liner and Cover Replacement Project?
RECOMMENDATION:
recommendation
Adopt Resolution No. 2026-8 in support of an exemption from the competitive bidding process and use of a CMAR contracting method for the Franzen Reservoir Liner and Cover Replacement Project.
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FACTS AND FINDINGS:
The full findings for exempting the Project from competitive bidding are attached to Resolution No. 2026-8 (Attachments 1 and 2).
Franzen Reservoir, located above the City of Turner, is the primary reservoir in Salem’s water system which is used to control drinking water flows to the City. It holds approximately 95 million gallons of water when it is completely full. The current reservoir cover and liner have reached the end of their useful life and need to be replaced. Due to the reservoir’s critical nature in our water system and the complexities with this work, staff are recommending the CMAR form of contracting to protect Salem’s drinking water supply and maintain a continuous flow of potable drinking water throughout the project.
The CMAR form of contracting (also referred to as Construction Manager/General Contractor (CM/GC)) uses an open and competitive RFP process to select a contractor. The RFP process is a one-step process requesting qualifications and proposals. This is the same delivery method used for Ozone Treatment Facility at Geren Island Water, the Aquifer Storage and Recovery system in South Salem, and the Salem Police Station. The competition will be open to all qualifying proposers, and City staff has already initiated communication with the local construction contracting community regarding the CMAR method. The proposal process will be open and impartial with selection based on scores derived from price, experience, quality, innovation, schedule, and other factors. The process to award subcontracts for all competitively bid construction work will be specified in the CMAR contract and monitored by the City.
Awarding the Project contract under the exemption will likely yield substantial construction cost savings and other benefits to the City and the public. The CMAR method uses a Guaranteed Maximum Price (GMP), allowing the City to obtain the full savings if actual costs fall below the GMP.
Integrating the CMAR contractor into the design process allows early risk identification and promotes teamwork between the City, designers, and the contractor. The Project requires expertise in heavy civil construction and long-term cost/benefit analysis of innovative design, knowledge best obtained directly from the construction industry. Many design decisions will require immediate feedback on constructability. The traditional design-bid-build method poses a higher risk of change orders and schedule impacts for a project of this complexity. Since there are significant costs and risks associated with delay, timely project completion is critical.
When the CMAR team includes the construction contractor participating in design, fewer change orders occur during construction compared to the traditional design-bid-build method. This is due to the CMAR contractor's better understanding of the City's needs and design intent. Additionally, contractor involvement throughout the design process on constructability and impacts of innovative methods significantly reduces the potential for change orders as issues have been proactively addressed, and the risk has been transferred to the CMAR team. Fewer change orders reduce the administrative costs of project management for both the City and the CMAR team.
Change orders are processed at less cost under a GMP because they are less frequent. The design-bid-build method typically results in the contractor charging up to twenty percent markup on construction change orders. The GMP method applies a lower predetermined markup. The experience of the industry is that the markup is in the range of three to seven percent.
BACKGROUND:
Franzen Reservoir is located in Turner, Oregon and was originally built in 1952. Franzen serves as the primary storage reservoir for the largest pressure zone in Salem’s water system with two separate cells to store and distribute clean water. The reservoir features a weight-tensioned, reinforced polypropylene floating cover, and a reinforced polypropylene geomembrane liner. These components were installed during the 2002 Franzen Reservoir Rehabilitation project and were designed with a 20-year lifespan. An assessment conducted in late 2021 indicated that both the liner and floating cover are nearing the end of their design life and require replacement.
The City has allocated $8.1 million from the current Capital Improvement Plan (CIP) in Utility Rates for the rehabilitation of the liner and cover, with additional funding anticipated in future CIP years. The total project cost is estimated at $25 - 30 million.
Oregon Revised Statutes (ORS) Chapter 279C and the City's Public Contracting Rules (PCR) 9.7 allow the City Council, acting as the Local Contract Review Board, to exempt a public improvement from typical competitive bidding requirements if after a public hearing, they find such an exemption is unlikely to encourage favoritism in the awarding of public contracts or substantially diminish competition for public improvement contracts, and will likely result in substantial cost savings and other substantial benefits to the City or the Public.
Allen Dannen, PE
City Engineer
Attachments:
1. Resolution 2026-8 Franzen Reservoir Cover
2. Exhibit A - Facts and Findings of Franzen Reservoir Cover
3. Presentation - Franzen Reservoir Cover