TO: Chair and Housing Authority Commissioners
THROUGH: Steve Powers, Executive Director
FROM: Andrew Wilch, Housing Administrator
SUBJECT:
title
Public Hearing - Exemption from the Competitive Bidding Process and Authorization of an Alternative Contracting Method for a Class of Public Improvement Contracts
Ward(s): All Wards
Commissioners(s): All Commissioners
Neighborhood(s): All Neighborhoods
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ISSUE:
Shall the Commission of the Housing Authority of the City of Salem, Oregon (Commission), acting as the Local Contract Review Board, adopt Resolution No. 2202 in support of an exemption from the competitive bidding process and the use of Construction Manager/General Contractor (CM/GC) services for a class of public improvement contracts for the renovation of affordable housing properties?
RECOMMENDATION:
recommendation
The Commission, acting as the Local Contract Review Board, adopt Resolution No. 2202 in support of an exemption from the competitive bidding process and the use of CM/GC services for a class of public improvement contracts for the renovation of affordable housing properties.
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SUMMARY AND BACKGROUND:
Affordable housing in Salem has been a desired goal for the past several years. Currently, the Housing Authority of the City of Salem (SHA) is working on two new affordable housing projects. The first is the combined renovation of the Southfair Apartments, a SHA-owned property, and Yaquina Hall which is currently owned by the State of Oregon. The Southfair Apartments were purchased at the request of the City Council in 1999. The Southfair Apartments were renovated as a tax credit project in 2001. The property exited the tax credit partnership and has been owned by the SHA since that time. Structural upgrades are now needed at the property.
The SHA currently has a purchase and sale agreement for the Yaquina Hall property in place. The SHA intends to renovate the property by constructing 50 new, one bedroom affordable housing units within Yaquina Hall. Combining the renovation work needed for Yaquina Hall and for the Southfair Apartments into one tax credit project gives the project the needed volume for financial feasiblity.
The second project is a renovation of 164 multi-family apartments. In early 2016, the SHA applied for a Rental Assistance Demonstration (RAD) conversion of the SHA’s other multifamily properties to bring in funds from the private sector. The SHA has been informed that U.S. Department of Housing and Urban Development (HUD) approval of the RAD conversion application is imminent. This RAD conversion would involve the renovation of 164 multifamily apartments in Phase 1. The conversion project will run almost concurrently with the Southfair/Yaquina Hall renovation project.
An exemption to the competitive bidding requirements set forth in Oregon Revised Statutes (ORS) Chapter 279C and the SHA’s Public Contracting Rules is necessary for these projects to proceed. An exemption is needed to allow the SHA to utilize the expertise of a CM/GC during the design stages of each project to gain as much efficiency as possible in both cost and amenities. The CM/GC would be selected competitively via a request for proposals (RFP) for each project. Both of these projects would involve the renovation of SHA-owned multifamily properties.
The public improvement contracts to be awarded for the renovations comprise a limited and distinct class of such public improvement contracts. ORS 279C.335 and SHA Public Contracting Rule (PCR) 9.7 allow an identified class of public improvement contracts to be exempted from the competitive bidding process.
FACTS AND FINDINGS:
Pursuant to ORS 279C.335(2) and PCR 9.7, the Local Contract Review Board may exempt a public improvement contract or a class of public improvement contracts from the competitive bidding requirements if, after a public hearing, the Local Contract Review Board finds that such an exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts, and the exemption will likely result in substantial cost savings and other substantial benefits to the contracting agency or the public.
1. The requested exemption is unlikely to encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts.
a. The nature of the work required for this class exemption is very specialized due to the layering of tax credit financing with, in the case of the RAD conversion, HUD rules and regulations. The RFP process will allow competition for the selection of the CM/GC for each project.
2. Awarding a public improvement contract under this class exemption will likely result in substantial cost savings and other substantial benefits to the SHA or the public.
a. Substantial cost savings will be realized by the SHA due to the fact that a CM/GC is the expert in constructing and managing projects. The exemption process will allow the CM/GC to use its specialized resources to complete the work. This specialized experience will improve the design of the project and minimize construction risks and cost overruns.
b. The type, cost, and amount of each contract and, to the extent applicable, the following aspects were considered:
(i) How many persons are available to bid: Any qualified firm can respond to the RFP for each project.
(ii) The construction budget and the projected operating costs for the completed public improvement: Substantial cost savings will be realized by the SHA because the CM/GC will be an expert at design and construction improvements for multi-family housing structures. The projects will be delivered in a shorter amount of time and at less cost since the CM/GC will be involved from the design phase and will be able to recommend improvements in the plans and processes prior to the start of the actual renovation work. This work will involve determining reductions in operating costs so that after renovation, the projects will generate the necessary cash flow to continue operations for years to come.
(iii) Public benefits that may result from granting the class exemption: Granting the class exemption will allow the CM/GC to complete the renovations and will minimize the length of time each property is either under construction or involved in the relocation of any tenants in place during the renovation work.
(iv) Whether value engineering techniques may decrease the cost of the public improvement: The design phase of the renovations once the CM/GC is in place will allow any value engineering techniques used for the rehabilitation of affordable housing to be incorporated at the early design stage.
(v) The cost and availability of specialized expertise necessary for the public improvement: The CM/GC will be an expert at this type of work and will either self-perform or subcontract construction on all of the properties covered by the RFP. The cost of CM/GC staff will be part of the hourly rates for each staff type and determined in the RFP process.
(vi) Any likely increases in public safety: Public safety will most likely only be involved during the construction and relocation phases. The CM/GC will be responsible for ensuring that the appropriate safety rules be implemented and followed by staff and subcontractors for all work.
(vii) Whether granting the exemption may reduce risks to the SHA or the public that are related to the public improvement: Having the CM/GC involved in the design phase would reduce any risk of unexpected and unplanned changes and costs during the renovation.
(viii) Whether granting the exemption will affect the sources of funding for the public improvement: Granting this class exemption will not affect the sources of funding for these public improvements. The projects will be funded by sources outside the CM/GC process, but use of a CM/GC will help the funding agencies more accurately project the financing required to successfully complete the renovations.
(ix) Whether granting the exemption will better enable the SHA to control the impact that market conditions may have on the cost of and time necessary to complete the public improvement: Use of a CM/GC should help speed up the design/construction part of these projects in order to fully utilize any funding from outside agencies.
(x) Whether granting the exemption will better enable the SHA to address the size and technical complexity of the public improvements: Exempting this class of public improvement contracts from the competitive bidding requirements and authorizing the use of the CM/GC will enable the SHA to ensure that both projects are successful due to the large size of each (92 units for Southfair/Yaquina and 164 units for the RAD conversion).
(xi) Whether the public improvements involve new construction or the renovation or remodel of an existing structure: The improvements involve the renovation of existing housing units currently owned, operated, and maintained by the SHA (Southfair Apartments and Public Housing), as well as the renovation of Yaquina Hall, into new housing units. The CM/GC’s knowledge of the facilities from the initial design stage forward will assist in minimizing construction risks and cost overruns.
(xii) Whether the public improvements will be occupied or unoccupied during construction: The improvements will be partially occupied during construction. The Southfair Apartments will be occupied, and temporary tenant relocation may be required during the renovations. Yaquina Hall is not occupied as is under partial demolition by the State of Oregon for asbestos and lead removal. The public housing apartments will be occupied during renovation, and tenants will need to be temporarily relocated as necessary during construction. The CM/GC will need to work within the restrictions that any relocation requirement places on the construction work.
(xiii) Whether the public improvements will require a single phase of construction work or multiple phases of construction work to address specific project conditions: The renovations to the Southfair Apartments and Yaquina Hall will likely occur in a single phase of construction work. For the public housing apartments, there will most likely be some staging involved since each site has multiple buildings. The CM/GC’s experience with this type of work will help minimize the length of time each property is under renovation and, thus reduce the amount of time the residents of each property are relocated.
(xiv) Whether the SHA has, or has retained under contract, and will use SHA personnel, consultants and legal counsel that have necessary expertise and substantial experience in alternative contracting methods to assist in developing the alternative contracting method that the SHA will use to award the public improvement contracts and to help negotiate, administer and enforce the terms of the public improvement contracts: The SHA has, and will use, staff that has prior experience and expertise in negotiating similar public improvement contracts with a CM/GC. All contracts will be reviewed and approved by the SHA’s legal department, the SHA’s Executive Director, and the Housing Administrator prior to execution.
As required by ORS 279C.335(5) and PCR 9.7(c), notification of the public hearing for this exemption was published in at least one trade newspaper of general statewide circulation a minimum of fourteen (14) days before the public hearing. At the time notice was published, copies of the draft findings were available to the public.
Upon approval of this exemption, the SHA will issue RFPs for CM/GCs for each project. These resulting contracts will be reviewed and approved by the SHA’s Executive Director, legal counsel, and the Housing Administrator. The estimated value of the work to be performed by the selected CM/GC will be dependent upon each renovation project and will be part of a financial package prepared by SHA staff and contractors.
Andrew Wilch
Housing Administrator
Attachments:
1. SHA Resolution No. 2202