FOR IMMEDIATE RELEASE
July 28, 2008
MAYOR BLOOMBERG ANNOUNCES REFORMS TO MAKE CITY CAPITAL CONSTRUCTION PROJECTS MORE AFFORDABLE AND EFFICIENT
Strategies to Encourage More Bidders on City Construction Projects and Reverse Perception that City is Difficult Client - in Order to Drive Down Costs
Savings of Over $300 Million Annually Possible
Mayor Michael R. Bloomberg today announced five reforms designed to increase competition to build the City’s infrastructure and drive the cost of City construction down. The reforms include allowing contractors to collect damages on certain construction projects for delays caused by the City, cutting in half the time it takes the City to process certain change orders, and dedicating resources to develop accurate project scopes and cost estimates before capital dollars are committed. These reforms are designed to entice more construction contractors to bid on the City’s core infrastructure projects – streets, sewers, water mains and bridges – as well as other projects such as parks, police precincts, firehouses and courthouses. Increased competition will drive down construction costs, which by some estimates, are rising one percent per month. The Mayor was joined at the announcement City Comptroller William C. Thompson, Deputy Mayors Edward Skyler and Robert Lieber, Department of Design and Construction Commissioner David Burney, Department of Citywide Administrative Services Commissioner Martha Hirst, Department of Environmental Protection Commissioner Emily Lloyd, Department of Transportation Commissioner Janette Sadik-Khan, Mayor’s Office of Contract Services Director Marla Simpson and Department of Parks & Recreation First Deputy Commissioner Liam Kavanagh. The Deputy Mayors are co-chairing the Capital Cost Containment Task Force, comprised of City agencies that will implement these initiatives, and determine whether they lead to increased competition and reduced costs to build the City’s infrastructure.
“As our population continues to grow, our aging infrastructure must be maintained and expanded,” said Mayor Bloomberg. “With construction costs rising, and given the City’s current economic outlook, we must do everything in our power to stretch every capital dollar, and encourage as many construction firms as possible to help us build and maintain the infrastructure needed to provide core City services – safe streets and bridges, clean water, spacious parks and hundreds of other public facilities throughout the five boroughs.”
“Today’s initiative is about increasing competition and decreasing costs. All of us here today have a common goal: striving to identify opportunities so that a broader pool of qualified contractors have a chance to improve this City,” said New York City Comptroller William C. Thompson, Jr. “As the Mayor has noted in PlaNYC, our City will encounter significant population growth and with that greater demands on our resources and infrastructure. We must look for innovative ways to address these future needs and encourage – not inhibit – opportunity along that path.”
“These reforms mark the beginning of an important shift in the way the City builds public works,” said Deputy Mayor Skyler. “Working with the construction industry, we have identified a number of ways to encourage more contractors to build City projects, in part by reducing the time it takes agencies to approve change orders, and by making the City accountable for delays that are within our control. These changes can reduce construction costs without sacrificing safety or quality; we will implement them immediately and continue to work with the industry to make additional improvements later this year.”
“Investing in New York City's infrastructure is critical to our long-term, five borough economic growth, and the program announced today will help us do it by reducing construction costs and encouraging increased competition for our public works,” said Deputy Mayor Lieber. “Working with the private sector for more than a year, we have developed a strategy that should help mitigate rapidly rising construction costs, allowing our infrastructure projects to be completed more efficiently and predictably.”
The measures announced today were identified by the Construction Cost Study Group, chaired by Peter M. Lehrer. The group found that much of the high cost of City-managed construction projects is attributable to the perception that the City is a difficult client who is slow to pay, particularly for change orders, and requires contract terms that contractors consider onerous and costly – particularly with respect to construction delays. This perception reduces the number of contractors willing to bid on City projects and increases the price of bids that are offered. An analysis performed in conjunction with the Construction Cost Study Group estimated that the addition of one bidder per project could reduce winning bid prices by two to three percent. The City estimates that if just two to three more contractors bid on every City project the City could save more than $300 million each year. The members of the Construction Cost Study Group will continue to work with the City to implement these and other initiatives.
“The City has taken some great steps forward to reduce construction costs that will lead to a more competitive environment, said Peter M. Lehrer. “These measures meet many of our recommendations and will make doing business with New York City more attractive and closely aligned with private industry practices. This will be good for everyone.”
“We are pleased the City is moving forward to address the issues raised by the Construction Cost Study Group,” said Denise Richardson, Acting Managing Director, General Contractors Association. “The inclusion of a damages for delay provision in City construction contracts is major shift in the City's approach to construction and through this and the other initiatives the City will reduce overall costs and project delays.”
The following reform efforts are being implemented immediately:
These reforms are being implemented by the City’s Capital Cost Containment Task Force that includes the Mayor’s Office of Operations, the Department of Design & Construction (DDC), the Department of Environmental Protection (DEP), the Parks Department, the Department of Sanitation (DOS), the Department of Transportation (DOT), the Mayor’s Office of Contract Services, the Law Department, the Department of Citywide Administrative Services (DCAS), and the Office of Management and Budget (OMB). Collectively, DEP, DOT, DDC, DSNY, Parks and DCAS managed over 2,500 public works projects in fiscal year 2008 totaling over $7 billion.
The Capital Cost Containment Task Force, led by Deputy Mayors Skyler and Lieber, will continue to identify opportunities to reduce construction costs, including an evaluation of the City’s bonding requirements, which the Construction Cost Study Group found may inhibit contractors’ ability to bid on City construction projects. The Mayor has directed the Task Force to report back this fall with additional opportunities to reduce construction costs.
The Construction Cost Study Group is comprised of leaders in the construction industry. The group conducted interviews with key capital and oversight agencies; reviewed metrics, project cost and schedule data of the City’s construction agencies; researched industry best practices; and held discussions with private sector construction management organizations to identify factors in the City’s control that result in the high price of City managed public works projects. The Study Group was comprised of the following industry volunteers: Chair Peter Lehrer, Lehrer LLC; Co-Chair Richard Davis, Weil, Gotshal & Manges; Co-Chair Gary Hirsch, Elk Homes LLC; Co-Chair David Thurm, The New York Times; Michael Burton, URS Corporation; Robbie MacPherson, Thelen Reid Steiner; Arthur Silverman, Thelen Reid Steiner; Daniel Tishman, Tishman Construction Co.; Richard Tomasetti, Thornton Tomasetti Inc.; and Norbert Young, McGraw Hill.
In May, the Mayor announced the City would be stretching four years of City-funded capital program commitments into five years, thereby reducing the City-funded portion of the capital commitment program by 20 percent annually from Fiscal Years 2009 to 2012. The City will now meet the City-funded capital goals it had set for itself one year later, in 2013, rather than in 2012. The capital commitments for FY 2009-2012 total $55.7 billion with this reduction.
These measures build upon innovations in procurement introduced as part of the City’s ambitious “Design and Construction Excellence Initiative” (D+CE). D+CE, a multi-agency effort launched by the Mayor in 2004, introduced quality based selection to ensure better design decisions and high-quality construction documents that promote cost-effective project management.
Stu Loeser / Jason Post (212) 788-2958