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Facing tighter capital budgets, leaders in New York State and City government are looking to streamline procurement practices to reduce costs and stretch scarce resources. However, most of these efforts require legislative or administrative approvals before they can be implemented, leaving government with procurement programs that, to date, remain largely unchanged.

New York State seeks to revise key procurement practices
As it struggles to contain historic deficits, New York State has made attempts to permit new procurement methods, some requiring legislative authorization.

Since it issued a report in 2002 supporting use of “design-build” procurement, the New York State Department of Transportation (DOT) has unsuccessfully sought legislative authority to procure a single team to design and build road and bridge projects. In several states where authority to use design-build exists, transportation agencies have found demonstrable time and cost savings when compared to design-bid-build procurement.

Building Congress President Richard Anderson noted that “Design-build construction has yielded real cost savings for states that permit this practice. New York State could speed project delivery and lower its costs for construction by allowing this proven technique.”

DOT is also considering bundling design and construction for several hundred bridges in a single or a limited number of contracts next year. Similar efforts have been implemented successfully in other states. DOT has suggested that it could look to its sister agency, Empire State Development to help expedite the procurement process.

Working with the building industry, State Senator Charles Fuschillo and State Assembly Member Joseph Morelle this year introduced legislation to allow public private partnerships (P3s) for State transportation projects. Like design-build, much of the benefit of P3s comes from a streamlined procurement process, allowing faster project delivery and more cost certainty. P3s also permit expanded use of financing projects with user-fees, such as tolls.

P3 legislation did not advance in either house, although it is expected to
be a key part of discussions to fund the DOT capital program next year.

New York City pilots new procurement strategies
The City has also signaled an interest in expanding its use of public private partnerships. The New York City Economic Development Corporation (EDC) released an ambitious Request For Proposals (RFP) in March seeking a consultant to review the City’s asset portfolio and recommend ways to leverage parking, real estate and “other assets that require large capital or operational expenditures” to reduce costs and generate revenues in partnership with the private sector.

The City has in the past engaged the private sector to maintain public parks, build and run charter schools, and develop affordable housing, among other public services. However, there has not been a formal effort to look broadly across all of the City’s assets particularly its transportation infrastructure to “develop new sources of revenue and/or relief from futurecapital obligations.” City officials say they hope to announce a consultant for the P3 initiative later this year.

The Mayor’s Office for Contract Services (MOCS) is also investigating how the obscure but critical “no damages for delay” provision in its contracts impacts capital construction costs.

Two years ago, MOCS initiated a pilot program on a limited number of projects permitting contractors to claim expenses for City-caused delays. When enough pilot projects are completed, MOCS will compare bid prices and final construction costs against projects with standard contract language. The City has not yet collected comprehensive data as no pilot projects have been completed.

Richard Anderson said, “Government can easily reduce its construction costs by removing onerous provisions like no-damages-for-delay which increase the ‘government premium’ contractors must charge to account for the delays and risks involved in working with the public sector.”

The City is looking at other cost-management options, including increased use of Citywide project labor agreements and piloting streamlined project management at the Department of Design and Construction. At the State level, ESD CEO Kenneth Adams suggested at a New York Building Congress forum that the State would be undertaking a thorough regulatory review to eliminate construction delays caused by overly burdensome oversight and reporting.

WHAT YOU CAN DO:

Urge Governor Andrew Cuomo and Assembly Speaker Sheldon Silver to make design-build and P3 legislation a priority in the coming legislative session.

Ask Mayor Michael Bloomberg to ensure quick completion and follow up to the damages for delay pilot program. The City must also prioritize its P3 consultant RFP to leverage its assets and maximize dwindling capital resources.

Ask New York City Council Finance Chair Domenic Recchia to remain active in the City’s capital procurement initiatives and encourage their completion.



Published

Jul 2011

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