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HomeMy WebLinkAbout20090803 - VIII-A-2 MEMO To: Honorable Mayor and City Council From: Tom Montgomery Date: July 27, 2009 Re: Adopt Trial Change Order Authorization Policy for 2009 Industrial Park Project Council is requested to adopt a trial change order authorization policy for the 2009 Industrial Park project that would grant staff authorization to approve change orders up to $25,000 in order to keep the project moving with the understanding that these change orders will be brought to the City Council at the earliest possible scheduled Council meeting. From time to time during construction of a project, conditions different than those shown on the plans and specifications present themselves. Examples of changed conditions are poor soils, or rock excavation that was not picked up on the pre-project borings; utilities of a different size or in a different location than shown on the as built drawings; or an unforeseen access issue that needs to be resolved with a property owner. These changed conditions may result in the need to make field decisions in an expeditious manner to avoid unnecessary delays and additional costs. The current practice of most cities is for staff to negotiate changes with the contractor as soon as a problem is discovered, in order to allow construction to continue with minimal delay. In these instances, by the time the change order is placed on a Council agenda, the work has already been completed. With larger construction issues; for example the Westwood Addition transite/asbestos services in 2004 which resulted in a large change order and a month delay in the project, work on the changed condition would be stopped until the issue and proposed resolution could be brought to Council for approval. In the past, State auditors reviewing Municipal State Aid Projects and our City auditors reviewing City projects have commented on Council approval of change orders after the fact. In discussing this problem with our Public Works colleagues in Dakota County (and nearby Savage), we have learned that both Savage and Burnsville have policies that allow staff to administratively approve change orders up to a set limit ($10,000 for Savage, $75,000 for Burnsville). A number of years ago, Council authorized the Finance Department to pay certain bills that would become past due and incur penalties before the Council would have the opportunity to authorize payment at the next scheduled Council meeting. While the proposed trial change order policy is very much different than the Finance Department authorization, the goal is the same in that both policies would prevent the City from being penalized while waiting for action on a fixed Council meeting schedule. The proposed trial change order policy would help limit construction delays and contractor claims for these delays. CAR OUNCIL CTION EQUESTED Council is requested to authorize, on a trial basis, Public Works administrative approval of change orders under $25,000 for the 2009 Industrial Park Area Improvement Project. All administratively approved change orders would be brought to the Council at the earliest possible scheduled Council meeting.