RECRUITING QUALIFIED CONTRACTORS

The recruitment of qualified contracts will occur through a process of requesting, reviewing, and awarding bids. Through a bid package, you will be able to articulate project specifics, timeline, and the type of contractor bids you seek. The bid package may also be referred to as a Request for Bid or Request for Qualification. When preparing your bid package be sure to consult with primary project funders that may be participating at the state and local level. If funding from HUD or USDA is being used, please be sure to understand their procurement requirements.

A developer must collaboratively manage the construction process and finances with the GC. This set of tasks may also involve project managers (internal or contracted) or contract administrators who support project oversight. Since there are a variety of ways to divide these duties, it is important to discuss and set clear expectations of roles and responsibilities at the outset for how you will collaborate.

Requesting, reviewing, and awarding bids is how you will find your general contractor (GC) and subcontractors with specific areas of expertise, such as plumbing and electrical. When preparing the bid package, you will articulate project specifics, timeline, and the type of contractor bids you seek. The bid package may also be called a Request for Qualifications (RFQ) or Request for Bid (RFB).

Your bid package can include the following:

• Work details and timeline: this should include architectural, structural, mechanical, electrical, and civil engineering work, plus materials, interior needs, and landscaping.

• Site description

• Selection and contract process overviews

• Bid terms and conditions

• Whether Davis-Bacon wages and compliance is required for your development.

• Instructions on what to include in a bid/proposal response, including any required documentation, such as licenses, notices, insurance, and bonding (different lenders may have differing requirements for insurance and bonding, so check with funders you have already selected).

The process of solicitation and invitation can depend on your funders. For example, you may be required to post the bid package in certain news outlets. Some cities and local governments have minority- or women-owned and small business programs that can alert you to qualified firms that you can reach out to with the RFQ. Prior to soliciting bids, you may have needed the services of an estimator to determine the approximate price of construction for your development. An estimate is less detailed than a bid and can help ensure that your financial model is more accurate. That said, please be aware that some funders will not allow you to use the same contractor that provided your estimate to then provide a bid for construction.

Your project location may impact the number of bids you receive, depending on the local labor pool. This can be a challenge in rural areas, for example, where there aren’t large labor pools. Construction contractors from metro areas may face longer commutes to your project, or may require lodging, increasing your costs. If you only receive one bid, before moving forward with selection, you may want to research why and if any adjustments would make your development more desirable or feasible to contractors. Reach out to local developers and ask if they can provide insight or connection to local contractors to discuss why they did not bid on your development. If there are no other bidders based on given project need, demand, or location, you can continue with a single or sole-source procurement, with proper justification and documentation of why it is necessary. This is required if using HUD funding and may also be required by other funders. You should note that a single or sole source bid still needs to be evaluated as if there are multiple bids.

As you receive proposals from contractors, make sure you have a formal record of each bid submitted. Sealed bids are publicly solicited for a firm fixed-price contract, either lump sum or unit price, that is awarded to the lowest cost responsible bidder whose bid conforms to all the material terms and conditions of the RFQ. Sealed bidding is the preferred method for procuring construction, supply, and non-complex service contracts^iv. Compile proposal information in a way that will streamline bid comparison.

When selecting a bid, consider several factors and questions, in addition to price:

• Qualifications and experience of the bidder: Have they completed similar projects before? Do they bring the expertise you need? Do they have the necessary licenses to complete the work?

• Completeness and responsiveness: Did they provide everything you requested in your bid package?

• Alignment with project goals: You may have additional goals for your project like employing local labor or supporting businesses owned by women or minorities—are they aligned with these goals?

Key contract terms should be outlined in the bid package, including a request that contractors confirm they can agree to those terms. That will make it easier to execute the full contract after the contractor is selected. You may consider obtaining a Notice to Owner (NTO) or lien waiver from contractors at the outset. These are agreements that contractors make to waive their right to place a lien on the property in the event of nonpayment for their services. Lenders may want this documented to ensure there is no risk of contractors placing a lien on the property in the future, which may prevent you from repaying their loan.^v You should also provide a formal letter to each contractor who submitted a bid to notify them if they were not selected.

DEVELOPING A CONSTRUCTION SCHEDULE

One of the first steps in the construction process is to develop and set a construction schedule based on key construction milestones. Examples of milestones include pre-construction, permitting and site work, foundation, framing, major installations (including HVAC, electrical, plumbing), interior finishes, fixtures and appliances, landscaping, and exterior work. The construction schedule should be developed with your general contractor and the construction manager your team selects through a competitive RFP process.

There is more than one way to organize a construction schedule and utilize it as a project management tool. A construction schedule can be organized by milestones, roles or workstreams and distributed to those who need to be aware of the timeline. Each schedule can also include details or dependencies before an item is completed or checked off.

Phased Development

To better facilitate the transition that occurs within a construction project, a phased approach allows you and your team to complete smaller segments of the project before moving onto the next.

A phased approach may be beneficial in these cases:

• To prove your concept if you are pursuing a newer, more innovative building model

• To allow your project to start generating revenue faster, which can then be used to help finance later development phases

• To minimize tenant relocation during a renovation project—this is beneficial to tenants and could minimize overall cost

The disadvantages of phased construction include:

• Overall longer construction process, which might mean higher total costs (although it may also generate revenues to help offset those costs)

• Potentially increased transaction costs on supplies if you are not ordering for all phases of the project at once

• Additional coordination and complexity, including additional potential regulatory review and approval processes

Prefabrication and Modular Housing Using prefabrication, meaning conducting construction operations offsite and then moving building components to the site, can reduce your overall construction timeline if your offsite location allows for more efficient production, taking advantage of easier access to skilled labor, materials, or equipment. However, prefabricated construction may also introduce potential for delays, particularly during the transportation process or during the building permitting process, since regulations are often not designed specifically for prefabricated construction and local officials may not have as much experience reviewing similar projects. For example, lenders may have difficulty funding modular construction since it is not considered part of their collateral until the building components reach the site.

PRE-CONSTRUCTION KICKOFF

Once a preliminary construction schedule has been developed, it is time to hold a preconstruction kick-off meeting with key development team members and stakeholders in the construction process. This will allow your architect, engineer, and consultants to review and finalize the assumptions made in the schedule and build a shared understanding of accountability for each member by role for the timeline.

The roles and responsibilities for each team member need to be clearly defined during the kick-off. There is also an opportunity to set standards and expectations around the process for project management. This includes inspection procedures, payment schedules, assumptions around permitting, or inspection timelines and protocols around cultural context identified in the design phase.

Your construction timeline and approach may also undergo some changes during this process. The team may provide insight on improvements to features or processes that can simplify or expedient your timeline, which can reduce your overall project costs.

Anticipate delays and be realistic about your construction schedule to help avoid issues down the line. Typical items that can cause delays include weather, contractor availability, material shipping (supply chain), failed inspections, and miscommunications with development team members. It is also important to consider any timeline limitations you may face due to the location, nature, or size of your site. For example, your development could be delayed by winter snowstorms or excessive heat. Also consider local building officials’ approval timelines, accounting for the typical progress inspection timeframe with your local code enforcement department. More information on the key milestones to account for inspections from local building officials is provided below.

No matter how effective your construction schedule is, you will likely still need change orders, or adjustments to contractors’ scopes of work. Sometimes this may cause delays or cost increases, which is why it is important to have cost contingencies and clear processes on change orders established at the start of the project. Whenever a change order is needed, collect written justification from the contractor and document the agreed-upon scope of changes and schedule impacts before the adjusted work begins. You may include a liquidated damages clause in your construction contract, which provides you relief if the construction completion date is delayed beyond the date in your contract.