48 CFR Part 536 — Construction and Architect-Engineer Contracts

PART 536—CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS Authority: 40 U.S.C. 121(c). Source: 64 FR 37224, July 9, 1999, unless otherwise noted. Subpart 536.1—General 536.101 Applicability. This part supplements FAR Part 36 policies and procedures applicable to contracting for construction and architect-engineer services. Contracts for construction management services are covered by FAR Part 37 and GSAM Part 537. Part 536 shall take precedence when the acquisition involves (1) construction or architect-engineer services, and (2) when the requirement is inconsistent with another part of the GSAR. [81 FR 4594, Jan. 27, 2016] 536.102 Definitions. Construction-Manager-as-Constructor (CMc) i.e., i.e., [84 FR 69632, Dec. 19, 2019] Subpart 536.2—Special Aspects of Contracting for Construction Source: 84 FR 3717, Feb. 13, 2019, unless otherwise noted. 536.270 Options in construction contracting. 536.270-1 Use of options. (a) Subject to the limitations in this section, contracting officers may include options in contracts when it is in the Government's interest. (b) The scope of work in the base contract at award shall require the contractor to provide a discrete and fully functional deliverable. Options shall not be used to incrementally deliver work required to fulfill the requirements of the scope of work for the base contract. (c) Contracting officers shall justify in writing the use of options. (d) Including an option may be in the Government's interest when, in the judgment of the contracting officer: (1) Additional work beyond the base contract is reasonably foreseeable; (2) It would not be advantageous to award a separate contract; (3) It would not be advantageous to permit an additional contractor to work on the same site; (4) Services arising out of or relating to the underlying construction contract may be required during or after substantial completion of the scope of work. For instance, if building equipment (e.g., mechanical and electrical equipment) will be installed under the construction contract, it may be advantageous to have the construction contractor maintain and service the equipment. In such an instance, the services performed may be included as an option to the underlying construction contract. Contracting officers shall ensure that the applicable clauses are included in any such option (e.g., Service Contract Act); or (5) It is otherwise justified. (e) Options for construction work may provide for an economic price adjustment based on cost or price indexes of labor or materials (see FAR 16.203-4(d)). Subject to the approval of the Head of the Contracting Activity (HCA), the contracting officer may develop and insert a project-specific price adjustment clause into the solicitation. 536.270-2 Solicitations. Solicitations containing options shall: (a) Include appropriate option provisions and clauses when resulting contracts will provide for the exercise of options (see 536.270-5); (b) State the period within which the options may be exercised; and (c) State whether the basis of evaluation is inclusive or exclusive of the options (if exclusive, see 536.270-4(c)). 536.270-3 Evaluation. For sealed bidding that includes options: (a) The low bidder for purposes of award is the responsible bidder offering the lowest aggregate price for the base bid and all options designated to be evaluated. (b) Before opening bids that include options, the contracting officer must determine, and record in the contract file, the amount of funds available for the project. The amount recorded must be announced at the beginning of the bid opening. This amount may be increased later when determining the items to be awarded to the low bidder if the following condition is met: The award amount of the base bid and evaluated options does not exceed the amount offered for the base bid, the evaluated options, and the same combination of items by any other responsible bidder whose bid conforms to the solicitation. This requirement prevents the displacement of the low bidder by manipulating the options to be used. 536.270-4 Exercise of options. (a) The contracting officer shall exercise options in writing within the time period specified in the contract. (b) The contracting officer may exercise options only after determining, in writing, that all the following conditions exist: (1) Funds are available. (2) The requirement covered by the option fulfills an existing Government need. (3) Exercising the option is the most advantageous method of satisfying the Government's need, price and other factors considered. (4) The contractor is not listed in the System for Award Management Exclusions (see FAR 9.405-1). (5) The contractor's performance under the contract met or exceeded the Government's expectation for quality performance, unless another circumstance justifies an extended contractual relationship. (6) Exercising the option is in accordance with the terms of the option. (7) The option price is fair and reasonable, unless already determined as such (e.g., at time of award). (c) The contract modification, or other written document which notifies the contractor of the exercise of the option, must cite the option clause as authority. If exercising an unpriced or unevaluated option, cite the statutory authority permitting the use of other than full and open competition (see FAR 6.302). (d) When the contract provides for economic price adjustment and the contractor requests a revision of the price, the contracting officer shall determine the effect of the adjustment on prices under the option before the option is exercised. 536.270-5 Solicitation provisions and contract clauses. (a) Insert a provision substantially the same as the provision at 552.236-74, Evaluation of Options, in solicitations for fixed-price construction contracts when the solicitation contains an option clause and options will be included in the evaluation for award purposes. (b) Insert a provision substantially the same as the provision at 552.236-75, Evaluation Exclusive of Options, in solicitations for fixed-price construction contracts when the solicitation includes an option clause and options will not be included in the evaluation for award purposes. (c) Insert a provision substantially the same as the provision at 552.236-76, Basis of Award-Sealed Bidding Construction, in solicitations for fixed-price construction contracts when contracting by sealed bidding. Use the provision with its Alternate I when the solicitation contains an option clause. (d) Insert a clause substantially the same as the clause at 552.236-77, Government's Right to Exercise Options, in solicitations and contracts for construction that include options. Subpart 536.5—Contract Clauses Source: 84 FR 3717, Feb. 13, 2019, unless otherwise noted. 536.506 Superintendence by the contractor. Insert the clause at 552.236-6, Superintendence by the Contractor, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. 536.511 Use and possession prior to completion. Insert the clause at 552.236-11, Use and Possession Prior to Completion, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. 536.515 Schedules for construction contracts. Insert the clause at 552.236-15, Schedules for Construction Contracts, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. Use the clause: (a) With its Alternate I when the contract amount is expected to exceed the simplified acquisition threshold and a design-bid-build project delivery method will be followed. (b) With its Alternate II when the contract amount is expected to exceed the simplified acquisition threshold and a design-build project delivery method will be followed. (c) With its Alternate III when the contract amount is expected to exceed the simplified acquisition threshold and a construction-manager-as-constructor project delivery method will be followed. [84 FR 3717, Feb. 13, 2019, as amended at 84 FR 69632, Dec. 19, 2019; 86 FR 55520, Oct. 6, 2021] 536.521 Specifications and drawings for construction. Insert the clause at 552.236-21, Specifications and Drawings for Construction, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. Use the clause: (a) With its Alternate I when a design-build project delivery method will be followed. (b) With its Alternate II when a construction-manager-as-constructor project delivery method will be followed. [84 FR 69632, Dec. 19, 2019] 536.570 Authorities and limitations. Insert the clause at 552.236-70, Authorities and Limitations, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. 536.571 Contractor responsibilities. Insert the clause at 552.236-71, Contractor Responsibilities, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. Use the clause: (a) With its Alternate I when a design-build project delivery method will be followed. (b) With its Alternate II when a construction-manager-as-constructor project delivery method will be followed. [84 FR 69633, Dec. 19, 2019] 536.572 Submittals. Insert the clause at 552.236-72, Submittals, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. Use the clause with its Alternate I when a design-build project delivery method will be followed. 536.573 Subcontracts. Insert the clause at 552.236-73, Subcontracts, in solicitations and contracts if construction, dismantling, demolition, or removal of improvements is contemplated. Subpart 536.6 [Reserved] Subpart 536.70 [Reserved] Subpart 536.71—Construction-Manager-as-Constructor Contracting Source: 84 FR 69633, Dec. 19, 2019, unless otherwise noted. 536.7101 Scope of subpart. This subpart describes policies and procedures for the use of the CMc project delivery method. 536.7102 Definitions. As used in this subpart— CMc Contingency Allowance Cost Cost of Performance Early Work Package Estimated Cost of the Work Fee for the Construction Work Guaranteed Maximum Price 536.7103 Construction contract solicitation procedures. (a) Procurement Timing. (b) Proposal Evaluation. (1) Evaluation Factors. (i) Except as provided in paragraph (ii) of this section, the solicitation shall provide that the technical evaluation factors, when combined, shall be considered significantly more important than cost or price. (ii) Subject to the approval of the HCA, the weighting of the technical evaluation factors and cost or price may be different than that required under paragraph (i) of this section. Any such written approval shall be documented in the contract file. (2) Price Realism. (3) Total Evaluated Price. (c) Government Budget (e.g., Prospectus) Information. 536.7104 Construction contract award. In accordance with FAR 4.1001, the contracting officer shall use the SF 1442 to identify the services or supplies to be acquired as separately identified line items on a unit price or lump sum basis including the design phase services, the construction work GMP option(s), and any other work not included in the previously identified items. [84 FR 69633, Dec. 19, 2019, as amended at 86 FR 68443, Dec. 2, 2021] 536.7105 Construction contract administration. 536.7105-1 Responsibilities. (a) During all phases of the project, the architect-engineer contractor that is providing design services under a separate contract with GSA is contractually responsible for the design in the same manner as under a traditional, design-bid-build project delivery method. (b) The design phase services provided by the construction contractor can include, but are not limited to, scheduling, systems analysis, subcontractor involvement, cost-estimating, constructability reviews, cost-reconciliation services, and market analysis. (c) The scope of work should task the construction contractor with reviewing the design documents and providing pricing information at various defined milestones during the design phase. (d) During the design phase, the architect-engineer contractor and the construction contractor shall collaborate on the design and constructability issues. The goal of this collaboration is to establish a final ECW that does not exceed the original target ECW. (e) No discussions between the architect-engineer contractor and the construction contractor shall be considered as a change to the construction contract or design contract unless incorporated by the contracting officer through a modification. 536.7105-2 Guaranteed Maximum Price. (a) General. (1) GMP. (i) The GMP is the ceiling price described by FAR 16.403-2. (ii) The GMP is established at contract award. The GMP may be established as one option or as multiple options through separate line items, with a separate GMP amount for each line item. (iii) The GMP is subject to adjustment under various standard contract clauses, including the changes clause, differing site conditions clause, and suspensions clause. (iv) The contract file shall contain all documents to support any scope changes including a separate analysis to document the rationale for any upward or downward adjustment to the GMP. (2) ECW. (i) The proposed ECW incorporated at construction contract award is the target ECW. (ii) The final ECW should be established prior to completion of the design ( i.e. (iii) The contracting officer shall negotiate the final ECW and incorporate it into the construction contract through a bilateral modification prior to exercising the GMP option. (3) CCA. (i) The CCA type of allowance may only be used as part of the CMc project delivery method and should not be confused with other types of allowances that may be used with other construction project delivery methods. (ii) The CCA provides for a contingency relative to a fixed percentage of the ECW, except for the requirements at paragraph (c)(3) of this section. The CCA at time of GMP option exercise is subject to negotiation between the contractor and the contracting officer and may be different than the amount at time of contract award. (iii) The amount of the CCA will depend on the status of design and construction, as well as the complexity and uncertainties of the project. Early phase designs usually include less defined scope and, accordingly, may require a higher initial CCA at time of contract award. Later phase designs may remove uncertainties and reduce risk, allowing for a lower CCA at time of GMP option exercise. (iv) The CCA shall not exceed 3 percent of the ECW, unless approved in writing by the HCA for a higher amount not to exceed 5 percent of the ECW. (4) Fee for the Construction Work. (i) The fee may be proposed per phase of construction if each phase is a separate option. (ii) At time of proposal submission, the offeror shall submit a list of the items included within the offeror's home office overhead. (iii) At time of proposal submission, the fee elements may be expressed as a percentage of the ECW, but shall be converted to a fixed amount prior to executing the GMP option. (iv) The fee for the construction work is not increased or decreased based on fluctuations in the actual costs of the work. The fee may, however be adjusted for changes that are the basis for a change order, including scope changes, differing site conditions, and Government-caused delays. (v) Any fee for the construction work associated with a change order shall not be driven by a fixed percentage. The contracting officer should determine whether the profit included, if any, in a contractor's proposal is reasonable, see FAR 15.404-4 for additional guidance. The limitations of GSAR 552.243-71, especially markups, still apply for any changes. (b) Design Phase. (1) The GMP may be bilaterally modified upward during the design phase only for approved additions to the scope of work. (2) The GMP may be bilaterally modified downward during the design phase for deletions to the scope of work. (c) Exercising the GMP Option. (1) The GMP option shall not be exercised until the final ECW is established. (2) If the sum of the final ECW, CCA, and fee for construction work is less than the GMP as established at contract award or as adjusted in accordance with FAR Part 43, then the contracting officer shall adjust the GMP downward accordingly through a bilateral modification to exercise the GMP option. (3) If the sum of the final ECW, CCA, and fee for the construction work is greater than the GMP as established at contract award or as adjusted in accordance with FAR Part 43, then the contracting officer should work with the contractor to identify measures to reduce the overall GMP. Such measures may include reducing the CCA, reducing the fee, or as a last resort, reducing the scope of the project. (4) The GMP option shall not be exercised if the final ECW, CCA, and fee for the construction work is greater than the GMP as established at contract award or as adjusted in accordance with FAR Part 43. (d) Construction Phase. (1) After award of the GMP option, changes in scope may be issued as an adjustment to the GMP or as a stand-alone firm-fixed-price line item. (2) Any changes in scope after award of the GMP option shall be reflected by a written modification to the construction contract in accordance with FAR Part 43. (e) Early Work Package. (2) If any early work package exercised reduces the scope of the construction services under the GMP option, the ECW shall be reduced, and the CCA, fee for the construction work, and GMP shall be adjusted accordingly. (f) GMP Adjustment. (2) Any modification that changes the GMP, including modifications for early work packages and fixed price conversions, must clearly state that it includes a change to the GMP and describe the changes to the individual parts of the GMP components in the modification. (3) Any modification that changes the total GMP, or individual parts of the GMP, is subject to the requirement for a prenegotiation objectives memo and price negotiation memo, including fair and reasonable price determination, per FAR 15.406. (4) The contracting officer should consult other members of the acquisition team, including the project manager, to analyze and justify any adjustments to the total GMP, or individual parts of the GMP. 536.7105-3 Accounting and auditing requirements. (a) Cost Accounting Standards. (2) The contracting officer may request a CAS waiver in accordance with the requirements at FAR 30.201-5 and 530.201-5. (3) If CAS applies, the contract clauses identified at FAR 30.201-4 shall be included in the contract. (4) If a CAS waiver is granted or if CAS does not apply, the contract clause identified at 536.7107(b) shall be included in the contract. (b) GMP Option Accounting. Open Book Accounting. (2) Payments and Reconciliation. (c) Auditing Requirements. 536.7105-4 Value engineering. In accordance with FAR 48.202, the clause at FAR 52.248-3 Value Engineering-Construction does not apply to incentive contracts. Accordingly, value engineering, as that term is used and described in FAR Part 48, shall not apply to the CMc project delivery method described in this subpart. 536.7105-5 Shared savings incentive. (a) General. (b) Share Ratio. (2) Subject to the approval of the HCA, the share ratio may be different than that required under paragraph (b)(1) of this section. Any such written approval shall be documented in the contract file. (c) Incentive calculation. 536.7105-6 Allowances. (a) Establishing a separate allowance in addition to the CCA is only permitted pursuant to a written determination approved by the contracting director supporting the use of any such allowance. (b) The written determination for a separate allowance in addition to the CCA shall consider the following: (1) Alternative contracting structures, such as a separate GMP line item or performing the work as part of the GMP option, and (2) Ensuring conformance with all applicable rules and procedures relating to allowances, including FAR 11.702. 536.7105-7 Early work packages. (a) Construction services for an early work package must be within the scope of the overall contract. (b) Early work packages may be part of the initial procurement as a separately priced line item, or the Government and the construction contractor may agree to develop an early work package after award, typically identified toward the beginning of the project. (c) Early Work Packages Developed After Award. (1) The parties shall bilaterally agree to the scope, schedule, and pricing for any such early work package, and the contract shall be modified in accordance with FAR Part 43. (2) If any such early work package reduces the scope of the construction services under the GMP option, the ECW shall be reduced, and the CCA, fee for the construction work, and GMP shall be adjusted accordingly. (3) Any modification to the contract for an early work package is subject to the requirement for a prenegotiation objectives memo and price negotiation memo, including fair and reasonable price determination, per FAR 15.406. (d) Early work packages that are firm-fixed-price are not subject to open book accounting, a shared savings incentive, or the need for determination of final settlement. 536.7105-8 Conversion to Firm-Fixed-Price. (a) At any time after completion of 100 percent construction documents, the Government and the construction contractor may bilaterally convert the whole contract to firm-fixed-price. (b) Conversion to firm-fixed-price may occur after the contingency risks, to be covered by the CCA, have been sufficiently reduced in the best interest of the Government. See FAR 16.103(b) for additional guidance for assessing risk management, profit motive, and timing considerations. (c) Conversion to firm-fixed-price is only permitted pursuant to a written determination from the contracting officer to the contract file supporting the conversion. The contracting officer should consult other members of the acquisition team, including the project manager, to analyze and justify the conversion. (d) The contracting officer shall not agree to a firm-fixed-price in excess of the GMP. (e) In accordance with 536.7105-3(c), the contracting officer shall obtain an independent audit of the construction contractor's costs incurred in the performance of the contract to date. (f) When evaluating the construction contractor's proposal for firm-fixed-price definitization, the contracting officer should compare the anticipated final cost to the firm-fixed-price being proposed. It may be reasonable for the construction contractor to include a contingency for assuming the risk associated with agreeing to the firm-fixed-price. The contracting officer should evaluate this contingency to ensure that the proposed amount reasonably reflects the remaining risks being assumed by the construction contractor. This evaluation may be informed by the history of the project, the balance of the CCA, and other factors. (g) The modification to convert to a firm-fixed-price is subject to the requirement to obtain cost and pricing data unless one of the exceptions in FAR 15.403-1 applies. (h) The modification to convert to a firm-fixed-price is subject to the requirement for a prenegotiation objectives memo and price negotiation memo, including fair and reasonable price determination, per FAR 15.406. (i) Upon converting to a firm-fixed-price, the contract is no longer subject to open book accounting, a shared savings incentive, or the need for determination of final settlement. 536.7106 Construction contract closeout. Unless the contract has been converted to a standard firm-fixed-price contract (see 536.7105-8)— (a) The contracting officer shall ensure that the construction contractor's proposal for final settlement is accurate and reliable in accordance with the open book accounting practices of the contract. (b) In accordance with 536.7105-3(c), the contracting officer shall obtain an independent audit of the construction contractor's costs. 536.7107 Contract clauses (FAR DEVIATION). (a) FAR deviation. (b) Insert a clause substantially the same as the clause at 552.236-80, Accounting Records and Progress Payments, in solicitations and contracts if construction, dismantling, or removal of improvements is contemplated when a CMc project delivery method will be followed and cost accounting standards do not apply. This clause is used when the clauses at FAR 52.230-2 Cost Accounting Standards, FAR 52.230-3 Disclosure and Consistency of Cost Accounting Practices, and FAR 52.230-6 Administration of Cost Accounting Standards do not apply. [84 FR 69633, Dec. 19, 2019, as amended at 86 FR 55520, Oct. 6, 2021; 89 FR 55086, July 3, 2024]

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