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Town Council Resolution 24 2010TOWN OF SNOWMASS VILLAGE TOWN COUNCIL RESOLUTION NO. 24 SERIES OF 2010 A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF SNOWMASS VILLAGE, COLORADO, DIRECTING STAFF TO IMPLEMENT BEST MANAGEMENT PRACTICES BASED ON THE RECOMMENDATIONS OF THE FINANCIAL ADVISORY BOARD ON CAPITAL PROJECTS WHEREAS, the Financial Advisory Board was requested by the Town Council to review major capital projects, and WHEREAS, the Financial Advisory Board reviewed three major capital projects including the Entryway/Recreation Center, Rodeo Housing Project, and the Town Hall capital projects, and WHEREAS, the Financial Advisory Board developed 16 recommendations for planning and implementing new capital projects based on that review, and WHEREAS, the Financial Advisory Board developed the 16 recommendations to improve the financial management of new capital projects such as those reviewed by the Board. NOW THEREFORE BE IT RESOLVED by the Town Council of the Town of Snowmass Village, Colorado, That the Town of Snowmass Village Town Council directs the Town Manager to develop a best management procedure and update those procedures as necessary for guiding the planning and implementation of capital projects generally consistent with the 16 Financial Advisory Board Recommendations in Attachment "A" of this resolution. The Town Council further directs the Town manager to utilize the staff responses noted in Attachment A as guidance for the development of such procedures. READ, APPROVED, AND ADOPTED by the Town Council of the Town of Snowmass Village, Colorado on the 3rd of May, 2010 upon a motion made by Council Member Butler, the second of Council Member Wilkinson and upon a vote of four (4) in favor and none (0) opposed. Council Member Lewis was absent. TOWN OF SNOWMASS VILLAGE q;_eo Z-t'� Bill Boineau, Mayor A T: 6 �C� BUJ Rhonda B. Coxon, Town Clerk 10-24 Resolution Page 2 of 8 APPROVED AS TO FORM ttiC John C. Dresser, Jr. Town 10-24 Resolution Page 3 of 8 Attachment A Resolution 24, Series of 2010 1. FAB Recommendation: The Town needs a process for planning and evaluating capital improvement projects that permits costs to be realistically and reliably estimated and allows the actual costs of the projects to be readily measured against both original and revised budgets. This process should be transparent and available to the public. Staff Response: Staff has already begun to create a management document of best management procedures that creates a process to implement the above mentioned recommendation and the other recommendations from the FAB. 2. FAB Recommendation: In estimating the costs of a project the value of the underlying land being devoted to the project should be taken into account. Staff Response: Staff agrees the land value should be taken into account along with any opportunity cost of using Town owned land. However, staff recognizes that the Town Council will utilize many different considerations for using Town land for a specific purpose. It is the Town Councils responsibility to weigh all the information available and the Town Land Use Code in determine the appropriate use for Town owned lands. 3. FAB Recommendation: Preliminary budgets and cost estimates should be identified as placeholders (the Town did begin to identify the basis for estimating items in its CIP budget, at the recommendation of the FAB, in 2006). Staff Response: In the Capital Budget staff does identify costs for projects of whether they are placeholder or hard numbers. As mentioned in the recommendation, the Town does do this in the budgeting process. 4. FAB Recommendation: A reliable cost estimate should be prepared before deciding to proceed with a project, including deciding whether to seek voter approval of financing for a CIP project. Staff Response: Staff and the FAB discussed this issue at length. Staff believes that the capital project process is an evolving process and the precision of cost estimates evolves as the design for a project develops. A precise cost cannot be identified until a Contractor signs a binding contract to build a project for a specified number. Having this level of commitment is often not possible prior to a ballot initiative. A practical limitation for this is that contracts are often not valid for more than 30 days. Setting the language in September and then having an election in November is beyond the period contractors are willing to lock in prices. However, in the best management practices that staff is preparing the 10-24 Resolution Page 4 of 8 likelihood that the project cost exceeds what was committed to in a ballot initiative can be limited in the following ways. o Design should be developed to the point where a contractor can give a binding contract. This requires a significant commitment of dollars in developing the design. o Competent expertise should be used to determine the cost and ensure that the construction documents are complete. o A healthy contingency should then be added to that amount to account for unexpected conditions, material cost escalation etc. o There needs to be a strong commitment to not change the scope of a project after a ballot initiative unless it is a cost neutral (or better yet a savings) change. If a ballot initiative is not required to fund a project, final approval for construction can occur when the Town Council directs staff to execute a binding contract for a maximum price. The FAB and staff discussed that a common problem in public financing is that the public entity may often minimize contingency budgeting to minimize the amount asked for in a ballot imitative to make a favorable vote more attractive. 5. FAB Recommendation: A reliable cost estimate usually requires that a substantial part of the design drawings for a project be complete, that a professional estimator prepare the estimate, and that the estimate include all furnishings and equipment. A reliable estimate also requires realistic contingences for infrastructure, design costs and construction. Staff Response: This recommendation is very similar to the 4th recommendation. Staff agrees that sufficient design needs to occur to create realistic cost estimates. It is recommended that both cost estimates and design will evolve in a capital project from concept development to construction. It is recommended that the contingency start large at a conceptual level and then be reduced upon getting to construction (but not less than 15% of the project budget). Staff also agrees that FFE and operational costs need to be considered early in the planning for a capital project. 6. FAB Recommendation: Projects should be bid only after the rights (either ownership or an option) to all real property underlying the project are secured. Staff Response: Staff strongly agrees. If for some reason this is not possible the Town should be in a position to take immediate possession if needed through condemnation. At the same time this creates added risk 10-24 Resolution Page 5of8 in that the Town will have to pay whatever the court hearing the condemnation determines is the value of the land. 7. FAB Recommendation: Projects should be bid only after all design is complete, and construction begun only after the construction contract is executed. Changing the scope of the project while construction is ongoing should be avoided. Staff Response: Staff generally agrees. However, it is desirable to obtain pricing as the project design evolves. Through a design build process or having a contractor involved in the design process, pricing can be obtained as the design evolves. Changing the scope after a final contract for construction is awarded is problematic and can be expensive. There are examples where a cost savings is identified once the construction process is initiated. Also the scope may have to change based on site conditions (bad soils, hydrology) once construction is initiated. That is why an adequate contingency is desired to manage these potential risks in a construction project. 8. FAB Recommendation: If a material change is proposed in the scope or costs of a project, Staff and Council should review the entire budgetary history of the project, its actual costs to date, and estimated project cost to completion, as well as impact on estimated ongoing operational costs and estimated subsidy in order to determine that the project is being managed in a cost effective manner. Staff Response: Staff agrees. Material change could be defined as a cost that could potentially lead to an overage in the contingency budget or increase in operational cost that cannot be accommodated in the operational budget. Staff believes that this type of material change should be fully and transparently discussed with the Town Council. 9. FAB Recommendation: The budgeting and recording of actual costs of the elements of a CIP project should be done on a consistent basis from the beginning to the conclusion of a project, whenever possible. If the accounting must be changed for any reason, there should be a careful reconciliation of the old and new accounting treatment so that the Town Government is able to evaluate and control the cost of the items comprising the project. Staff Response: This is something staff acknowledges was a challenge with several of the projects that the FAB reviewed. Staff agrees that the cost accounting should be done in a consistent and transparent manner using best accounting practices so that actual costs can effectively be compared to budgeted costs. 10. FAB Recommendation: In hiring a general contractor for a CIP project, the Town should not merely choose the low bidder; instead it should weigh cost with 10-24 Resolution Page 6 of 8 experience and other factors indicating ability to perform competently, on time and within estimated cost. Staff Response: Staff agrees that a competitive process is important to obtain the best price. Depending on the type of project, it is recommended to have a request for qualifications and select only qualified contractors and/or designers to move forward to compete in a request for proposal process. It is also possible to combine a RFQ and RFP process together. However, it is important to agree ahead of time how quality, experience, and price will be evaluated in the selection process. 11. FAB Recommendation: Effective supervision of a project's contractor requires that the contractor provide weekly updates for the Town on both progress and budgetary issues. Staff Response: Staff strongly agrees with this recommendation. 12. FAB Recommendation: The Town should consider developing model contracts for construction and professional services (architects, etc.) and using these contracts as the basis for soliciting bids on projects in order to be sure that each bid can be evaluated on a consistent basis. The architect should be made responsible for the work of the other design professionals. Staff Response: Staff believes it is critical to have the Town Attorney closely review construction and design contracts and to have an owner's representative carefully review contracts. The final sentence of this recommendation is generally a good idea in terms of having one point of accountability. There may be times, depending on the level of expertise of the project manager, where there can be a savings by having certain design consultants report to the project manager. Sometimes an architect is not used depending on the type of project (New snowmelt system). 13. FAB Recommendation: Planning of projects should be based on how much the Town concludes it should spend rather than being based on including everything the Town or the community would like to have. Staff Response: Staff agrees that it is important to have the resources to pay for a project. Staff believes an idea can still be explored if there is strong public benefit and the realistic opportunity to find funding for a project. Sometimes it is necessary to develop the concept with the vision that public support for a funding request or private sponsorship can be obtained. 14. FAB Recommendation: Staff and Council should verify at the inception of a project that adequate qualified personnel are available to staff the project and will be able to devote adequate time to the project. If there is any doubt about the 10-24 Resolution Page 7of8 qualification or availability of the Town's personnel to handle a project, the Town should hire an owner's representative to oversee the project. Staff Response: The Town Manager should ensure that qualified project management is available. If it is not available on staff then outside owners representative services should be obtained. The Town Manager should resist, even if qualified simply putting a Director or other senior staff into a project management position unless it can be demonstrated that that the staff member has sufficient time to manage a capital project. Again, project management requires frequent visits to the project site, weekly meetings, weekly review of pay requests and change orders. It is rare that a major capital project does not take 20-40 hours or more per week to adequately manage. 15. FAB Recommendation: Instead of staffing each capital project in the Town Department for which the project is intended (e.g. development of employee housing in the Housing Department), Council and the Town Manager should consider establishing a capital project development team to handle all capital development projects. The Finance Department should be included in any capital project development team and involved in all phases of the project. Staff Response: Staff believes the response to recommendation 14 is appropriate to answer this recommendation. Given current staffing levels it is not practical to have a project development team to handle all capital projects. The Town does have several members of staff that have significant experience with capital projects. However, they have other regular daily responsibilities. Staff agrees that those individuals that may manage projects obtain ongoing training as appropriate in managing capital projects. Also staff agrees that the Finance Department should be actively involved in monitoring the finances of capital project. That is part of the daily function of the Finance Department. 16. FAB Recommendation: In evaluating the scope of a project, it is important to accurately forecast the operating costs of a project since failure to do so will burden the Town's budget on an ongoing basis which may result in eliminating other essential services (e.g. the unanticipated and increasing operating deficit of the Rec Center will burden the ongoing RETT budget and may effectively reverse the priority of projects specified in the RETT ordinance). Operating cost estimates should include an allowance for depreciation or a reserve for capital replacements. Staff Response: Staff agrees that the Town should carefully budget for the operational costs of any capital project and factor in capital replacement. To adequately estimate operational costs it sometimes requires bringing the operational staff early into the planning process to adequately budget for operations. A difficult consideration is whether to hire an operational manager before funding approval of a project. That is 10-24 Resolution Page 8 of 8 ideal for budgeting but also not practical in most cases if there is a chance the project will not get budgeted. It is recommended that an operational manager if applicable to the capital project be retained prior to ordering the FFE for a project. The best that may be possible if public funding approval is required is to obtain the services of a professional operator as a consultant to the project.