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tion of A-E firms must differ from the selection of contractors to perform other similar professional services.
Where construction costs are estimated to exceed $500,000, the Government should seek A-E estimates of the life-cycle costs of the facility when practicable. As discussed above with regard to design costs, benefits could be derived from focusing the attention of competitors on ways to reduce life-cycle costs of proposed facilities.
REIMBURSEMENT OF PROPOSAL COSTS
Our recommendations for increased emphasis on competitive consideration of the kind, quality, and cost of A-E services illustrate our concern that the process of selection of A-E firms be brought more in line with practices in other areas of Government procurement. In order to achieve realistic competition in some cases, especially those involving complex, costly facilities or unusually difficult design problems, it may be desirable to carry competition through the early phases of design. This is frequently the case in research projects leading to large investments, such as weapon systems or ships. It is unreasonable to expect the typical A-E firm to bear the costs of competition in all cases; thus, where necessary, the Government should be prepared to fund the cost of design competitions in cases where carrying competition this far would be cost-effective. This principle has been followed in other areas. Both the House and Senate reports on Public Law 92–582 acknowledge that in “unique situations involving ‘prestige' projects such as in the design of memorials and structures of unusual national importance, when the additional cost justifies the approach, and when time allows, the agency head can rely on design competition under the recognized procedures that have been traditionally applied to this type of procurement." 20
In summary, we recommend a departure from current Federal practice in the selection of Architect-Engineer firms for facility design and a strengthening of Public Law 92–582. We reject the concept that present practice leads to adequate competition, 21 and that selec
Three Commissioners* do not support the concept presented in the Commission position. They offer the following comments on the Commission position and a recommendation they would support.
The majority report purports to urge that Congress avoid freezing procurement procedures into a set pattern but in fact proposes to freeze the procedures for procuring architect-engineer services into the same mold of procedure as for procurement of goods and nonprofessional services. The majority's first recommendation would force the Federal Government to abandon the competitive selection procedure and to follow the set pattern of taking proposals as the basis for selecting an A-E.
One of the objectives for creating the Commission was to find ways in which the bureaucratic complexity of Government procurement could be simplified. With respect to the procurement of A-E services, however, the majority's Recommendation 1, rather than streamlining, would fasten upon the Government and A-Es an unnecessarily burdensome, bureaucratic, and expensive procurement procedure.
It also states that “our study” indicated that the newly enacted Public Law 92–582 (which formally adopted the traditional competitive selection method used throughout the Government and the private sector) would not provide for adequate competition. The statement implies that inquiries were made which developed information indicating that the traditional competitive selection method was not the most effective means of securing quality in design and that selection based on competitive proposals would yield better results. In fact, however, the recommendation to base selection on evaluation of proposals is totally at variance with the conclusions to be drawn from information developed by the Study Group appointed by the Commission by hearings, interviews, and inquiries.
20 H. Rept. 92–1188 at p. 10; S. Rept. 92–1219, p. 8.
* A recent survey shows that the top 20 A-E firms selected by four Government agencies during fiscal 1971 performed the following percentages of agency A-E business :
77 percent GSA
71.6 percent DOD
61 percent Corps of Engineers
40.5 percent (civil functions) See H. Rept. 92–1188, 92d Cong., 2d sess., p. 27 (dissenting views of Hon. Chet Holifield).
*Commissioners Gurney, Sampson, and Sanders.
The majority acknowledges that the objective in selecting an A-E is obtaining quality of service, rather than the lowest priced design work. In footnote 21 the majority cites percentage figures purporting to show that the bulk of Government design work goes only to a few firms.
The minority would note, first, that the discussion in the majority report contains nothing to show how selection of A-Es on the basis of competitive proposals would obtain better quality of service than does the traditional method. It may be that the majority intended that the footnote 21 figures be understood as demonstrating that government design contracts are awarded to a favored few for the most part, as a means of supporting its proposition that the traditional competitive selection procedure does not generate adequate "competition.” However, the figures from which the footnote percentages were drawn represent the aggregate fees paid the firms on the lists. Among the 20 top firms on the Department of Defense list are Newport News Ship Building and Dry Dock Company and the Federal Republic of Germany. Newport News performs design services of a peculiarly specialized nature for which there are few sources. It is entirely possible (or perhaps even probable) that those contracts would have been awarded to Newport News had the procurements been effected by the method outlined in the majority's Recommendation 1 rather than by the traditional method. The minority would also surmise that the contracts with the Federal Republic of Germany would have been awarded to that “firm" whatever method of A-E selection might have been current at the time. The picture the majority report would paint with the percentage statistics is further distorted by the fact that a firm which got one large design contract would appear on the list whereas another firm of equal competence, having been awarded two or even three relatively small design contracts would not. In short, the majority report fails to demonstrate that there exists
any lack of competition in the selection of A-Es to support its proposal that competition should be increased by adoption of Recommendation 1.
Further, if an undue number of contracts were being awarded on the basis of favoritism rather than competence, members of the profession would be the first to urge that Congress impose some method for selecting A-Es other than the one in use throughout the Government (as well as the private sector). It is well known that the profession favors continued use of the traditional method.
That the majority's recommended method of selection would, in fact, be less effective in securing top quality professional services is almost self-evident. Under the traditional competitive selection method, the procuring agency makes its initial selection on the basis of information obtained not just from the prospects but also from independent sources. But if the selection were to be made on the basis of an evaluation of proposals, the procuring agency would find itself limited to considering only such information as the prospects themselves might choose to provide in the proposals, and unable to include in the evaluation information obtained from independent sources as to the prospects' respective abilities to produce satisfactory results for their clients.
The content of the technical proposal, which the majority would make the basis of selection, would include a concept plus the A-Es estimate of cost, the latter being the “primary factor" for selection purposes. The discussion, which ordinarily would be expected to support the recommendation, instead points out some of the objections to use of these very factors for selection purposes. The report notes that artists' sketches and rough cost estimates would be of little use; that requiring cost estimates as part of the proposal makes no sense where the services to be procured are preparation of cost estimates; and that the Government itself has frequently established the desired concept before securing design services to carry out the concept. To this list of factors which show that the type of proposal envisioned would not serve satisfactorily as a basis for selection, the minority would add other shortcomings and deficiencies. A top architect-engineer is able to generate a number of concepts, any one of which would satisfy the Government's require
ments, with some being more acceptable or desirable than others for various reasons. The “proposal” approach could serve to eliminate the best qualified firm if it happened to choose one of its ideas, rather than another, for presentation in the proposal. Secondly, it is the minority's firmly held belief that, in most cases, it is the function of responsible officials within the Government, together with Congress, to determine the sum that should appropriately be spent in satisfying a particular need; the majority's approach would tend to move this internal governmental management decision into the hands of an outsider who would be focusing exclusively upon a single project rather than weighing the needs of a single project against competing requirements in terms of an entire program and the request for appropriation therefor.
The majority's second recommendation calls for inclusion, in the competing proposals envisaged under its first recommendation, of the respective architect-engineers' estimate of lifecycle costs. This recommendation reflects a total lack of understanding of the integral part life-cycle cost considerations play in the development of a design. Any forecast of lifecycle costs made in advance of the design development is meaningless. Development of estimated life-cycle costs is not a function of competition but one of the services to be provided once an A-E has been selected and awarded a contract. In developing his design, the A-E can take into consideration the comparative life-cycle cost of elements of the structure and make reasoned choices among the various possibilities open to him. Only when the design is thus firmed up, and the choices made, can a realistic estimate of total life-cycle costs for the project be made. The agency itself has the opportunity to participate in making these choices.
Dissenting Recommendation 1. The procurement of A-E services should continue to be based on a competitive selection process as outlined in Public Law 92–582, which focuses on the technical competence of interested prospects. Solicitations of a price proposal and negotiations as to price should be undertaken only when the best qualified firm has been ascertained; if mutual agreement can
not be reached, the next best qualified firm should be asked for a price proposal, followed by negotiation; and if necessary, the process should be repeated until a satisfactory contract has been negotiated. [Offered in lieu of Commission recommendations 1 and 2.]
Professional services contracts with architectengineers include contracts for preliminary studies; preliminary and master planning; architectural and engineering studies, consultation, investigations, and surveys; and the preparation of designs, drawings, specifications, and cost estimates.
The prevailing method for selection of an A-E is generally as follows. Information is developed from contacts within the profession and former clients to identify potential sources of the desired services. Information is obtained from the identified prospects themselves and from their professional colleagues; additional information may be developed from contacts with the builders, owners, and even the occupants or users of buildings or facilities designed by the several prospects. This information relates, but is not necessarily limited to, factors such as the following:
• The professional qualifications, registration, previously designed projects, and general reputation of the principals of the firm and key personnel other than principal. • The extent of in-house capabilities and the extent to which the prospect ordinarily draws upon consultants or must draw upon consultants for the particular project contemplated. • The caliber of consultants regularly or frequently engaged. • Prior major design projects, any unusual architectural, structural, or functional design solutions developed for those projects; overall degree of client satisfaction with results or client experience with shortcomings. • Standing within the profession. • Record of designing within construction fund limits and on schedule.
The depth and sophistication of the inquiries vary with the resources for making inquiries of effort devoted to the selection process by the Government and the competing firms should be consistent with the nature and scope of services to be provided. Government agencies should make a conscientious effort to afford opportunities to as many different firms as possible, consistent with maintaining high standards of performance and quality. Additionally, newly established or small firms should be given fair consideration for projects within their capabilities.
STATUTORY LIMITATIONS ON A-E FEES
and the size of the project contemplated. In general, Federal agencies which regularly contract for design services have relatively good information-gathering resources and have the staff capability for making a relatively sophisticated evaluation of the information secured. This structured evaluation process screens out the unqualified firms, identifies those capable of providing service of a high order of quality, and ultimately pinpoints the firm best able to perform the services contemplated. At that point, the firm is approached for the purpose of negotiating a mutually acceptable agreement on price, schedule, and other details. If agreement on these elements is reached, a contract is signed. If not, the next best qualified firm is approached.
The Federal Government has detailed independent estimates made by qualified technical personnel who are experienced in the procurement of A-E services, and these estimates are used in negotiating for a reasonable price. In addition, if the price exceeds $100,000, the selected A-E must furnish cost and pricing data which he is required to certify and which is verified by a pre-award audit.
The combination of a structured evaluation of factors pertinent to, and significant in, the selection of an A-E (including evaluation of technical qualifications), together with the measures taken to ensure that the fee agreed upon is reasonable, assures the Federal Government of securing quality service at a fair and reasonable cost.
This generally recognized and accepted method of A-E selection insures continued support of the “Guiding Principles for Federal Architecture” approved by President Kennedy in 1962 and endorsed by Presidents Johnson and Nixon. President Nixon's concern for architectural excellence in Federal construction was also expressed in his speech before the Associated Council of the Arts of May 26, 1972, and in his Design Message of May 18, 1972.
In considering actions to improve and strengthen the present system, the Office of Federal Procurement Policy should prescribe a structured system for evaluation of A-E technical competence so as to achieve a greater degree of uniformity of application. Selection criteria should be consistent with the nature and scope of services to be procured. The level
Recommendation 4. Repeal the statutory sixpercent limitation on A-E fees. Authorize the Office of Federal Procurement Policy to provide appropriate policy guidelines to ensure consistency of action and protection of the Government's interest.
Five statutory provisions 22 set forth a sixpercent limitation on A-E fees, measured by estimated construction costs. Initiated by a 1939 statute authorizing the use of private A-E firms by the military services, the limitation is arbitrary and inappropriate for certain services and projects.23 Some small projects might require a 12-percent fee; others less than six percent, because they involve designs which have been used repetitively. Our studies indicate that inconsistencies and ambiguities in the five statutes limiting A-E fees have created confusion in both Government and industry.
Only those A-E services involving the preparation of designs, plans, drawings, and specifications bear a direct relationship to construction costs. Other A-E services, such as feasibility studies, site investigations, subsurface exploration, and services during the construction process vary widely in their rela
22 Armed Services Procurement Act, 10 U.S.C. 2306(b); Federal Property and Administrative Services Act, 41 U.S.C. 254 (b); and specific A-E statutes for the Army, Navy, and Air Force, 10 U.S.C. 4540, 7212, and 9540.
23 While Public Law 92-582 did not expressly deal with the existing statutory provisions limiting A-E fees to six percent, the broad definition of "architect-engineer services" used in the act could be construed as broadening of the kind of services subject to the limitation. H. Rept. 92–1188 indicates that the Committee considered and rejected the Comptroller General's recommendation to repeal the statutory limitation on A-E fees.
velopments. It may also result in varying interpretations as to intended coverage. It is our opinion that the Office of Federal Procurement Policy 24 should be given the responsibility to establish appropriate policy guidelines for A-E fees and for interpretation of the controls applicable thereto. This arrangement would provide the necessary controls as well as the flexibility for adjustment and modification as deemed necessary.
Consolidation of Statutory Ceilings
tionship to the estimated construction cost. In addition to questions as to what A-E services the limitation applies, it is unrealistic in today's market to apply a six-percent limitation to complex construction projects. Some agencies which have large in-house A-E capability contract out work within the limitation and use their own personnel to perform the remaining work. Other agencies which lack such inhouse capability have difficulty in living with the current limitations.
The tie-in of the limitation to estimated construction costs also creates problems, as such costs are not necessarily related to the value of A-E services rendered and are not always known at the time the fee limitations must be applied. Furthermore, some A-E contracts do not involve construction projects.
Although some of these problems could be solved by increasing the ceiling on A-E fees, or perhaps by providing exceptions for specific types of work or projects, it is likely that over a period of time agencies would again be faced with problems similar to those prevalent under the existing statutes.
While some ceiling or control on A-E fees may be desirable for most Federal projects, the present across-the-board limitation creates problems for both agencies and A-Es on small jobs, renovation projects, and facilities requiring an usually high degree of design effort. We feel it is inappropriate for a fixed percentage of fee limitation to be set out in a statute. A specific percentage limitation set forth in a statute may over the years become outmoded and too restrictive in the light of new de
If the statutory ceiling provisions are to be retained, the five existing statutes limiting A-E fees should be redrafted into a single statute applicable on a Government-wide basis and incorporating the following features:
• Application of the percentage limitation to the preparation of designs, plans, drawings, and specifications only • Exemption from the limitation of (1) all rehabilitation, remodeling, and renovation projects; (2) projects with a construction cost estimated to be less than $500,000; (3) A-E contracts which do not involve programmed construction projects; and, (4) at the discretion of the agency head or his designee, unusual, complex, or highly technical projects which would require an especially high level of design effort.
24 See Part A, Chapter 2, for a discussion of this recommended policy group.