Part II: Terms and Conditions of NIH Grant Awards
Subpart B: Terms and Conditions for Specific Types of Grants, Grantees, and Activities -- Part 2 of 8
Procurement Requirements for Construction Services Under NIH
Construction activity is usually carried out through a contract(s) under the grant. Therefore, the circumstances of the procurement are critical to the successful completion of the grant-supported project. All construction work must be procured by the methods described in 45 CFR 74.40 through 74.48 or in 92.36, as applicable. Normally, this means a prime construction contract awarded following a competitive sealed bidding (previously "formal advertising") process resulting in a lump sum, fixed-price contract. NIH may authorize other procurement methods and other types of contracts when sealed bidding or a fully competitive negotiated process is impractical. The specific requirements for contracting for construction management services and design-build services are described below.
In general, grantees must:
- Ensure that all qualified contractors are given an opportunity to bid and have their bids fairly considered.
- Guarantee, insofar as possible, that the contract(s) will result in the completion of a facility (ready for occupancy) that conforms to the design and specifications approved by the NIH awarding office (or any appropriate modification thereof with NIH awarding office approval, as required) at a cost that is within the owner's ability to pay (the term "owner" refers to the legal entity that holds (or will hold) title to the property on which the grant-supported construction is performed and is generally the applicant or grantee).
- Obtain NIH awarding office approval of plans and specifications both before bids or proposals are solicited and before the award of a prime construction contract. The procurement methods to be employed must be reviewed and approved by the NIH awarding office. The grantee (owner) is responsible for ensuring that the project is constructed to completion in accordance with the approved plans or specifications and for obtaining necessary approvals for changes as specified in this section.
- The grantee (owner), including the firms acting for it in a professional capacity, must take adequate steps to ensure that the total cost of all contracts, i.e., total cost of construction, awarded under a project will be within the amount of funds available for the project. This can be accomplished by accurate price estimating and/or the use of bid alternates. A precise description of the scope of work, specifications, materials, and construction techniques in the invitation for bids will facilitate accurate cost estimating by both the bidder and the grantee's (owner's) professional representatives. The description of work becomes especially important when multiple contracts will be let in support of the same project, since each contractor must know exactly what is involved in the portions of the job on which he or she is bidding.
- Stipulate in invitations for bids a time for completion of the project, expressed either in calendar days or as a fixed date, for each prime contract to be awarded under the project.
Where more than one NIH or HHS program will support a construction project, or where the NIH-supported project is less than the entire facility or construction to be bid, the grantee must obtain bids that provide, to the maximum extent possible, the costs for that portion of the total job that will be financed by NIH funds and any required grantee matching. This may be done by (1) showing the cost for each building or site in the project, if it consists of more than one building or construction site and can be divided for bidding and construction purposes, or (2) identifying, to the extent possible, or prorating the applicable costs when the project is a single site or contains common space and cannot be divided for bidding and construction purposes.
Where practical, the grantee (owner) may request, in the invitation for bids, alternates to the base bid that are keyed to specified and explicitly stated changes in the project scope, materials, or construction techniques. Alternates may be used when it is anticipated that the amount of the low bid will exceed the amount of funds available to the owner to award a contract, and the grantee (owner) must make adjustments to the project to reduce costs in order to award a contract within the funds available. "Add" alternates will make it possible to incorporate necessary features that otherwise would not have been included in the project. Alternates that are selected may be included in determining the low aggregate bid. The grantee must identify, in its bid schedule, whether the low bid will be determined inclusive or exclusive of alternates. If inclusive, then alternates shall be awarded in order, up to the amount of funds available. For example, Alternate #1 will be awarded first, Alternate #2 second, Alternate #3 third, etc. No alternate may be awarded out of sequence. If all bids exceed the funds available even after the steps described above have been taken, the grantee (owner) may:
- Decline to award a contract and instead issue a revised invitation for bids containing changes in specifications or other factors affecting price that have been approved by the NIH awarding office.
- Negotiate with the low bidder (this is an exception to sealed bidding), or, if that bidder should refuse, in writing, to negotiate, negotiate with the next lowest bidder. Any changes in design and specifications resulting from such negotiations must be approved by the NIH awarding office. If efforts to negotiate are unsuccessful, all bids shall be canceled and the project shall be rebid.
- If a construction management firm is currently employed by the grantee (owner), authorize that firm to perform the construction work after obtaining NIH awarding office prior approval. The price for the work involved must not exceed the line-item prices stipulated in the construction management contract (guaranteed maximum price) as approved by the NIH awarding office (see "Construction Management Services" in this section for requirements for a construction management agreement).
- Enter into a design-build contract (see "Design-Build Services" in this section) for a functionally equivalent facility.
Construction Management Services
Construction management services are management services that may be procured on a negotiated basis rather than by sealed bidding. These services include technical consultation during the design stage of a project and organization and direction of construction activities during the construction phase. In the negotiated procurement process, the request for proposal (RFP) shall address both the technical qualifications of the offeror (possibly 75 percent of the evaluated score) and the business (cost) aspects of the proposal (possibly 25 percent of the evaluated score). The award shall be based on a combination of both the technical and business evaluations. The basis of the award, i.e., whether cost or technical qualifications will weigh more heavily in the award decision, must be stated in the RFP. The services of construction managers may be procured by sealed bidding if State or local governments prohibit the procurement of construction management services on a negotiated basis.
Contracting for construction work on a project covered by a construction management agreement is subject to all of the requirements otherwise applicable to the solicitation and award of contracts, except that bids may be obtained by prequalification and selective solicitation. When pre-qualification and selective solicitation are used, the construction manager must (1) pre-qualify all firms that respond to the announcement and are determined to meet the prequalification standards; (2) establish bidders lists for each of the invitations for bids, including, at least, all firms qualified in (1), and possibly including other known qualified firms; (3) solicit, in writing, bids from all firms on the bidders list; (4) consider bids from any contractor who requests permission to bid and who is determined by the grantee (owner) to meet the prequalification standards; and (5) prepare a bid abstract.
Guaranteed maximum price (GMP) is not the preferred method of award for construction management services under NIH grants. The grantee must obtain NIH prior written approval to use this method. If use of this method is approved, the grantee must comply with the following requirements:
- The construction management contract must place total financial responsibility on the construction manager to complete construction of the project at or below the GMP. If the contract exceeds $100,000, the construction manager will be required to comply with the bid guarantee and bonding requirements as specified in 45 CFR 74.48(c) or 92.36(h).
- The GMP must be obtained from the construction manager before NIH will authorize the solicitation and award of the first construction contract. This requirement applies whether or not phased construction techniques are employed. Each portion of the work for which a separate contract is expected to be let shall be separately priced as an individual line item in the GMP contract.
The grantee must transmit all GMP bids to the designated GMO, with its recommendation for award to the lowest responsive responsible bidder.
After the competitive award of a GMP contract, the following applies:
- All GMP subcontracts shall be bid on the open market, and there must be at least three bidders to allow for an award. In those instances where three bids cannot be obtained, the grantee must submit, in writing, to the GMO or other designated official, a detailed explanation of why the GMP contractor is unable to comply, along with supporting documentation for NIH consideration and approval or other action.
- All GMP bids must be completely itemized, by trade, to include a separation of labor and materials, all markups, and no contingency other than that which will cover change order items as approved by the grantee.
- All costs lower than the GMP line item bid as approved by the NIH awarding office shall be refunded or credited to the grantee by the contractor and by the grantee to NIH. All costs in excess of the GMP after all items have been bid are the responsibility of the GMP contractor.
- All subcontract prices must be approved by the NIH awarding office prior to individual awards. The awards shall be made to the lowest-priced responsible, responsive bidders.
In the event a contract with a GMP clause was awarded to a construction management firm prior to the NIH grant award, the firm's subcontractors must compete in an open competition for the subcontract work under the GMP contract. The GMP contractor must make available all pertinent information to the public that could influence bids and interpretation of the design intent.
In design-build contracting, construction firms respond to an RFP by submitting building designs to meet the grantee's (owner's) performance requirements within a guaranteed maximum price (see GMP requirements under "Construction Management Services" in this section) that covers all architectural, engineering, and construction services required. The design-build firm must be selected in a manner that will allow maximum feasible competition. The selection must be accomplished by a process that includes public announcement of the RFP, provided that at least one form of the announcement receives nationwide distribution; consideration of all proposals from firms that are determined to be qualified; and selection based on the firms' qualifications, responsiveness to the criteria in the RFP, and cost.
Because of the nature of design-build contracting, the following departures from sealed bidding are authorized:
- Technical considerations as well as cost may be treated as competitive factors;
- The grantee (owner) may negotiate cost or design with one or any number of firms.
On all design-build projects, the grantee (owner) must ensure a firm total cost by including in the contract a provision that extra costs resulting from errors or omissions in the drawings or estimates will be the design-build firm's responsibility.
Equal Employment Opportunity, Labor Standards, and
Other Contract Requirements
Labor standards and equal employment opportunity requirements for federally assisted construction must be specified in the information provided to bidders on construction contracts under NIH grants and must be included in the contract documents for all such projects (see 45 CFR Part 74, Appendix A, and 45 CFR 92.36(i)). NIH construction grants are not subject to the requirements of the Davis-Bacon Act or the Copeland "Anti-Kickback" Act.
Equal Employment Opportunity
Construction contracts (and subcontracts) awarded under NIH grants are subject to the requirements of Executive Order 11246 (September 24, 1965), as amended, as implemented in 41 CFR Part 60-1 by the Office of Federal Contract Compliance Programs (OFCCP), U.S. Department of Labor. The grantee is required to include the "Equal Opportunity Clause" at 41 CFR 60-1.4(b) in any construction contract under the grant. The contractor must be directed to include this clause in any applicable subcontracts.
In addition, grantees and construction contractors under NIH grants are required to comply with the solicitation and contract requirements for affirmative action specified in 41 CFR Part 60-4 for contracts that will exceed $10,000 in designated geographical areas. These requirements are specified in the "Notice of Requirement for Affirmative Action To Ensure Equal Employment Opportunity (Executive Order 11246)" and the "Standard Federal Equal Employment Opportunity Construction Contract Specifications (Executive Order 11246)."
The OFCCP regulations also require that the grantee notify the applicable OFCCP regional, area, or field office when it expects to award a construction contract(s) that will exceed $10,000.
Further information about these requirements and the full text of these regulations is available at http://www.dol.gov/esa/ofcp_org.htm.
Pursuant to 41 CFR 60-1.8, the grantee shall require each prospective construction contractor for a contract that will exceed $10,000 to submit a certification that the contractor does not, and will not, maintain any facilities it provides for its employees in a segregated manner, or permit its employees to perform their services at any location, under the contractor's control, where segregated facilities are maintained, and the contractor will obtain a similar certification prior to the award of any covered subcontract.
Contract Work Hours and Safety Standards Act
Construction contractors and subcontractors with contracts/subcontracts exceeding $100,000 under NIH grants are subject to the requirements of the Contract Work Hours and Safety Standards Act, 40 U.S.C. 327-333, concerning the payment of overtime and the maintenance of healthful and safe working conditions.
Wages paid any laborer or mechanic employed by the contractor or subcontractor must be computed on the basis of a standard workweek of 40 hours. For all work in excess of the standard workweek, mechanics and laborers shall be compensated at a rate not less than one-and-a-half times the basic rate of pay. If this requirement is violated, the contractor or subcontractor is liable to the employee for the unpaid wages and may be liable to the Government for liquidated damages. NIH or the grantee may withhold otherwise payable funds to satisfy any such liability. The statute also specifies penalties for intentional violation of these requirements.
Further, no contractor or subcontractor under an NIH grant shall require any laborer or mechanic employed in the performance of the contract to work in surroundings or under working conditions that are unsanitary, hazardous, or dangerous to an individual's health or safety, pursuant to standards issued by the Secretary of Labor. Violation of these requirements may be cause for debarment from future Federal contracts or financial assistance.
Invitations for bids must stipulate a time for completion of the project, expressed either in calendar days or as a fixed date, for each prime contract to be awarded under the project.
At the option of the grantee (owner), a liquidated damages provision may be included in the construction contract, allowing for assessment of damages when the contractor has not completed construction by the date specified in the contract. Liquidated damages must be real and justified and must be approved by NIH prior to solicitation. Where there is an assessment of damages, any amounts paid belong to the owner.
Disposition of Unclaimed Wages
If it is discovered, either during or after the period of performance of an NIH-assisted construction contract, that an employee is entitled to wages but cannot be located for the purposes of payment (or for some reason refuses to accept payment), the grantee may eventually have to repay the Federal Government. Therefore, NIH suggests that the contractor be required to turn over any unclaimed wages to the grantee.
The grantee should notify the GMO that an escrow account has been established in the affected employee's name and should maintain the account for a period of either 2 years following the completion of the contract or such longer period as may be required by State or local law. Upon the expiration of this period, any amounts still unclaimed will be disbursed by refunding to NIH either the entire amount, if the construction project was 100 percent funded by NIH, or an amount representing the percentage of NIH participation in the project. In the event the project was funded by more than one NIH or HHS program at differing rates, the percentage on which the refund is based should be an average percentage calculated by weighting each program's rate of participation by the dollar amount of that program's contribution.
If the contractor has made a reasonable effort to locate the employee by having mail forwarded and contacting the employee's union, the grantee need not repeat such attempts. If there is reason to believe that the contractor's efforts to locate employees that are due wages were not thorough, the grantee should attempt to locate the employees. Doing so will reduce the likelihood of future claims against the grantee.
If any wages held in escrow are paid to an employee or an employee's legal representative during the period in which the account is maintained, a complete report must be made to the GMO when the account is closed.
Prior Approval Requirements
Grantees (owners) must obtain written prior approval from the GMO for grantee-initiated changes in project or budget as follows:
- A revision that would result in a change in scope of the project, including proposed modifications that would materially alter the costs of the project, space utilization, or financial layout, and associated changes in the previously approved solicitation or contract.
- A revision that would increase the amount of Federal funds needed to complete the project.
- Any other applicable change as specified in "Administrative Requirements—Changes in Project and Budget." Construction grants are not eligible for expanded authorities.
The request for approval shall include sufficient information to allow NIH review of the circumstances and need for the proposed change. After receipt of written prior approval from the GMO, the grantee may authorize the approved modification(s) of the construction contract. Other less substantive modifications to construction contracts may be accomplished without the prior approval of the NIH awarding office. However, copies of all change orders to construction contracts must be retained as grant-related records (see "Administrative Requirements—Monitoring—Record Retention and Access").
Alteration and Renovation Projects under Non-construction Grants
Two copies of each of the following documents are to be submitted with each request for approval of A&R costs greater than $300,000, but not more than $500,000 (whether proposed in the application or as a postaward rebudgeting request):
- A single line drawing of the existing space and proposed alterations.
- A narrative description of the proposed functional utilization of the space and equipment requirements prepared by the program and administrative managers who will use and be responsible for the working space and, when appropriate, with input from architectural and engineering advisors. Final drawings and specifications will be based on this description.
- The description shall include a detailed explanation of the need, character, and extent of the functions to be housed in the space proposed for A&R, using the following headings, as appropriate:
- General information,
- Description of the functions to be performed in the space,
- Space schedule (detailed description of floor space),
- List of fixed equipment proposed for the facility,
- Cost estimate (see sample format in Exhibit II-1),
- Special design problems,
- Description of the existing and proposed utility systems for the modified space,
- Description of plans to provide accessibility for the physically handicapped,
- Provisions for meeting the requirements of the Life Safety Code,
- The length of the property lease if the space is rented, and
- Other information required by program legislation or regulations.
When the proposed alteration is to occur in a building that is under construction or in an incomplete structure, two copies of the following documentation also must be provided:
- A detailed justification for the need to perform the work before the building is completed,
- A cost comparison between doing the work before and after the building is completed, and
- A description of other specific benefits to be gained by doing the work before the building is completed.
Applicants/grantees undertaking A&R projects that will require NIH funding of more than $500,000 are subject to the review, approval and documentation requirements included or referenced in this section for construction grants.
Real Property Management Standards
Real property constructed under an NIH grant-supported project is subject to the requirements of 42 CFR Part 52b and the provisions of 45 CFR 74.30 through 74.32 and 74.37 or 92.31, as applicable, regarding use, transfer of title, and disposition, unless alternate requirements are specified in the governing statute. For example, the governing statute for a construction grant program may contain usage and disposition requirements that are in addition to or different from the usage and disposition requirements of 42 CFR 52b and 45 CFR 74.32 or 92.31, as applicable. These may include provisions governing the length of the grantee's accountability obligations, the Federal right of recovery, or waivers. In those cases, to the extent the statutory provisions are inconsistent with the requirements of 42 CFR Part 52b and/or 45 CFR Part 74 or 92, including those described in this subsection, the statutory provisions, as reflected in the terms and conditions of the award, apply. Real property constructed or renovated with NIH grant support may not be conveyed, transferred, assigned, mortgaged, leased, or in any other manner encumbered by the grantee, except as expressly authorized in writing by NIH. In the event of any default of any description under a mortgage on the part of a grantee, the grantee shall immediately provide the designated GMO with both telephonic and written notification of the default.
The mortgage agreement shall:
- Provide that the mortgagee notify NIH at least 30 days prior to initiating foreclosure action;
- Specifically allow, in the case of default, that NIH or its designee may assume the role of mortgagor and continue to make payments; and
- Provide that, in the event NIH (or its designee) chooses not to assume the role of mortgagor in the case of default, the mortgagee shall pay NIH an amount equal to the share of the sales proceeds otherwise due the grantee (mortgagor) multiplied by the Federal (NIH) share of the property.
Any NIH assignment of the property and mortgage responsibilities to any party, other than NIH, shall be subject to prior approval of the mortgagee.
Use and Disposition
NIH construction awards generally require that a facility be used for biomedical or behavioral research so long as needed for that purpose (usually no more than 20 years from the date of beneficial occupancy) or other period prescribed by statute. During that time, the grantee shall comply with applicable disposition requirements. If, during the required usage period, the facility is no longer used for the original intended purpose and NIH did not provide prior approval for an alternate use, NIH may recover the Federal share. NIH will monitor grantee compliance with these requirements for the duration of the required use period. After the required usage period, the grantee has no further accountability to NIH concerning the use of the property or any sales proceeds.
For disposition of property acquired on an amortized acquisition basis, the formulas in 45 CFR 74.32 and 92.31 do not apply in determining the Federal share. In cases of amortized acquisition, the Federal share will be determined by multiplying the amount of mortgage principal already repaid at the time of disposition by the average Federal participation (taken from the Financial Status Report) plus the increase in value over the purchase price multiplied by the average Federal participation plus the Federal participation in the down payment. The computation of the Federal share of real property acquired with long-term debt financing must be computed for each year of grant support in which Federal funds are used to meet all or a portion of the down payment and/or principal on the mortgage.
Real Estate Appraisals
If a real estate transaction funded in whole or in part by NIH requires the use of a real estate appraisal (including, but not limited, to appraisals to determine the Federal share of real property and appraisals to determine required insurance levels), the appraisal must be performed by appraisers certified or licensed by the applicable State in accordance with the requirements established by Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), as amended (Public Law 101-73).
Notice of Federal Interest
In order to protect the Federal interest in real property that has been constructed or has undergone major renovation with NIH grant funds, grantees shall record a lien or other related notice of record (Notice of Federal Interest) in the appropriate official records of the jurisdiction in which the property is located. The time of recordation shall be when construction or renovation begins. Fees charged for recording the Notice of Federal Interest may be charged to the grant (see "Allowability of Costs/Activities—Allowable Costs/Activities" in this section).
Immediately upon completion of construction, nongovernmental grantees shall, at a minimum, provide the same type of insurance coverage as they maintain for other property they own, consistent with the minimum coverage specified below. "Completion of construction" means either the point at which the builder turns the facility over to the grantee (e.g., the date of the final acceptance of the building) or the date of beneficial occupancy, whichever comes first.
Federally owned property provided to a grantee for use need not be insured by the grantee. If title to real property acquired with NIH grant funds vests in the grantee, the following minimum insurance coverage is required:
- A title insurance policy that insures the fee interest in the real property for an amount not less than the full appraised value of the property. When the Federal participation in the construction of real property covers only a portion of a building, title insurance should cover the total cost of the facility in order to prevent liens on the unsecured portion from having an adverse impact on the portion with a Federal interest. In those instances where the grantee already owns the land, such as a building being constructed in the middle of a campus setting, in lieu of a title insurance policy, the grantee may provide evidence satisfactory to the NIH awarding office, such as legal or title opinion, that it has good and merchantable title free of all mortgages or other forecloseable liens to all land, rights of way, and easements necessary for the project. In instances where a grantee is given land by the State, if the State recently acquired the land in a land swap transaction, the grantee that is then given the land should obtain title insurance. However, if the State has owned the land for a considerable period of time, title insurance would not be necessary, and a copy of the State documents giving the land to the grantee would be sufficient. If the grantee must buy the land on which to build, a legal opinion would not be sufficient, and title insurance must be obtained in order to protect the Federal interest in the building to be constructed.
- A physical destruction insurance policy that insures the full appraised value of the facility from risk of partial and total physical destruction. When the Federal participation in the construction or renovation of real property covers only a portion of a building, the insurance should cover the total cost of the facility, because any damage to the building could make the building unusable and could thus affect the Federal interest. The insurance policy is to be maintained for the duration of the Federal interest in the property (usually 20 years) (see "Real Property Management Standards—Use and Disposition" in this section). The cost of insurance coverage after the period of grant support must be borne by a source other than the grant that provided the funds for the construction or renovation. The grant account will not remain active for this purpose.
Within 5 days of completion or beneficial occupancy, the grantee shall submit, to the GMO,
a written statement signed by the authorized organizational official certifying that the
grantee (1) has purchased the required insurance policies on the NIH-funded facility, and (2)
will maintain the insurance coverage at the full appraised value of the facility throughout
the period of Federal interest as specified in the NGA.
The NIH IC may waive one or both of the requirements above upon a showing that the grantee
is effectively self-insured against the risks involved. The term "effectively
self-insured" means that the grantee has sufficient funds to pay for any damage to the
facility, including total replacement if necessary, or to satisfy any liens placed against the
facility. If the grantee claims self-insurance, the grantee must provide to NIH a
certification that it has sufficient funds available to replace or repair the facility or to
satisfy all liens. This certification should state the source of the funds, such as the
organization's endowment or other special funds set aside specifically for this purpose.
ALTERATION AND RENOVATION COST ESTIMATE OUTLINE
This is a suggested format and is not to be construed as a required form.
Estimate the costs in which the Federal Government is requested to participate
2. General alteration and renovation $________
(e.g., carpentry, masonry, painting)
3. Plumbing $________
4. Heating, ventilation, and air conditioning $________
5. Electrical $________
6. Architect's and engineer's fees $________
7. Other costs (specify) $________
8. TOTAL A&R COSTS (To Federal Government)
9.Fixed equipment $________
EXHIBIT II-1 (Continued)
LIST SOURCE AND AMOUNT OF FUNDS FOR TOTAL ALTERATION AND RENOVATION PROJECT:
NIH SOURCES AND AMOUNTS ALL SOURCES AND
Total gross square meters/feet of floor area in alteration and renovation proposal
Estimated cost per gross square meter/foot excluding fixed equipment
Total net square meters/feet of floor area in alteration and renovation proposal
Estimated cost per net square meter/foot, excluding fixed equipment