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Managing Consultant Contracts

Managing Consultant Contracts Project Classification
Capital Improvement Projects Safety Projects Asset Management Projects Maintenance Projects
1. When Does KYTC Use Consultants x x x x
2. Scope Determination x x x
3. Other Scope Items x x x
4. Consultant Management During Project Development x x x
5. Pay Estimates x x x x
6. Consultant Evaluations x
7. Close Out and Final Pay Estimate x x x x
8. Quality of Provided Services x x x x
x = Information from the topic may be applicable for the project classification.

1. When Does KYTC Use Consultants?

KYTC uses consultants when it lacks in-house resources and/or expertise to complete work. Collaborating with consultants helps the Cabinet deliver more projects on schedule and with greater technical expertise. Successful completion of projects is only possible if KYTC and consultants build partnerships founded on strong cooperation, robust communication, mutual support, trust, and confidence, and the integrity of the selection process. An understanding of how to effectively manage consultants helps Cabinet Project Managers (PM) deliver projects. 

This series of articles review key activities associated with consultant management, including:

  • Differentiating PM responsibilities and consultant responsibilities to ensure the project purpose and need is met
  • Determining the scope of work and understanding contract documents
  • Advertising for professional services and selecting consultants
  • Managing consultants as they deliver project requirements

Additional guidance can be found in the Professional Services Guidance Manual, the Highway Design Guidance Manual (HD-205) and the Planning Guidance Manual (PL-206).

2. Scope of Work Determination

The first and perhaps most important dimension of project delivery is determining the scope of work and communicating to prospective consultants how much effort is needed to deliver the scope. Establishing the scope of work sets expectations related to the project’s schedule and deliverables and is used to determine the approximate consultant fee.

Definition: The scope of work is all the products, services, and results delivered as part of a project (Project Management Body of Knowledge, p. 561). The PM develops the scope. The following information should be included in a project scope (Highway Design Guidance Manual, HD-202.6.3):

  • Project type, description, and limits
  • Aspects of roadway performance that need improvement
  • Draft purpose and need statement
  • Roadway characteristics
  • Options that may be considered
  • Design criteria
  • Proposed access control
  • Project estimate, programmed budget, and possible funding types
  • Potential environmental impacts and constraints
  • Right-of-way requirements
  • Utility impacts
  • Constructability and maintenance of traffic
  • Number and types of structures
  • DNA Studies, Planning Studies, or other relevant available studies
  • Necessary prequalification services
  • Schedule of proposed deliverables and milestone dates
  • Area map

The Planning Guidance Manual (PL-206.3) includes a similar list for scoping planning studies.

Establishing a complete and clear scope of work before initiating a project ensures KYTC and the consultant understand expectations and can accomplish project goals within the expected timeline while reducing the potential for misunderstandings and conflicts.

The initial scope for most capital improvement projects is typically defined in the Enacted Highway Plan, which outlines a project’s expectations, funding, schedule, and budget. A project in the Enacted Highway Plan is commonly referred to as a promise.

On some projects the scope of work may support the use of single or multiple statewide contracts. Whether statewide contracts are used typically depends on the project schedule and budget, and whether the required prequalification services were included in the advertisement. If the schedule is time-constrained, statewide contracts let the PM issue the notice to proceed for a consultant faster. However, some limitations with this approach must be considered (see the HKP article Utilizing Statewide Consultant Contracts).

The scope of work in the consultant advertisement expands on the initial scope that appears in the Enacted Highway Plan. It typically details engineering services requested by KYTC. Examples of scope items within a preliminary engineering and environmental services project may include: 

  • Gantt chart with scheduled milestones
  • Preliminary Line and Grade plans
  • Existing ground survey
  • Conduct public involvement
  • Traffic and safety analysis
  • Develop construction cost estimates
  • Identify right of way and utility impacts
  • NEPA documentation
  • Develop Design Executive Summary
  • Risk Analysis Matrices
  • Prepare Drainage Folder/Advanced Situation Folder

For capital improvement projects, a best practice is to include a statement in the advertisement that indicates a contract modification may be used to advance the project to final design after preliminary engineering is finished. This affords the project development team (PDT) the flexibility to continue with the current consultant, perform work in-house, utilize a statewide contract, or advertise for a new consultant to deliver the final design deliverables.

3. Other Scope Items 

Because many sources of knowledge are needed to develop an initial scope, the PM must anticipate what types of expertise are required to deliver the project. For example, on a typical roadway design project, a consultant specializing in roadway design is needed. KYTC will also likely require expertise on geotechnical issues, environmental concerns, traffic, and structures to deliver all aspects of the project. The PM must communicate with different User Divisions and subject-matter experts (SMEs) to determine if their expertise will be required.

In-house capacity and expertise dictate how KYTC completes the work. Options include:

  • Performing the work in-house
  • Utilizing a Division’s on-call contracts (statewide contracts)
  • Including work in the project advertisement

The PM may choose more than one of these options on a project. For example, a PM may elect to use in-house services for the geometric design and geotechnical investigations but opt for statewide contracts to perform services for which there may be limited resources, such as traffic modeling.

The PM determines required prequalifications for work included in the project advertisement (see Selecting a Consultant). Some scope items may be included in the initial advertisement as contingent prequalifications. These prequalifications are not required within the initial proposal as it is uncertain as to the extent practicable if they are necessary. Should the need for these services arise during current or future phases of project delivery, the selected consultant team must obtain the required qualifications before providing those services or bring on a prequalified subconsultant at that time.  If that requires the addition of a subconsultant to the team, the subconsultant must be approved by KYTC.

As project complexity and difficulty increases, PMs should consider whether to retain other types of professionals. Decisions about what forms of expertise are needed should be made in consultation with user divisions and SMEs. For example, communication with the public is critical on many projects. If the PDT decides a project warrants special attention to communication (e.g., social media, outreach), KYTC should consider using public involvement and/or communication professionals to leverage the power and reach of different media outlets. Advertisements must describe all the specialized engineering resources needed (e.g., traffic modeling and simulation, visualization techniques, tolling expertise).

Red Flag

Any prequalified service which is not included in the advertisement will not be permitted on the contract. If it is possible that a prequalified service will be needed for the project, it should be included in the advertisement. However, including prequalified services that are not needed could limit consultant competition.  It is imperative that the PDT and Professional Services balance the merits of bundling prequalification services while not overburdening consultant’s response.

4. Consultant Management During Project Development

Once the KYTC PM and the PDT are in place and a consultant has received a notice to proceed, KYTC’s foremost goal is project delivery. The PM is responsible for delivering the overall project. Consultants are team members who deliver the scope of work agreed upon in their contract and must appease the PM. A PM should not ask consultants to deliver more effort than they are obligated to under the terms of their contract and should allow reasonable production-hours to complete the services. A good consultant provides deliverables on time and at the level of quality that has been agreed to in the contract and within an expected fee for engineering services.

Clear and consistent communication between the PM, PDT (including all SMEs (i.e., environmental, structural, planning, traffic)), and consultant is imperative for ensuring all parties deliver products on schedule and meet project milestones or scheduled deliverable dates. Managing milestones is a key part of project delivery and maintaining the project’s critical path. The HKP article Project Schedule and Development of Milestones lists common milestones that apply to most capital improvement projects. PMs can use one of KYTC’s milestone lists, but they also have the authority and flexibility to add/subtract specific milestones.

A good resource for managing consultants and milestones is the Consultant Monthly Report (CMR).  Consultants submit this report each month and attach it to all pay estimate submissions. The first CMR for a project must include a milestone page which lists all milestones specified in the consultant’s contract along with departmental obligations and other items on the project’s critical path (e.g., timeframes for outside review). A milestone page should also be included in the CMRwhen milestone dates are changed or have been met. Milestones must specify a date, unless the milestone is not required — in which case, indicate the date is Not Required (NR).

The consultant provides statements that report progress and mention actions required of KYTC (e.g., Conceptual Design Report submitted June 10 – awaiting approval.) PMs should issue a response to this information within one week of receiving it and indicate actions the consultant needs to perform. A chronological order of events should be provided in the History and Project Documentation listing at the back of the CMR. If necessary, the consultant or the PM can include attachments on additional pages. Once both parties address outstanding items, the PM approves the CMR and sends copies to the consultant, Location Engineer, and relevant KYTC divisions and branches (e.g., submit the discussion of environmental issues to the Division of Environmental Analysis).

The Cabinet PM must prioritize building a strong relationship with the consultant PM. A good relationship — combined with direct and routine communication — is just as valuable as a CMR for managing consultants. Maintaining good communication is critical for making progress, hitting milestones on schedule, and determining whether KYTC staff are meeting their responsibilities.

Cabinet PMs oversee many projects at the same time, which makes it challenging for them to provide the level of attention individual projects need. Making the consultant responsible for as much of the project as possible is an advantageous strategy. However, this may not be possible if KYTC needs to use in-house resources. A reliable consultant PM facilitates the Cabinet PM’s job and works to ensure projects are delivered on time, within budget, and at the expected quality as promised. The consultant PM must understand their responsibilities and demonstrate they can deliver on their obligations. The Qualifications Based Selection (QBS) process helps ensure this occurs. For more information, see Consultant Evaluations below.

Red Flag

The consultant PM is a key member of the project team. Often, KYTC selects a particular consultant based on the consultant PM. A consultant should not change their PM without Cabinet approval. However, KYTC or the consultant may strengthen the consultant team by adding a new subconsultant if the Cabinet PM approves the change and the new firm is prequalified in the necessary service area(s).

5. Pay Estimates 

The consultant routinely submits pay estimates as progress is made (typically every month) using the Engineering and Engineering Related Services Pay Estimate (TC 40-408) form. The form includes specific pay estimate instructions. The Personal Service Contract (PSC) invoice form must be submitted with each invoice. 

The CMR is attached to the pay estimate. The original contract and subsequent contract modifications specify maximum payment percentages at corresponding project milestones. The PM is responsible for determining if the pay estimate is consistent with progress described in the report and project milestones. The pay estimate should only be approved for the portion of work completed. If the pay estimate is consistent with the CMR and PSC, the PM emails the pay estimate and supporting documentation with appropriate signatures and statements of approval to KYTC’s consultant estimate accounts group for further payment processing. For more information see the HKP article Reviewing a Pay Invoice.

6. Consultant Evaluations 

Throughout project development PMs should communicate performance-related concerns or issues to the consultant. This gives the consultant the opportunity to adjust and improve. PMs overseeing capital improvement projects formally evaluate consultant performance at designated milestones (e.g., conceptual design approval, joint inspection approval, contract plan submittal).

To facilitate continual communication and evaluation, PMs may reasonably expect to receive partial products and intermediate design details in formats that allow for timely review and feedback. Each Division has its own methods for evaluating consultants. The Location Engineer and PM, possibly with input from the SMEs, complete independent evaluations for consultants working in different disciplines at different stages of project development. When completing evaluations consider items such as:

  • Consultant pay estimates and monthly reports
  • Design Executive Summary
  • Value Engineering Studies
  • Quality and timeliness of required submittals
  • Adherence to project budget
  • Meeting documentation

Evaluation forms and instructions are available on the Division of Highway Design’s intranet website.

The PM can justify and contextualize scores (e.g., degree of project complexity) in the evaluation’s comments section. Once the consultant receives the evaluation, if they disagree with the assessment, they may request an appeal within 30 days through the director of the Division of Highway Design. The director then discusses the evaluation with the PM, Location Engineer, and/or appropriate SMEs to determine whether a reevaluation is warranted. If applicable, the director communicates reevaluation results to the consultant.

Performance evaluations are also submitted for some projects developed through statewide contracts. Depending on the type of contract, they may be completed at the conclusion of each Letter Agreement or at the end of the contract term. These scores provide valuable feedback to the consultant and greatly assist future selection committees by demonstrating the strength of incumbent consultant(s) currently providing services on similar contracts.

Red Flag

One evaluation factor used in the QBS process is past performance. Consultant selection committees can access all relevant performance evaluations, which can significantly impact consultants’ abilities to win new projects. It is extremely important that a PM provides honest and constructive feedback during project development to ensure that consultants deliver products whose quality meets KYTC expectations. This also provides opportunities for consultants to improve the overall quality of their deliverables and services.

7. Closeout and Final Estimate  

For projects with construction lettings, the closeout process may begin when the construction contract is awarded. On projects with different final deliverables (e.g., bridge inspections), the closeout process begins with the agreed-upon final submittal.  The PM may leave the contract open during construction if design tasks are possible during construction.

Some contracts may automatically close based on their end date in the eMARS accounting system, which is one year after the final milestone. Contracts will also close each fiscal year if the remaining balance in eMARS is less than $1,000. When a contract requires additional work, the PM must tell the consultant to maintain a balance of $1000, if possible.

Once a project is complete, the PM submits final pay estimates with documentation to the Location Engineer so they can complete the Consultant Closeout Form. The Location Engineer uses this form to check that all deliverables have been submitted and that all necessary approved documents (Final Drainage folder and Pavement Design folder) are in ProjectWise. The Location Engineer reviews and submits the final pay estimate to the Division of Professional Services for final closeout.

If remaining encumbrances are not spent, the consultant should send a letter that states all work is complete and that no additional charges will be made. This may not apply to most lump sum contracts, but the situation is more common with cost-plus-fixed-fee, estimated unit price, or specific rate of compensation contracts. For example, if a project’s geotechnical work is not billed at 100 percent in a lump sum contract, a copy of the final geotechnical project charges and work performed should be submitted with the letter.

If the budget has a negative balance the PM must submit a funding request to the Division of Program Management before the final payment can be made. The funding request should be enough to cover the negative amount. This situation typically arises due to in-house charges because the consultant contract had funding encumbered when contract was signed.  For more information, refer to the HKP article Project Cost Estimation and Management, Section 3.2 (Project Cost Management and the Role of Budgets).

Upon receipt of the final pay estimate, the PM and Location Engineer must submit final consultant evaluations. For project-specific highway design contracts, the consultant’s final rating is the average of PM and Location Engineer’s scores. The Transportation Engineering Branch Manager of the Roadway Design Branch sends the Final Consultant Evaluation to the consultant along with a letter noting the average rating.

The Roadway Design Branch also notifies the Division of Professional Services of the scores, that the consultant has completed all project work, and that no further charges are needed. Each statewide letter agreement is reimbursed, although statewide master agreement contracts are not closed until all assignments under the contract are complete. When applicable, PMs should request that the design phase program be closed once payment is made. Before cost-plus contracts are closed out, the Division of Professional Services must advise the Office of Audits External Audits Branch Manager to audit the contract for any necessary cost adjustments. Although not required, the Office of Audits also currently provides audits for some lump sum contracts. These post-audits help understand trends across the Cabinet and for specific firms, provide a sense of accuracy of previous negotiations, and help negotiate future services.

Use the following checklist to close out a consultant contract.

Checklist to close out a consultant contract
Criteria Complete? (Y/N)
All work has been accomplished and products delivered
• Determination made by the PM and/or Location Engineer after conferring with all appropriate Central Office divisions (e.g., Highway Design, Structural Design, Environmental Analysis, Geotechnical Branch).
All necessary consultant evaluations
Audit of cost-plus contracts by Division of Professional Services
All payments processed

8. Quality of Provided Services

KYTC has adopted several practices to ensure that consultants and subconsultants provide high-quality service. A prequalification process (see the HKP article Selecting a Consultant) verifies that a consultant has the experience and resources needed to perform a service. The RFP, consultant’s scope of work, consultant’s contract, pre-design conference or scoping meeting minutes, and other meeting minutes should inform the consultant of the standards and expectations. Regular communication throughout project development between the KYTC PM and the consultant PM also helps to ensure the Cabinet receives the expected quality of service.

In addition to the project team’s review, a Constructability Review (CR) of plans and estimates may minimize the need for expensive change orders that result from design errors and omissions and to evaluate the buildability of record plans before letting.

To maximize the benefits of Constructability Reviews, the review should occur at key stages of the design process. The PM may contact the Quality Assurance Branch in the Division of Highway Design to request a review. The Quality Assurance Branch also facilitates post-construction reviews, the goal of which is to better understand how the design process and design standards can be improved so that errors and omissions are minimized.

A consultant evaluation completed by the Cabinet PM should accurately reflect the quality of service provided by a consultant. PMs can reference a database of consultant evaluations when deciding on a consultant for future projects.

9. Associated Articles

10. Reference Documentation 

Administration of Consultant Contracts Knowledge Book:

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