United States
Environmental Protection
Agency
September
1984
vvEPA The
Construction
Incentive
Program
For additional information contact:
EPA-OWPO(WH-547)
401 M Street, SW
Washington, DC 20460
(202)382-7370/7369
EPA Region 1
John F. Kennedy Federal Building
Boston, MA 02203
EPA Region 2
26 Federal Plaza
New York, NY 10278
EPA Region 3
6th & Walnut Streets
Philadelphia, PA 19106
EPA Region 4
345 Courtland Street, NE
Atlanta, GA 30308
EPA Region 5
230 South Dearborn Street
Chicago, IL 60604
EPA-MERL (489)
26 West St. Clair Street
Cincinnati, OH 45268
(513)684-7614
EPA Region 6
1201 Elm Street
Dallas, TX 75270
EPA Region 7
324 East 11th Street
Kansas City, MO 64106
EPA Region 8
1860 Lincoln Street
Denver, CO 80203
EPA Region 9
215 Fremont Street
San Francisco, CA 94105
EPA Region 10
12006th Avenue
Seattle, WA 98101
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The Construction Incentive Program
Introduction
Under the Federal Water Pollution Control Act, EPA
has awarded billions of dollars in grants for the
construction of wastewater treatment facilities. In an
effort to minimize these costs, EPA has developed a
program to encourage cost-savings during construction.
The EPA's Construction Incentive (Cl) Program
provides an opportunity for contractors to capitalize on
their construction experience by reducing a facility's
construction costs without compromising its reliability or
performance.
General Program Description
Contractors on EPA construction grant projects are
encouraged to propose changes in the project that will:
• provide at least $50,000 gross capital savings, and
• result in a net savings over the life of the project.
If the proposed changes submitted in a Construction
Incentive Change Proposal (CICP) result in net capital
savings of $1 million or less, the contractor receives
fifty percent of the savings. When the net capital
savings exceed $1 million, the contractor receives
$300,000, plus twenty percent of the savings.
The contractor can propose changes in either
construction techniques or materials at any time during
construction. These changes require the approval of
both the design engineer and the reviewing agency.
Although the Cl program is voluntary, the contractor
may only participate in the program if the Construction
Incentive Clause has been included in the approved
contract documents. The Cl Clause may not be added
to the documents after bids are received on a project.
Conclusion
The Construction Incentive Program provides an
excellent opportunity for municipalities to reduce
construction costs on their projects by sharing the
savings with the contractors.
CICP Examples
Keokuk, Iowa
A CICP in Keokuk, Iowa, involving structural
modifications to the design of a pretreatment facility
produced a gross capital cost savings of 1.3 percent.
The modifications included: (1) the replacement of
drilled piers with driven HP pilings, (2) the substitution
of lightweight vermiculite concrete with a structural cap
for the standard concrete fill, and (3) grit channel
modifications to avoid demolition of existing concrete.
Virginia Beach, Virginia
A CICP for an outfall for the Hampton Roads Sanitation
District in Virginia Beach, Virginia resulted in a 1.5
percent gross capital cost savings through the use of
an alternate construction method for joining the
prestressed concrete pipe.
To assist in the understanding of this program, the
complete EPA Construction Grants Program Cl Clause
has been reproduced below:
CONSTRUCTION INCENTIVE CLAUSE
I. PURPOSE
This clause defines a "construction incentive change
proposal" (CICP) and establishes the policy and
procedures for the application of CICPs in the
construction grant process of the EPA construction
grants program.
II. CICP
A. Definition: A CICP is a formally written proposal
for a change order during the construction of a
wastewater treatment project funded under the EPA
construction grants program. A CICP must be initiated,
developed and identified as such by the contractor or
subcontractor. A CICP must result in a gross capital
savings of $50,000 or more.
A CICP must result in a net capital cost reduction while
causing no increase in the total life cycle cost of the
project and meeting the following conditions.
1. The required function, reliability and safety of the
project will be maintained.
2. The proposed change will not result in any contract
rebidding.
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3. The proposed change must be in compliance with
Section 204(a)(6) of the Federal Water Pollution
Control Act Amendments of 1972 which prohibit
proprietary and restrictive specifications for bids in
connection with construction grant projects.
4. The proposed change will not cause undue
interruption of the contract work.
5. The proposed change must be in compliance with
local permits and regulations.
B. Applicability: All contracts for the construction of
wastewater treatment projects funded under the EPA
construction grants program.
C. Content: A CICP must contain pertinent
information and supporting documents for evaluation by
the involved contracting authority. As a minimum, the
following information should be included.
1. Name of individuals associated with the
development and preparation of the CICP.
2. A detailed description with duly signed plans and
specifications of the present design and the
proposed changes. Clear identification of any
advantages and disadvantages for each change.
3. A detailed procedure and schedule for
implementing the proposed change. This should
include all necessary contract amendments and the
latest date the CICP could be approved for
implementation.
4. A summary of estimated costs to include the
following:
a. project construction costs before and after the
CICP. This should be a detailed estimate
identifying the following items for each trade
involved in the CICP;
1. quantities of materials and equipment;
2. unit prices of materials and equipmentf
3. labor hours and rates for installation,
4. subcontractor and prime contractor
mark-ups;
b. operation and maintenance costs before and
after the CICP;
c. costs for implementing the CICP not included
in item 4a above;
d. contractor's share of the savings based on
paragraph III below;
e. other data as required in the construction
grants regulations for change orders (40 CFR
Parts 33 and 35):
f. time required for executing the proposed
change.
To the extent indicated below, contractors may restrict
the Environmental Protection Agency's and the project
owner's use of any construction incentive change
proposal or the supporting data submitted pursuant to
this program. Suggested wording for inclusion in CICPs
is provided below:
"The data furnished pursuant to the construction
incentive clause of contract # shall not be
disclosed beyond that which is necessary to
accomplish the review, or duplicated, used, or
disclosed, in whole or in part, for any purpose other
than to evaluate change proposals submitted under
said clause. This restriction does not limit the
Government's right to use information contained in the
data if it is or has been obtained, or is otherwise
available, from the contractor, or from another source,
without limitations. If such a proposal is accepted by
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the owner under said contract after the use of the data
in such an evaluation, the United States Environmental
Protection Agency and the project owner shall have the
right to duplicate, use, and disclose any data
reasonably necessary to the full utilization of such
proposal as accepted, in any manner and for any
purpose whatsoever, and have others do also."
The grantee may, subject to approval by the reviewing
agency, modify, accept or reject the CICP. However, if
a CICP is modified or is not acted upon within the
timeframe specified in the CICP, the contractor may
withdraw, in part or in whole, the CICP. In any event,
the grantee will not be liable for the cost of developing
the CICP withdrawn or rejected.
When a CICP is accepted by the grantee, the
processing procedure for change orders should be
used and approval of the CICP by the reviewing
agency is required. When a CICP is rejected, the
contractor may not appeal to the EPA.
III. SHARING PROVISIONS
Construction Cost Sharing
Upon acceptance of a CICP, the contractor will share
the net capital savings pursuant to this contract based
on the formula below. Computation for the net savings
is to be based on the following formula:
Net Capital Savings = (Initial construction cost -
revised construction cost) - (CICP development cost +
CICP implementation cost)
The CICP implementation cost should include, when
appropriate, the consultant's fee for reviewing and
redesigning the changes. However, costs for
processing the CICP incurred by the grantee, and the
reviewing agency are excluded.
The contractor's cost for developing the CICP is limited
to that directly associated with the preparation of the
CICP package. When approved, such costs will be
reimbursed to the contractor. However, any costs which
cannot be satisfactorily substantiated will be rejected
and will not be subject to reimbursement.
Sharing Formula
A. when the total cumulative net capital savings
based on the computation above is $1 million or
less, the contractor will receive 50 percent of the
savings.
B. when the total cumulative net capital savings
exceed $1 million, the contractor's share will be
computed based on the following formula:
y = .2x + 300,000
where
y = contractor's share in dollars
x = total net capital savings in dollars
for example, if the total net capital saving is
$3,572,000:
y = .2($3,572,000) + 300,000
= $1,014.400
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