Mike Purdy's Public Contracting Blog

State Charged with Public Works Procurement Process Reform

noreply@blogger.com (Mike Purdy) — Wed, 23 May 2012 10:39:00 PDT

Under the terms of legislation approved this year, the Washington State Department of Enterprise Services (DES) will be conducting an ambitious review of the state's current public works procurement processes and will make reform recommendations.

The state's capital budget bill (ESB 6074 - Section 1022) outlined the charge to DES but allocated only $75,000 to complete the quick turn-around study.

Focus of report: Because of the limited funding for the study, DES may concentrate some of its focus on state agencies, although the legislation broadly applies to the state's "current public works procurement processes." The report is required to include historical data on:

Use of change orders
Use of Job Order Contracting
How competitive public works contracts are advertised
Contract closeout procedures

In addition, DES told the Capital Projects Advisory Review Board (CPARB) on May 10, 2012 that the study may address a number of other topics, including the following:

Best value procurement
Use of electronic signatures
Standardizing bidding thresholds for all agencies
Prequalification of contractors on Design-Bid-Build projects

Labor union concerns: The impetus for the study came from the state employees labor union (Washington Federation of State Employees) and the impact that some public works processes are having upon their work. For example, union representatives expressed concern in testimony to the Legislature that some public works change orders are outside the original scope of work of the project and represent work that state employees, and not contractors, should be performing.

Stakeholder input: In developing its report and recommendations, DES may consult with the Capital Projects Advisory Review Board (CPARB) for advice and assistance, and will also solicit input from various stakeholders.

Other concurrent studies: In addition to the study being conducted by DES, two other organizations are conducting reviews of public works contracting, specifically the alternative public works contracting processes authorized by RCW 39.10:

Capital Projects Advisory Review Board (CPARB)

Joint Legislative Audit and Review Committee (JLARC)

Public works legislation in 2013: It is anticipated that next year the Legislature will be reviewing significant legislation addressing public works procurement and contracting procedures:

CPARB: CPARB's intent is to recommend legislation to the Legislature in January 2013. That legislation will take into account recommendations from JLARC as well as CPARB's Reauthorization Subcommittee. It is anticipated that the legislation will make recommendations for certain changes to the GC/CM, Design-Build, and Job Order Contracting laws, and will authorize continuation of these alternative methods beyond June 2013, which is when the current law expires.

DES: DES is required to submit its report to the Legislature and Governor by December 15, 2012, and to include draft legislation to implement the recommendations in its report. This legislation will also presumably be considered by the Legislature in 2013.

Overlap between studies: All three reviews (DES, CPARB, JLARC) will be examining Job Order Contracting processes and practices.

Investigations Target Washington State's Minority Business Office

noreply@blogger.com (Mike Purdy) — Tue, 22 May 2012 08:03:00 PDT

Washington State's Office of Minority and Women's Business Enterprises (OMWBE) is under investigation for potential fraud in how it has certified Disadvantaged Business Enterprises (DBE), which are required to be used on U.S. Department of Transportation funded projects.

Multiple investigations: Not only did KING 5 News run a 20 minute video expose on May 20, 2012 culminating their almost one year investigation, but Governor Christine Gregoire has asked the Washington State Patrol to conduct an investigation to determine whether OMWBE was involved in any criminal abuses of power. And because the DBE goals are used on federally funded transportation projects, the FBI is also investigating. In response to the mounting pressure, OMWBE's Director, Cathy V. Canorro submitted her resignation letter to the Governor on May 9, 2012, with her resignation effective on June 1, 2012.

Questionable DBE certification? KING 5 News tells the story of at least one certified DBE they claim should not have been certified because they are not really owned and operated by a disadvantaged person, and the owner apparently has no construction experience.

Front company? KING 5 News recounts the story of another DBE that didn't perform construction work with their own forces, but subcontracted the work to non-DBE firms, even though their participation on the project was what was used to meet the DBE requirements.

What are the facts? It's a complicated and important issue. If you're interested in finding out the details of the specific companies involved, what former OMWBE investigators had to say, the following are some links with additional information:

KING 5 News Up Front, "Fraud in the DBE," May 20, 2012. This video recounts the results of KING 5 News' investigation

"Wash. official resigns amid allegations of fraud," by Michael Bastasch, May 16, 2012, The Daily Caller News Foundation

Resignation letter of OMWBE Director Cathy V. Canorro, May 9, 2012 to Governor Christine O. Gregoire

What is Ordinary Maintenance and is it a Public Work?

noreply@blogger.com (Mike Purdy) — Mon, 21 May 2012 08:57:00 PDT

What is Ordinary Maintenance and is it a Public Work?

This is one of the most frequently asked questions by those dealing with public works in the State of Washington.

Public Works Definition: RCW 39.04.010 defines a public work, in part, as follows:

What is not a Public Work: Based on this definition of a public work, "ordinary maintenance" is not a public work.

Ordinary Maintenance Definition: So, if ordinary maintenance is not a public work, what is it? WAC 296-127-010 notes that ordinary maintenance is not a public work and defines ordinary maintenance as follows:

Work performed by agency personnel While the definition of ordinary maintenance in WAC 296-127-010 is somewhat long and detailed, the key thing to note in the definition is that ordinary maintenance "is defined as work not performed by contract." The only work that would not be performed by contract is work that is performed with a public agency's own personnel. All other work is done by a contract with a contractor or service provider. Thus, work performed by an agency's own personnel, whether it is regularly scheduled or not regularly scheduled, is ordinary maintenance, and such work is not a public work.

Is Maintenance the same as Ordinary Maintenance? The short answer is that maintenance and ordinary maintenance are different, but that is the subject of another blog posting later.

Summary: Ordinary maintenance is work performed by an agency's personnel and is not a public work.

Training: Public Works Bidding and Contracting

noreply@blogger.com (Mike Purdy) — Sun, 20 May 2012 08:31:00 PDT

2 Day Class on Public Works Bidding and Contracting

When:

June 19-20, 2012 (9:00 a.m. to 4:00 p.m.) - Yakima, Washington (17 seats available)

June 27-28, 2012 (9:00 a.m. to 4:00 p.m.) - Ridgefield, Washington (15 seats available)

Instructor: Mike Purdy

Class Outline:

Types of Contracts
Bidding
Bid Receipt
Bid Guaranty
Bid Responsiveness
Award
Bidder Responsibility
Contract Execution
Prevailing Wages
Construction
Change Orders
Close-out
Alternative Public Works Contracting

Sponsored by: Washington Cities Insurance Authority (WCIA)

Cost:

Free - WCIA Members
$175 - Non-WCIA Members

Information and Registration: Click here.

Is a Bid Guaranty Required on Small Works Roster Projects?

noreply@blogger.com (Mike Purdy) — Wed, 16 May 2012 08:48:00 PDT

Washington state authorizes some public agencies to solicit competitive bids for public works construction projects less than $300,000 without advertising the project in the newspaper. Instead, the invitation to bid is sent to firms on a Small Works Roster maintained by the public agency.

Bid guaranty requirements: Many types of public agencies have requirements for a bid guaranty (usually 5% of the amount of the bid) to be submitted with the bid. Bid guaranties come in the form of either a bid bond, cashier's check, certified check, or cash.

May the bid guaranty be waived? A project bid under the Small Works Roster process of RCW 39.04.155 is not required by state law to have a bid guaranty submitted. This is supported by the following:

Different procedures: RCW 39.04.155 notes that the Small Works Roster is "in lieu of other procedures to award contracts." Thus, even if the state law governing a particular agency type requires a bid guaranty on public works projects, the Small Works Roster procedures may be different.

Electronic bids: It is permissible under the Small Works Roster requirements for a public agency to accept telephone or electronic bids from contractors. If a public agency follows this practice, it would be impossible to accept an enforceable bid guaranty over the telephone or electronically. In other words, a photocopy of a bid bond, cashier's check, certified check, or cash would not be enforceable!

Should telephone or electronic bids be accepted? Even though it is permissible to accept telephone or electronic bids for Small Works Roster projects, without proper controls and documentation, this can be a problematic practice. If an agency does accept telephone or electronic bids under the Small Works Roster process, they should automatically waive the bid guaranty requirement. If the bid guaranty requirement is important to an agency, then bids should be submitted in hard copy format.

How to Respond When a Proposal Price Exceeds the Budget

noreply@blogger.com (Mike Purdy) — Tue, 15 May 2012 08:34:00 PDT

Under a Request for Proposals (RFP) process, often used for selecting consultants and other service providers, evaluation criteria typically include:

Qualifications and experiences of the proposer and staff
Proposed approach to the project
Proposed price

Evaluate and Rate Proposals: Proposals are then evaluated and rated by the public agency, assigning points for each of the evaluation criteria based on the quality and appropriateness the proposal to the project.

3 options: But what happens when the highest ranked firm's price is too high and more than the money available in the budget for the project?

There are three options for addressing this situation:

Award to another proposer: Include language in the RFP alerting proposers that the agency reserves the right to award to other than the highest ranked proposer if their price exceeds the budget. The agency would then look to the second highest ranked proposer to see if their price was within budget. Here's some RFP language that I used in one recent RFP:

Negotiate: Because this is a proposal and not a bid, an agency may discuss the scope of work and price with the highest ranked proposer, and negotiate the price so that it is within the budget available.

Re-advertise: If it appears the proposers did not understand the agency's scope of work and made assumptions that drove the price up, an agency could choose to revise the scope of work and re-advertise the RFP, asking for new proposals.

Connecticut Approves Alternative Delivery Methods for Transportation Projects

noreply@blogger.com (Mike Purdy) — Mon, 14 May 2012 08:19:00 PDT

The Connecticut Legislature has approved legislation authorizing the state's Department of Transportation to utilize both Design-Build and Construction Manager at Risk (CMAR) in its construction projects. Connecticut Governor Dannel P. Malloy is expected to sign S.B. 33.

Only 3 states with no Design-Build for transportation projects: With the new law, Connecticut will join 46 other states that authorize Design-Build for transportation projects. Only Iowa, Nebraska, and Oklahoma do not permit Design-Build for transportation projects.

Construction Manager at Risk (CMAR): This alternative delivery method, also known as CM at Risk, GC/CM (General Contractor/Construction Manager), and CM/GC (Construction Manager/General Contractor), involves selecting the contractor early in the design process based on qualifications and limited pricing (overhead and profit and general conditions costs). The contractor then provides input during design to the engineer or architect and is responsible for the actual construction. Laws vary, but often the contractor selects subcontractors based on a public bidding process and awards to the low bidder.

Design-Build: Under the Design-Build model, the public agency selects one firm under a single contract to both design and build the project. Design-Build provides for a more seamless process and is often faster than the traditional Design-Bid-Build method of public works construction.

State of Washington: The State of Washington permits the use of both GC/CM and Design-Build with various requirements outlined in RCW 39.10. A subcommittee of the state's Capital Projects Advisory Review Board (CPARB) is currently meeting to discuss recommendations for potential changes in the law that will be considered by the Legislature in January 2013. RCW 39.10 will expire in June 2013 unless reauthorized by the Legislature.

More information about Connecticut's law: Click on the following links for additional information about Connecticut's new law:

News Release from DBIA (Design-Build Institute of America), "Connecticut Passes Transportation Design-Build Law"

Fairfield County Business Journal article from May 9, 2012, "Design-build bill awaits Malloy's signature

Job Opening: Manager, Purchasing and Supplier Diversity

noreply@blogger.com (Mike Purdy) — Sun, 27 May 2012 10:01:28 PDT

Port of Tacoma (Washington)

Position: Manager, Purchasing and Supplier Diversity

Location: Tacoma, Washington

Closing Date: May 27, 2012

Salary: $5,517 per month to $7,173 per month

Job Summary: This position manages, administers and controls the Purchasing and Materials Management functions for the Port of Tacoma including operations and maintenance inventory requirements. This position also has responsibility for cultivating and nurturing a supplier diversity program.

For More Information and to Apply: Click here.

Do Your Bidding Documents Address Unbalanced Bids?

noreply@blogger.com (Mike Purdy) — Wed, 09 May 2012 09:02:00 PDT

An unbalanced bid occurs in a unit price bid when the bidder artificially shifts a significant part of the costs for a project from one part of the work to another - to the potential detriment of the public agency.

Why do bidders unbalance their bids? Bidders may unbalance their bids in anticipation that certain units of work may be required during the project with significantly higher quantities than the estimated quantity for a particular unit price bid item. By bidding these unit prices high and other unit prices artificially low, the bidder is gambling and hoping that they can make additional profit on units that will be used more on the project - all the while still maintaining a competitive overall bid price to enable them to be awarded the project.

The problem with unbalanced bids: An unbalanced bid works to the potential detriment of a public agency which may end up spending more on a project because of this strategy of a bidder.

Bidding document language: It is important that bidding documents provide a public agency with the right to reject a bid that is materially unbalanced. Without such language, it may be harder to reject an unbalanced bid. The City of Seattle Standard Specification provides that the City may consider a bid irregular and reject it if:

Resources:

U.S. Department of Transportation. The Federal Highway Administration developed a May 16, 1988 memorandum on "Bid Analysis and Unbalanced Bids."

Seattle construction attorney John P. Alhers has written an excellent treatment of the subject on the blog of his law firm Ahlers & Cressman PLLC: "Unbalanced Bids and Unbalanced Schedules of Value - Hidden Dangers for Contractors and Owners."

Practical tip: Review your bidding documents to ensure they address unbalanced bids.

Job Transition: Alyce Benge Accepts Position in Arizona

noreply@blogger.com (Mike Purdy) — Tue, 08 May 2012 08:12:00 PDT

Alyce Benge, CPPO

A long-time fixture in Washington state procurement circles, Alyce Benge, has accepted a position as the Purchasing Administrator for Arizona's third largest city.

Mesa, Arizona: Alyce will begin her new duties as the Purchasing Administrator for Mesa, Arizona on May 21, 2012. In her new job, she will lead a team of 12 buyers and other purchasing staff.

Leaving Port of Tacoma: Her last day in her current position as the Purchasing Manager at the Port of Tacoma will be May 16, 2012. Alyce is also the Vice President of the Washington State chapter of NIGP.

Career History: Her 25 year career in public procurement has included positions with the Issaquah School District, the State of Washington's Office of State Procurement, the Federal Way School District, Olympic College, and the City of Poulso. She has a degree from the University of Washington.

Best Wishes: Washington state's loss is Arizona's gain! She plans to still attend the 2012 NIGP Forum that will be held in August in Seattle.

Training: Competitive Construction Bidding

noreply@blogger.com (Mike Purdy) — Tue, 08 May 2012 08:02:00 PDT

Competitive Construction Bidding

When: Thursday, May 17, 2012 (1:00 p.m. to 5:00 p.m.)

Where: Portland, Oregon (World Trade Center, 121 SW Salmon, Bldg. 2)

Agenda:

The Bidding Process - Update on the Traditional Low bidding Process

Alternative Public Project Procurement Process

Oregon's Model Procurement Rules, The Model Bidding Code, Bid Protests and Recent Cases

Contractor's Perspective on Bidding Construction Projects

Private Construction Bidding Procurement

Sponsored by: The Seminar Group

Cost: $325 for a single registration. Reduced fees for other categories

Information and Registration: Click here.

Can Price be Used in Selecting Architects and Engineers?

noreply@blogger.com (Mike Purdy) — Mon, 07 May 2012 08:25:00 PDT

In selecting a consultant to provide architectural and engineering services, can a public agency use the proposed price as part of the evaluation and selection process? In most cases, the answer is "no."

State Laws: All but a handful of states have a Qualifications Based Selection (QBS) law. Some of these state laws apply only to state agencies and not local governments, while others apply to both state and local agencies. Click here for a state-by-state list of QBS laws. In Washington State, RCW 39.80 applies to state and local agencies and prohibits the use of price as a selection criterion.

Federal Laws: At the federal level, federal contracts and state and local agency projects funded with federal money are governed by the 1972 federal QBS law, known as the Brooks Act.

What is QBS? Under Qualifications Based Selection, the public agency is required to select the most qualified firm, without the cost or proposed price being requested or being included as an evaluation criterion. The parties then enter into negotiations about the scope of work and cost. In the event that negotiations are unsuccessful, the public agency may then enter into negotiations with the second most highly qualified firm.

What disciplines are covered by QBS? Various state and federal laws define architectural and engineering services covered by QBS differently.

Washington State: In Washington state, RCW 39.80 covers four disciplines under QBS: architecture, engineering, landscape architecture, and land surveying.

Federal Brooks Act: The following is the list of disciplines covered under the Brook Act. It is more expansive than the list of covered disciplines by Washington state law:

Federal Departments: Certain federal funding sources, such as the U.S. Department of Transportation [49 U.S.C § 5325(b)], augment the list of disciplines covered under the federal Brooks Act.

Practical tips:

State Law: Review the requirements of your state law regarding Qualifications Based Selection and what disciplines are covered.

Federal Law: If your project includes federal funds, the Brooks Act will apply. The particular funding agency may have other requirements that expand the list of what is covered by QBS.

Select Based on Qualifications: Ensure that your solicitation document, typically a Request for Qualifications, does not include price as an evaluation criterion.

Learn How to Negotiate: Because most government agencies are typically more comfortable just accepting the low bid, obtain proper training in how to negotiate the cost of architectural and engineering work.

Resources: The American Council of Engineering Companies (ACEC), a strong proponent of QBS laws, has a web page with some good resources describing the purpose and practice of QBS. Click here to visit their QBS resource page.

The Cloud and Public Procurement

noreply@blogger.com (Mike Purdy) — Sun, 06 May 2012 19:05:00 PDT

As technology develops and advances, it impacts how business is conducted - and it may have an impact on public procurement and contracting. One of the emerging trends of technology relates to cloud computing, in which data is stored on remote servers operated by others.

Eileen Youens is a Texas-based attorney and public procurement consultant. I've communicated with Eileen over the years and had the chance to meet her when I was in Texas last year providing consultant advice to a contractor there. Eileen has written a timely, clear, and thought-provoking blog post on "Public Procurement in the Cloud." She addresses the following topics in her article:

Explains what cloud computing is
Addresses how cloud computing might apply to public procurement
Outlines 5 concerns with cloud-based public procurement
Offers 5 suggestions for exploring and implementing cloud-based public procurement

Technology will continue to change how we work. Eileen's blog post is a great introduction to how cloud computing may impact public procurement and contracting in the years ahead. It's worth reading and thinking about. Click here to read it.

Reciprocal Bid Preference Law and GC/CM

noreply@blogger.com (Mike Purdy) — Wed, 02 May 2012 08:08:00 PDT

Does Washington State's new reciprocal bid preference law (RCW 39.04.380) apply to GC/CM projects?

GC/CM Subcontract Bidding: The Department of Enterprise Services (DES) has stated that RCW 39.04.380 does not apply when the GC/CM conducts public bidding for selection of subcontractors on GC/CM projects. I agree with that interpretation.

GC/CM Selection: DES is reviewing their position on whether RCW 39.04.380 applies in the selection of a GC/CM by public agencies. From my review, it doesn't appear that the bid preference law applies to the selection of a GC/CM for the following reasons:

GC/CM Addressed in RCW 39.10: RCW 39.04 addresses Design-Bid-Build projects and thus RCW 39.04.380 is applicable only to Design-Bid-Build projects. On the other hand, RCW 39.10 addresses Alternative Public Works, including GC/CM, and lays out all of the requirements governing Alternative Public Works. The requirements for selection of a GC/CM are outlined in considerable detail and specificity in RCW 39.10.360. Because RCW 39.04.380 does not either directly or indirectly address its applicability to GC/CM projects, there is no basis to assume that the reciprocal bid preference requirements would apply to the selection of a GC/CM. If the Legislature had intended that the reciprocal bid preference requirements should apply to GC/CM selection, they would have been explicit in requiring it, since it would represent a modification to the process outlined in RCW 39.10.360.

Reciprocal Bid Preference is in Conflict with GC/CM Selection Process: RCW 39.10.360 (4) requires that the GC/CM be selected based on what contractor receives the highest number of points from the qualifications and pricing portion of the selection process. Thus, in many instances, the firm submitting the lowest price for the Percent Fee and Specified General Conditions costs is not the firm with the highest number of points, and they are not awarded the project. There is no reference in RCW 39.04.380 that the reciprocal bid preference applies to, or modifies, the clearly defined GC/CM selection process in RCW 39.10.360. Without any explicit reference in either RCW 39.04.380 or elsewhere in RCW 39.10 that the reciprocal bid preference applies to GC/CM selection, application of reciprocal bid preferences to GC/CM selection would be in violation of the requirements of RCW 39.10.360.

GC/CM Selection is Not a "Bidding Process": RCW 39.04.380 (3) indicates that the reciprocal bid preference is applicable to "any bidding process for public works." As noted above, the selection process for a GC/CM is not a bidding process, but is based on a Request for Proposals in which the contractor is selected based on qualifications and very limited pricing (less than 10% of the construction contract amount). In public procurement, there are really two basic models of how selection occurs. First, strict bidding in which price is the only determining factor in selection, used for Design-Bid-Build public works projects, purchase of goods/supplies/materials/equipment, and purchase of some non-consultant services. The second model is one in which selection is based on qualifications only or a combination of qualifications and price through either a Request for Qualifications or a Request for Proposals (RFP). This model is used for selecting architects and engineers, consultant services, and GC/CM contractors. An RFP process is not a "bidding process" as used in RCW 39.04.380, and thus it is not appropriate or correct to apply the reciprocal bid preference requirements to an RFP process, when the law clearly indicates it is to be used only for "bidding processes for public works."

Legislative Intent: In reading the legislative background on RCW 39.04.380, including the summary of committee meetings prepared by committee staff, there is no indication that RCW 39.04.380 was intended to apply to the GC/CM selection process. The Legislature, in adopting Alternative Public Works contracting procedures in RCW 39.10, established an entirely separate framework for the implementation of these alternative methods, including GC/CM.

More Information: It will be interesting to see what DES' position is on whether the reciprocal bid preference law applies to the selection of a GC/CM. Click here for more blog entries about bid preferences.

Free Online Course: Price Analysis, Cost Analysis, or Total Cost of Ownership

noreply@blogger.com (Mike Purdy) — Tue, 01 May 2012 09:48:00 PDT

Free Online Course: Price Analysis, Cost Analysis, or Total Cost of Ownership: Determining the Best Approach

Sponsored by: Institute for Supply Management (ISM)

Cost: Free

More Information and Registration: Click here.

What is a Material Irregularity in a Bid?

noreply@blogger.com (Mike Purdy) — Mon, 30 Apr 2012 09:49:00 PDT

When a bidder fails to submit a required document with its bid, does that render the bid non-responsive, or may the omission of a required document be considered as an immaterial irregularity, and the contract awarded to them?

This is the question that the City of Scranton, Pennsylvania is wrestling with now. Under the City's blight removal program, an invitation to bid was developed for the demolition of 13 homes throughout the city.

Bid protest: After bids were received in February 2012, the City awarded a contract to the low bidder, Shea Demolition, for $121,375. The second low bidder, Scartelli Construction Services then filed a bid protest, alleging that Shea failed to submit its qualifications and a schedule for the work with its bid, as required in the bidding documents.

Internal City dispute: The City Controller ruled that Shea's bid was non-responsive and that the project needed to be re-bid. The City's Office of Economic and Community Development disagreed with the Controller, arguing that the qualifications were not necessary since they knew of Shea's reputation, and that the schedule wasn't critical since the City had provided six months for the work to be completed.

Responsive or non-responsive? Is the City Controller or the Office of Economic and Community Development correct? The Controller's attorney stated that "The law on bidding is clear. Whether the requirements contained in a bid invitation are met is not a discretionary matter." Is he right? It really all depends on the nature of the irregularity in the bid. In this particular situation, without having seen the bidding documents, it appears that the Controller's position is probably correct and that the failure of Shea to submit their qualifications and schedule with the bid is a material irregularity. Whether the Controller's position that the project must be re-bid is correct versus awarded to the second low bidder is a matter of the City's policy and the budget for the project.

What is a material irregularity? How should you make a determination whether an irregularity in a bid is material or immaterial? Generally, the test as to materiality is whether it gives a substantial advantage or benefit not enjoyed by other bidders. Since the City of Scranton required certain documents to be submitted with the bid, these became requirements. A bidder failing to submit them has an advantage or benefit that other bidders don't have. They have additional time because they don't have to prepare their qualifications and schedule. In addition, they have the theoretical advantage of deciding after bids are opened whether to take the project (arguing their bid is responsive) or not (arguing that the irregularity is material and their bid is non-responsive). This is a decision for public agencies only to make.

What should be required with the bid? In order to help decrease the risk of bid protests, and to provide bidders with as much time as possible to prepare and submit their bid, my practice has always been to only require a few documents to be submitted with the bid: the bid form, a bid guaranty, and anything else legally required to be submitted with the bid. Adding other requirements to the bid submission creates a risk of non-responsive bids.

More Information: For more information about the City of Scranton's situation, click here to read an article from thetimes-tribune.com.

Colorado Kills Bid Preference Bill

noreply@blogger.com (Mike Purdy) — Sat, 05 May 2012 15:55:01 PDT

The Colorado Legislature voted down a bid preference bill for public works construction contracts on April 25, 2012.

Details of the bid preference: The bill would have provided a 3% bid preference on service and construction contracts over $1 million for companies proving that at least 90% of the workers were Colorado residents. An additional bid preference of 1% would be added if the company provided health and retirement benefits to their workers, and another 1% bid preference would be applied for firms providing apprenticeship training.

States with bid preference percentages: If the bill had passed, Colorado would have joined Alaska, Wyoming, Nevada, and New Mexico as the only states offering a bid preference on public works construction projects. The State of Washington adopted a reciprocal bid preference law (RCW 39.04.380) that went into effect on March 30, 2012. Click here for blog postings about Washington's new reciprocal bid preference law.

Washington State Resident Hiring Law Unconstitutional: Had Colorado's bill been approved, there would have been discussion as to whether it was constitutional. For many years, the State of Washington had a public works law requiring 95% or more Washington State residents where more than 40 workers were used, and 90% or more Washington residents where less than 40 workers were used. In 1982, the Washington State Supreme Court declared that chapter 39.16 RCW was unconstitutional and violated the privileges and immunities clause of the U.S. Constitution, Article IV, Section 2.

More Information:

Denver Business Journal article of April 25, 2012 - "Bid-preference bill, key piece of Democrats' jobs package, dies in House.

1982 Washington State Supreme Court decision, Laborers Local Union No. 374, et al, Appellants, v. Felton Construction Company, et al, Respondents, click here.

Project Delivery Methods for Public Construction Projects

noreply@blogger.com (Mike Purdy) — Mon, 07 May 2012 14:12:47 PDT

Let's take a look at some of the project delivery methods that are sometimes used for public works construction projects.

Design-Bid-Build: Traditionally, most public works construction projects are advertised and then awarded to the lowest responsible bidder with a responsive bid. This is known as the Design-Bid-Build model, where there is a separate designer, the agency then bids the project, and it is awarded to a contractor to build it.

Rosters: Sometimes, there are variations to the bidding process. The project may be publicly advertised or the plans and specifications may be provided to only a limited number of bidders on a roster. But it's still Design-Bid-Build since bidders are submitting prices for constructing the project based on complete plans and specifications.

Design-Build: In the Design-Build model, the public agency selects one firm to both design the project and to build it. Here are some features of Design-Build:

Ends the blame game: Eliminates a traditional source of contention with contractors blaming the designer for faulty design when things go wrong, and the designer blaming the contractor for faulty installation.

Speed: Can be a fast process for delivering projects.

Requires sophisticated owner: It is a more complex process and requires a fairly sophisticated public agency to manage not only the selection process, but the actual design and construction portions of the work.

Not applicable for all projects: May not be a good project delivery method if the agency and the end users or the public want to have significant input into the design.

Selection process: In some instances, the Design-Builder might be selected based on a combination of qualifications, design, and price, while in others they may be selected only based on qualifications, and then work with the agency during the design process. At the end of design, the parties would negotiate a contract price.

Industry resources: The Design Build Institute of America (DBIA) is an industry association that promotes this method and develops best practices.

Construction Manager at Risk: The Construction Manager at Risk method goes by a variety of different names, including GC/CM (General Contractor/Construction Manager), CM/CM (Construction Manager/General Contractor), CM at Risk, and CMAR.

Preconstruction Services: It is a method in which the agency selects a contractor early in the design process to provide consultant input to the design from a contractor’s viewpoint, and to begin planning the project.

Qualifications and Price Based Selection: The selection is based on qualifications and limited pricing, such as the cost of general conditions work and the contractor’s overhead and profit.

Negotiated Price: When the design documents reach a certain percentage of completion, the agency and contractor negotiate the construction cost.

Subcontractors: In some jurisdictions, there are requirements that all work be competitively bid or that limits the amount of work the contractor may perform with their own forces, while other agencies don’t have such requirements.

IDIQ (Indefinite Delivery/Indefinite Quantity): Job Order Contracting is one form of IDIQ and is a means for agencies to obtain the services of a contractor on an on-call or as-needed basis for construction, maintenance, and repair work without advertising each specific project. Typically, the contractor is selected partially on qualifications and partially based on either unit prices or price markups. Other forms of IDIQ include advertising for bids from contractors to perform on-call work in a specific specialty area (such as electrical or carpentry). Selection is usually based on unit prices.

Public-Private Partnerships: In an era with shrinking public dollars for public improvements, some agencies have successfully tapped into the private sector with creative, “one-off” types of partnerships, in which the private sector contributes financially to the project with the prospect of gaining financially. Examples might include a toll highway built and operated by the private sector, or low income housing projects that benefits from federal tax credits.

Best Value Procurement: In Best Value Procurement, a contractor is selected based on a combination of their bid of complete plans and specifications for a construction project, and also based on their qualifications. Evaluation criteria with maximum points are established for both the bid price as well as specifics about the contractor’s qualifications. As an example, if the bid amount was only worth 15 points out of a total of 100 points, an agency could end up awarding a project to a firm without the low price because they were rated high on their qualifications.

No Competition: Some public agencies have dollar thresholds, below which they are not required to obtain bids for a project, but are free to select any contractor.

Emergency Project: Other times, competitive bidding is waived in the event of an emergency situation when there is not sufficient time to advertise and award a project. Emergencies are usually based on a threat to public safety or health, or a situation which would prevent the agency from performing its essential functions and providing critical services.

Work Performed by Agency Staff: Some public agencies have dollar thresholds, below which their own internal staff may perform public works projects, and that don't have to be competitively bid to contractors.

Other Project Delivery Methods: There are a variety of other project delivery methods, some of which are not used as frequently. These include Multiple Prime Contracts and Integrated Project Delivery.

Regulations and Resources: In assessing the most appropriate project delivery method to use:

Regulations: Review your state and local laws to see what methods your agency is authorized to use.

Staff: Assess your staff resources and knowledge and whether you have sufficient ability to engage in some of the more complex project delivery methods.

Project: Evaluate what project delivery method will be best for a specific project.

Indemnification Law on Public Contracts Amended

noreply@blogger.com (Mike Purdy) — Tue, 24 Apr 2012 08:37:00 PDT

With strong backing and support from the professional design community, the Washington State Legislature approved (with only one dissenting vote) Substitute House Bill 1559 related to indemnification provisions in public contracts. Governor Christine Gregoire signed the bill.

Current Law: The purpose of the current law in RCW 4.24.115 is to establish a standard of concurrent negligence in indemnification clauses. In other words, a public agency may not require a contractor to indemnify the public agency against liability for damages "caused by or resulting from the sole negligence" of the public agency. Instead, it establishes that indemnification is valid and enforceable only to the extent of the concurrent negligence of the contractor and public agency.

Three Changes in Law: SHB 1559 will amend RCW 4.24.115 in the following three areas:

Clarification of covered parties: The existing law states that it applies to a contract "relative to the construction, alteration, repair, addition to, subtraction from, improvement to, or maintenance of, any building, highway, road, railroad, excavation, or other structure, project, development, or improvement attached to real estate, including moving and demolition in connection..." [emphasis added] Many agencies interpreted the phrase "relative to" to include contracts for architectural, engineering, landscape architectural, and land surveying services, even though the language is not explicit. SHB 1559 specifically adds contracts for these four disciplines to the protections provided for in the law.

No duty to defend: One of the regular sticking points in negotiating contracts with designers relates to whether the indemnification provided by the designer covers their duty to defend the public agency in the event of a claim. SHB 1559 explicitly prohibits language in public contracts that includes the duty to defend and the cost of such defense.

Extent of indemnification: The current concurrent negligence standard is only applicable to liability for damages related to bodily injury and property damage. Thus, for any other type of liability, a public agency could apply a sole negligence standard. SHB 1559 changes this. The concurrent negligence framework will expand to cover any liability arising out of any services performed on the contract.

Contracts will change: The bill, which becomes effective on June 7, 2012, will require public agencies to review and change indemnification language included in both construction contracts and contracts for architectural, engineering, landscape architectural, and land surveying services. Indemnification is a complicated area and attorneys are best suited to sort through and develop appropriate contract language. Public agencies should consult with their attorneys for what language may need to change in their contracts.

More Information: Two Seattle area law firms have recently written helpful articles about SHB 1559 that may help in understanding this new legislation:

April 5, 2012 article by Stan Beck and Grant Degginger from Lane Powell PC in the Seattle Daily Journal of Commerce: Design professionals win big in revised anti-indemnity statute.

April 17, 2012 blog by John P. Ahlers of Ahlers & Cressman PLLC: Washington's Anti-Indemnification Statute (RCW 4.24.115) is Amended to Include Design Professionals and Contractors Receive a "Kiss"

Speech on Washington State Legislative Updates - PowerPoint

noreply@blogger.com (Mike Purdy) — Mon, 23 Apr 2012 19:27:03 PDT

On April 19, 2012, I spoke at the Pacific Northwest Chapter meeting of CMAA (Construction Management Association of America) on the following Washington State legislation affecting public works contracting:

2011: Update on Reciprocal Bid Preference law (RCW 39.04.380) - approved in 2011

2012: Bills that passed and didn't pass the 2012 legislative session

2013: Potential legislation to be considered in 2013

Presentation Available Online: Click here to view my PowerPoint presentation.

Conflict of Interest Charges Lead to Bid Protest

noreply@blogger.com (Mike Purdy) — Wed, 18 Apr 2012 05:55:13 PDT

A bid protest was filed on April 5, 2012 with the Charleston (SC) International Airport by the second low bidder on a $150 million passenger terminal redevelopment project.

Inside Information? The basis of the protest is that an Airport board member owns a construction company that is part of the winning contractor's team, and that the board member was inappropriately involved in decisions and had inside information about the project.

Involved in Decision Making for Project? Board member Joey Jefferson, owner of Palmetto Civil Group, LLC, recused himself from the project in a letter dated the date the contract was awarded by the board. However, the second low bidder maintains that Jefferson was involved in a variety of prior meetings related to the project. He was apparently involved in the selection of the architectural firm for the project. It is also alleged that he participated in a meeting that narrowed down the list of bidders and dealt with the contractor selection process.

Unfair Advantage Alleged: The protest letter from Holder Construction Co. notes that

Lessons Learned: While all of the facts have not yet come out, if Mr. Jefferson was involved as alleged, it would represent a breach of ethical standards applicable to public officials.

Public Interests Come First: Elected officials, as well as appointed officials, have a high standard and duty to ensure their private business dealings are not in conflict with their public duties. They must remember that their primary obligation is to the public and not to their own financial interests.

Require Signed Conflict of Interest Statements: A best practice is for anyone involved in contractor or consultant selection to be required to file a signed statement that they have no conflict of interest with any of the competing firms.

Regular Ethics Training: Public agencies should require elected officials and key management personnel to attend yearly ethics training to be reminded of ethical issues.

More Information: Click here for an April 7, 2012 article from The Post and Courrier.

How Long Should Bid Prices be Valid?

noreply@blogger.com (Mike Purdy) — Mon, 16 Apr 2012 11:27:06 PDT

Public works bidding documents should specify how long after the bid submission deadline the contractor must agree its bid price will remain valid.

Factors to consider: What factors should go into a pubic agency's decision on how many days to require that the bid remain valid?

How long will the award evaluation process take? In making a decision on the number of days, factor in how long it will take to:

Evaluate whether the bid is responsive
Address any claim of error by the bidder
Review and tabulate the accuracy of unit price extensions and the total for all bidders
Evaluate the certainty of funding for the bid amount including any additive or alternative bid amounts
Review any criteria in the bidding documents to determine whether the bidder is responsible
Address any potential protests or appeals
Obtain internal approvals from management and elected officials to award
Obtain approval from any funding sources or grant providers (if required)

If you establish a number of days that is too short, the bid price might expire prior to completing some of the steps above.

How much risk is it reasonable to ask the bidder to take? If the bidders are required to hold their prices for too long, the bid prices may come in high, as the bidders will be forced to factor in unknown risks related to subcontractor or supplier price increases.

What state, local, or grant regulations apply? Verify whether there are any state, local, or grant requirements governing the length of time a bid must be valid, or whether there is an agency policy for determining this period of time.

What is the impact on the project's schedule? If the project is on a tight time schedule, a shorter period of time may be appropriate for the bid validity period.

How much time is reasonable? The shortest period of time for bid validity that I've typically seen is 30 days. This seems to provide sufficient time for most projects to go through the bid evaluation process. Sometimes, I've seen 45 or 60 days if there are other factors involved. The longer the time period, the more risk in the bidding process.

Obtain an extension of prices: In the event that the bid evaluation process takes longer than anticipated, or there is a bid protest, pay attention to the clock. If the bid prices are set to expire, contact the bidder(s) and request a written extension of their bid price through a specific date. Include language in your bidding documents that you reserve the right to request this. The bidder, of course, is not obligated to extend their prices. If the bids expire for whatever reason, the project will need to be re-advertised.

April 30 Deadline for Early Registration for 2012 NIGP Forum

noreply@blogger.com (Mike Purdy) — Sun, 15 Apr 2012 20:08:00 PDT

After Monday, April 30, 2012, the registration fee for attending the 2012 Annual NIGP Forum in Seattle, will increase.

What: The Forum is the largest North American educational conference exclusively for individuals in public procurement, and is sponsored by the National Institute for Governmental Purchasing.

When: The Forum will be held from August 18-22, 2012.

Information and Registration: For more information about the Forum, including fees and registration process, visit NIGP's website.

New Apprenticeship Compliance Regulations Adopted

noreply@blogger.com (Mike Purdy) — Wed, 11 Apr 2012 09:15:00 PDT

The Washington State Department of Labor and Industries adopted new regulations at the end of 2011 establishing a process for investigating contractor violations of apprenticeship program standards relating to the ratio, supervision, or approved work processes.

Applicability: The new regulations in WAC 296-05-015 were adopted on December 31, 2011. They apply to the compliance requirements of RCW 39.04.350 (for bidder responsibility) and RCW 39.12.055 (for debarment).

Bidder Responsibility: One of the mandatory bidder responsibility criteria of RCW 39.04.350 for public works projects applies only to the following agencies who are subject to the apprenticeship requirements of RCW 39.04.320 on public works projects:

State Department of Enterprise Services (formerly General Administration or GA)
Washington State Department of Transportation (WSDOT)
Institutions of higher education
All school districts

RCW 39.04.350 (1)(e) states that a bidder on a project for one of the above-named agencies will be found to not be a responsible bidder if they been

Debarment: Separate from the mandatory bidder responsibility requirement above, RCW 39.12.055, which is part of the prevailing wage law, states the conditions under which a contractor may be debarred for a one year period of time. One of the three violations that may subject a contractor to debarment relates to a determination by the Washington State Apprenticeship and Training Council that the contractor is out of compliance

Nature of Apprenticeship Violations: Under both the bidder responsibility and debarment laws noted above, the violations of apprenticeship standards relate to:

Working apprentices out of ratio: Each separate apprenticeship program approved by the Department of Labor and Industries has an approved ratio of how many apprentices may work at any given time on a project based on the number of journey-level workers present. For example, if the program standards require that there be no more than one apprentice for every two journey-level workers, but the contractor has two or more apprentices working with a crew of two journey-level workers, the contractor would be out of compliance with the ratio.

Working without appropriate supervision: Program standards for each apprenticeship program require certain levels of supervision for apprentices. At its extreme, for example, if an apprentice was working alone on a project without any supervision, that would be a violation of the supervisory standards, and probably the ratio standards as well.

Working outside approved work processes: Apprentices for a particular trade may perform duties related to that particular trade as defined in the program standards of the Department of Labor and Industries and the prevailing wage work classifications. Performing work outside of what an apprentice is authorized to work on would be a violation of the apprenticeship standards.

Due Process: The new regulations in WAC 296-05-015 describe the due process requirements of the Washington State Apprenticeship and Training Council in investigating allegations and making findings that a contractor is out of compliance with apprenticeship standards.

Public Notice: The new WAC states that a list of those found out of compliance will be made "available to the public upon request." Presumably, and hopefully this means that the Department of Labor and Industries will, for debarment purposes, include such violations on their existing online debarment list for violations of prevailing wage, workers compensation, and contractor registration requirements. The new WAC, however, is not clear on this point.

Training: Construction Change Order Pricing

noreply@blogger.com (Mike Purdy) — Tue, 10 Apr 2012 09:49:00 PDT

Construction Change Order Pricing: This training will feature a representative of the Washington State Auditor's Office, reviewing the findings from a recently released audit on Construction Change Order Pricing by public agencies. The training will include a presentation by a contractor, and there will be a panel discussion with the auditor, contractor, and a public agency.

When:

May 3, 2012 (Renton, Washington)
May 10, 2012 (Camas, Washington)
May 17, 2012 (Everett, Washington)
May 22, 2012 (Yakima, Washington)

Times: 10:00 a.m. to 3:00 p.m.

Cost: Free

Sponsored by:

Presenters:

Chris Cortines, CPA, Deputy Director of Performance Audits, State Auditor's Office
Mike Myette, P.E., President, MM Construction Consulting, LLC
Linda Shilley, Contract Administrator, Port of Olympia

More Information and Registration: Click here.