Should You Reduce the Amount of Payment and Performance Bonds?

Most public agencies require that contractors submit a Payment Bond for 100% of the contract amount, and a separate Performance Bond for 100% of the contract amount.

Can Bond Amounts Be Reduced?  The amount of the bonds is generally regulated by state or local laws.  Sometimes, these laws will permit a public agency to reduce the amount of the bonds.  For example, in Washington State, RCW 39.08.030 permits cities and towns to reduce the bond amounts to not less than 25% of the contract amount.  If an agency chooses to reduce the amount of the bonds, it should specify the required bond amounts in the bidding documents.

Risks of Reduced Bond Amounts:  There are risks, especially in this difficult economic market, of reducing the amount of Performance and Payment bonds.  In the event of a default by the contractor or their failure to pay subcontractors, suppliers, and workers, the public agency should ensure maximum protection of the taxpayers' assets.

Bond Premiums Not Affected:  When making decisions about whether to issue the bonds to a contractor, bonding companies evaluate the total risk of the project.  Generally, the bond premium that contractors pay to sureties for a reduced bond amount is the same as a bond amount for the full contract price.  So there's really not a lot of reasons why a public agency should reduce the bond amounts.  

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Training: Competitive Public Construction Bidding

Competitive Public Construction Bidding

When:  March 15, 2012 (1:00 p.m. to 5:00 p.m.)

Where:  Seattle, Washington (Crowne Plaza Seattle, 1113 Sixth Avenue)

Agenda (Faculty):

• The Bidding Process (B. Michael Schestopol)
• Alternative Public Project Procurement Process (Rodney S.Eng)
• Insurance Considerations in the Bidding Process (Thomas F. Ahearne)
• Contractor and Municipality Perspectives on Bidding Construction Projects (Dennis P. Greenlee, Jr.)
• Strategies for Bidding Claims (Karin L. Nyrop)

Cost: $325

Information and Registration:  Visit the website of The Seminar Group.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Additional Public Works Legislation Introduced in Washington State

In addition to the bills I noted in my blog from January 16, 2012, the following three bills relating to public works contracting in Washington state have been introduced this session:

Increasing Use of Design-Build on WSDOT Projects:  Second Substitute Senate Bill 5250 would require the Washington State Department of Transportation to use Design-Build on public works projects over $5 million, down from the current $10 million requirement.  The bill would also require WSDOT to report to the legislature each biennium on the performance of Design-Build on its projects.

Limiting Prevailing Wage Complaints:  Senate Bill 6480 would restrict the ability of individuals to file a wage complaint against a contractor a) if an employer paid a prevailing wage rate based on a "previous written determination" of the Department of Labor and Industries or b) if an employer paid the prevailing wage rate as noted on the Affidavit of Wages Paid form.

Requiring Certified Payrolls on Pubic Works Projects:  Senate Bill 6416 is a poorly written piece of legislation that would impose a significant burden on contractors (especially small businesses) as well as public agencies.

• Earlier Submittal of Intents:  The bill appears to require earlier submittal to public agencies of the Statement of Intent to Pay Prevailing Wages from a prior to payment standard to before the agency "finalizes a contract for any public work subject to prevailing wage requirements."  The use of "finalizes" is ambiguous in this context as to whether it means award or execution.  It is also problematic in that many subcontractors are not known at that point in time.

• Payrolls Required Before Payment:  The bill would also require public agencies to require electronic certified payroll records from the contractor and all subcontractors prior to making any payment to the contractor.

• Agencies Must Publish Payrolls:  The bill would require public agencies to publish the payrolls on a "publicly accessible database" after deleting the Social Security numbers of the workers.  Agencies would also have to forward a copy of the unredacted payrolls to the Department of Labor and Industries.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Pennsylvania Town Reverses Public Works Apprenticeship Requirements

The Plymouth Township Council voted on January 23, 2012 to repeal its previously adopted "responsible bidding" ordinance that required all public works exceeding $25,000 be performed only by contractors with an approved apprenticeship program.

Quality of Work or Union Favoritism?  The Pennsylvania town originally had approved the ordinance to help ensure qualified workers on public projects.  Some, however, charged that the requirements, favored union contractors.  With the Council now controlled by Republicans, the ordinance adopted when Democrats had a Council majority, was repealed.  

Project Delays:  Council Chairman Sheldon Simpson, speaking in favor of the repeal noted that "We've heard people testify that they cannot get an apprenticeship unless they are in a union.  And now, we can't wait more than 30 days, in order to keep the project rolling."

More Information:   

• Click here to read a news article from The Times Herald on the repeal of the apprenticeship requirement.

• Click here to read the minutes of the Council meeting from July 12, 2010 when the original ordinance was adopted.  These minutes include comments from the public who testified about the ordinance.

Washington State Apprenticeship Requirements:  In Washington state, RCW 39.04.320 requires that certain public agencies must require contractors to use 15% of the labor hours on public works projects over $1 million with apprentices enrolled in a state approved apprenticeship training program.  The agencies under this requirement are

• State Department of Enterprise Services (formerly General Administration)
• Washington State Department of Transportation (WSDOT)
• All school districts
• All institutions of higher education

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

What's a Supplemental Public Works Contract?

Let's say that almost all of a public works project has been completed, but that there will be a delay before all of the remaining work of the project is completed.  That delay will cause an unreasonable delay in the release of the contractor's retainage.  

Example:  This sometimes occurs when the contract requires a period of time for the contractor to maintain landscaping that has been installed, even though everything else on the project has been completed.  

Releasing Retainage Early:  Rather than wait for all of the work to be completed before beginning the retainage release process, Washington State law has a provision that allows a public agency to establish a separate contract and release most of the retainage before all of the work is completed.

Steps for a New Contract:  Here are the steps from RCW 60.28.011(7):

1. Substantial portion of work has been completed.
2. Public agency finds there will be an unreasonable delay in completing the remaining work (not the contractor's fault).
3. With concurrence of contractor, public agency deletes from the contract the remaining work.
4. Agency accepts as complete the contract minus the deleted work.
5. Agency follows the process for release of retainage on the contract.
6. Agency and contractor enter into a new contract without advertisement or bidding.
7. The amount of the new contract for the remaining work should be for an amount equal to or less than the cost of the remaining work as was provided in the original contract.
8. When the remaining work is completed on the new or supplemental contract, the public agency establishes the final acceptance date and proceeds to release retainage consistent with how retainage is released on all public works projects.

State Law:  Here's the language from RCW 60.28.011 (7):

If the public body administering a contract, after a substantial portion of the work has been completed, finds that an unreasonable delay will occur in the completion of the remaining portion of the contract for any reason not the result of a breach thereof, it may, if the contractor agrees, delete from the contract the remaining work and accept as final the improvement at the stage of completion then attained and make payment in proportion to the amount of the work accomplished and in this case any amounts retained and accumulated under this section shall be held for a period of sixty days following the completion. In the event that the work is terminated before final completion as provided in this section, the public body may thereafter enter into a new contract with the same contractor to perform the remaining work or improvement for an amount equal to or less than the cost of the remaining work as was provided for in the original contract without advertisement or bid. The provisions of this chapter are exclusive and shall supersede all provisions and regulations in conflict herewith.

Mike Purdy's Public Contracting Blog
© 2012 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Checking and Documenting Federal Debarment Status of Vendors

Sometimes public agencies are subject to audit findings, not because they don't know the requirements, but because they don't document compliance with the requirements.

No Documentation of Compliance:  The Washington State Auditor's Office recently issued an audit finding against the Housing Authority of Kittitas County for failure to ensure that a vendor on a federally-funded project was not on the federal suspension and debarment list.

Response from Housing Authority:  The Housing Authority stated that they did check the suspension and debarment status of the vendor in question.  However, they couldn't provide the auditor evidence that they had done so.  They commented that they were unaware they had to retain documentation demonstrating compliance with this requirement.

Check and Document:  Federal suspension and debarment status may be checked by going to www.epls.gov and printing out the results to keep in the contract file.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Job Opening: Purchasing Manager

KCDA (King County Directors Association

• Position: Purchasing Manager

• Location: Kent, Washington

• Closing Date:  Not indicated

• Salary: Not indicated

• Job Summary:  Serve as Purchasing Manager for KCDA, a purchasing cooperative servicing schools and public agencies in Washington, Oregon, Alaska, and Idaho.  Experience in public sector procurement and wholesale distribution.

• For More Information and To Apply:  Contact Judy Bush at (425) 251-8115, ext 126, to request an information packet.
  

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com