Tuesday, April 29, 2008

Training - Managing Risk on Your Projects

Managing Risk on Your Projects - training

Sponsored by: American Public Works Association, Washington State Chapter

Program Speakers:

· Beth Andrus, Construction Law Attorney, Skellenger Bender

· John Milton, Director of Enterprise Risk Management, WSDOT

Date: Wednesday, May 21, 2008

Time: 4:45 p.m. to 7:45 p.m.

Location: Rock Salt on Latitude 47, 1232 Westlake Avenue North, Seattle

Registration Fee (includes dinner): $37

Registration Deadline: Wednesday, May 14, 2008

Register online at APWA’s website.

For more information call Keith Nakano at (206) 382-5221.

Program Description: This program will discuss how risk may be managed on your project from a legal and programmatic perspective.

· What kinds of legal risks are prevalent on most projects and what might you encounter?

· How do you manage the risk to avoid claims?

· How does your agency develop its programmatic budget estimate?

· How well does the budget match up with the actual construction cost?

Sound Transit Job - Contracts Officer Needed

Sound Transit is advertising for a high profile Contracts Officer position to act as the head of the Contracts Division at the agency, formally known as the Central Puget Sound Regional Transit Authority. The position was formerly titled as Contracts Manager. The Contracts Division at Sound Transit has 25 employees, and four of these are direct reports to the Contracts Officer. The Division is responsible for construction contracting as well as goods and services.

For more information, visit Sound Transit's website.

Audit Slams King County Emergency Jail Contract

The Washington State Auditor’s Office released an audit on April 28, 2008 criticizing the improper growth by change orders of an emergency contract awarded by King County.

In 2004, King County awarded a $14.2 million emergency contract for work on an electronic security system at the King County jail. Over a five year period, the contract grew in size with multiple change orders to more than $50 million. According to the audit, the change orders were for work unrelated to the original security system that was the basis of the original emergency declaration by the King County Council in 2003. The Auditor's report asserts that King County violated competitive bidding laws through adding the unrelated change orders to the contract.

For the complete audit report, visit the State Auditor’s Office website.

Monday, April 28, 2008

Bidding Book for Washington Cities and Towns

The Bidding Book for Washington Cities and Towns, last updated by the Municipal Research and Services Center (MRSC), provides valuable information.

Here's an outline of their Table of Contents:

  • Bid Limits that Differ by Class of City
  • Exceptions to the Bidding Laws
  • Bid Laws That Apply to All Cities and Towns
  • Purchasing from Other Governments and on Other Governments' Contracts
  • The Bidding Process
  • Other Bidding Issues

Design Build Training

Anatomy of a Successful Design Build Project

Sponsor: Northwest Region of the Design Build Institute of America (DBIA)

Date: Thursday, May 15, 2008

Time: Registration 7:15 a.m., Breakfast 7:30 a.m., Program 7:45 – 9:00 a.m.

Location: The Rainier Club, 820 Fourth Avenue Seattle, WA

Cost: $45 (non-member); $40 (DBIA member)

To register, visit the website of the Northwest Region of the DBIA

Description: In May of 2006 the Washington State Department of Corrections (DOC) issued a design build contract to Hunt/Lydig for the design and construction of the $160,000,000 Coyote Ridge Correction Center Expansion in Connell, Washington. The original scope included the addition of 2,048 medium security beds with associated program space totaling over 560,000 sf. Today, due to Owner requested scope enhancements, the current budget is $188,000,000 and the project is 85% complete with substantial completion scheduled for the end of October 2008.

Across the board, everyone involved with this project, including the owner, the end user, the contractor, and the design team will tell you that this project is a huge success, and a model for the design build process.

14 Questions to be addressed:

  1. Why the DOC selected to use design build for this project?
  2. Why this project has been so successful when others have been challenging?
  3. Who is assuming the multitude of risks associated with the project?
  4. Who led the team throughout the different stages of the process?
  5. What each leg of the stool (Owner, design team, contractor) did to contribute to the success?
  6. What lessons are being learned on this project that will be beneficial to future projects?
  7. What needs to happen to continue the success all the way through building startup commissioning, occupancy and closeout?
  8. When were sub-consultants and subcontractors brought into the process?
  9. When did the owner have the most influence in the design?
  10. When is the right time to let everyone do their job?
  11. How was the design build selection process managed?
  12. How were the selection criteria established and implemented?
  13. How did the user group interact with the design build team throughout the design process?
  14. How did each team member judge the success of the project?

Thursday, April 24, 2008

Washington Construction Law Blog

The law firm of Davis Wright Tremaine publishes a blog on Washington Construction Law.

In their April 5, 2008 blog entry under the category of "NW Blogs" they made the following entry about my blog that you're reading now (Mike Purdy's Public Contracting Blog):

  • "Here's a link to a useful public contracting blog maintained by Mike Purdy at UW."

While I do work at the UW as their Contracts Manager for the Capital Projects Office, I maintain the blog on my own time as part of my consulting business, Michael E. Purdy Associates. It's nice to have Davis Wright, Tremaine take notice of my blog.

I hope you're finding my blog useful. If there are subjects you'd like me to address, please drop me an e-mail or comment on this entry.

Tuesday, April 22, 2008

Mike M. Johnson, Inc. v. Spokane County

You may have heard a lot in recent years about the Mike Johnson case. Johnson was a contractor whose dispute with Spokane County led to a ruling by the Washington State Supreme Court in 2003 on the importance of contractors filing notice and claim documentation with owners in a timely manner, consistent with the terms of the contract. The case has cause a lot of concern among contractors.

If you're interested, you can read the full case at the following website address:
Mike M. Johnson, Inc. v. Spokane County.

Look for legislation to be introduced in the 2009 Legislative session by the AGC. Owners and the AGC are having numerous discussions on trying to craft compromise legislation that will meet everyone's interests.

Articles on Construction Issues

The Seattle law firm of Oles Morrison Rinker and Baker has a web site where they have posted a number of articles on various aspects of construction contracting.

Unfortunately, some of the article are dated and they haven't posted anything new since 2005.

But some of the articles provide helpful information, remembering, of course, that the firm generally represents contractors, so there will be a slant to their advice. Nevertheless, it may be a helpful resource. You can find it at this
Oles Morrison website.

Training on Bonding and Insurance

The good news is that APWA's Contract Administration Subcommittee and the Muncipal Research and Services Center (MRSC) are offering free training on bonding and insurance in May in three separate locations (Everett, Renton, and Camas).

The bad news is that the classes in Everett and Renton are filled up already, with 95 registered for Everett and 74 registered for Renton, both above the capacity of the facilities.

The training in Camas on May 14th, however, still has room for 53 more to register. To find out more information about the Camas class and to register, click here. The class runs from 10:00 a.m. to 2:30 p.m.

If you would need any assistance or separate training on bonding and insurance, e-mail or call me. I've done training on the subjects before and would be glad to tailor training to your agency.

Old Retainage Laws Still on the Books

If you look at the Revised Code of Washington (RCW) related to retainage and prompt pay on public works projects in Washington State, you will note there are a couple of sections that appear to address the same subjects, but have different numbers and slightly different content.

RCW 60.28.010, 60.28.020, 60.28.050, and 39.76.010 only related to public works contracts entered into prior to September 1, 1992. In other words, they're not applicable any longer. If you try to apply these laws today, you'll find yourself out of compliance with state law. RCW 39.04.901 describes how the application of the old and new laws.

The correct versions that you should be reading and applying are RCW 60.28.011, 60.28.021, 60.28.051, and 39.76.011. These are for public works contracts entered into after September 1, 1992.

Unfortunately, these older laws haven't officially been repealed. After more than 15 years, it's probably time to request that the Legislature repeal these old laws and clear up the confusion. The Industry-Wide Subcommittee of the Capital Projects Advisory Review Board (CPARB) has identified this as one of their priority issues for the 2009 Legislative session. Hopefully, the legislation will pass and it won't get lost in the shuffle of other more controversial legislation.

If you have any questions about the application of these correct laws, drop me an e-mail or call me.

Monday, April 21, 2008

Bid Irregularities - Material or Immaterial?

A public owner should reject a bid as non-responsive that is materially different from the requirements of the bidding documents.

An owner may waive an irregularity in the bid as an informality if the irregularity is immaterial.

That begs the question: What constitutes whether an irregularity is material or immaterial?

In a well established Washington State Supreme Court decision from March 1969 (Gostovich v. City of West Richland), the court wrote that “The test as to the materiality of a variance is whether it gives a bidder a substantial advantage or benefit not enjoyed by other bidders.”

How this test of materiality gets applied to particular situations is very much dependent on the specific facts of a case.

Some issues on a public works bid that may result in a non-responsive bid include, but are not limited to the following:

  • Was a Subcontractor's List submitted as required?
  • Was a Bid Guaranty in the proper amount and type submitted with the bid?
  • Was the bid submitted and received by the owner by the deadline?
  • Was the bid form signed?
  • Did the bidder submit a bid price on all required bid items?
  • Did the bidder attend a mandatory pre-bid site meeting?
  • Were all addenda acknowledged?
  • Did the bidder submit documents required by the bidding documents to be submitted with the bid?
Again, depending on the facts, there may be surprising answers to these questions. If you have specific questions about these or any other responsiveness questions, please let me know.

Saturday, April 19, 2008

Final Detail Cleanup Laborer - Prevailing Wage Error

The Washington State Department of Labor and Industries announced on April 18, 2008 an error in their prevailing wage rates published and effective on March 2, 2008 for 14 Washington counties.

The error affects the prevailing wage rate for Final Detail Cleanup Laborer (i.e. dusting, vacuuming, window cleaning; NOT construction debris cleanup).

The correct prevailing wage rate for this classification is $27.11 per hour.

This error affects only the following Washington counties:

Pend Oreille
Walla Walla

If you are a public agency in one of these counties, you may want to review the bidding documents for any project that you bid with the 03-02-08 wage rates. Compare the hard copy of the wage rates that you published in the bidding documents with the corrected $27.11 per hour for Final Detail Cleanup Laborer. In the event you find that any bidding documents included an incorrect prevailing wage rate, it's probably a good idea to issue a no-cost change order incorporating in the correct wage rate.

Wednesday, April 16, 2008

Upcoming Performance Audits

The following is a list of public agencies that the Washington State Auditor's Office plans to conduct a performance audit of in 2008. Performance audits are authorized under the provisions of Initiative 900, approved by the voters in 2005. The Auditor's Office has already issued a number of reports, including those on Sound Transit, the Port of Seattle, WSDOT, and others.

List of 2008 planned performance audits:

  • King County (Construction Management)
  • King County Rural Library District (Construction Management)
  • Washington State University (Construction Management and Administration)
  • Washington Department of General Administration (Capital Projects Management)
  • Seattle School District (Construction Management)
  • Highline, Meade, Richland, Lake Stevens, Pasco school districts (Construction Management)
  • Washington State Department of Transportation (Cost Estimation)
  • Port of Seattle (Comprehensive Operations)
  • Sound Transit (Operations)
  • King County Public Utilities (Operations)
  • Seattle Public Utilities (Operations)
  • Seattle City Light (Operations)
  • Public Utility Districts: Chelan, Grant and Douglas Counties (Construction Management and Operations
  • Washington Department of Social and Health Services (to be determined)
  • Washington Department of Corrections (to be determined)
  • Washington State Department of Transportation's Ferries Division (Capital Budgeting, Planning and Procurement)
  • Multiple state agencies (Complaint processing)
  • K-12 School Districts (Student transportation)
More information about performance audits may be found at the State Auditor's Office website.

Tuesday, April 15, 2008

Contract Centralization vs. Decentralization

Different public agencies have different models for how they handle public works construction contracting and consultant contracting. Some are very centralized with expert contracting staff handling the basic procurement and contracting functions, while others have no staff or very limited resources dedicated to contracting.

Because contracting is a specialized function, decentralization poses a number of risks for an agency, since personnel not in tune with contracting practices and laws may end up conducting bids and solicitations and writing contracts and amendments (or change orders).

There is always a tension between the contracting function and the project management and construction management function. Project and construction managers lean toward speed, working independently of established guidelines, and making the project move forward, while contract administrators serve as a balance to protect the agency’s legal, financial, and audit risks. Often, the time spent doing the bid, solicitation, contract, change order, or amendment correctly in the first place can save the agency significant expense later.

Contracts are written to anticipate and deal with how to handle circumstances if there is a disagreement between the parties or a lack of performance. It's important to think about this and develop contracts that protect the public's best interests.

It’s important to be able to distinguish between what are business decisions that should be made by project and construction management personnel, and decisions that have longer term impacts about the legality of the process or contract. Contracting staff bring valuable expertise to the table in helping to ensure that scopes of work and costs are sufficiently negotiated and documented.

I'd be interested to hear your stories about where your agency fits on the centralization or decentralization spectrum and what you have found to be important factors in dealing with the tensions between expediency and process.

Regional Contracts Manager position with Kaiser Permanente

I recently received information from Kaiser Permanente about a Regional Contracts Manager job they have open in Oakland, CA. The position manages other contracts manager and focuses on construction contracting. The pay goes up to $135,000 a year and may be higher depending on experience. If you're interested in the position, let me know and I can forward the e-mail I received to you, or you can contact the recruiter directly. See the contact information below:

Rose Chang
Kaiser Permanente
1800 Harrison St
Oakland, CA 94612
(510) 625-4481


Thursday, April 10, 2008

Web Conference: Subsurface Claims - Managing Project Impacts of Unexpected Conditions

Course Title: Subsurface Claims - Managing Project Impacts of Unexpected Conditions

When: Thursday, May 8, 2008, 11:30 a.m. to 1:00 p.m.
Where: Your Office or Conference Room (this is a web based training conference)

Cost: Government - $129

Sponsored by: Contract Solutions Group
Co-sponsored by: Washington Cities Insurance Authority

To register and view the course brochure, click here.

Improving integration of geotech reports, plans and contract clauses to reduce subsurface claims
• Reducing the common sources of subsurface condition claims
• Establishing the appropriate level of pre-bid investigation
• Avoiding and resolving claims from perspectives of geotech professionals who represent owners and contractors.

Wednesday, April 9, 2008

Federal Abuse of Credit Cards

In an audit released on April 8, 2008, investigators for the Federal Government Accountability Office (GAO) found significant abuse of credit card transactions by federal employees. Problems included unauthorized purchases, purchases for items that could not be accounted for, inappropriate purchases, and failure to follow procedures.

Last year, federal employees spent $20 billion using the “SmartPay” credit cards that are widely viewed as a means to streamline procurement methods. However, use of government credit cards comes with significant risks if not monitored carefully by supervisors and managers and if insufficient systems are in place for monitoring the use of the credit cards.

Inappropriate purchases uncovered by the federal auditors included payment for lingerie, gambling, iPods, Internet dating services, and a $13,000 steak dinner.

If your agency uses or is considering using a procurement credit card system, make sure that you have adequate systems and management controls in place that include regular reporting, blocking of purchases from certain categories of merchants, and that managers and employees are held accountable for their actions. Government credit cards are a decentralized method of procurement that is convenient, but can be risky, as the audit from GAO found.

For more information about the audit, see the article in the Washington Post.

Tuesday, April 8, 2008

Errors in March 2, 2008 State Prevailing Wages for King County

The originally published Washington StatePrevailing Wage Rates for Public Works Contracts for King County,” effective 03-02-08, contained multiple errors in the wage rates.

On or about March 7, 2008, the Washington State Department of Labor and Industries posted a corrected version of the King County prevailing wage rates to their website that included changes to the wage rates for at least 21 classifications including for the following major classifications:

  • Electricians – Powerline Construction
  • Elevator Constructors
  • Fabricated Precast Concrete Products
  • Industrial Power Vacuum Cleaner
  • Modular Buildings
  • Landscape Construction
  • Plumbers & Pipefitters
  • Power Line Clearance Tree Trimmers

The revised document is also labeled as effective 03-02-08 and there is no explanation from Labor and Industries on the errors on their website. I don’t know if there are similar errors for other counties. You may want to investigate this for other counties.

If you are in King County, you may want to review the bidding documents for any project that you bid with the 03-02-08 wage rates before March 7th. Compare the hard copy of the wage rates with the wage rates included online at L&I’s website now. In the event you find that your bidding documents included the prevailing wage rates that L&I has since corrected, you may want to issue a no-cost change order incorporating in the correct wage rates.

Purchasing Jobs in Pierce County

Agency: Port of Tacoma

Position: Purchasing Manager

Salary: $62,250-$77,813 per year, DOQ.

Deadline: Open until filled. First resume review on April 11, 2008

Click here for job annoucement

Agency: Pierce Transit

Position: Purchasing Assistant

Salary: $35,487 - $47,558

Deadline: April 14, 2008 at 4:00 p.m.

Click here for job announcement

Training: Utility Coordination and Risk Allocation

Course Title: Utility Coordination and Risk Allocation training.

When: Friday, April 18th. 8:30 a.m. to 4:45 p.m.
Where: Washington State Convention and Trade Center (downtown Seattle).

Cost: Government - $219; Private Firm - $279

Sponsored by: Contract Solutions Group
Co-sponsored by: Washington Cities Insurance Authority

To register and view the course brochure, click here.

Summary: Learn how the October 2006 decision by the Washington State Supreme Court in the Scoccolo vs. City of Renton case changed the rules for utility relocation risk allocation.


  • Franchises - Use of Right of Way Issues
  • Case Study - Planning Utility Coordination Efforts
  • Utility Industry Perspectives - Best Practices
  • Contractor Perspectives - Best Practices
  • Design Phase - Best Practices
  • Avoiding and Dealing with Construction Problems
  • Questions and Answers with Panel

Friday, April 4, 2008

Sales Tax Increase for Various Washington Counties

Effective April 1, 2008, there are sales tax increases for the following counties: King, Kittitas, Mason, Spokane, Yakima. The Washington State Department of Revenue publishes quarterly updates to the sales tax rates by county and by city within each county. The chart may be found at the following website address for Local Sales and Use Tax Rates and Changes.

According to Washington State law (RCW 82.14.055), “A local sales and use tax rate increase imposed on services applies to the first billing period starting on or after the effective date of the increase.”

Tuesday, April 1, 2008

What is a Performance Audit?

On April 1st, I attended a training session in Ocean Shores, Washington, sponsored by the Washington State Chapter of the American Public Works Association (APWA) and the Municipal Research and Services Center (MRSC) on issues related to performance audits. In November 2005, the voters of the State of Washington approved Initiative 900 that directed the Washington State Auditor's Office to conduct performance audits of state and local government agencies in the state. The initiative became effective on December 8, 2005. The State Auditor's Office has already conducted a couple of fairly high profile audits, most recently the highly critical audit of the Port of Seattle’s construction management and contracting practices that made front page headlines when it was release in late December 2007. There have also been performance audits on the construction management programs of Sound Transit and the Washington State Department of Transportation (WSDOT). The State Auditor’s Office will continue selecting various public agencies and programs to audit.

Speakers at the training session included a representative from the State Auditor’s Office, a principal from one of the consulting firms hired by the State Auditor’s Office to conduct the Sound Transit and WSDOT audits, and a representative from WSDOT.

Unlike an annual financial and compliance audit, a performance audit looks at issues of economy, efficiency, and effectiveness of the policies, management, fiscal affairs, and operations of state and local governments, agencies, programs and accounts. A performance audit seeks to identify areas of performance that could be improved in order to meet best practice and other criteria standards.

For each performance audit, the State Auditor’s Office identifies objectives for the audit, working in consultation with the agency. For construction management and contracting programs, the State Auditor’s Office is continuing to refine and develop the criteria that currently include the following, but that are adapted for each specific audit:

  1. Over the most recent three-year period ending June 30, 2008, has the entity been effective, efficient and economical at planning, designing and managing the construction projects and construction contracts in order to:
    1. Minimize all costs associated with its construction projects, including but not limited to engineering, land acquisition, environmental review, environmental mitigation, permitting and construction?
    2. Minimize unnecessary change orders and delays that result in extra costs?
    3. Keep projects on schedule?
    4. Minimize risk by identifying it, eliminating it, minimizing it or sharing it with the contractor through good contract terms and contractor management?
    5. Obtain the best quality, timeliness, workmanship and other value?
    6. Minimize building maintenance and utility costs through cost-effective floor and building designs (decreases in future maintenance and utility costs should exceed the additional construction costs necessary to achieve them)?
  1. How effective was the entity at soliciting, procuring and managing its Engineering, Consulting and Construction Management Contracts related to construction projects in order to minimize costs and maximize the value and quality of services provided?
  1. How effective has the entity been at complying with the State’s and its own bidding and procurement requirements?

In preparing for a performance audit, an agency should identify those issues that may become the subject of the audit, evaluate the risks associated with the current practices, identify how the agency currently measures performance, etc. It may be useful for an agency to conduct a pre-audit of its own practices, either with in-house personnel or by hiring an outside consultant to conduct the audit. A pre-audit can help an agency identify areas that need improvement prior to a formal performance audit.

Once an agency has been selected for a performance audit, it’s a good idea for the agency to develop a communications plan for how they will interact with the auditor, elected officials, the public, etc. In addition, the agency should identify resources to help manage the interactions with the auditor.

If you’re interested in more information about performance audits, I would be glad to strategize with you about other key issues to be aware of and to share other information gleaned from the training. The State Auditor’s Office website has a special section with more information about performance audits, including a copy of the audits that have been completed thus far.