Training this Week

Last minute reminder on two training opportunities this week. I will be teaching at both of them.

Training: Improving Construction Planning & Bidding Practices in a Troubled Economy

When: Wednesday, December 3, 2008 (8:30 a.m. to 4:30 p.m.)

Where: Washington State Convention and Trade Center

Cost: $219 (Government agencies); $279 (Private firms)

To register and for more information, click on the sponsor's name here: Contract Solutions Group



Training: Prevailing Wage Law in Washington

When: Thursday, December 4, 2008 (8:30 a.m. to 4:30 p.m.)

Where: La Quinta Inn and Suites, Tacoma

Cost: $359

To register and for more information, click on the sponsor's name here: Lorman Education Services

Releasing Retainage Prior to Final Completion of Work

How do you handle a public works project where there is a small amount of work remaining that won't be completed for a period of time? Do you continue to hold the contractor's retainage on all of the contract, or are there alternatives?

There is a provision in Washington State law that provides a process for a public agency to accept the completed work, release the retainage associated with the completed work, and then enter into a new contract with the contractor for the remaining work without advertising or bidding. The new contract, often called a "Supplemental Contract" would then be closed out in the same manner as the main contract.

RCW 60.28.011 (7) states the following: "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."

If you would like a copy of a sample Supplemental Contract for use in situations as described above, please contact me.

New Prevailing Wage Scopes of Work Adopted

The Washington State Department of Labor and Industries has adopted new scope of work descriptions for three classifications of labor that are subject to payment of prevailing wages. The new scope of work descriptions will appear along with other scope of work descriptions in the Washington Administrative Code (WAC).

The new scope of work descriptions will become effective on January 1, 2009.

The following are the three newly adopted scope of work descriptions, along with the WAC number:

• Diver and Diver Tender (WAC 296-127-01316)
• Industrial Power Vacuum Cleaner (WAC 296-127-01334)
• Construction Site Surveyor (WAC 296-127-01396).
  

The actual scope of work descriptions are not yet available online under the WACs. If you would like a copy of the adopted scope of work descriptions, please contact me.

Training: AIA and ConsensusDOCS

AIA and ConsensusDOCS Contract Documents: Comparison and Contrast

Where: Teleconference Training

When: January 12, 2009 (10:00 a.m. - 11:30 a.m. Pacific)

Cost: $199 for registrations by December 8, 2008

Sponsored by Lorman Education Services Agenda:

• 2007 AIA Documents - What is New and Different from prior 1997 Editions
• 2007 ConsensusDOCS - Why and How They Developed, and What They Are
• Comparison and Contrasting of the Principal AIA and ConsensusDOCS Contract Forms
• Subcontract Documents (AIA A-401-2007 and ConsensusDOCS Document 750-2007)
• Functional Comparison of the AIA and ConsensusDOCS
  

Faculty:

• David R. Hendrick
• Stephen M. Phillips

L&I Corrects Elevator Constructor Prevailing Wage Rates

On November 14, 2008, the Washington State Department of Labor and Industries published corrections to the prevailing wage rates for elevator constructors. The wages modify wages that were published on August 31, 2008, and affect a number of counties. In publishing the corrections, L&I noted that the revised wage rates would not become effective until December 14, 2008, consistent with the provisions of WAC 296-127-011.

This thirty day delay in the effective date of the corrections marks an improvement in how L&I administers corrections to prevailing wage rates. Yet to be seen is whether L&I will change the title of the prevailing wage document online on December 14th to reflect that the document includes corrections. Such a change would make inclusion of the correct prevailing wage rates in bidding documents much easier for public agencies.

State Auditor Cites Redmond for Change Orders

The Washington State Auditor's Office issued a finding recently that the City of Redmond did not comply with competitive bidding laws when they issued change orders to two projects that should have been competitively bid.

One project was a $1.7 million sidewalk improvement project. Redmond issued one change order for $140,000 that added two sidewalks in different locations and that were not within the original scope of the project. They issued another change order for $404,000 that also added two sidewalks not in the original scope of work.

On the second project, a $1.8 million contract for the Sammamish River Habitat Enhancement Phase 4 project, the city approved a $146,463.60 change order to landscaping and irrigation that the auditor deemed to be a separate project.

In each case, the auditor asserted that the projects should have been competitively bid as separate projects. In essence, although they didn't use the term, these changes constituted "cardinal changes" to the contract. A cardinal change is a major change in the scope of a project that deviates from the intent of the original concept and general scope of work as approved.

The auditor's criticism was that the city wasn't guaranteed that they received the lowest price on the negotiated change order work (actually an issue with all change orders), and that other contractors weren't enabled to bid on the work as a separate project.

The City of Redmond responded that they issued the change orders for convenience of using the original contractor on-site when additional funding became available.

One tool that the City of Redmond could have used would have been to bid additional segments of the sidewalk project as additive bids. They would have received competitive prices and when funding became available, they could have awarded the additive work (as long as it wouldn't have changed the order of the who the low bidder was).

For a copy of the three page audit report from the State Auditor's Office, click here.

I have prepared a training session on what are appropriate versus inappropriate change orders and issues to be aware of when issuing change orders. Please contact me if you would like to discuss having me provide the training for your agency on this subject.

Bridge Collapse Due to Design Miscalculation

The Minneapolis bridge that collapsed on August 1, 2007 killing thirteen people and injuring 145 others failed due to an error by the firm that designed the bridge, according to the National Transportation Safety Board's final report issued on November 14, 2008. The firm, Sverdrup & Parcel, not in business any more, miscalculated the size of supporting steel plates. For more information on the accident and the report, click here for an article from the Chicago Tribute.

Free Prevailing Wage Training for Contractors

The City of Bellevue is sponsoring a free training session on Washington State Prevailing Wage Law for contractors on Thursday, November 20, 2008. The training will feature staff from the State Department of Labor and Industries and will be held from 9:30 a.m. to 11:00 a.m. at Bellevue City Hall. Contact Mayvis Schwab at the City of Bellevue for reservations: MSchwab@bellevuewa.gov.

Veterans Day

It was on November 11, 1918, at 11:00 a.m. (the eleventh day of the eleventh month at the eleventh hour) that the armistice or peace treaty went into effect that ended what we now know as World War I - what President Woodrow Wilson termed "the war to end all wars."

Since that time, the commemoration of the day has been broadened as a time for us to honor the many men and women among us who have served in our nation's military.

Asking for Competitive Unit Prices with the Bid

Often, a public agency will want to request that bidders submit unit prices to be used in the event of change order work during a project.

If, however, the agency only asks for unit prices that are in addition to the base bid and that have no relationship to whether the bidder is the low bidder, there is little motivation for the bidder to provide competitive unit prices. In fact, the owner could end up paying significantly more for change order work if the bidder includes high unit prices.

If establishing unit prices for potential change order work is important for the agency, unit prices should be competitive. The following sample bid form layout is one way to accomplish that.

					Base Bid $
Item #	Unit Price Description	Estimated Quantities	Unit of Measure	Unit Price	Unit Price Extension
1					$
2					$
3					$
		Total Bid for Award Evaluation Purposes: (Base Bid plus all Unit Price Extensions)			$

Here's how it would work. For bid evaluation purposes, the low bid is determined based on the combination of the base bid amount and the Unit Price Extension amount (which is based on the bidder's Unit Price multiplied by the owner's estimated quantities). However, the owner would only award the project for the amount of the base bid.

Under this scenario, the owner needs to have clear language in the bidding documents describing how the award will be made. I have developed language for bidding documents that can be adapted for any agency to address this type of situation. Please contact me if you are interested in a copy of the language.

Minimum vs. Prevailing Wages

Effective January 1, 2009, the minimum wage in Washington State will increase from $8.07 per hour to $8.55 per hour.

While most prevailing wage rates for most classification and for most counties are above the $8.55 new minimum wage rate, there are some classifications in some counties where the prevailing wage rate will end up being lower than the minimum wage rate.

Generally, public works contracts include a provision that the contractor must comply with all applicable federal, state, and local laws and regulations. Thus, contractors and subcontractors are obligated to pay their workers at least the minimum State wage rate in cases where it is higher than the prevailing wage rate.

Preventing Contractor-Subcontractor Payment Disputes

Subcontractors will frequently ask public agencies what they can do to get paid by a contractor. While this is a contractual relationship between the subcontractor and contractor that the public agency can't directly impact, there are a number of fairly basic steps that a subcontractor can take that may help in getting paid. The following suggestions may be helpful for public agencies in advising subcontractors of how to approach a payment dispute.

1. Research the contractor. To the extent that a subcontractor of any tier chooses to work for a contractor with a poor reputation and history of paying subcontractors, this may negatively impact the subcontractor's financial viability. Therefore, subcontractors should research contractors before choosing to work for them. In addition to checking references of the contractor (talking with other subcontractors who have worked for them), a subcontractor could research the whether the contractor meets the bidder responsibility criteria that public agencies are required to research prior to awarding a public works project. I have set up a webpage on the Resources link of my website that lists the websites of different agencies that have information about contractors (the mandatory bidder responsibility criteria required by RCW 39.04.350).
   
   
2. Written Contract. A subcontractor should ensure they have a clear, written contract or agreement with the contractor about the scope of work, the schedule, and what the contractor will pay.
   
   
3. Invoice. A subcontractor should provide a timely, clear, and written invoice to the contractor when services or a portion of services are complete and the subcontractor is due for payment.
   
   
4. Talk. A subcontractor and contractor should attempt to resolve any payment or performance dispute by talking opening about the issues. It is best when there is open communication early on in the progress of the work and that such communication continues on a regular basis.
   
   
5. Joint Check. Some public agencies will, upon request of a subcontractor and with the written concurrence of the contractor, issue a joint check payable to the contractor and subcontractor. This is sometimes a helpful step, especially when the subcontractor does not trust the contractor.
   

Employees vs. Independent Contractors

In hiring consultants, it's important to make sure they are really independent contractors and not merely consultants that act more like employees of the public agency.

Washington State law [RCW 49.44.170 (1)] addresses this subject and defines what is considered to constitute unfair practices with respect to this issue and payment of employment-based benefits.

There are also federal standards addressing this subject.

Retainage Release Checklist

Before a public agency releases retainage to the contractor on a public works project, certain dates must have passed and certain documents must be on file with the public agency.

I've developed a Release of Retainage Checklist to help track these dates and documents. Keep in mind that some of the items noted on the Checklist may not specifically be required by State law (releases from Employment Security Department and Employer Liability Certificate from Labor and Industries), but, as a matter of policy, it's a good idea to obtain these releases in order to limit the public agency's potential risk exposure.

If you'd like a copy of the Release of Retainage Checklist, please contact me, and I'll be glad to e-mail you a copy.

I also provide training on the release of retainage process and how to handle claims filed against the retainage and payment bond.