Online Bidding Gains Ground

While I haven't investigated much, online bidding appears to coming into more use. Bid Express - Online Bidding Exchange is one company who provides the infrastructure for this type of bidding.

As of September, the Washington State Department of Transportation (WSDOT) will be using the online bidding capabilities of Bid Express. Contractors pay a monthly subscription fee for use of the system. For more information, visit WSDOT's information flyer on this transition. Another resource is WSDOT's webpage with Bid Express.

WSDOT will be conducting training for contractors on August 10, 11, and 12, 2009. Interested contractors should contact Kari Slusser at slussek@wsdot.wa.gov/ or by phone at (360) 705-7837 to register for the training.

Symposium for Architects

A symposium on "The New Reality: Expanding the Architects Role through Outreach, Innovation, & Collaboration" will be held in Seattle from September 14-16-2009 at the Fairmont Olympic Hotel.

Find out how architects are redefining the scope, capacity, and relevance of their practices.

Visit the website for the symposium at http://reinventionconf.com/.

Click here to view a flyer on the symposium.

Early registration fee ends August 3, 2009.

Addendum Template Adopted

The University of Washington has published an Addendum template online for use by its project managers and architects/engineers on public works projects.

This Word document may be viewed and downloaded at the website of the UW's Capital Projects Office.

State of Washington May Stop Contractors' Work if no Workers Compensation Coverage

Effective July 26, 2009, the Washington State Department of Labor and Industries may issue a stop work order for any contractor without workers compensation (industrial insurance) coverage.

Substitute Senate Bill 5613 authorizes a $1,000 a day penalty for failure to comply and outlines options for how a contractor may respond to a stop work order. The legislation adds a new section to chapter 51.48 RCW.

Washington Construction Law Seminar

16th Annual Washington Construction Law Seminar

When: September 17 & 18, 2009

Where: Washington State Convention & Trade Center - Seattle, Washington

For more information and to register, visit The Seminar Group's website.

Faculty include:

• Bruce P. Babbit
• Paul R. Cressman, Jr.
• John P. Ahlers
• Erika S. Baurecht
• Stanton P. Beck
• M. Wayne Blair
• Anthony S. Broadman
• Jerry A. Creim
• Kate Diamond
• A. Richard Dykstra
• David K. Eckberg
• Robert H. Fitzburgh
• Alexander A. Friedrich
• Arnold R. Hedeen
• Bryan A. Kelley
• Karin L. Nyrop
• Christopher J. Soelling
• Jerry N. Stehlik
• John D. Sullivan
• Pamela S. Tonglao

State of Washington Delays Implementation of New Retainage Release Law

Substitute House Bill 1555, approved by the Washington State Legislature, became effective on July 26, 2009.

One of the key new provisions of the law is to require public agencies in the State to request approval from the State Department of Labor and Industries prior to the public agency releasing retainage funds to the contractor for public works projects of $35,000 or more. The purpose of the review by Labor and Industries is to verify that the contractor and subcontractors have paid workers compensation premiums to the State.

On Friday, July 24, 2009, the Department of Labor and Industries issued a communication delaying implementation of this provision of SHB 1555 until sometime "on or after October 1, 2009." L&I noted that they are "delaying enforcement while we are preparing our computer systems."

One of the other changes embedded in SHB 1555 is that public agencies are now required to obtain a release from the Employment Security Department, in addition to the Department of Revenue prior to releasing retainage to the contractor for public works projects of $35,000 or more. While many pubic agencies have, by practice, required the approval from Employment Security prior to release of retainage, the new law now requires it.

Thus, one of the practical impacts of SHB 1555 is that public agencies, effective July 26, 2009, must have in hand, an approval from both the Department of Revenue and the Employment Security Department prior to release of retainage. The implementation of the approval from Labor and Industries will apparently not take place until sometime on or after October 1, 2009.

SHB 1555 also changes the priority order for claims filed against the retainage by moving claims by state agencies ahead of claims by subcontractors and suppliers.

If your agency would like training on the public works close-out process including a discussion of bonding, retainage, and claims, and how the new law impacts it, please contact me. I have prepared a four hour training program that addresses the complexities of these subjects.

$9 Million Claim of Error Denied

On July 21, 2009, the Orange County (California) Board of Supervisors unanimously rejected the claim of error from Whiting-Turner Construction in which they had claimed a $9 million transposition error in their bid.

The Board found that the proposed adjustment of their bid was not permissible under the terms of the bidding documents. Whiting-Turner was not prepared to enter into a contract for the lower amount. The Board's action relieved Whiting-Turner of their obligation under the bid and awarded the contract to McCarthy Building Companies, Inc.

From my review of the bidding documents, I agree that the decision by the Board of Supervisors was the correct decision.

Task Force Convened to Address Implementation of Bidder Responsibility Criteria

A task force met on July 22, 2009 to begin planning for a collaborative conversation this fall between public owners and contractors on how the State of Washington's bidder responsibility law is being implemented.

The law, RCW 39.04.350, went into effect in July 2007. Since that time, many public owners have developed supplemental bidder responsibility criteria for public works projects that contractors have complained are too restrictive of the bidding pool.

The focus of the planned conversation will be for both contractors and owners to understand the interests and objectives of one another with respect to use of bidder responsibility criteria as part of contract award for public works construction projects.

I attended the planning session representing the University of Washington, along with representatives from the City of Seattle, the American Public Works Association, the Utility Contractors Association of Washington, the Association of Washington Cities, and the Municipal Research and Services Center (MRSC).

The Associated General Contractors (AGC) of Washington published an article on their website on July 21, 2009 about how bidder responsibility is being implemented. I was interviewed for the article and am quoted in it.

Federal Minimum Wages Increases to $7.25 per Hour

Effective July 24, 2009, the federal minimum wage will increase from $6.55 per hour to $7.25 per hour. Visit the U.S. Department of Labor website for more information.

The minimum wage in Washington state is $8.55 per hour, higher than the federal minimum wage or that of any other state.

For the purposes of prevailing wages in Washington State, $8.55 per hour is the lowest prevailing wage rate to be paid for any classification of labor on a public works project.

New Washington Public Works Laws Effective July 26, 2009

A variety of new laws impacting public works contracting in Washington State will become effective on July 26, 2009.

Among these new laws are the following:

• Bid and Purchase Limits
• HB 1196 - Increasing the Dollar Limit for Small Works Roster projects from $200,000 to $300,000.
• ESHB 1847 - Increasing the Bid Limit thresholds for cities, towns, counties, water & sewer districts, metropolitan park districts, fire districts, public hospital districts, school districts, and higher education. Different limits apply depending on the type of agency.
• SB 5228 - Construction projects by County forces
  
  
• Apprenticeship
• SB 5873 - Requiring use of apprentices on certain higher education public works projects, adding a mandatory bidder responsibility criterion related to compliance with apprenticeship requirements, and authorizing the state to debar contractors who fail to comply with apprenticeship standards
  
  
• Prevailing Wages
• SB 5903 - Public Works Contracts for Residential Construction. Making public agencies responsible for accurately identifying whether a project is subject to residential prevailing wages and requiring agencies to pay the difference in wages if an incorrect determination is made in the bidding process.
• SSB 5904 - Establishing standards for what constitutes an independent contractor with respect to prevailing wages.
  
  
• Change Orders
• HB 1195 - Requiring public agencies to execute change orders for undisputed work in a timely manner.
  
  
• Retainage and Bonding
  
• HB 1199- Eliminating outdated sections of state law related to retainage
• HB 1555 - Expanding the purpose of retainage to include the state Employment Security Department and Department of Labor and Industries, requiring public agencies to notify these agencies and receive their approval prior to release of retainage, and other provisions. I'm hoping that Labor and Industries will issue some type of instructions about how they intend to implement this legislation with respect to agencies requesting and receiving releases from them, and whether they will have this in place by the July 26, 2009 effective date. Look for something later this week.
  
• SSB 5499 - Permitting the Department of Transportation to reduce the amount of Payment and Performance Bonds on highway projects

• Alternative Public Works Contracting
• HB 1197 - Various clarifying provisions related to Design-Build, General Contractor/Construction Manager (GC/CM), and Job Order Contracting

If you would like detailed training on all or any of these legislative changes, or have questions, please contact me.

County in Florida Considers Local Preference Ordinance for Selection of Consultants

A county in Florida is considering adoption of an ordinance that would award 10% more points in the selection process to consulting, architectural, and engineering firms with a local headquarters office located in Pinellas County.

Florida state law permits local agencies to award preference points based on location and other jurisdictions in the state are also considering similar proposals.

The Pinellas County Commission will discuss the proposed ordinance at their July 21, 2009 evening meeting.

More information is available in a news article at www.tampabay.com.

Free Prevailing Wage Training for Public Agencies

The Washington State Department of Labor and Industries, and the State Auditor's Office are sponsoring a series of three hour training sessions on prevailing wage requirements in August and September. There is no charge for the training.

• August 17, 2009 - Tumwater (8:30am to 11:30am; 1:30pm - 4:30pm)
• August 25, 2009 - Spokane (8:30am to 11:30am)
• August 27, 2009 - Yakima (8:30am to 11:30am; 1:30pm - 4:30pm)
• August 31, 2009 - Tukwila (8:30am to 11:30am; 1:30pm - 4:30pm)
• September 1, 2009 - Tukwila (8:30am to 11:30am)
• September 15, 2009 - Mount Vernon (8:30am to 11:30am; 1:30pm - 4:30pm)
• September 22, 2009 - Vancouver (8:30am to 11:30am; 1:30pm - 4:30pm)
• September 29, 2009 - Moses Lake (8:30am to 11:30am; 1:30pm - 4:30pm)

Agenda:

• Prevailing Wage Responsibilities
• Competitive Bidding Requirements
• Common Pitfalls and Ways to Avoid Them
• Contractor Registration Requirements
• Small Works Roster Projects

Visit the website of the Department of Labor and Industries to register online.

Revised Standard Design-Build Contracts Released

The Design-Build Institute of America (DBIA) released a revision to their standard package of Design-Build contracts documents, including General Conditions.

The May 15, 2009 release revised contract documents originally issued by DBIA in 1999. According to DBIA, "The new documents adopt a menu approach that allows parties to customize contracts to their unique project, emphasizing that there is more than one way to address a particular contractual issue."

The revised documents address a number of contentious issues in Design-Build contracting and also deal with developments in the construction industry over the last ten years, including sustainable design, Building Information Modeling (BIM), and electronic data.

For more information, including information about how to order the contract, visit DBIA's website.

Recent GC/CM Selections

The following are recent selections of contractors as General Contractor / Construction Manager (GC/CM) for public works projects in the State of Washington:

• City of Lynnwood - Recreation Center Renovation: Lease Crutcher Lewis
  
  
• Kennewick General Hospital - Hospital at New Southridge Campus: JE Dunn Construction Company
  
  
• LOTT Alliance: Mortenson Construction
  

Early Subcontractor Involvement on GC/CM Projects

One of the benefits of the General Contractor/Construction Manager (GC/CM) process is the early involvement of the contractor in working with the owner and the designer on the project. The GC/CM lends their expertise with cost estimating, constructability reviews, scheduling, etc., and at the same time becomes more familiar with the project over a longer period of time than they would under a Design-Bid-Build scenario.

One of the next steps in extending this early contractor involvement in the project is to involve key subcontractors early on in the project as well. Under Washington State law (RCW 39.10.370), there is a provision that permits the GC/CM to conduct early subcontract bidding, award, and construction of certain subcontract bid packages even before finalization of the contract documents and negotiation of the Maximum Allowable Construction Cost (MACC). If this option is pursued, the owner and GC/CM typically will enter into a GC/CM contract for a portion of the MACC only, and then later amend the contract to include the additional and full scope of work for the project.

There are two benefits to such early involvement by subcontractors. First, it helps to establish what the market pricing is for the work which helps both parties in MACC negotiations and mitigates risk to the GC/CM. Second, some owners see early involvement by subcontractors as a means for having them perform valuable "design-assist" functions. In other words, the subcontractor might complete the design of the project after the design development stage (or maybe later), rather than have the architect/engineer do so. The subcontractor's early involvement can be of great benefit to the project.

Particularly for public owners, there are a number of issues and risks that must be considered in evaluating whether early subcontract bidding and "Design-Assist" services works well in a GC/CM contract, especially under the constraints of Washington State law. While there are clear advantages to such involvement, there are also risks, some of which may also push the boundaries of what is permissible under authorizing laws.

Here are some issues that need to be evaluated and discussed in the context of how Design-Assist would work on a GC/CM project.

1. Clarity and Fairness in Bidding: To the extent that the GC/CM conducts subcontract bidding early before completion of the design, there is the risk that subcontractors will be making different assumptions about the project, thus creating an unequal competitive bidding environment. While the bidding documents may direct that the subcontractor bid a complete project (based on incomplete documents at the design development stage), without the details of construction documents specifying exactly what is intended, there may be widely varying assumptions made by subcontractors in developing their bids. The earlier that subcontract bidding of incomplete construction documents occurs, the more doubt is cast over whether the intent of open competitive bidding of subcontract bid packages is actually being met, and whether subcontractors are actually bidding on the same work.
   
   
2. Cost Increases: Under the traditional GC/CM model, the GC/CM conducts subcontract bidding after negotiation of the MACC, which in Washington State may not occur prior to the construction documents being at least 90% complete. If subcontract bidding is pushed back even earlier, there are additional risks to both the GC/CM and owner as to responsibility for increased costs of subcontract bid packages once the design is completed and construction occurs (whether the design is completed by the designer or the subcontractor under a "design-assist" model). While it is fairly clear that the owner is responsible for additional costs to the extent that the owner adds work to the project, there are other cost increases that are less clear as to whether the subcontractor, GC/CM, or owner will bear the cost for price increases over what the subcontractor bid. Owners and GC/CMs who pursue early subcontract bidding must have a very clear set of expectations and contractual language about actual costs versus what the subcontractor bid.
   
   
3. Liability and Risk Allocation: To the extent that part of early subcontract bidding by the GC/CM includes the subcontractor performing "Design-Assist" responsibilities, there must be clear provisions about liability and who bears the risk of design errors and unanticipated design issues. What is the liability of the original designer if a subcontractor is completing their design? Is the subcontractor responsible? How do you determine which party is responsible in the event of a problem? What is the liability of any designer that the subcontractor may hire to complete the design? Who pays for design errors, and who bears the risk for increased construction costs due to lack of coordination between the various designers?
   
   
4. Roles and Responsibilities: This item is closely tied in with Liability and Risk Allocation issues above. Clear roles and responsibilities at each step in the process must be assigned for the following parties: Designer, Subconsultant to the Designer, GC/CM, Subcontractor, Designer for the Subcontractor, Owner.
   
   
5. Cost Procurement of Design Services: If early subcontract bidding includes procurement of "Design-Assist" services by the subcontractor, is this violating Qualifications Based Selection requirements that the federal government and many states have? In Washington State, chapter 39.80 RCW requires that architectural, engineering, landscape architectural, and land surveying services be procured based on qualifications and that price may not be a factor in the selection process. If the "Design-Assist" services, along with the construction work, is actually bid by the GC/CM, does this violate Qualifications Based Selection requirements?
   
   
6. Reduction of A/E Design Fees: Under Design-Assist, if the Architect/Engineer (A/E) will no long be preparing Construction Documents, that should result in a decrease in the fees that are paid to them.
   
   
7. Failure to Negotiate the MACC: Under any early subcontract bidding scenario in which work begins prior to negotiation of the final MACC, whether for the purpose of assisting the parties in negotiating the MACC and/or to provide "Design-Assist" services, the risk is present that the owner and GC/CM may not be able to successfully negotiate the MACC, even though some work may have already been performed. It is important to carefully evaluate on a project-by-project basis the type of work to be done early and evaluate the risk and options in the event a MACC is not successfully negotiated between the owner and GC/CM.

Without clear legislative direction about "Design-Assist" and subcontract bidding at a very early stage of completion of the construction documents, both owners and GC/CMs should be very cautious, and if they do decide to utilize these tools, they should have very clear expectations and contract language describing how these issues will be handled.

While Design-Assist may occur regularly in the private sector, public agencies need to make sure that the concept fits within legislatively approved methods of contracting.

Small Business Fair for Washington State

Last year more than 400 businesses attended the Washington Small Business Fair. This year will mark the 13th annual fair of providing resources to help small business owners.

When: Saturday, September 12, 2009

Times: 8:00 a.m. to 4:00 p.m.

Where: Renton Technical College (3000 NE 4th Street, Renton, Washington)

Cost: Free

Registration: None required. Just show up.

For more information: Visit www.bizfair.org.

What: The Small Business Fair is designed to provide practical information on how to start or expand a small business. There will be a number of seminars and exhibitors present with valuable information for small businesses.

Seminar topics include:

• How to Get Government Contracts
• Business Law Essentials
• Navigating the IRS and State of Washington Web Sites
• Developing a Business Plan
• Using Social Media to Market Your Business
• Drive Traffic to Your Web Site
• Taxes and the Small Business Owner
• More...

$9 Million Bid Transposition Error: Airport Staff Recommends No Correction is Permitted

Officials at John Wayne Airport in Orange County, California have recommended that the Board of Supervisors for the county not permit contractor Whiting-Turner to correct their bid amount due to a transposition error that resulted in a bid amount some $9 million less than what the contractor said was intended. Airport officials are recommending that Whiting-Turner be relieved of their obligation under their bid bond.

Furthermore, the Board of Supervisors will be considering a recommendation to award the Terminal C construction contract to McCarthy Building Contractors, Inc. in the amount of $102,309,469.

The recommendations were to have been considered by the Board of Supervisors at their July 14, 2009 meeting, but they have continued the matter until Tuesday, July 21, 2009.

The full airport staff report and recommendations is available online.

In the report, airport officials state that "the law and the facts would not authorize the County to award the subject contract to Whiting-Turner in the changed bid amount of $98,996,795. The bid instructions do not authorize a procedure that would either allow the County to disregard as irrelevant the total lump sum stated by a bidder, or allow a bidder to change its lump sum bid after bid submission for the purpose of correcting arithmetical or computational mistakes."

Based on the bidding documents and instructions for this project, I agree with the recommendations of the airport staff. There is no basis for permitting Whiting-Turner to change their bid amount from $89,996,795 to $98,996,795.

To read my previous blog entries on this subject, click on the dates below:

• June 4, 2009
• June 9, 2009
  

Bid protests and challenges such as this must be evaluated very carefully by owners based on the specific facts of each case.

Training on Bonding, Retainage and Claims

On Thursday (July 16, 2009), I will be providing four hours of training to the staff at KCDA (King County Directors Association), a purchasing and contracting cooperative established to provide supplies and services to government agencies, with a focus on school districts.

The class is titled "Public Works Contract Close-out: Bonding, Retainage, and Claims" and covers the following subjects:

• Purpose of Retainage
• Retainage and Sales Tax
• Management of Retainage
  
• Payment and Performance Bonds
  
• Completion Dates
• Notification to State Agencies
• Filing, Renewing, and Releasing Claims Against Retainage
• Pre-Claim Notices
• Foreclosure and Payment
• Priority of Claims Against Retainage
  
• Release of Retainage
• Recent Revisions to Washington State Law
• Preventing Payment Disputes

In the State of Washington, retainage is addressed in chapter 60.28 RCW.

The information in this class is applicable whether you are a public agency, or a contractor, subcontractor, or a supplier who works on public works projects.

If you are interested in learning more about how I can provide this training for you, please contact me.

Changes Proposed to Prevailing Wage Regulations

The Washington State Department of Labor and Industries is proposing a variety of revisions to the prevailing wage regulations for the state. The changes would revise certain provisions of Washington Administrative Code chapter 296-127.

Some of the changes are housekeeping nature, and some are more substantive. Here is a quick list of a few of the subjects addressed:

• Adjustments of prevailing wages during a contract for maintenance and service contracts
• Changing the standard for applicability of prevailing wages for supervisors
• Adding limited liability companies as a category for owner exemption from prevailing wages
• Combined filing with public agency of Statement of Intent to Pay Prevailing Wages and Affidavit of Wages Paid for projects less than $2,500
  

If you would like a copy of the track changes version of the draft revisions, please contact me and I will e-mail it to you.

Labor and Industries is requesting comments by July 15, 2009.

Did DC Councilman Break Ethics Rules by Awarding a Contract to his Girlfriend?

The District of Columbia City Council has authorized an independent investigation into whether DC Councilman and former mayor Marion Barry violated ethics requirements by awarding a $15,000 personal services contract to his girlfriend, Donna Watts-Brighthaup. She was paid to develop "poverty reduction strategies."

Visit the Washington Post to read more about the investigation.

Regardless of whether Barry is found to have technically violated any ethics requirements, there is, at a minimum, an appearance of an ethical breach. When it comes to public officials awarding contracts, it is important that they avoid even the appearance of a conflict of interest. Nevertheless, it's surprising how many cases like this come up.

In Seattle, in 2008, Councilmember Richard McIver was slapped with an ethics fine for awarding a contract to a friend who also regularly made her Virgin Islands condo available for McIver's use. Click here to read my previous blog entry on this Seattle case.

To help educate public agencies about ethical issues in contracting, I've developed and taught a training session on "The Ethics of Public Contracting: Integrity, Transparency, and Appearances." Here are the ten key questions addressed in this interactive training class:

1. How should you make ethical decisions?
2. Why do we having public bidding?
3. What ethics laws and standards apply?
4. What's so important about appearances?
5. What are the 4 risks of ethical lapses?
6. What gifts can I accept?
7. What situations pose a conflict of interest?
8. What are the ethics of contract administration?
9. How do I manage the ethics of internal politics?
10. What trends in public contracting affect ethics?

Please contact me if you are interested in discussing this important training for your agency.

False Claims Seminar in Southern California

The Southern California Chapter of the Construction Management Association of America (CMAA) is sponsoring a morning seminar on False Claims in construction contracting.

When: July 30, 2009 (8:00 a.m. to 10:30 a.m.)

Where: The Grand, Long Beach, California

Topics to be addressed include:

• The Federal & California False Claims Act (FCA)
  
• What constitutes a False Claim
• Damages, Penalties, and Attorney's Fees
• Proving False Claims
• Defenses to False Claims
• The Owner's Perspective: How the FCA can be used to discourage overstated claims
• The Contractor's Perspective: How to avoid FCA liability
• Recent Federal and California Cases - How is the FCA being applied
  

For more information and to register, visit the website of CMAA's Southern California Chapter.

Oregon Agency Criticized in Audit for Contracting Practices

An audit of the contracting practices of the Multnomah Educational Service District (ESD), an agency providing services to 171 Oregon school districts, found that 82% of the personal service contracts entered into by the ESD did not show any evidence that a competitive process was utilized in selecting the consultants.

The ESD stated that they did go through a competitive process but failed to maintain the submittals of unsuccessful proposers as part of the documentation in their files.

The audit recommended that the ESD develop contracting policies and procedures and address the following:

1. Contractors are selected using competitive screening and selection processes.
2. Contracts are signed by all parties prior to receiving and paying for services.
3. Contracts, leases, and intergovernmental agreements are adequately administered and monitored.
4. Contract files are organized and meet applicable documentation and retention requirements.
5. Intergovernmental agreements are used appropriately and a written record of how price was determined is maintained.
6. Responsibilities between different departments should be clearly assigned, and staff should be adequately trained.
7. Develop the monitoring capabilities of existing contract management and accounting information technology systems.
8. Review all unsupported payments to contractors and seek reimbursement for any payments determined inappropriate.
9. Seek reimbursement from contractors determined to have overcharged the ESD and review payments made to those contractors outside of the audit period for potential savings.
   

To read the four page audit, visit the Oregon Secretary of State website.

There is also a brief article on the audit available at www.OregonLive.com.

The audit points out the critical need for government agencies to review and develop contracting policies and procedures that results in consistent and transparent practices that protect the public's interests.

Update Presentation on California's High-Speed Rail Project

The Southern California chapter of the Construction Management Association of America (CMAA) will host an evening meeting to hear about California's High-Speed Rail Project.

The almost $10 billion project was approved by voters in California in November 2008. High-speed trains (220 mph) will eventually link major cities in the state including San Francisco, Los Angeles, Sacramento, San Jose, Fresno, and San Diego. A trip on the high speed train would take passengers from San Francisco to Los Angeles in 2.5 hours. Driving that distance is about a six hour drive.

When: Thursday, July 23, 2009 Time: 5:30 p.m. to 8:30 p.m.

Where: The Grand, Long Beach, California

Speaker: Dave Thomson, Project Manager for California High Speed Rail Authority

For more information & to register, visit the website of the Southern California Chapter of CMAA

One Year of e-mail Subscriptions to this Blog!

One year ago today, on July 8, 2008, I launched an e-mail subscription service to Mike Purdy's Public Contracting Blog.

Over the last year more than 130 of you have signed up for this free subscription. There are subscribers from at least a dozen states including:

• Arizona
• Arkansas
• California
• Florida
• Georgia
• Maryland
• Michigan
• Minnesota
• New York
• Oregon
• Virginia
• Washington

There are also subscribers from Canada!

Once a day, whenever I have posted an entry on the Blog, you receive an e-mail with the content.

It's easy to sign up, and you won't miss any information.

1. Just enter your e-mail address in the box in the upper right hand corner of this page.
2. You will immediately receive an e-mail in which you need to click on the link to confirm the subscription.
3. That's it!

Auditor Finds City of Seattle Should Improve Internal Controls over Contracting and Purchasing

The Washington State Auditor's Office recently issued findings that the City of Seattle should improve its internal controls over its contracting and purchasing functions.

The audit noted the following areas of concern:

• One public works project bypassed the City's centralized contracting services group and did not comply with competitive bidding requirements. The City was encouraged to establish internal controls to prevent this type of activity in the future.
  
  
• A change order increased the value of a public works project from $138,258 to a total of $402,557. The auditor found that the change order work was unrelated to the original contract. The City responded that they believed the change order was appropriate.
  
  
• The Seattle Public Library, which is governed by its separate Board of Trustees, did not verify that contractors on public works projects met the mandatory bidder responsibility criteria (contractor registration, etc.) prior to award of public works projects, and did not obtain the required "Statements of Intent to Pay Prevailing Wages" from subcontractors prior to paying the contractors.
  
  
• The City continued to pay one vendor more than $500,000 even after a blanket contract for water meters had expired.
  
  
• The City paid one vendor $108,000 without a contract and without any competitive bidding as required.

To read the complete seven page audit report, including the City's response to the findings, click on this link to the State Auditor's Office.

If you are interested in having me perform a pre-audit of your contracting practices, or if you need assistance in responding to recommendations from an audit, please contact me.

Training: Controlling Purchasing Card Risk

Teleconference Training: Controlling Purchasing Card Risk

When: July 16, 2009, 10:00 a.m. to 11:30 a.m. (Pacific Time)

Where: Live Teleconference in your office

Cost: $199

For more information and to register, visit Lorman Education Services

Instructor: Richard J. Palmer, Ph.D., CPA, CMA, CFM, Eastern Illinois University

Purchasing cards represent a value and efficient means for government agencies and businesses to procure goods and services. Unfortunately, without sufficient control mechanisms in place, they can also be abused by employees using them for personal gain. What types of controls should your organization put into place to avoid abuse, fraud, and audits?

See my blog from January 11, 2009 on the audit of the California Avocado Commission and their abuse of government issued credit cards.

If you would like to discuss having me conduct a pre-audit of the risks associated with how your agency is currently managing your purchasing card program, please contact me.

Federal Court Rules Contractor Waived Right to Cumulative Impact Delay Claim

The U.S. Court of Appeals for the Federal Circuit recently ruled that by signing a change order, the contractor "released the government from any and all liability for equitable adjustments" for cumulative impact delay claims on a project. This represents a change from previously established federal practices that entitled the contractor to such adjustments.

For a more complete analysis of this June 25, 2009 case, visit the website of Perkins Coie, a well-known law firm with offices in 13 cities across the United States and two offices in China.

Training: Effective Management of Construction Contracts

Effective Management of Construction Contracts

When: Wednesday, October 14, 2009

Times: 8:00 a.m. to 5:00 p.m.

Where: Hampton Inn (Richland/Tri-Cities) - 486 Bradley Blvd., Richland, Washington

Sponsored by: NIGP (National Institute of Governmental Purchasing)

Instructor: Darin Matthews, CPPO, C.P.M.

Cost:

• National NIGP members: $160
• WA State NIGP Chapter members: $225
• Nonmembers: $225

For more information and to register, visit the website of the Washington State Chapter of NIGP

Evening Presentation: Integrated Project Delivery

Integrated Design Promise and Reality: IPD from the Trenches - Seattle Children's Bellevue Clinic

"The need for Integrated Project Delivery is here, fueled by advancing developments in BIM (Building Information Modeling) and increasing demands for true budget and cost accountability. IPD changes the contractual and delivery process, but moreover strongly impacts the design phases, deliverables, roles and responsibilities in order to foster a new context for teamwork."

When: Tuesday, July 14, 2009 (5:00 p.m. to 9:00 p.m.)

Where: Sellen Construction Offices, 227 Westlake Ave. N., 4th Fl., Seattle, WA

Sponsored by: Lean Construction Institute, Cascadia Chapter

Speakers:

• Ted Sive
• Jeff Guizio
• Jack Avery
• Brian Zealler
• Rich Oehmcke

For more information and to register, click here.

Federal Audit Blasts Use of Time-and-Materials Contracts

The federal Government Accountability Office (GAO) recently published a critical audit of the widespread use by federal agencies of time-and-material contracts in procuring a variety of commercial services. "These contracts are risky because the government bears the risk of cost overruns," the audit noted.

Here are a couple of resources related to this audit by GAO:

• GAO Audit Report to Congress (47 pages)
• Summary article on the Audit in FederalTimes.com
  

There are a couple of different models for negotiation and payment of services provided in a contract:

• Time-and-Materials: The public agency pays the provider for the actual cost of materials used and agrees to a negotiated hourly rate for labor. Under this model, there is no incentive for contractors to control costs. The more hours they spend on a project, the more they get paid. It is almost a guaranteed employment program for the contractor. Time-and-Materials are often used on public works construction project change orders where such work is often referred to as "force account" work. What makes this a more controlled process for the public agency is that the agency will have their own inspectors present monitoring the work of the contractor. Even with such monitoring, however, productivity is not defined and a slower, less efficient contractor may end up spending more hours than another contractor would.
  
  
• Time-and-Materials, Not-to-Exceed: This is similar to the pure Time-and-Materials contract, but with one critical distinction: the dollar amount of the work is capped at a maximum. In other words, both parties agree that the scope of work is valued at a certain maximum. The public agency agrees to pay the contractor up to the maximum, based on documented time spent and materials actually purchased for the project. If the project takes fewer hours and materials cost less than estimated, the public agency pays less than the Not-to-Exceed amount.
  
  
• Lump Sum: Lump Sum contracts are generally used on public works construction projects where the contractor bids a lump sum (sometimes based on specific unit prices) to perform the work. They are also used in negotiating other types of contracts. Regardless of how much time or money it takes to perform the scope of work, the public agency agrees to pay the Lump Sum amount. This works well in a competitive bidding situation. In a negotiated bid, the public agency must be savvy on how to negotiate, must have a very clearly defined scope of work, and have the ability to estimate the actual value of the services. On a project that does not have a well defined scope of work, contractors may be reluctant to agree to a Lump Sum price. If a contractor does agree to a Lump Sum amount for a less than clear scope of work, the price may be significantly higher than what the public agency might expect in order for the contractor to cover their risk for the unknown conditions of the project.
  

The different pricing models are really all about which party bears the risk in contracting. Other than in competitive bid situations, it is critical for the public agency to have appropriate skills in negotiating contracts.

NY Court Rejects Bidder Responsibility Protest

A New York State Supreme Court judge rejected the protest of LVI Environmental Services on a $34.1 million asbestos abatement project. LVI claimed that the low bidder Cambria Contracting did not meet the bidder responsibility criteria for experience necessary to perform the project. In ruling against LVI, the judge noted that officials had a "rational basis" for awarding the project to Cambria. LVI is weighing their options on whether to appeal the June 30, 2009 ruling by the court. Other resources:

• DemocratAndChronicle.com article on the court ruling
• My previous blog entry on this dispute.