Mike Purdy's Public Contracting Blog: 2010

Tuesday, December 21, 2010

Happy Holidays!

Best wishes to you and your family as you take time to step back from the busyness of everyday life and spend time with your loved ones during this holiday season.

May it be a good time of remembering the spirit and substance of what we pause to celebrate at this time of year.

Because many of you will be taking time off in the next couple of weeks, and you'll have enough to get caught up with after vacation, and because I will also be taking some time off, this will be my last blog posting for 2010. It will resume again on Tuesday, January 4, 2011.

Thanks for the positive feedback so many of you have provided about my blog as a resource to help you in doing your job.

The picture here is of our Christmas tree with live candles that we light each night.

Merry Christmas and and a Happy New Year!

Monday, December 20, 2010

Summary of 2010 Training and Speaking by Mike Purdy

The year that is coming to a close has been a busy one of training and speaking for me. I gave a total of 33 speeches or training sessions (some all day long) in cities across the State of Washington and in two national webinars for a variety of public agencies and associations.

Below is a summary of the training and speaking I've done during 2010.

COMPREHENSIVE PUBLIC WORKS TRAINING

Public Works Bidding, Award, Contract Management, and Close-out [Jointly sponsored by Washington State Department of Transportation (WSDOT) and Municipal Research and Services Center (MRSC)] - Richland, WA, Bellevue, WA, Camas, WA, and Mt. Vernon, WA

Construction Contract Management 101 [City of Sammamish, WA]

Purchasing, Bidding and Contract Management for Local Agencies [Washington Finance Officers Association (WFOA) - Vancouver, WA and Quincy-Columbia Basin Irrigation District - Quincy, WA]

BIDDING

When Bad Things Happen to Good Contracts: Bid Protests, Claims of Error, and Scandals [Washington Finance Officers Association (WFOA) - Vancouver, WA and Construction Specifications Institute (CSI) - Puget Sound Chapter - Seattle, WA]

Receiving and Opening Public Works Bids [Washington Association of School Business Officials (WASBO) - Tacoma, WA]

Do I Have to Take the Low Bid? - Tools for Awarding to Responsible Contractors [National Institute of Governmental Purchasing (NIGP) - Webinar and National Association of Purchasing Management (NAPM) - Spokane, WA]

Bulletproof Your Public Bidding Process: Keys to Minimize Liability [Government Educator - Webinar]

BIDDER RESPONSIBILITY

Bidder Responsibility Criteria: Balancing the Interests of Owners and Contractors [Utility Contractors Association of Washington (UCAW) - Lynnwood, WA

Writing Supplemental Bidder Responsibility Criteria [Pacific Northwest Public Purchasing Association - Bellingham, WA]

Developing and Managing Supplemental Bidder Responsibility Criteria [City of Bellingham, WA]

BONDS

Construction Bonds: Bid, Performance, Payment, Retainage, Warranty, Contractor's Registration [Jointly sponsored by American Public Works Association (APWA) - Washington State Chapter and Municipal Research and Services Center (MRSC) - Renton, WA, Camas, WA, Everett, WA, Yakima, WA

APPRENTICESHIP

Apprenticeship Utilization Requirements on Public Works Projects [Washington Association of School Business Officials (WASBO) - Edmonds, WA]

PUBLIC WORKS CONTRACT CLOSE-OUT

Public Works Contract Close-out: Bonding, Retainage, and Claims [Washington Association of School Business Officials (WASBO) - Tacoma, WA, Washington Finance Officers Association (WFOA) - Vancouver, WA, Enduris - Spokane, WA, and Michael E. Purdy Associates - Everett, WA]

ETHICS

Avoiding the Front Page of the Newspaper - Why Ethics in Public Contracting Matters [National Association of Purchasing Management (NAPM) - Spokane, WA]

Ethics in Public Contracting [Energy Northwest - Richland, WA]

SCOPES OF WORK

Writing Effective Technical Specifications [Michael E. Purdy Associates - Vancouver, WA]

Writing Effective Scopes of Work [Energy Northwest - Richland, WA]

CONSULTANT CONTRACTING

Developing and Managing RFPs and RFQs [Washington State Transportation Training Coalition - Everett, WA and Enduris - Spokane, WA]

ALTERNATIVE PUBLIC WORKS CONTRACTING

Issues and Trends in Public Project Delivery [Construction Management Association of America (CMAA) - Pacific Northwest Chapter - Bellevue, WA]

An Introduction to the GC/CM Contracting Process [City of Bellingham, WA]

GC/CM Contracting for Contractors and Subcontractors [Associated General Contractors (AGC) of Washington - Bellingham, WA]

If you are interested in me providing training for your agency or speaking to your association, please contact me.

Sunday, December 19, 2010

CPARB Schedules 2011 Meeting Dates

Washington State's Capital Projects Advisory Review Board (CPARB) has scheduled its five meetings for 2011 as follows:

February 10, 2011
May 12, 2011
September 8, 2011
November 10, 2011
December 8, 2011

CPARB normally meets from 9:00 a.m. to noon in Olympia. The meetings are open for anyone to attend and observe.

Job Transition

Connie Pham Bartels has accepted a position with the City of Seattle as the Project Funding and Consultant Contracts Supervisor in the Capital Projects Division of the Seattle Department of Transportation (SDOT). Her first day in the new position is December 20, 2010. Previously, she worked for Sound Transit in the Contracting and Procurement Division.

Thursday, December 16, 2010

Federal Bid Protests Increase by 16% in 2010

The number of bid protests filed with the federal Government Accountability Office (GAO) increased by 16% between 2009 and 2010.

4th Year of Protest Increases: The continuing tight economic conditions are undoubtedly a major factor in the protests which have seen increases over the last four years as indicated in the chart below:

More Information:

Click here to read the complete GAO report to Congress on bid protests (19 pages)
Click to read a summary article from the Georgia Tech Procurement Assistance Center

Practical Tips: Make sure you have a comprehensive and independent quality control process for reviewing your solicitation documents before they are advertised to ensure that the selection process and requirements are clear. Your solicitation documents should also define your agency's protest procedures, which may be partially governed by your state law.

Wednesday, December 15, 2010

When Not to Approve a Change Order

Change orders to construction projects are a fact of life. However, not all change orders are appropriate.

Expiration of Subcontractor Bids: If a public agency is delayed in awarding a contract, but the contractor signs the contract for the amount of their bid, the public agency should not execute a change order to compensate the contractor for increased subcontractor prices due to the subcontractor bids having expired. This amounts to bid negotiation, something typically not permitted in public works contracting.

Obtain Bid Price Extension: Public agencies should make sure the contractor's bid price does not expire by requesting an extension of their commitment to their bid price prior to expiration. Many agencies require that the contractor commit in their bid to hold their bid prices for 30 or 60 days. Even if a contractor's bid price expires, if the contractor signs the contract at the bid price, they have then committed to the project at the cost of their bid, and no additional compensation should be due to them based on changed subcontractor prices.

Tuesday, December 14, 2010

Does a Certificate of Insurance Grant "Additional Insured" Status to a Public Agency?

Most public agencies require that the contractors and consultants they contract with carry Commercial General Liability Insurance and Commercial Automobile Insurance.

What is an Additional Insured? But because the contractor or consultant is the "named insured," they are the only party covered in the event of a claim, unless the public agency is also named as an "additional insured" under the contractor's or consultant's insurance policy.

What evidence should a public agency obtain to ensure they are, in fact, named as an "additional insured" on the contractor's or consultant's insurance policies?

Certificate of Insurance is Not Sufficient Evidence: Often, public agencies will accept a certificate of insurance as evidence that they are named as an "additional insured," especially if the certificate of insurance states on it that the public agency is an "additional insured." However, the certificate of insurance does not provide certainty that the public agency is actually an "additional insured."

What is an Acord Form? One of the most common insurance industry certificates of insurance is an Acord form. The language in the upper right hand corner of the Acord certificate of insurance states that the following:

The certificate holder is the public agency. In other words, the certificate of insurance is informational only and does not confer "additional insured" status on the public agency.

Get an Endorsement: The only thing that modifies an insurance policy to guarantee that the public agency is an "additional insured" under the contractor's or consultant's insurance policy is an endorsement to the policy. An endorsement is an amendment or modification to the insurance policy. Thus, even if the certificate of insurance names the public agency as an additional insured, it is not evidence that the insurance policy has been amended to reflect the public agency being named as an "additional insured."

Crossing Out Acord Form Language: Some public agencies will require the insurance broker to cross out the language on the Acord certificate of insurance noted above. This causes two problems.

Insurance brokers and agents are very hesitant to cross out this language, because a certificate of insurance is only informational.
Even if the public agency is successful in getting an insurance broker or agent to cross out the language, the modified certificate of insurance does not demonstrate that the policy has been endorsed, or amended, to name the public agency as an "additional insured." Only an endorsement is evidence of "additional insured" status.

Protect the Public's Interests: Public agencies should require that they be named as an "additional insured" under a contractor's or consultant's insurance policies in order to have the public agency covered in the event of a claim. As evidence of "additional insured" status, public agencies should require a certificate of insurance and an endorsement naming the public agency as an "additional insured."

Monday, December 13, 2010

Training on Purchasing, Bidding & Contract Management for Local Agencies

I conducted an all day training session for 25 personnel from various irrigation districts in central Washington on Monday in Quincy, WA. The agenda included the following:

Types of Contracts

Types of Solicitations

Goods, Supplies, Equipment and Materials
Competition Based on Price
Competition Based on Price and Other Factors
Piggybacking
Purchasing or Procurement Cards
Auctions
Sole Source
Emergency

Public Works Contracting
Bidding
Award
Contract Execution
Construction
Close-out

Please contact me if you would like a more detailed outline of the class or if you are interested in me providing the training for you.

Sunday, December 12, 2010

Job Opening: Contractor Data Systems Administrator

The Port of Seattle has advertised to fill a Contractor Data Systems Administrator position.

Salary: Minimum $24.96 per hour - Midpoint $31.20 per hour

Job Location: Seattle, Washington

Position Description: The person in this position will oversee the day-to-day activities of the Office of Contractor Data, and provide support for the data collection systems for construction projects for the Aviation and Seaport Divisions and Port Construction Services.

More Information: Click here.

Application Deadline: Friday, January 7, 2011 at midnight (Pacific Time)

Thursday, December 9, 2010

The Plight of Small Businesses in Obtaining Government Contracts

Small businesses, and especially minority and women owned businesses, face many hurdles in competing for government work.

Washington State Task Force: The State of Washington's Capital Projects Advisory Review Board (CPARB) recently established a Small Business Task Force to identify strategies and tools to open up opportunities for small and minority businesses.

The purpose of the Small Business Task Force is to identify not only challenges faced by small businesses, but to think through possible solutions that may end up as legislative recommendations for CPARB to consider.

First Task Force Meeting: The Small Business Task Force held their first meeting on Thursday, December 9, 2010 and was attended by many representatives from various constituencies: small businesses, minority businesses, public agencies, contractors, organized labor, and others.

The Task Force spent the first meeting discussing both the challenges of small businesses in participating in capital projects (design and construction) as well as identifying potential solutions.

Issues to Discuss: From my perspective, the types of challenges fall into four broad categories that can help make public procurement more "small business friendly":

Selection Processes: What can agencies do to reduce the level of effort required to respond to solicitations while still meeting their business needs? Are there ways to reduce the level of effort required by public agencies in producing solicitations?
Contract Requirements: Should the length and substance of contracts be adjusted for specific projects based on the dollar value and risk of the project, rather than have a one-size-fits-all contract for all projects that may create problems for small business compliance?
Contract Administration: What can be done to help ensure that public agencies report consistently and in a timely manner on their utilization of small, minority, and women owned businesses? When agencies establish goals for small business utilization, do they have the necessary staffing and processes to follow-up on commitments made by contractors and consultants?
Regulatory Requirements: Are there laws and regulations that should be changed that would help small businesses? Are there existing laws that would be beneficial to small and minority businesses but which are not used by public agencies?

No One-Size-Fits-All Solution: There are a host of other issues that must be taken into account in addressing this important issue:

A recognition of the differing experiences and needs of prime contractors/consultants versus subcontractors/sub-consultants
The size of the public agency. Some small and medium sized agencies don't have staffing resources to deal with small business issues
The availability level of small and minority owned businesses in different geographic areas of the state.

Competing Interests: In developing solutions that will help open up opportunities for small and minority owned businesses, it is important to remember that there are different and often conflicting interests of the various stakeholders, including the following:

Small Businesses versus Large Businesses
Minority Owned Businesses versus Non-Minority Owned Businesses
Non-Union Businesses versus Union Businesses

It will be important for all parties on the Task Force to work together cooperatively in understanding the interests of the other parties, and to work creatively to craft solutions that work for all parties.

New Port of Seattle Program: On a related note, the Port of Seattle is launching, in 2011, a Small Contractor and Supplier Program (SCS). For more information about the program, visit the Port's website.

Wednesday, December 8, 2010

Prevailing Wage Law in Washington - Training

Prevailing Wage Law in Washington - 2 separate classes

When and Where:

Seattle - January 21, 2011 (8:00 a.m. to 4:30 p.m.) - Washington State Convention Center

Tacoma - March 11, 2011 (8:00 a.m. to 4:30 p.m.) - La Quinta Inn & Suites - 1425 East 27th St.

Cost: $359

Sponsored by: Lorman Education Services

Seattle Instructors:

Laura Herman
Judd H. Lees
David J.Soma
Suzanne J. Thomas

Tacoma Instructors:

Michael H. Ferring
Laura Herman
William G. Jeffery
Judd H. Lees
David J. Soma

Information and Registration:

Tuesday, December 7, 2010

Contract Negotiations and Standard Contract Language of Public Agencies

After selecting a consultant or service provider based on a Request for Qualifications (RFQ) or Request for Proposals (RFP), where factors other than price are used as selection criteria, a public agency is faced with then negotiating a contract with the successful firm.

Sometimes negotiations break down over the language included in the public agency's standard contract and the parties are unable to successfully negotiate a contract.

To mitigate against this problem, there are a couple of strategies that public agencies can employ:

Make Contract Language Available: Some agencies will either include the standard contract language as an attachment to the RFP or RFQ, or refer firms to the agencies website where the language can be read. However, without taking additional steps such as those outlined below, the parties may still find they disagree about specific contract terms.

Require Firms to State Objections to Contract Language: Some agencies take it a step further and require as part of the response to the RFP or RFQ a statement by the proposer that they have no objection to the standard contract language, or if they do have objections, to identify the sections that are problematic. However, without indicating what the public agency intends to do with the information about the objections to the language, the parties may still find themselves at loggerheads when it comes to contract negotiations.

Require Firms to Propose Alternate Contract Language: Other agencies require responding firms who have objections to the contract language to propose alternate contract language for consideration by the public agency. In most cases, the alternative contract language will not be beneficial to the public agency, and the agency is still faced with potentially protracted contract negotiations over issues that have been identified prior to contract award.

Assign Points Based on Acceptance of the Contract Language: Another strategy employed by some public agencies is to assign points to firms who do not object to the contract language. The number of points assigned would be reduced if alternate language was proposed that was not beneficial to the public agency. This has the benefit of forcing firms to decide how much they object to the contract language or if is something they can live with. This strategy has the most hope for ensuring successful and smooth contract negotiations.

If a public agency is using a two step selection process (qualifications and then price), it may be beneficial to request feedback from the proposers on draft contract language during the qualifications portion of the selection process, and then issue final contract documents during the pricing portion of the selection process.

In any event, standard contract language must protect the public's interests, but be fair to firms proposing to do work.

Monday, December 6, 2010

Job Opening: Senior Contracts Specialist

Sound Transit has advertised to fill a Senior Contracts Specialist position.

Salary: Negotiable

Job Location: Seattle, Washington

Position Description: The person in this full-time position will perform the full range of senior professional and technical duties involved in cradle-to-grave procurement and contract work, including the preparation, finalization, analysis, and administration of agreements and contracts for goods and services.

More Information: Click here.

Application Deadline: Monday, December 20,2010 (11:59 p.m.)

Sunday, December 5, 2010

CPARB to Meet December 9, 2010

Washington State's Capital Projects Advisory Review Board (CPARB) will meet this Thursday, December 9, 2011 from 9:00 a.m. to noon in Olympia.

The agenda, along with background materials for the topics to be discussed, are all available online by clicking here.

CPARB is charged by the Legislature with reviewing alternative public works contracting procedures and providing guidance to state policymakers on ways to further enhance the quality, efficiency, and accountability of public works contracting methods. There are 23 members of CPARB representing various stakeholders in public works contracting.

Thursday, December 2, 2010

Selection Records and Scores: Public Records or Confidential?

Generally, most information maintained by public agencies about selection processes for contractors, consultants, and vendors is a matter of public record and subject to disclosure to anyone requesting such information. But there are important exceptions.

When to Withhold Information: If a public agency is using a two or three step selection process, information about scores from the early selection stages is generally not something that should be disclosed until the complete selection process has been completed.

2 Step Selection Process: Under a two step selection process, an agency asks for qualifications first, followed by a price or cost proposal from a short-list of firms. The scores from both the qualifications and prices are added together to determine the highest ranked firm.

3 Step Selection Process: Under a three step selection process, an interview might be added in as a third step after qualifications are scored and before price proposals are received.

Risks of Disclosing Information Early: Providing information about the scores from the qualifications and/or interview stages before the price proposals are due may invite firms to calculate what their price needs to be in order to win the award, a low price may not be beneficial to the public agency if the firm has not covered all of its costs, and it creates a less than open and transparent selection process.

Let me provide a couple of examples to illustrate:

GC/CM Selection: In selecting a contractor to serve as General Contractor/Construction Manager (GC/CM) on a public works construction project, a three step process is generally used in the State of Washington. Public agencies should not disclose the scores or order of ranking of the finalists selected to submit prices until after the deadline for submission of prices. To disclose the scores for the qualifications and interview prior to the deadline for the prices invites contractors to calculate how low their bid needs to be in order to be the highest ranked firm. There have been examples of public agencies in Washington who have made the mistake of disclosing the scores for the first two stages early with the result being that contractors have low-balled the project, essentially buying the award of the project. Prices that are artificially low may cause performance problems for the public agency during construction.

Air Force Bid: As part of the ill-fated $40 billion Air Force air-refueling tanker contract, the Air Force recently made a "clerical error" and sent critical price information received from the two finalists (Boeing and Airbus) to the competing firms. In other words, Boeing received the Airbus pricing and Airbus received the Boeing pricing. The final step of the selection process is for both firms to provide a best and final price offer to the Air Force. Fortunately, both firms realized the mistake of the Air Force and returned the data to the Air Force, but it isn't known whether they looked at the information and obtained any advantage. Click here for a Seattle Times article on the Air Force error.

Under a multi-step selection process, it is obviously very important to keep certain information confidential (scores, ranking, and pricing) until the final selection has been made. Otherwise, the entire selection process becomes tainted, and may become the subject of a protest. At a minimum, such early disclosure undermines the integrity of the selection process and decreases the public's confidence in the transparency of the process.

Wednesday, December 1, 2010

Receiving and Monitoring Payrolls on Federally Funded Construction Projects

If a public agency receives any federal funding for a construction project, the terms of the grant agreement will most likely require that the federal prevailing wage requirements of the Davis-Bacon Act will apply.

Receive and Review Payrolls Weekly: One of the primary obligations of a public agency on such projects is to collect and review on a weekly basis the payroll reports from the contractor and each subcontractor, regardless of tier, to ensure that federal prevailing wages are being paid for the appropriate classification of work being performed.

Audit Finding: In a recent audit finding by the Washington State Auditor's Office, the auditor found that a public hospital district, the Coulee Medical Center in Grand Coulee, Washington, rather than receiving and monitoring the weekly payroll reports, simply had the general contractor collect the payroll reports and then provide them to the hospital at the end of the project. Without any review or monitoring of the prevailing wages being paid on a weekly basis on the $1.5 million of federal funding for the project, the district was out of compliance with the terms of their grant and was unable to ensure that prevailing wages were paid on an ongoing basis during the project.

Practical Tips:

Read the terms of your grant agreement and know what your obligations are.
Collect weekly payroll reports from the contractor and each subcontractor.
Review the payroll reports on a weekly basis to ensure appropriate prevailing wages are being paid.
Conduct interviews of construction workers on-site and compare information collected there with information reported on the payrolls.
Work with the contractor to ensure they pay restitution to any workers underpaid the prevailing wage.
Ensure that the staff who will be reviewing the payrolls have proper training on how to monitor the prevailing wages (overtime, appropriate classifications, apprentices, fringe benefits, relationship of federal to state prevailing wages, etc.).

Monday, November 29, 2010

Avoiding Conflicts of Interest When Selecting Consultants

What is the relationship between your selection committee members and the consultants who submit proposals? What is the nature of the relationship between your project manager and the selected consultant?

Personal Relationships with Consultants: In many cases, government employees know the consultants who are proposing, often having worked with them in the past. But what if the project manager or other evaluators also have a social relationship or personal friendship with any of the consultants submitting proposals or with the selected consultant? Does that create a conflict of interest or the appearance of a conflict of interest?

Contract Termination: The City of Sammamish, Washington recently terminated a $30,000 consultant contract for an environmental study to establish the "ordinary high water mark" for Lake Sammamish, after it was revealed that the city's project manager was a personal friend of the consultant. In addition, the city's project manager was a member of the selection committee, and just prior to the selection process, the city's project manager had invited the consultant onto the city employee's boat.

Keep it Squeaky Clean: In announcing the contract termination, in which the consultant will keep $20,000 for work already performed, Deputy City Manager Pete Butkus stated: "We want to make sure this is squeaky clean." The study is "a very emotional issue for many people and we want to make sure it is technically correct and there's not anything that would allow someone to question the results."

Costly Relationship: The city will start over with a new selection process, a different city project manager, and a new contract that will be for the same study as the terminated contract.

More Information:

SammamishReview.com article, City ends contract in water level study, November 24, 2010

SammamishReporter.com article, City pulls plug on Lake Sammamish study, November 20, 2010

Practical Tip: As part of the selection process, require each evaluator to sign the evaluation form with their scores. The evaluation form should include a statement that the evaluator does not have a conflict of interest (financial, relational, or other nature) with any of the firms being evaluated or key personnel of any of the firms, and that there is no perception of a conflict of interest that could arise from any relationships.

Sunday, November 28, 2010

State Refines Draft "Best Value Selection" Legislation

The State of Washington, through a task force of the Capital Projects Advisory Review Board (CPARB) is continuing to revise draft legislation that would permit use of a best value selection process for public works construction projects, on a pilot basis. If the task force is able to reach agreement on the draft legislation, and if CPARB approves the draft legislation at its December 9, 2010 meeting, the legislation would be introduced for consideration by the Legislature in January 2011.

Best value contracting as is being discussed by the task force means "a public works project that is awarded based on price, qualifications, and value added to the overall project." Click here to read the draft legislation.

The task force will be meeting on Thursday, December 2, 2010 from 10:30 a.m. to 11:30 a.m. to discuss finalizing the draft legislation. The meeting is open, but due to the small room, only a dozen people will fit in the room. Other interested parties may participate via the telephone.

Tuesday, November 23, 2010

Best Wishes for Thanksgiving Day

For almost 150 unbroken years, beginning with Abraham Lincoln in 1863, in the midst of the Civil War, each President has issued a Thanksgiving Day Proclamation.

The Proclamations have come in both bounteous and trying economic times, in times of peace and in times of war. All the Proclamations urge Americans to step back from the immediacy of life and pause to remember how much we have to be thankful and grateful for. It's a good habit to cultivate - and not just once a year.

Cultivating a Heart of Thankfulness: Our lives, like the life of our nation, are a mixture of joy and sorrow, health and sickness, prosperity and poverty, wholeness and brokenness, community and loneliness. May we, in the midst of all that comes our way in life, remember this Thursday the many blessings we enjoy from a gracious God. May we learn to live in the moment each day - cultivating a heart of thankfulness for all the good things in our lives.

Kennedy's 1963 Proclamation: On November 5, 1963, just weeks before his untimely death in Dallas, Texas, President John F. Kennedy issued his third and last Thanksgiving Day Proclamation as president. I've included the text of his Proclamation below. The headings are mine to make it easier to read.

*******************************************

Colonial Forefathers: Over three centuries ago, our forefathers in Virginia and in Massachusetts, far from home in a lonely wilderness, set aside a time of thanksgiving. On the appointed day, they gave reverent thanks for their safety, for the health of their children, for the fertility of their fields, for the love which bound them together and for the faith which united them with their God.

George Washington: So too when the colonies achieved their independence, our first President in the first year of his first Administration proclaimed November 26, 1789, as "a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty god" and called upon the people of the new republic to "beseech Him to pardon our national and other transgressions… to promote the knowledge and practice of true religion and virtue… and generally to grant unto all mankind such a degree of temporal prosperity as He alone knows to be best."

Abraham Lincoln: And so too, in the midst of America’s tragic civil war, President Lincoln proclaimed the last Thursday of November 1863 as a day to renew our gratitude for America’s "fruitful fields," for our "national strength and vigor," and for all our "singular deliverances and blessings."

The Passage of Time: Much time has passed since the first colonists came to rocky shores and dark forests of an unknown continent, much time since President Washington led a young people into the experience of nationhood, much time since President Lincoln saw the American nation through the ordeal of fraternal war - and in these years our population, our plenty and our power have all grown apace. Today we are a nation of nearly two hundred million souls, stretching from coast to coast, on into the Pacific and north toward the Arctic, a nation enjoying the fruits of an ever-expanding agriculture and industry and achieving standards of living unknown in previous history. We give our humble thanks for this.

Ideals of Honor and Faith: Yet, as our power has grown, so has our peril. Today we give our thanks, most of all, for the ideals of honor and faith we inherit from our forefathers - for the decency of purpose, steadfastness of resolve and strength of will, for the courage and the humility, which they possessed and which we must seek every day to emulate. As we express our gratitude, we must never forget that the highest appreciation is not to utter words but to live by them.

Gratitude for Blessings: Let us therefore proclaim our gratitude to Providence for manifold blessings - let us be humbly thankful for inherited ideals - and let us resolve to share those blessings and those ideals with our fellow human beings throughout the world.

A Day of National Thanksgiving: NOW, THEREFORE, I, JOHN F. KENNEDY, President of the United States of America, in consonance with the joint resolution of the Congress approved December 26, 1941, 55 Stat. 862 (5 U.S.C. 87b), designating the fourth Thursday of November in each year as Thanksgiving Day, do hereby proclaim Thursday, November 28, 1963, as a day of national thanksgiving.

The Great Unfinished Tasks: On that day let us gather in sanctuaries dedicated to worship and in homes blessed by family affection to express our gratitude for the glorious gifts of God; and let us earnestly and humbly pray that He will continue to guide and sustain us in the great unfinished tasks of achieving peace, justice, and understanding among all men and nations and of ending misery and suffering wherever they exist.

IN WITNESS WHEREOF, I have hereunto set my hand and caused the Seal of the United States of America to be affixed.

DONE at the City of Washington this fourth day of November, in the year of our Lord nineteen hundred and sixty-three, and of the Independence of the United States of America the one hundred and eighty-eighth.

John F. Kennedy

Monday, November 22, 2010

Local Preferences: Awarding Work to Local Firms

The Great Recession has prompted many local governments to think creatively on how to keep local contractors and their employees busy rather than permit construction dollars going to non-local firms.

Here are a couple of stories and resources addressing the issue of local preference:

Breaking Up Work in Smaller Contracts: In Pennsylvania, the Hancock County School District in New Cumberland has made the decision to package construction bid packages for a three-year, $56 million program into smaller contracts, allowing local contractors the chance to compete for smaller projects. If the entire project was bid separately, only large firms from far away would have the capacity to bid. Click here to read an article from The Review.

Seeking Changes in State Law: In Massachusetts, the town of Middleboro reluctantly awarded a water tank construction project to the low bidder from New Hampshire. The second low bidder was from nearby East Bridgewater, Massachusetts but their bid was $4,000 higher. Massachusetts state law requires award to the lowest bidder. After awarding the project to the out-of-state firm, town officials voted to work for a change in the state's procurement laws that would permit them to grant preference to local firms. Click here to read an article from EnterpriseNews.com.

Unpacking the Meaning of Local Preferences: From North Carolina, Eileen R. Youens, Assistant Professor of Public Law and Government at the University of North Carolina's School of Government, has written extensively on the subject of local preference. She is one of the most knowledgeable and articulate commentators on public contracting. You can read her entertaining and useful "Local Preferences in Public Contracting" blog posts by clicking below:

Sunday, November 21, 2010

California City Rejects All Bids on Multi-Million Tennis Court Project

The City of Mission Viejo, California rejected all bids on a controversial multi-million dollar tennis center renovation project and voted to re-advertise the project.

Claim of Error: The action occurred after the low bidder claimed error, having left out $300,000 of lighting for the project on their $3.2 million low bid.

Bid Irregularities with Second Low Bid: After evaluating the second low bid from Horizons Construction, the City's staff concluded that Horizons' bid, which was $250,000 more than the low bid, "was not satisfactorily completed." In the public hearing before the City Council, staff commented that there were "irregularities in the bid" of Horizons, but offered no further explanation of the nature of the irregularities. Horizons did not speak at the Council meeting and presumably wasn't present.

Hope for Better Prices on Re-Bid: With the current competitive bidding environment for construction services, the City Council voted to reject all bids and re-advertise the project, with revised bidding documents, breaking the project into phases to assist with budgeting issues.

Community Controversy: While there was next to no discussion about the recommendation to reject all bids or the irregularity in Horizons' bid, testimony at the heated November 15, 2010 City Council meeting revealed that the project is a controversial one, with residents testifying about delays in the project, and Council members questioning the project as well as additional designer costs. For more information, read the article in the Orange County Register.

Things to Remember:

Claims of Error: Public agencies who receive claims of error from contractors, based on either mathematical/clerical errors or errors of judgment, may be best served by accepting the claim of error, rather than denying the claim and entering into a contract with a contractor who will start the project losing money.

Non-Responsive Bids: In rejecting bids based on "irregularities," it is important to determine whether the irregularity was material or immaterial. A material irregularity is one that provides an advantage or benefit to one bidder not enjoyed by other bidders. Public agencies should be careful to manage the evaluation of bids in an open, fair, and transparent manner, that increases the public's confidence in the integrity of the bidding process.

Thursday, November 18, 2010

113 Industry Associations Urge Congress to Repeal 3% Withholding Requirement

Unless Congress acts soon to repeal 2005 legislation, starting on January 1, 2012, just a little over a year from now, federal, state, and local governments and agencies with annual expenditures in excess of $100 million will be required to withhold 3% of each payment to vendors, contractors, and consultants, and send the money to the federal government for income tax purposes.

Associations Urge Delay or Repeal: On November 11, 2010, a coalition of 113 industry associations sent a letter to all members of Congress urging them to delay implementation of the 3% withholding tax for two years, if full repeal is not possible during the lame duck session this year. Click here to read the five page letter and documentation. The Government Withholding Relief Coalition also asked Congress to conduct an independent study of the real cost of implementing the 3% withholding tax.

Cost Concerns Raised: Significant concerns have been raised by both businesses and government agencies on the cost of implementing this new tax. The Coalition has argued that since the legislation was passed in 2005, there have been a number of reforms approved that mitigate against the need for the tax. Government agencies and businesses are beginning to incur costs now as they gear up to implement the legislation on January 1, 2012.

Read the Legislation: Click here to read the actual 3% withholding tax legislation (one page). You will note at the end of the legislation it states it is effective for payments made after December 31, 2010. That was subsequently amended by ARRA (American Recovery and Reinvestment Act) on February 17, 2009 to delay implementation until January 1, 2012.

Federal Policy Collision: Interestingly, at the same time the 3% withholding tax is moving forward, the U.S. Department of Transportation has adopted regulations (49 CFR 26.29) that restrict withholding of retainage on federally funded projects due to the negative impact it has on small and disadvantaged businesses. This represents a public policy is a collision at the federal level: the 3% withholding tax is detrimental to small businesses, while USDOT's regulations are designed to protect small businesses.

Retainage Regulations: USDOT's retainage regulations are problematic for some states, such as Washington, that requires withholding of retainage to protect the claims of subcontractors, suppliers, and workers (RCW 60.28.011). More on this in an upcoming blog.

Wednesday, November 17, 2010

Los Angeles Cancels Contract with Construction Program Consultants and Launches Ethics Investigation

The Los Angeles Unified School District has canceled a contract with a consulting firm hired to manage the District's $7 billion school construction program, while its Inspector General investigates a number of ethical issues raised through a whistleblower complaint.

Reduction of Consultants? Over the last decade, four key consultants have helped the district manage its school construction program. After the District "ordered a reduction in the number of highly paid outside consultants" due to a budget crisis, the four consultants left the District and formed a new company, Consilia, LLC. The new company was then hired this fall by the District to manage $7 billion for a school construction program in a contract worth more than $3.7 million. The District is investigating whether the order to reduce highly paid consultants was circumvented by the hiring of Consilia, LLC. "It looks funny," Superintendent Ramon C. Cortines said, "when we say we are reducing the number of consultants, then the consultants leave and we turn around and hire their consulting firm."

Competitive Selection? A related issue under investigation relates to whether Consilia, LLC was selected through a proper selection process. Some sources charge that the four consultants wrote the scope of work for managing the construction program, and then formed Consilia, LLC to carry out the program. District officials have stated that Consilia, LLC was selected after a competitive request for proposals was issued for which three proposals were received.

Work as Subcontractor? The District's Office of the Inspector General is also investigating whether the District permitted the hiring of Consilia, LLC as a subcontractor on a contract that violated a ban imposed by the District on using subcontractors on that contract.

Concerns About Cancellation: A member of the District's construction oversight committee expressed concerns about the cancellation of Consilia's contract: "The public needs to be worried about the $7 billion they just gave the district [through a 2008 bond meaure] because the people who know how to spend it have all just been fired," said civil rights attorney, Connie Rice.

More Information:

Los Angeles Times article, November 17, 2010
Daily News, Los Angeles, November 16, 2010
DailyBreeze.com, November 17, 2010

http://PublicContracting.blogspot.com

Integrated Project Delivery - All Day Training

Integrated Project Delivery - Making It Work For You

When: Monday, December 13, 2010 (8:00 a.m. to 5:30 p.m.)

Where: Seattle, Washington (Mountaineers Club, 7700 Sand Point Way NE)

Cost:

$195 (AIA, AGC, LCI, or SMPS Members)
$285 (Non-Members)

Content:

IPD Terms and Tools
IPD Contracts and Risks
IPD Case Studies
IPD for Smaller Budgets

Speakers:

AP Hurd, Vice President of Development, Touchstone
Chuck Hardy, General Services Administration
David Pixley, Project Management Director, Facility Planning & Development, Sutter Health
Eric Smith, Interim Director, Major Projects Group, University of Washington Capital Projects Office
James Frey, Senior Vice President, Alberici Group (representing the AGC)
Jay Halleran, Managing Partner, NBBJ
Ken Sanders FAIA, Managing Parner, Gensler
Scott Redman, President, Sellen Construction
Todd Johnson, Vice President, Facilities, Seattle Children's Hospital

Sponsored by: AIA Seattle, AGC Washington, Lean Construction Institute

Information and Registration: Click here.

http://PublicContracting.blogspot.com

Tuesday, November 16, 2010

Are You Paying Consultants Consistent with Contract Terms?

In negotiating and executing a consultant contract, both the consultant and the public agency agree upon the basis of payment, including but not limited to hourly rates, permitted reimbursable expenses, and sub-consultant mark-up percentages.

Review Invoices: When invoices are submitted to the public agency for payment, it is critical for appropriate public agency staff to carefully review the invoice to ensure that the payment requested is consistent with the terms of the contract.

Audit Finding: The Washington State Auditor's Office issued a Citizen Hotline Report on November 8, 2010 reporting on its investigation of charges made by a citizen against the City of Snoqualmie. The citizen complaint complained that the City was overpaying consultants because City personnel were not carefully reviewing invoices submitted for payment. The auditor found that the City was overcharged $13,000 based on invoices reviewed by the auditor. The City then passed the costs onto private developers in accordance with agreements in place.

Specifically, the auditor noted the following overpayments by the City:

Hourly Rate Overpayment: The City paid a forestry consultant at an hourly rate of $110 per hour, when the contract limited the hourly rate to $85 per hour. For a six month period in 2007, this amounted to an overpayment to the consultant of more than $4,000.

Mileage Reimbursement Overpayment: The City reimbursed the same forestry consultant for mileage at 48.5 cents a mile, while the contract only permitted reimbursement at 31.5 cents a mile, resulting in an overpayment of more than $1,600.

Payment for Reimbursables Not Permitted: The City reimbursed an engineering firm almost $1,700 for the use of a four-wheel drive vehicle and cellular telephones that were not allowable under the contract.

Hourly Rate Overpayment: The City approved invoices for and paid for the work of a senior project manager with an engineering firm at an hourly rate of $130, when the contract only permitted $120 per hour.

Mileage Reimbursement Overpayment: The City approved mileage reimbursement for an engineering firm in excess of what was permitted by the contract. In addition, the City approved mileage reimbursement for personnel who were working on the project, but did not incur actual mileage expenses because no travel occurred.

Practical Tips: In managing your consultant contracts, do you have processes in place to ensure that invoices paid are appropriate and consistent with the terms of the contract? Here are a couple of procedural tips that can help you in managing contract payments.

Contract Terms: Know the payment terms of your contract.

Copy of Contract: Ensure that staff who are managing contracts or approving payments for contracts actually have a copy of the contract.

Detailed Invoices: Require that invoices be submitted in sufficient detail to determine the breakdown of costs so the public agency can determine if the costs are consistent with the terms of the contract.

Review Invoices: Have appropriate staff with direct knowledge of the work performed review the invoices not just for whether the work was performed, but whether the charges are consistent with the terms of the contract.

Internal Controls: Institute appropriate internal controls within your agency so that others (supervisors, purchasing, contracting, or accounting) also review invoices for consistency with the terms of the contract.

Rejection of Invoices: Reject invoices submitted that are inconsistent with the terms of the contract, and require the consultant to re-submit the invoice after it has been corrected.

More Information: Click here to read the complete 15 page Citizen Hotline Report. In addition to the overpayments noted above, the report also concluded that the City could have saved a significant amount of money by hiring a city employee to perform the work instead of paying consultants.

http://PublicContracting.blogspot.com

Monday, November 15, 2010

Contractor Involved in Excessive Subcontractor Lawsuits

Ebenal General, Inc., a Bellingham, Washington based contractor has racked up at least 35 lawsuits by subcontractors since 1999, with 14 of those lawsuits in just 2009 and 2010. That doesn't count the eleven times since 1998 that Ebenal has sued subcontractors to force them "to live up to their agreement," according to the owner of the construction company.

Statistics such as these are outside the norm for most general contractors. Contractors with business practices responsible for multiple lawsuits can be problematic for both subcontractors and owners.

Risks for Subcontractors: Subcontractors need to be knowledgeable about the integrity and practices of the general contractors they work for. One project where a contractor fails to pay a subcontractor can be the cause of a subcontractor going out of business.

Risks for Owners: Owners who hire general contractors with a poor record of subcontractor relationships and payments and a history of lawsuits can cause project completion to be delayed, often with substantial additional costs to the owner. Ebenal has recently failed to complete on time a dormitory project at Western Washington University in Bellingham.

Bidder Responsibility Criteria: In 2007, the Washington State Legislature adopted RCW 39.04.350 which provides public agencies with the right to establish supplemental bidder responsibility criteria to address issues such as having an excessive history of lawsuits and failure to pay subcontractors in a timely manner.

More Information: To read an article from The Western Front Online about Ebenal, click here.

http://PublicContracting.blogspot.com

Sunday, November 14, 2010

Types of Design-Build Entities

The Design-Build Institute of America (DBIA) recently adopted a position paper expressing no preference for the type of Design-Build entity that may contract with an owner.

Different types of Design-Build entities include the following:

Contractor with a designer (architect/engineer) as a subconsultant
Designer with a contractor as a subcontractor
Joint venture between a contractor and designer
Entity with in-house design and construction capabilities

Click here to read DBIA's one page position paper, including key elements that should be present in any contractual arrangement.

http://PublicContracting.blogspot.com

The Future of Capital Project Delivery

All Day Conference: The Future of Capital Project Delivery

When: Wednesday, November 17, 2010 (8:30 a.m. to 5:00 p.m.)

Where: Tulalip, Washington (Tulalip Resort Conference Center)

Sponsored by: Northwest Construction Consumer Council (NWCCC)

Cost:

$299 for NWCCC members
$379 for Non-members

Presentations on the following subjects:

Target Value Design
BIM Project Execution Planning
Integrating Technology into Lean Construction
Project Delivery through Best Value Selection
Advancing New & Emerging Technologies to Provide Highest Business Value in Capital Project Life-cycle
Industrial Engineering Techniques for Improving Field Operations
Project Delivery at Boeing
Innovation and Integration in Project Delivery at the University of Washington
The Future of Capital Project Delivery

Speakers:

Eric Smith, University of Washington
Churck Lynch, Boeing
Dr. Glenn Ballard, UC Berkeley
Steve Hutsell, Corps of Engineers
John Lynch, Washington State Department of General Administration
Kimon Onuma, Originator of BIMStorm
Brigitta Foster, Sandia National Labs
Ceoff Anderson, Lease Crutcher Lewis
Ray Topping, FIATECH
Deke Smith, BuildingSMART Alliance NIBS

Information and Registration: Click here.

http://PublicContracting.blogspot.com

Thursday, November 11, 2010

Davis-Bacon Prevailing Wage Compliance

Many public agencies and contractors are being faced for the first time with unraveling the complexities of managing compliance with federal Davis-Bacon prevailing wage requirements. Below are two different approaches: training and outsourcing.

DAVIS-BACON TRAINING

Webinar: How to Fulfill Your Certified Payroll Requirements

When: Wednesday, November 17, 2010 (11:00 a.m. Pacific Time - for 90 minutes)

Sponsored by: Associated Builders and Contractors (ABC)

Speaker: Nancy Smyth, President of Sunburst Software Solutions

Information and Registration: Click here.

DAVIS-BACON OUTSOURCING

Faced with monitoring Davis-Bacon federal prevailing wage requirements on four upcoming capital construction projects, the Seattle School District has decided to manage compliance with Davis-Bacon requirements not with their own staff, but by outsourcing the compliance function. The school district has issued a Request for Proposals (RFP) to obtain the services of an outside firm to manage Davis-Bacon compliance.

Duties of the selected firm will include:

Working with the District's project managers to assure compliance with Davis-Bacon
Construction monitoring, including reviewing and overseeing contractors' payroll compliance, checking and documentation, and closeout
Ensuring that all legal requirements for contractor forms, logs, rates, etc. have been met and submitted to federal agencies and the District's project manager

The RFP is available on the Builders Exchange website (www.bxwa.com). Click on "Posted Projects," "Goods and Services," and "Seattle Public Schools Goods and Services."

OTHER TRAINING

I've been approached by one public agency recently about developing and providing training for their staff on federal Davis-Bacon prevailing wage monitoring and compliance. It's a class I may be developing soon. Please contact me if this is something you would be interested in having me present for your agency, or at a class with staff from different agencies.

http://PublicContracting.blogspot.com

Tuesday, December 21, 2010

Monday, December 20, 2010

Sunday, December 19, 2010

Thursday, December 16, 2010

Wednesday, December 15, 2010

Tuesday, December 14, 2010

Monday, December 13, 2010

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Thursday, December 9, 2010

Wednesday, December 8, 2010

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Thursday, December 2, 2010

Wednesday, December 1, 2010

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Sunday, November 21, 2010

Thursday, November 18, 2010

Wednesday, November 17, 2010

Tuesday, November 16, 2010

Monday, November 15, 2010

Sunday, November 14, 2010

Thursday, November 11, 2010

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