Two Vacancies on CPARB

Two vacancies have been created on Washington State's Capital Projects Advisory Review Board (CPARB) with the recent resignations of Cynthia Cooper and Rodney Eng.

Cynthia Cooper resigned as Director of the State's Office of Minority and Women's Business Enterprises (OMWBE), effective October 4, 2010.  Cathy Canorro is the new acting director of OMWBE and OMWBE's new representative on CPARB.

Rodney Eng, longtime Director of the Contracts Section for the Seattle City Attorney's office, recently resigned his position with the City.  His resignation creates a vacancy on CPARB for a representative of cities.  The Association of Washington Cities (AWC) is responsible for recommending to the governor an individual to represent the interest of cities on CPARB.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Seattle Extends Deadline for Comments on New Plans and Specs

The City of Seattle has extended the deadline for submission of comments on the proposed 2011 City of Seattle Standard Specifications and Plans from October 30, 2010 to November 19, 2010.

Click here to view the proposed 2011 Standard Specifications and Plans and learn how to submit comments.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

City Adds More than $500,000 to Contract by Change Order

The Washington State Auditor's Office has issued an audit finding asserting that the City of Bellingham, Washington should have competitively bid $536,151 of sewer pipe and drainage repairs, instead of issuing six change orders to an existing and unrelated contract.

Obtaining a Fair Price:  Change orders for work unrelated to an original contract violate the intent of the state's competitive bidding requirements, and do not, according to the auditor, "guarantee the most efficient use of public resources."  The City asserted that they negotiated a significant reduction in the contractor's markup percentage for the change order work.

Emergency Not Declared:  "In retrospect," the City noted, it "should have declared an emergency for public safety/health and environmental reasons."  The change order work was authorized when the City discovered that sewer pipes and drainage under City Hall were leaking, necessitating immediate action.  

A formal declaration of an emergency and waiving competitive bidding would have authorized the City to contract for the emergency repairs through either a new contract or any existing contract, even if not related to the emergency work.

City Changes Practices:  According to City Public Works Director, Ted Carlson, the City has made changes to its practices to ensure similar problems don't occur in the future.

Additional Information:

• Audit finding
• Article in The Bellingham Herald 

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Court Rules Louisiana May Not Collect on Bid Bond

The Louisiana Court of Appeals, First Circuit, has ruled that the State of Louisiana may not collect on a bid bond provided by a contractor who failed to execute a public works contract with the State.  Click here to read the decision by the court.

The contractor, a joint venture, was unable to obtain the required payment and performance bonds and thus was unable to execute the contract.  The State then attempted to collect on the bid bond that was submitted with the bid on May 29, 2008 by Benetech, LLC and JRDKS Construction LLC, a Joint Venture, for the Bayou Segnette Project.

The Court ruled that the joint venture's bid should have been rejected as non-responsive due to the fact that the bid bond was submitted by an unauthorized surety company.  Louisiana state law requires that surety companies on public works projects meet certain conditions (La. R.S. 38:2219, La. R.S. 38:2218C).  Because the bid bond was not valid to begin with, the Court determine that the State could not collect on it.

Practical Tips:  

• What Sureties Are Authorized?  Check your state and local laws as well as the provisions of your specifications for requirements that may dictate that the surety must be on the U.S. Department of the Treasury's Financial Management Services list, on a list published by your state insurance department and authorized to do business in your state, and/or have a specific rating in A.M. Best's Key Rating Guide.

• Review Your Bonds:  Carefully review bid bonds after bid opening to ensure that the bond has been issued by an authorized surety company.  The same type of review should occur for payment and performance bonds.

Thanks to Louisiana and Washington attorney Scott Wolfe, of Wolfe Law Group, for pointing out this court case on his Construction Law Monitor blog.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

AGC Offers Annual GC/CM Training in January 2011

The AGC Education Foundation, in conjunction with the Mechanical Contractors Association and the University of Washington) will be sponsoring a two day training workshop on the use of GC/CM (General Contractor/Construction Manager) in the State of Washington.

When:  January 27-28, 2011 (8:00 a.m. to 5:00 p.m.)

Where:  Seattle, Washington (AGC Building, Conference Center, 1200 Westlake Avenue North)

Cost:  $350 per person (including lunch on both days)

Spaces Available:  55

More Information and Registration:  Click here.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates)

http://PublicContracting.blogspot.com

County Establishes Construction Roster for Small Contractors

King County (Washington) is establishing a public works construction roster that will be limited to contractors with gross annual revenues less than $1 million.  

Small Projects for Small Contractors:  The "Limited Public Works Roster" will be used for projects less than $35,000, and is an attempt to help ensure that small contractors, many of whom are owned by minorities or women, are afforded an opportunity to compete on the County's public works projects.

State Law:  The roster is a tool authorized by Washington State law (RCW 39.04.155) that permits public agencies to take into account the annual gross revenues of contractors (as reported on their federal tax returns) as follows:

• Solicit and award small works roster contracts to contractors with gross revenues under $1 million.
• Encourage contractors with gross revenues under $250,000 to submit quotations or bids on small works roster contracts.  

Categories for Revenue Thresholds:  King County is establishing two categories on the roster based on the two revenue thresholds.  It's unclear to me how the County intends to use these two categories, especially since there doesn't appear to be authority to restrict competition to contractors with revenues less than $250,000, but only to "encourage" these firms to submit bids.

Roster Projects Not Advertised:  These small public works projects will not be advertised in the newspaper, but the County will invite a minimum of three contractors to submit bids, and will then rotate invitations to other contractors on the roster until all contractors in a trade category have been provided the opportunity to submit a bid before asking firms a second time.

More Information:  More information and the County's application form for the Limited Public Works Roster are available online at http://www.kingcounty.gov/operations/procurement/Contractors/Limited_Public_Works.aspx.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Contractor Demolishes Wrong Building

A demolition company under contract with the City of Anchorage, Alaska to demolish three buildings at a city park got confused and demolished a fourth building as well.  The mistakenly demolished building was used by the Girl Scouts of Alaska as a storage facility.  

The contractor, Alaska Demolition, realized their mistake midway through the demolition process.  All activity was halted, and the city was notified.  The city made the decision to have the contractor complete the demolition because of the substantial damage that had already occurred to the 16-by-16-foot building.

The Girl Scouts were understandably surprised:  "I think that any time you're under the impression that your equipment is stored safely, you're surprised to find that it's bulldozed," said Jennifer Gallant, Girl Scouts spokeswoman.

Click here to read a news article from the Anchorage Daily News.

Lessons Learned:

• For contractors:  Read the drawings and specifications!

• For public agencies:  Have a pre-construction meeting to review the project, and have appropriate inspection or construction management staff available on-site during a public works project.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

6 States to Increase Minimum Wages in 2011

The following six states have announced plans to increase their minimum wage rates effective January 1, 2011:

• Arizona (to $7.35)
• Montana (to $7.35)
• Ohio (to $7.40)
• Oregon (to $8.50)
• Vermont (to $8.15)
• Washington (to $8.67)

For more information, visit the Wage & Hour Counsel blog of Litter Mendelson, P.C.

Minimum wage rates are separate from prevailing wage rates that many states and the federal government require be paid on public works projects.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Governor Seeks Members for Public Works Board in Washington State

Washington Governor Chris Gregoire is seeking members for the statewide Public Works Board, an infrastructure funding program.  

The Association of Washington Cities (AWC), which nominates potential elected official members to the governor has established an application process.  The deadline for submission of applications to AWC is November 19, 2010.   

Click here for more information.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

New Contractor Reporting Form for Off-Site Prefabricated Items

Contractors and subcontractors in Washington State who hire firms from outside the state to provide prefabricated, project-specific items for a public works project estimated to cost $1 million or more must begin reporting certain data about these contracts.

The Department of Labor and Industries has developed "EHB 2805 Addendum" to the Affidavit of Wages Paid form for fulfilling the reporting requirements.  Public works projects of the Washington State Department of Transportation (WSDOT) and local public works transportation projects are exempt from the reporting requirements.  Contractors and subcontractors who are found to have violated the reporting requirements more than once will be found not to be responsible bidders and may not be awarded public works projects.

For additional information about this new law, now codified in RCW 39.04.370, please click here to refer to my previous blog entries on the subject.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy Associates) 

http://PublicContracting.blogspot.com

Dealing with Questions at Pre-Bid Meetings

Public agencies frequently schedule pre-bid or pre-proposal meetings prior to the submission deadline to give prospective bidders or proposers the opportunity to find out more about the project, and thus respond more competitively.  

Check Your Solicitation Documents:  Invitations to Bid (ITB) and Requests for Proposals (RFP) generally have (or should have) language in them stating that no verbal communications will change the content of the solicitation.  Only the ITB or the RFP or an addendum issued to amend or supplement the solicitation document are actually binding.

Practical Tips:  So how should public agencies handle questions that are asked and answered at pre-bid or pre-proposal meetings?  Here are a couple of strategies and tips:

• Verbal Reminder that Verbal Statements Don't Count:  Open the meeting by reminding the attendees that nothing said verbally at the meeting is binding.  Only the ITB or RFP is authoritative.

• Written Reminder that Verbal Statements Don't Count:  Include a statement on the printed agenda for the meeting cautioning attendees that verbal information communicated at the meeting is not binding.  Here's some suggested language for the agenda of a meeting that also includes a site visit:

This pre-bid meeting and site visit are provided as a courtesy to potential contractors to assist them in becoming familiar with the project site conditions.  Attendees acknowledge and agree that only the Invitation to Bid and any addenda issued may be relied upon by bidders.  No information presented during this pre-bid meeting and site visit shall amend or replace the information in the official procurement documents issued by the public agency, unless explicitly stated in a subsequent written addendum.  Verbal statements made by representatives of the public agency or its representatives during this meeting and site visit, or at any  other time, are for informational purposes only, and are not to be relied upon unless subsequently confirmed in an official written addendum issued by the public agency.

• Record Questions and Answers:  Assign someone with the responsibility to record all questions asked and the answers provided.  Collect these questions and answers and include them in an informational addendum.  To the extent any of the questions point out issues that need to be changed in the solicitation document, issue an addendum changing the language.

• Say When You Don't Know the Answer:  If you don't know the answer to a question, don't try to make one up on the spot.  Instead, let the audience know that an answer will be provided in an addendum.

• Learn From the Questions:  Listen carefully to the questions asked as they can point out potential weaknesses in your solicitation document.  Sometimes, the questions may come outside of the pre-bid or pre-proposal meeting in the form of an e-mail or other written inquiry.  You may want to modify or strengthen your solicitation document based on questions asked by issuing an addendum.

• Contractors Want Anonymity:  Because contractors and consultants often don't want to verbally ask questions at pre-submittal meetings out of concern of giving away their approach to the project, distribute index cards to the attendees on which they can anonymously pose their questions.  Have appropriate staff at the meeting respond verbally to the questions, and follow-up with written answers in an addendum.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy) 

http://PublicContracting.blogspot.com

Upcoming Statewide Public Works Committee Meetings

The following is a list of upcoming meetings of various statewide stakeholder committees dealing with public works projects:

• Prevailing Wage Advisory Committee (PWAC) - October 25, 2010 (9:00 a.m. to 11:30 a.m. in Tukwila, WA)

• Task Force on Bidder Responsibility - October 26, 2010 (10:00 a.m. to 12:00 p.m. in Kent, WA)

• Capital Projects Advisory Review Board (CPARB) - October 28, 2010 (9:00 a.m. to 12:00 p.m. in Olympia, WA)

• Project Review Committee - December 2, 2010

In many cases, the agenda and various documents to be considered at these meetings are available by clicking the link above.

Mike Purdy's Public Contracting Blog (http://PublicContracting.blogspot.com)

Copyright 2010 by Michael E. Purdy

Collecting and Monitoring Weekly Payrolls on Federal Construction Projects

State and local agencies receiving federal funding for construction projects must comply with federal Davis-Bacon prevailing wage requirements.

Weekly Payrolls Required:  One of the requirements is that agencies collect and monitor the payroll reports of contractors and subcontractors prior to making payment, in order to ensure that workers have been paid federal prevailing wages.

Audit Findings:  The City of Everett, Washington recently was issued an audit finding by the Washington State Auditor's Office for failing to receive payrolls on a weekly basis.  The auditor "found two instances in which the City did not obtain certified payroll until May 2010 for work performed in 2009."  Click here to read the audit finding.

Grays Harbor Transit (Grays Harbor County, WA) also received a similar audit finding when the auditor could not find 71 payroll reports over a five week period in which 26 contractors worked.  Click here to read the audit finding.

Practical Tip:  Make sure that your contractor and all subcontractors are aware of the federal requirement that they pay their workers weekly, and that payrolls must be submitted weekly.  Have systems in place to ensure that you collect and review all payrolls on a timely basis.

Training on New GC/CM Law in Washington State

In 2010, the Washington State Legislature approve Senate Bill 6401, which permits a General Contractor/Construction Manager (GC/CM) to select the electrical and/or mechanical subcontractors in a manner very similar to how the GC/CM is selected by the public agency (based on qualifications, certain bid prices, and a negotiated maximum allowable subcontract cost). 

The benefit to the public agency is that these key trades can be brought on board very early in the design process, bringing their preconstruction services expertise and helping to reduce the risk for future claims on the project.

The AGC Education Foundation and the Mechanical Contractors Association of Western Washington are sponsoring a four hour training session on the implementation of this new law.

When:  November 17, 2010 (8:00 a.m. to 12:00 p.m.)

Where:  Seattle, Washington (AGC Building - Conference Center, 1200 Westlake Avenue North)

Cost:

• $50 per person for non-members
• $25 per person for MCAWW and AGC of WA members

More Information and Registration:  Click here

Additional Resources:  I have developed a summary outline of the new legislation, which is now codified in RCW 39.10.385.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy) 

http://PublicContracting.blogspot.com

NIGP Forum 2012 in Seattle

The Washington State chapter of NIGP (National Institute of Governmental Purchasing) is seeking an individual to chair the Volunteer Committee to help plan for the national NIGP Forum to be held in Seattle in 2012.

For more information about this or other volunteer opportunities, contact one of the Forum Committee co-chairs:

• Karen Fitzthum, King County, (206) 263-9295, Karen.Fitzthum@kingcounty.gov
• Heidi Bohl, Office of State Procurement, (360) 902-7435, Heidi.Bohl@ga.wa.us

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy) 
http://PublicContracting.blogspot.com

People in Transition - Promotion

Chad Joressen was promoted to Purchasing and Contracts Administrator with the Whatcom Transportation Authority in Bellingham, Washington.  With a strong warehousing background in transit and the military, Chad began his new duties on August 16, 2010.

Mike Purdy's Public Contracting Blog (© 2010 by Michael E. Purdy)

http://PublicContracting.blogspot.com

State Agencies Combine Retainage Release Form

Three Washington State agencies responsible for providing public agencies with a release letter on all public works projects of $35,000 or more have collaborated and combined their previous two release forms (completed by public agencies) into one release form.

Previously, the Department of Revenue and the Employment Security Department used a form entitled "Notice of Completion of Public Works Project" while the Department of Labor and Industries used a form with the same title and the subtitle "Request for Release."  Both forms had similar information but were not identical in the information requested.

There is now just one form to be completed by public agencies when requesting the three state agencies provide their approval letter to release retainage held on public works projects of $35,000 or more.  The new form may be found at the following website address:  http://www.lni.wa.gov/FormPub/Detail.asp?DocID=2404.

Multiple Audit Findings on Not Conducting Federal Debarment Checks

The Washington State Auditor's Office recently issued a number of audit findings to various agencies for failing to check whether contractors selected were suspended or debarred from doing business with the federal government.  The requirement applies to contracts of $25,000 or more when a state or local agency is funding a project with federal funds.

The easiest way to check for federal suspension and debarment is to visit www.epls.gov and print out a copy of the results and keep it in the contract file.

The following agencies received audit findings on the subject.  Click on the name of the agency to read the actual audit finding:

• Skagit Council of Governments (Skagit County, WA)
• City of Toppenish (Yakima County, WA)
• Monroe Fire District (Snohomish County, WA)
• City of Yakima (Yakima County, WA)
• Snohomish County Public Utility District No. 1 (Snohomish County, WA)
• Walla Walla Housing Authority (Walla Walla County, WA)
• Grays Harbor County (WA)
• Snohomish Health District (Snohomish County, WA)

Future Construction Plans in a Tight Economy

Evening Meeting:  Sound Transit - Future Construction Plans in a Tight Economy

Speaker:  Don Davis, Deputy Executive Director for Project Management and Construction Management at Sound Transit

When:  October 21, 2010 (5:30 p.m. to 8:00 p.m.)

Where:  Rock Salt Steak House (1232 Westlake Avenue North, Seattle, Washington 98109)

Sponsored by:  Pacific Northwest Chapter of CMAA (Construction Management Association of America)

Cost:  $45

More Information and Registration:  Click here.

Seattle to Publish New Standard Plans and Specifications

The City of Seattle will be publishing a new edition of its standard plans and specifications in January 2011.  The standard  plans and specifications are used on the City's public works projects. 

Until October 30, 2010, the City will be accepting comments on the proposed 2011 edition.

To view the proposed standard plans and specifications and comment on them, visit the following website:  http://www.seattle.gov/util/30daycommentperiod/.

Practical Tip:  Whether you are a public agency or a contractor, do you know what the general conditions or standard specifications you work with require?  Contracts are a tool to protect all parties, but it's important to know their provisions to manage and administer them fairly.

Training: Construction Defects

Seminar:  7th Annual Construction Defects:  Update and Strategies

When:  December 9, 2010 (9:00 a.m. to 5:15 p.m.)

Where:  Seattle, Washington (Grand Hyatt Seattle, 721 Pine Street)

Agenda Topics and Faculty:

• Owner's Perspective on Construction Defects (Jesse O. Franklin IV)

• Contractor's Perspective on Construction Defects (David F. Betz)

• Consultant's Perspective on Construction Defects and Design Errors (Brandon Erickson, PE)

• Managing Construction Defect Claims from an Insurance Perspective (Walter Isler)

• Green Design Considerations:  What to Do When Things Go Wrong (Edward R. Coulson)

• Pursuing Insurance Coverage for Construction Defects: Common Pitfalls for Construction Coverage (Thomas F. Ahearne)

• Ethical Considerations Related to Construction Defects Litigation (Steven J. Jager)

• Making or Breaking Your Defect Case: Arbitrator / Mediator Perspective (Anthony D. Gipe)

Cost:

• $495 for single registration
• $470 for two or more registrations
• $395 for government employees and Non-Profit/NGO
• $297 for contractors and subcontractors
• Other rates for other classifications

Sponsored by:  The Seminar Group

More Information and Registration:  Click here

Performing Federal Debarment Checks for Sub-Recipients

A public agency receiving federal funding that in turn grants sub-awards to sub-recipients to carry out the terms of the grant, must check to ensure that none of the sub-recipients are suspended or debarred from doing business with the federal government.  The provision applies to such contracts of $25,000 or more.

Audit Finding:  Kitsap County, Washington recently received an audit finding from the Washington State Auditor's Office for failing to check on the suspension and debarment status of  sub-recipients.  Click here to read the audit finding.

How to Check for Debarment:  Public agencies may check on federal suspension and debarment of sub-recipients (and contractors) by either of the following three methods:

• Consult the federal Excluded Parties List System before awarding funds to sub-recipients or contractors.  www.epls.gov.
• Insert a clause or condition into the contract that states the sub-recipient or contractor is not suspended or debarred.
• Obtain a written suspension and debarment certification from the sub-recipient or contractor.

From my perspective, checking www.epls.gov and printing the documentation to maintain in your contract file, is one of the best methods for checking the suspension and debarment status.

Job Opening: Capital Asset Manager

The Washington State Department of Social and Health Services is seeking a Capital Asset Manager.

Salary:  $72,396 to $90,492 annually

Job Location:  Olympia, Washington

Position Description:  The position manages the Office of Capital Asset Management and is responsible for developing, implementing, and monitoring a statewide capital asset management system for the Department's 21 state-owned facilities.

More Information:  Click here.

Application Deadline:  Sunday, October 17, 2010 (5:00 PM Pacific Time)

Training in Spokane

Monday and Tuesday of this week, I've been in Spokane, Washington, conducting two all day training sessions for about 15 member public agencies of Enduris, a risk management pool.

On Monday, October 11, 2010, I taught a class on Developing and Managing RFPs and RFQs.

On Tuesday, October 12, 2010, I taught a class on Public Works Contract Close-out:  Bonding, Retainage, and Claims.

Dealing with Conflicting Bid Prices

If your agency requests that bid prices be submitted in both words and numbers, make sure that you have a statement in your bidding documents addressing which takes precedence in the event of a conflict.

Not all agencies have such precedence language.  Without such language, it can lead to bid protests that are difficult to manage.

Example:  In one case, a public agency requested unit bid prices in both words and numbers.  The low bidder (at least based on the numbers) submitted a bid price in numbers for $150 per unit.  When multiplied by the estimated number of units, their extended price was $7,500.00.  But in writing the unit price in words, the bidder wrote down "seven thousand five hundred dollars," the amount of the extended bid price.

No Precedence Language:  The public agency had no language about how to handle a conflict between words and numbers, and decided to accept the unit price in numbers as the correct bid price.  

Bid Protest Filed:  This led to a bid protest in which the second low bidder argued that the low bidder's bid contained a material irregularity and that the bid should be rejected as non-responsive.  The basis of the material irregularity argument was that the low bidder had an advantage or benefit that other bidders didn't have:  they could choose, after submission of their bid, to either accept or not accept award of the bid based on the irregularity.  While I think the protesting contractor had a strong argument, the public agency denied the protest, and the protester chose not to pursue the matter further.

Bidding Should Promote Public Trust:  The public agency's deficient bidding documents caused delay in the project, and did not promote one of the basic principles of public contracting:  public bidding should be transparent and promote public trust in the process.

Note:  I've changed some of the numbers in the example above.

Economic Outlook for the Puget Sound Region

Breakfast meeting:  Economic Outlook for the Puget Sound Region

Speaker:  Dick Conway, local economist

When:  Wednesday, October 13, 2010 (7:15 a.m. to 9:00 a.m.)

Where:  Rainier Club (620 4th Avenue, Seattle, Washington)

Sponsored by:  DBIA Northwest Region (Design Build Institute of America)

Cost:  $65 - Member; $90 - Non-Member

More Information and Registration:  Click here

Should You Incorporate RFPs and Proposals into the Final Contract?

What documents should be incorporated go into a final contract?  Should it include, by reference, all of the terms of a Request for Proposals (RFP) issued by a public agency?  Should it include the actual proposal submitted by either consultants or contractors in response to the RFP?

Some agencies make it a practice to incorporate the RFP and proposals into the final contract.  From my perspective, I think such a practice raises the following issues:

• RFP Scope of Work May Be Preliminary:  An RFP often includes only a preliminary or limited scope of work for the project that may be modified by the successful proposal, by time, and by contract negotiations.  Sometimes the RFP may include performance milestones and a schedule that may change by the time of contract execution.  Including the RFP by reference as part of the contract sets up a potential conflict between the scope of work in the contract and the terms in the RFP.

• Procedural Nature of RFPs:  An RFP, by its nature, consists of a lot of procedural matters such as the selection process and evaluation criteria that are not, in fact, contractual terms or obligations of the selected contractor or consultant.  Including the RFP by reference as part of the contract isn't necessary or important.

• Proposals Are Proposals and Not Contracts:  In submitting a proposal, a firm submits their proposed approach for completing the work.  But during contract negotiations, some of those concepts may be modified or dropped from consideration.  In addition, proposals are not written in contractual scope of work language.  Including a proposal by reference as part of the contract may set up an ambiguity or direct conflict between the proposal and other provisions of the contract regarding what the scope of work actually is.

Make the Contract Self-Contained and Complete:  If there are provisions in your RFP or the proposal of the successful firm that are important contractual terms, scope of work descriptions, performance expectations, or scheduling issues, take the time to extract these relevant items from the RFP and proposal, and directly include them in the appropriate location in the actual contract. Make sure the language you develop is contractual so that you can hold the firm you are contracting with accountable for the work.

Consult With Your Attorney:  As you evaluate your agency's practices and whether to incorporate the RFP and proposals into your contracts by reference, or take the relevant items from these documents and include them directly in your contract, make sure you talk with your attorney and other policy makers in your agency.

Comments:  I am interested in your observations on this question and your practices.  If you have additional reasons why you do not include the RFP and proposal in your actual contract, or if you have reasons why you do include them in your contract, please contact me. 

Training: Insurance in the Construction Industry

Seminar:  Insurance in the Construction Industry

When:  October 15, 2010 (8:30 a.m. to 5:00 p.m.)

Where:  Seattle, Washington (Red Lion Hotel on 5th - 1415 Fifth Ave)

Cost:  $495 for a single registration.  Discounts available for some.

Topics Include:

• Most Often Litigated Builder's Risk Issues
• General Liability Insurance: Hot Topics
• Top 10 Most Questionable Decisions in Washington Construction Insurance
• Duty to Defend
• Emerging Issues Regarding Additional Insured Coverage
• Constitutional Issues in Construction Insurance Disputes
• The Duty to Investigate in Construction Defect Disputes
• File Splitting:  Does it Really Benefit the Insured?
• Mediation of Construction Disputes: Time for a Change?

Information and Registration:  Visit the website of the sponsor, Lorman Education Services.

People in Transition: Job Updates

Sound Transit:  Thuy Hong, an experienced contracts administrator and attorney, previously with the City of Seattle, joined Sound Transit in August 2010 as Senior Construction Contracts Specialist.

City of Seattle:  Tom Peloquin, consultant contracts supervisor, with the Seattle Department of Transportation (SDOT), will retire on December 31, 2010, after 14 years of managing consultant contracts, capping an even longer career with the City.

If you have updates of new hires, promotions, or retirements of people working in the procurement and contracting area with public agencies, please contact me.

Can You Negotiate A Low Bid Amount?

Let's say you've just received four bids to build a new building for your agency, and all four bid amounts are over your estimate.

Are Negotiations Permitted?  Can you negotiate with the low bidder, using value engineering and scope reductions to bring the cost of the project in under budget, and either award at a reduced amount or execute a change order immediately after award for the reduction?

West Virginia Bid Dispute:  That's the question facing Wood County, West Virginia commissioners, who authorized the project architect-engineer to reduce costs by almost $1 million on an almost $6 million low bid submitted by Phoenix Associates, Inc.  The commissioners' action has caused a flurry of activity between the attorneys for the first and second low bidders who are arguing whether the "West Virginia Fairness in Competitive Bidding Act" permits or doesn't permit negotiation of price with the low bidder. 

West Virginia's law doesn't appear to address the subject of bid negotiations, but does by its silence suggest it is not permitted.  It requires that the "construction contract shall be awarded to the lowest qualified responsible bidder."

The county's attorney, Wood County Prosecutor Jason Wharton, has advised the commissioners to "reject all the bids, come up with a new set of specifications and rebid."  The commission will decide at their October 7, 2010 meeting whether to award a contract or rebid it.  Click here for an article on the dispute in the NewsandSentinal.com.

Transparency in Public Bidding:  One of the purposes of public bidding is to ensure that all bidders have the opportunity to compete for public projects on the same basis - all bidding on the same scope of work.  While bid negotiation may make financial sense for a public agency, it doesn't promote a transparent and fair bidding environment, nor does it necessarily ensure a competitive price.

Additive and Deductive Bids:  One tool that public agencies have available on public works projects is to request additive bids for a scope of work that is desirable to award if the bids come in low enough to meet the budget.  Using additives enables the work to be competitively bid and not negotiated.  The opposite of additive bids would be deductive bids, in which the public agency deducts an amount bid by the contractors from the base bid amount.  Both additives and deductive bids serve as bid protection tools for the public agency to reduce the likelihood of having to reject all bids and readvertise the project. 

Audit Findings for Bid Negotiations: In 2009, the Washington State Auditor's Office issued an audit finding that the City of University Place, Washington improperly negotiated with the low bidder, awarded the contract at the amount bid, and immediately after award executed a change order reducing the scope of work and dollar amount of the contract to bring it in under budget. 

Authority to Negotiate:  Know what your state and local laws permit and don't permit.  In the State of Washington, state agencies have authority under RCW 39.04.015 for limited negotiations with the low bidder, if the low bid does not exceed the available funds by:

(a) Five percent on projects valued under one million dollars; (b) the greater of fifty thousand dollars or two and one-half percent for projects valued between one million dollars and five million dollars; or (c) the greater of one hundred twenty-five thousand dollars or one percent for projects valued over five million dollars.

If these negotiations will bring the bid price within the available funds, state agencies may negotiate the bid price.  The tool is not available to other types of public agencies in Washington state.

Webinar: Do I Have to Take the Low Bid?

Webinar:  Do I Have to Take the Low Bid?  Tools for Obtaining Qualified Contractors

When:  October 19, 2010 (10:00 a.m. to 11:30 a.m. Pacific Time)

Instructor:  Mike Purdy

Sponsored by:  NIGP (National Institute of Governmental Purchasing)

Cost: 

• $75 for NIGP members
• $105 for non-NIGP members

More Information and Registration:  Visit NIGP's website

2 Speeches in Spokane, Washington

Last week, I was in Spokane, Washington for the 67th annual Pacific Northwest Purchasing Conference, hosted by NAPM-Spokane, an affiliate of the Institute for Supply Management.  There were about 80 public and private sector attendees from three states: Washington, Idaho, and Alaska.

While there I gave the following two training speeches:

• Avoiding the Front Page of the Newspaper:  Why Ethics in Public Contracting Matters

• Do I Have to Take the Low Bid?  Tools for Awarding to Responsible Contractors

3 Projects Approved to Use GC/CM

On September 23, 2010, the State of Washington's Project Review Committee (PRC) approved the following three agencies to use the General Contractor/Construction Manager (GC/CM) alternative public works contracting procedure:

• City of Bellingham, Post Point Wastewater Treatment Plant Improvements
• Seattle Public Schools, Sealth/Denny Phase 3
• Welllpinit School District, High/Middle School Modernization

The PRC also re-certified Washington State University as an experienced public body to use GC/CM for another three years without having to bring each individual project to the PRC.

City Fails to Monitor Federal Prevailing Wages

On a federally funded construction project, the City of Washougal, Washington recently received an audit finding from the Washington State Auditor's Office for failure to "have adequate internal controls in place to ensure that certified payrolls were collected and reviewed by the project administrator within seven days of the payroll payment date."

Payrolls Not Collected Every Week:  The City relied on the engineering firm it hired to manage the collection and review of payrolls.  However, the engineering firm did not ensure that all payrolls were received from the contractor and all subcontractors on an ongoing basis, and assumed they could wait until the end of the project to collect all of the payrolls, using retainage as leverage with the contractor.

Tips for Reviewing Payrolls:  Collection and review of weekly payrolls from the contractor and all subcontractors on federally funded projects requires experienced staff and dedicated resources.  Key subjects to pay attention to in the review of certified payrolls include the following:

1. Classification:  Do the payrolls reflect the correct classification of labor for the type of work being performed?
2. Wage Rate:  Has the contractor paid the correct prevailing wage rate for the classification used?  On most federally funded projects, the contractor must compare the federal prevailing wages with the applicable state prevailing wages and pay the higher of the two wages.
3. Overtime:  Has the contractor paid the correct overtime rates?
4. Apprentices:  If any apprentices are used, are the apprentices registered in an approved apprenticeship training program, authorized by either the federal Bureau of Apprenticeship and Training (BAT) or an authorized state apprenticeship program?
5. Fringe Benefits:  Has the contractor paid the required fringe benefits either directly to the workers as part of their hourly pay or to an approved plan, fund, or program?
6. Interviews:  Has the public agency conducted on-site interviews with workers?  Some federally funded projects require that on-site interviews with workers be conducted to validate that the information provided on the payroll reports is consistent with what the workers indicate they are being paid.
7. Payroll Signature:  Has the payroll report been signed by an authorized representative of the contractor or subcontractor?  Some federal agencies require that an officer of the firm sign a statement indicating what employees are authorized to sign the payrolls on their behalf.
8. No Work Performed:  Did the contractor submit all of the payrolls?  If a firm did not work for a particular week, payroll reports should reflect this either by numbering the payrolls consecutively or by submitting a "no work performed" statement for the week they were not working on the project.
9. All Subcontractors:  Do you have a process for knowing what subcontractors worked on the project so you can ensure you collect payrolls from all subcontractors, of any tier?

Contract Language Required:  The federal Davis-Bacon prevailing wage requirements apply to public works construction contracts of $2,000 or more.  Public agencies receiving federal funding for their construction projects must also ensure they include language in their bidding and contract documents notifying the contractor that compliance with federal prevailing wage provisions is required.