Mike Purdy's Public Contracting Blog: February 2011

Monday, February 28, 2011

Selecting the Right Consultant: Scores and Consensus

Three Key Questions:

How detailed should evaluation criteria be in a Request for Proposals (RFP) or Request for Qualifications (RFQ)?
Should the evaluation criteria include the weighting or maximum number of points for each criterion?
What if the mathematical result of your selection committee doesn't result in selecting the consultant that most of the committee believes would be best for the project?

Lean Toward Transparency: In the interests of not only transparency and openness in the selection process, but of communicating to consultants what experiences, personnel, and approach are most important to a public agency, I think it is best to always include detailed evaluation criteria with the maximum number of points possible for each criterion.

Concerns With Detailed Criteria and Weighting: Some public agencies believe that including detailed criteria and weighting may not result in the best selection if the scores don't match the general assessment of the selection committee.

Consensus Meeting: To deal with this concern, I think it is a good practice for members of the evaluation committee to individually rate proposals or qualifications, and then come together as a committee to discuss their scores. The purpose of such a meeting is to attempt to develop consensus, not meaning that each evaluator will have the same scores or that there will only be one score for the entire committee. Instead, a consensus meeting allows members to discuss different scores and perspectives. What one person saw might not have been apparent to another evaluator.

Modifying Scores Based on Other Perspectives: During the consensus meeting, evaluators should be free to modify their scores based on opinions and assessments from other members of the committee. Of course, evaluators should always be free to not modify their scores based on the discussion. The process of scoring proposals and qualifications, even if based on criteria, can be a somewhat subjective process, and the consensus discussions of the committee can help to balance out scoring. Scoring only in isolation, devoid from discussions, may not result in the best selection for an agency. That is the value of the consensus meeting of the evaluation committee.

Document With Comments: Members of the selection evaluation committee should not merely assign numerical points for each criterion, but should make comments on an evaluation form noting some of the strengths and weaknesses of each proposal or statement of qualifications. Not only can such comments help guide the consensus meeting of the committee, but they can be valuable justifications in the event of a protest, and can help capture some of the reasons for a selection in the event the public agency provides a debriefing to unsuccessful consultants. Finally, some federal funding sources require a written document of the strengths and weaknesses of each proposer to be part of the procurement file, and the comments on each evaluation form can serve as a good source of information to help develop this document.

2 Procurement Job Openings

► King County (WA) is recruiting to fill a Lead Senior Buyer position.

Salary: $71,048.64 to $90,058.59 annually

Job Location: Seattle, Washington

Position Description Summary: This position provides leadership and direction to assigned buying staff for the procurement of goods, services, equipment, technology and emergency contracting in support of King County Operations.

More Information: Click here.

Application Deadline: Thursday, March 3, 2011 at 4:30 p.m.

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► The Washington State Department of Social and Health Services (DSHS) is recruiting to fill the position of Procurement Contract Manager.

Salary: $60,768 to $75,888 annually

Job Location: Olympia, Washington

Position Description Summary: This position has primary oversight and responsibility for managing the Central Contract Services Procurement Program for DSHS, for formal, informal and second-tier processes.

More Information: Click here.

Application Deadline: Wednesday, March 9, 2011 at 5:00 p.m.

Sunday, February 27, 2011

Contracting Scandal and Fraud Rocks Seattle School District

The Seattle School District is embroiled in a damaging contracting scandal involving allegations of fraud in the management and award of contracts surrounding its program designed to promote the use of minority and women owned businesses.

Superintendent May Be Fired: The crisis, which became public last week with the publication of a special investigative audit by the Washington State Auditor's Office, has put the jobs of school superintendent Maria Goodloe-Johnson and other high ranking officials, at risk.

Fraud: At the center of the scandal is a former district employee, Silas Potter, Jr., who resigned in June 2010, when he deposited a $35,000 check made out to the District into a private company he had established with the same name as the District program he managed (Regional Small Business Development Program).

Questionable Payments by District: The audit found that, through the District's small business program that Potter managed, the District paid:

$1,519,965.34 for services with a questionable public purpose
$280,005.25 for services it did not receive and for services that benefitted a private company.

How Did the District Produce Results? While the District produced statistics over the years about the high percentage of minority and women owned businesses utilized on construction projects, many wondered how the District could obtain such results given the requirements of Washington state law requiring award of contracts to the low bidder.

District Lobbied for State Law Change: One tool the District apparently took advantage of was a change in state law that the District lobbied for. In 2007, the Legislature approved changes to the Small Works Roster program (RCW 39.04.155) permitting public agencies to essentially restrict competition on projects less than $35,000 (Limited Public Works process) to businesses with gross annual revenues under $1 million. The District also apparently produced results through questionable awards of contracts to businesses who did not perform legitimate services.

Warning Signs Ignored by District: In 2009, the District received a report from a private consultant hired by the District to investigate Potter's management of the Small Works Roster program. The report from the Sutor Group resulted in the District stripping Potter of his responsibilities for awarding construction contracts and resulted in a reorganization within the District, but it still left Potter able to award consultant (personal service) contracts, which he continued to do, many to friends and associates. According to the State Auditor's Office report, many of these contracts did not result in work actually being performed, but the entities were nevertheless still paid.

Organizational Conflict of Interest: While it is clear that Potter was not sufficiently supervised, it is also clear that the District set the stage for the scandal by creating an organizational structure with an inherent conflict of interest that did not segregate the functions of small business development from procurement and contracting. Potter was authorized to not only encourage the development and use of small businesses, but to actually award those contracts to them, thus making his program look successful. Without checks and balances in place to ensure that procurement laws are followed, there are no guarantees that programmatic objectives will not override regulatory requirements.

More Information: The Seattle Times and State Auditor's Office have conducted significant investigations and written extensively on the scandal. The following are some of the many good resources available for more information:

State Auditor's Office audit

State Auditor's Office - Summary of interview and findings

Seattle School District Independent Investigative Report from attorney Patty Eakes (February 25, 2011)

Seattle Public Schools spending targeted in criminal probe (Seattle Times article from Feb. 22, 2011)

Seattle schools officials were warned two years ago of financial problems (Seattle Time article from February 23, 2011)

Documents detail financial abuse in Seattle schools program (Seattle Times article from February 24, 2011)

School superintendent could be ousted within a week over spending scandal (Seattle Times article from February 25, 2011)

Brash furniture man made school program his fiefdom (Seattle Times article from February 26, 2011)

Lessons Learned:

Checks and balances and internal controls in public contracting are critical.

Supervision of employees, especially those involved in contracting decisions, is critical.

Public agencies should have clearly documented procurement and contracting procedures that should be followed.

Public agencies should carefully and regularly evaluate the management of their contracting program, looking for areas of exposure and risk.

Public agencies should institute procedures to enable employees to report inappropriate activities.

Thursday, February 24, 2011

The Benefits of Reviewing Proposals and Interviewing Finalists

In selecting consultants based on a Request for Proposals (RFP) or Request for Qualifications (RFQ), public agencies review and score the proposals or qualifications submitted based on established evaluation criteria and weighting for each criterion.

Interview Finalists Using Criteria: Because agencies are selecting a firm based on their proposal, qualifications, and expertise to provide a service, it is often a good idea to also conduct interviews with the finalist firms to validate information submitted with the proposal. There should be established criteria and weighting for the interview portion of the selection process as well.

Selection Based on Interview Only: Some agencies will only use the points assigned for the interview, and not the points from the proposal, suggesting that the proposal represents a pass/fail process only. The drawback to this approach is that some people present very well in an interview, but may not have the substance of experience as documented in a proposal.

Selection Based on Proposal Only: Other agencies do the opposite and only assign points based on the proposals, but not the interview. The drawback to this approach is that the proposal may have been put together by the firm's marketing department, and look impressive. However, selection needs to also include an evaluation of the actual people you will be working with.

Selection Based on Proposal and Interview: Thus, I think the best practice is to combine the scores from the proposals and interviews in determining the highest ranked firm. This helps balance out the strengths of substance in a proposal with the communication style and chemistry issues that come out in an interview.

Wednesday, February 23, 2011

Job Opening: Procurement Manager, Intercity Transit (Olympia, WA)

Intercity Transit in Olympia, Washington is recruiting to fill the position of Procurement Manager.

Salary: $63,419 to $85,613 annually

Job Location: Olympia, Washington

Position Description Summary: This position is responsible for the planning and management of the procurement function for the agency. This includes the development and administration of effective procurement and contract administration activities as well as managing the acquisition and inventory of vehicle parts and the disposal of surplus property.

More Information: Click here.

Application Deadline: Friday, March 18, 2011 at 4:00 p.m.

Tuesday, February 22, 2011

Is GC/CM or Design-Build Appropriate for Your Project?

CMAA Annual Seminar: Is GC/CM or Design-Build Appropriate for Your Project?

When: Friday, April 29, 2011 (7:30 a.m. to 4:30 p.m.)

Where: Bellevue, WA (Bellevue Hilton, 300 112th Ave SE)

Cost:

CMAA Member: $175
Non-CMAA Member: $225
Early Bird CMAA Member: $150 (by April 16)
Early Bird Non-CMAA Member: $200 (by April 16)

Agenda:

Welcome - Setting the Stage (Dan Becker, HDR)

Issues and Trends in Public Project Delivery (Mike Purdy, Michael E. Purdy Associates, LLC)

Project Review Committee and Capital Projects Advisory Review Board (Eric Smith, Director, Major Capital Projects, University of Washington, Capital Projects Office)

Olympia City Hall - Design-Build Delivery (Lyle Martin, Hoffman Construction; Scott Harm, Belay Architecture; Court Olson, OAC Services - CM)

CM/Owner's Representative Role on GC/CM and Design-Build Projects (Larry Johnson, VP, HDR West Region Alternative Delivery Manager)

UW Foster School of Business Phase One - PACCAR Hall - GC/CM Project (Steve Tatge, UW Project Manager; Bob Dillon, UW Construction Manager; Dave Schneider, LMN Architects Project Manager; Kurt Winje, Sellen Construction Project Manager)

Owner's Panel - Why they use or don't want to use GC/CM or Design-Build

Information and Registration: Click here

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

Monday, February 21, 2011

Alliance NW - Small Business Conference and Trade Show

Annual Alliance NW Small Business Conference

When: Thursday, March 10, 2011 (7:30 a.m. to 4:00 p.m.)

Where: Puyallup, WA (Puyallup Fair & Events Center - Americraft Showplex Exhibition & Conference Center)

Cost: $105 per person (includes lunch, breakout sessions, networking opportunities. Free parking)

Presented and Hosted by: Washington State Procurement Technical Assistance Center

Information and Registration: Click here

Sound Transit Hires New Senior Contracts Specialist

Sound Transit has hired a new Senior Contracts Specialist to work in the Goods and Services section of the Procurement and Contracts Division.

Rosalind (Rox) Knox begins her new duties at Sound Transit effective February 22, 2011. Roz, who has a CPPB (Certified Professional Public Buyer) certification, was previously employed as a Contract Specialist 3 with the State of Washington's Office of State Procurement (Department of General Administration).

Thursday, February 17, 2011

Disclosing or Not Disclosing Names of Evaluators

When public agencies evaluate responses from consultants or contractors through either a Request for Proposals (RFP) or Request for Qualifications (RFQ) process, there are different practices regarding whether the names of the evaluators should be made public.

Prior to Selection: Prior to a selection decision being made, most agencies keep the names of the evaluators confidential. This helps to prevent consultants and contractors from privately lobbying the evaluators to rate their proposal more favorably.

After Selection: After the proposals (or qualifications) have been evaluated based on the established evaluation criteria, all information surrounding the selection process, including the evaluators' individual score sheets and comments, is typically considered subject to public disclosure. This may vary on a state-by-state or agency basis, but the norm is that this information must be disclosed upon request. There are two practices regarding disclosure of such information:

Names on Evaluation Forms: Some agencies include the name of the evaluator on the evaluation form on which the evaluator rates and comments on the proposal. In this case, it is a good practice for each evaluator to sign the evaluation form, including agreeing to a statement on the form that the evaluator does not have a conflict of interest, either real or apparent, with any of the proposers.
No Names on Evaluation Forms: Other agencies choose not to include the evaluators' names on the evaluation form, instead assigning a number or letter corresponding to each member of the evaluation committee. In this case, the evaluator enters their scores and comments, but does not sign the form, but should sign a separate form for the record noting that they do not have a conflict of interest with any of the proposers. Depending on the public disclosure laws applicable to a specific public agency, even an agency that uses this approach may be required to disclose the list of evaluators along with the number or letter assigned to them. Generally, this information would all be considered public information, subject to disclosure.

Professional Comments: Regardless of which approach is used, it is important that evaluators be instructed to include only professional comments that support their specific scores in response to the evaluation criteria.

Wednesday, February 16, 2011

No Bid for Modular Home Bought From Commissioner's Spouse

The Washington State Auditor's Office issued a finding against the King County (WA) Fire Protection District No. 28 for the following:

No Bid: The District failed to solicit bids or declare that an $85,000 modular home it purchased from the spouse of one of the Fire District's Commissioners was available from only one source.

Conflict of Interest: Even though the Commissioner abstained from voting on the purchase, the transaction represented a conflict of interest under state law.

Gift of Public Funds: The District reimbursed the Commissioner $1,850.92 for the cost of a lot fee for keeping the modular home in its current location until the District obtains permits and relocates the home. Without any written agreement, the Auditor noted that such reimbursements represented a gift of public funds, a violation of the State constitution.

Practical Tips:

Pay attention to the bid laws that affect your type of agency, and follow them.
Be sensitive to conflicts of interest, whether real or apparent. If you have any doubts, it may be a problem. Consult with the leadership of your agency and fully disclose any potential conflicts.
Make sure you have a contractual agreement in place before you make payments.

Audit Report: Click here to read the three page audit report.

Tuesday, February 15, 2011

Bidder Responsibility Workshop

Free Bidder Responsibility Workshop

When: March 10, 2011 (8:30 a.m. to 12:30 p.m.)

Where: Seattle-Tacoma International Airport (The Conference Center)

Cost: Free

Speakers:

Dan Absher: CPARB Board member (general contractor member), President, Absher Construction
John Ahlers: CPARB Bidder Responsibility Task Force Co-Chair, Partner Ahlers & Cressman PLLC
Nora Huey: CPARB Bidder Responsibility Task Force member, Port of Seattle, Director of Central Procurement Office
Mike Purdy: CPARB Bidder Responsibility Task Force member, Michael E Purdy Associates, LLC, Procurement Consultant for Public Contracting
Paul Szumlanski: CPARB Bidder Responsibility Task Force member, General Administration

Information and Registration: Click here. Only 90 seats available.

Description: In 2007, the Washington legislature passed RCW 39.04.350 the "bidder responsibility statute." The statute allows public works owners to develop supplemental criteria for determining bidder responsibility prior to award of a public works project. The invitation to bid or bidding documents must include the supplemental criteria, the basis for evaluation, the deadline for submitting responsibility documentation, and the deadline for appealing a determination that a bidder is not responsible. The supplemental bidder responsibility criteria have been implemented successfully by many public works owners and with controversy by many others.

This half day workshop will cover Mandatory Bidder Responsibility Criteria, Supplemental Bidder Responsibility Criteria, examples of projects which Supplemental Bidder Responsibility Criteria were challenged and reversed, different approaches to determination of the bidder's compliance and much more. Participants will break into groups to analyze examples and time will be devoted to Q & A.

New Application Forms for Use of GC/CM and Design-Build

Washington State's Capital Projects Advisory Review Board (CPARB) has approved a recommendation from its Project Review Committee (PRC) to adopt revised application forms for public agencies seeking approval to use either the GC/CM (General Contractor/Construction Manager) or Design-Build process.

Project or Agency Approval Required: Under RCW 39.10, public agencies must either seek approval to use these alternative public works processes on a project-by-project basis or to obtain certification from the Project Review Committee (PRC) as a certified public body, experienced in using these delivery methods.

Approved on February 10, 2011: CPARB approved the revised forms at their February 10, 2011 meeting, after hearing a report and recommendation from the PRC Chair, Penny Koal (Dean of Capital Facilities at South Puget Sound Community College).

PRC Meeting Frequency: The Project Review Committee meets every other month to consider applications and hear presentations from public bodies seeking approval.

Terminology in Other States: In other states and in the private sector, GC/CM is also known by other terms, such as CM/GC or CM at Risk.

Job Opening: Procurement Unit Manager

The Office of State Procurement (Washington State Department of General Administration) is recruiting to fill a Procurement Unit Manager position.

Salary: $72,970 to $83,393 annually

Job Location: Olympia, Washington

Position Description Summary: This position is responsible for managing a team of 10 or more procurement professionals, with contracts valued at approximately $200 million annually. The Procurement Unit Manger will have $20 million independent signature authority.

More Information: Click here.

Application Deadline: Thursday, February 24, 2011 at 11:59 p.m.

Monday, February 14, 2011

5 Inch Error Costs Contractor $20,000 to $25,000

A 5 inch surveying error has resulted in a misalignment of a concrete ramp being built in Seattle by PCL Construction.

After assessing its options, PCL decided to tear down 160 feet of concrete and start over, a mistake that will cost the company between $20,000 and $25,000. The ramp is part of work being performed on the South Spokane Street Viaduct.

Click here for an article from the Seattle Times with more details.

Regional Contracting Forum Set for March 30, 2011

The 9th annual Regional Contracting Forum, which is sponsored by the Puget Sound region's largest government agencies, provides an opportunity for contractors, consultants, and suppliers to meet with agency representatives and network.

When: Wednesday, March 30, 2011 (8:00 a.m. to 3:30 p.m.)

Where: Washington State Convention and Trade Center (Seattle)

Cost: Free

Information: Click here

Registration Starts on February 15, 2011

Sponsors:

City of Seattle
King County
Port of Seattle
Sound Transit
University of Washington
Office of Minority and Women's Business Enterprises (OMWBE)
Washington State Department of Transportation (WSDOT)

Last Year's Attendance: At the 2010 Regional Contracting Forum, there were more than 80 exhibitors and 2,000 attendees.

Job Opening: Construction Contract Administrator

The Port of Seattle is recruiting to fill a Construction Contract Administrator position.

Salary: $56,394 to Midpoint $70,473 annually

Job Location: Seattle, Washington

Position Description Summary: This position is responsible for managing the procurement contract process for routine construction contracts from inception to closing, including problem solving on routine/conventional public works construction procurement and compliance issues, addressing bid protests, and presenting recommendations to management.

More Information: Click here.

Application Deadline: Friday, February 25, 2011 at midnight

Sunday, February 13, 2011

Use of Stipends on Design-Build Projects

Many owners pursuing Design-Build projects will pay a stipend amount to shortlisted responsive proposers as a tool to help compensate design-build teams for the cost of preparing a proposal, and to encourage competition from competitive firms. But what is the right amount to pay?

DBIA Position on Stipends: The Design-Build Institute of America (DBIA) has issued a two page Position Statement on the use of stipends noting that "payment of a stipend is a best practice on most design-build projects," but that a stipend "rarely covers the cost of proposal preparation." Based on industry surveys, DBIA reports that stipends "commonly range between 0.01 percent and 0.25 percent of the project budget." The Position Statement suggests that:

Washington State Law: Under RCW 39.10.330 (5), the Washington State Legislature has gone on record with respect to the amount of a stipend (called an honorarium):

Mike Purdy's Public Contracting Blog

http://PublicContracting.blogspot.com

Thursday, February 10, 2011

Small Business Legislation Endorsed by CPARB

Washington State's Capital Projects Advisory Review Board (CPARB) voted on Thursday, February 10, 2011 to endorse draft legislation that would help small businesses interested in performing public works projects.

The legislation would accomplish two things:

Waiver of Bonding and Retainage: Enable public agencies to waive payment and performance bonds and retainage on public works projects of $5,000 or less that are not selected through the Limited Public Works process (a subset of the Small Works Roster authorized in RCW 39.04.155). Not having to submit the bonds is a cost savings to small contractors, as well as a convenience issue, and obtaining the full amount of each progress payment without retainage increases the cash flow of small businesses, reducing the need to borrow money.

Increase Threshold for Combined Prevailing Wage Form: Increase the threshold from $2,500 to $5,000 for when a contractor could submit a combined "Statement of Intent to Pay Prevailing Wages" and "Affidavit of Wages Paid." The combined prevailing wage form is a less cumbersome and quicker process for small businesses, saving them both time and money.

CPARB will work with legislators to get the bill introduced quickly in order for it to have time to be considered during the current legislative session. No bill number has yet been assigned because it has not formally been introduced yet.

The idea for the bill came out of the work of CPARB's Small Business Task Force.

Wednesday, February 9, 2011

Competitive Public Construction Bidding in 2011 (Seminar)

When: Thursday, March 24, 2011 (1:00 p.m. to 5:00 p.m. with optional reception following)

Where: Seattle, Washington (Hilton Seattle, 1301 Sixth Avenue)

Agenda and Faculty:

1:00 p.m. - The Bidding Process (B. Michael Schestopol, Oles Morrison Rinker & Baker LLP)

2:00 p.m. - Alternative Public Project Procurement Process (Mike Purdy, Michael E. Purdy Associates, LLC)

3:00 p.m. - Insurance Considerations in the Bidding Process (Thomas F. Ahearne, Foster Pepper PLLC)

3:45 p.m. - Contractor's Perspective on Bidding Construction Projects (Tom Peterson, Hoffman Construction Company)

4:20 p.m. - Municipality's Perspective on Bidding Construction Projects (Rodney Eng, Offices of Rodney Eng)

Cost:

$325 for single registration
$270 for government employee
Click here for other rates

Information and Registration: Visit the website of The Seminar Group

Job Opening: P-Card Administrator

The Port of Seattle is recruiting to fill a P-Card Program Manager position.

Salary: $63,765 to Midpoint $79,716 annually

Job Location: Seattle, Washington

Position Description Summary: This position is responsible for oversight, correct usage, internal auditing, compliance reviews, training and overall implementation of the Procurement Card (P-Card) Program at the Port of Seattle.

More Information: Click here.

Application Deadline: Wednesday, March 2, 2011 at midnight (Pacific Time)

Reminder Note: King County (WA) is also recruiting for a P Card Program Manager. Click here for more information.

Tuesday, February 8, 2011

In-State Bidding Preferences on the Rise

As the economy continues its slow recovery and small businesses struggle financially, many states and local governments are turning to tools designed to protect their own local businesses by offering them financial incentives in the public bidding process, over firms from out of state.

The Disadvantages of Bidding Preferences: While the intent of such moves is understandable, there are often unintended and detrimental consequences to such preference programs:

Reciprocity: Let's say that Washington State established bidding preference for Washington State firms (and it's under consideration now). Other states may then choose to establish a preference for their in-state bidders over Washington State bidders. Often, these types of requirements can be detrimental to businesses trying to do business in other states where they are at a competitive disadvantage. The end result is that it may hurt local businesses, who end up with less income, and thus pay fewer taxes to already financially strapped government agencies.

Certification: With the award of a contract actually riding on whether a firm is defined as being an in-state business, it becomes very important and difficult to define which businesses actually qualify for the preference points. It requires setting up new government bureaucracies to monitor and certify what businesses actually qualify for the preference points, at a cost to governments that are cutting their most basic services to balance budgets.

Higher Costs: Local preference programs often result in higher costs to government agencies. While government is trying to help its own local businesses, they end up at the same time of paying higher prices. For example, if an agency had a 5% preference program for local or in-state businesses, a low bid of $100,000 wouldn't be awarded the contract if an in-state or local business had a bid of $105,000 or less. Thus, in this example, an agency could end up paying up to $5,000 more on work really valued at $100,000, something that most public agencies these days cannot afford to pay. This becomes a situation of governmental budgets subsidizing local businesses, which may be viewed as a gift of public money to a private entity, something prohibited in many jurisdictions.

The Bottom Line: Bidding preference programs impact the budgets of government agencies by lower taxes, increased cost to manage certification programs, and paying prices higher than the low bid.

New Washington State Legislation: House Bill 1809 (Companion Senate Bill 5662) has recently been introduced into the Washington State Legislature. This is in addition to the previous bill (HB 1355) that I reported on earlier that would establish a 3% preference in bidding on state agency contracts.

Resident Contractor: Under HB 1809, which would apply to public works contracts awarded by the state or a municipality, a new term for "resident contractor" is defined. A resident contractor must be certified by the State Department of General Adminstration and meet the following requirements:

Be registered as a contractor in Washington State
Maintain a place of business in the state staffed by the contractor or an employee of the contractor for a period of six months immediately preceding the date of the bid
Pay residents of the state at least 85% of its payroll, in dollar volume, or employ residents of the state for at least 85% of its employees
Have the owner of various business entity types be a resident of the state.

7% Preference in Award: HB 1809 would require the state or municipality to pay up to 7% more for a public works project if a resident contractor was within 7% of the low bid. The project would be awarded at the higher amount to the resident contractor.

Penalties and Sanctions: The bill includes a series of penalties and sanctions for contractors who submit false information in the process of obtaining certification as a resident contractor by the Department of General Administration. Interestingly, one of the penalties is "an assessment equal to the difference between the contract amount and what the state's cost would have been if the contract had been properly awarded." But this penalty only appears to apply to the state and not to municipalities.

Other States: I'm aware of the following activity in other states:

North Carolina has an in-state preference program
Nevada has a preference program that may be amended
New Mexico is considering legislation on the subject
Others

Monday, February 7, 2011

Bill to Encourage Use of Small Businesses

Substitute House Bill 1173 is an improvement over the original version of the bill introduced into the Washington State Legislature (see my earlier blog entry on the bill).

What is the Intent? The substitute bill is essentially just a clean up of language from RCW 39.04.155 and doesn't appear to make any substantive changes. The intent of the bill is probably to give public agencies an option on Limited Public Works process to restrict competition to small, micro, and mini-businesses. But it doesn't really do that, just like the existing law doesn't really do that.

Alternative Language: I think the intent of Section 5 might be more accurately expressed if it read as follows:

Encouraging Use of Small Businesses: The current language of RCW 39.04.155 and the proposed substitute bill that allows agencies to adopt procedures to "encourage" smaller businesses to submit bids is curious language. An agency always has the right to "encourage" certain firms to submit bids. Thus, in my suggested "intent" language above, I've eliminated the "encourage" language to suggest that agencies would have the option to restrict competition on the limited public works to small businesses, minibusinesses, and/or microbusinesses.

Sunday, February 6, 2011

Job Opening: P Card Program Manager at King County (WA)

King County (WA) is recruiting to fill a P Card Program Manager position.

Salary: $70,774.50 to $89,710.82 annually

Job Location: Seattle, Washington

Position Description Summary: This position manages the county Purchasing Card (P-Card) Program and other procurement programs as assigned. The duties for this position include researching and recommending best practices, analyzing, monitoring and developing the program, identifying and leveraging benefits, and maintaining administrative policies and procedures for the approval and use of cards.

More Information: Click here.

Application Deadline: Tuesday, February 15, 2011 at 4:30 p.m.

2011 Project Review Committee Meeting Dates

Washington State's Project Review Committee (PRC), which reviews and approves applications from public agencies in the state to use either Design-Build or GC/CM (General Contractor/Construction Manager) as alternative public works delivery methods, has announced the schedule for their meetings in 2011.

If you are a public agency and are contemplating use of one of these methods, the following chart shows the deadline for submission of the application and the date of the PRC meeting, at which the public agency would make a presentation.

Application Due Date	Public PRC Meeting Date
March 1, 2011	March 24, 2011
May 2, 2011	May 26, 2011
July 1, 2011	July 28, 2011
September 1, 2011	September 22, 2011
November 1, 2011	December 1, 2011
January 2, 2012	January 26, 2012

The Project Review Committee evaluates applications to determine if the project is appropriate for the alternative public works contracting method proposed, and whether the agency has the appropriate staff or hired consultants with Washington State GC/CM experience to manage the project.

Thursday, February 3, 2011

Bill Would Expand Use of Design-Build for Washington DOT Projects

SB 5250, introduced into the Washington State Legislature, would expand the authority of the Washington State Department of Transportation (WSDOT) to use Design-Build as a project delivery method on their projects.

Use of Design-Build on Smaller Projects: Under the current law (RCW 47.20.780), WSDOT is required to develop a process for Design-Build projects over $10 million. Under Proposed Substitute SB 5250, that dollar threshold would be reduced to $1 million, thus encouraging WSDOT to use Design-Build on smaller projects. The bill would also eliminate current language permitting WSDOT to conduct five pilot Design-Build projects between $2 and $10 million.

Design-Build Option Must Be Considered: SB 5250 would also shift the focus of the law from permitting WSDOT to use Design-Build to requiring them to consider Design-Build when certain conditions are met. If WSDOT chose not to utilize Design-Build for a project over $10 million, they would be required to provide, upon request, a written explanation of their decision not to use Design-Build to the Legislature's transportation committees and the Office of Financial Management.

Authority for Design-Build for Other Agencies: WSDOT has separate Design-Build legislation from other public agencies in the State of Washington who are governed by chapter 39.10 RCW for the use of Design-Build.

Job Opening: Senior Contracts Specialist at Sound Transit

Sound Transit is recruiting to fill a Senior Contracts Specialist position.

Salary: Negotiable

Job Location: Seattle, Washington

Position Description Summary: This position performs duties involved in the preparation, finalization, analysis, and administration of agreements and contracts for the goods and services section of the Procurement and Contracts Division. The position is responsible for cradle-to-grave procurement and contract work. Solicitations and contracts may fall in the areas of information technology, financial consultants, property management and real estate consultants, public works small works roster bids, janitorial services, landscaping, and other related areas.

More Information: Click here.

Application Deadline: Friday, February 11, 2011 at 5:00 p.m.

Wednesday, February 2, 2011

Subcontractor Bonds on GC/CM Projects

Many states permit the use of public works contracting methods different from the traditional Design-Bid-Build model. These alternative models include Design-Build, Job Order Contracting, and General Contractor/Construction Manager (also known in some states as CM at Risk or CM/GC).

Mandatory or Discretionary Bonds: Under Washington State's General Contractor/Construction Manager (GC/CM) law, the contractor is required to obtain a payment and performance bond from all subcontractors with a subcontract amount over $300,000 [RCW 39.10.380 (3)]. At the contractor's discretion, they may require a payment and performance bond from subcontractors with a subcontract amount of $300,000 or less.

Who Pays for the Bonds? Who pays the cost of such subcontractor bonds? One of the more complex areas of GC/CM contracting is the various cost categories that comprise what is known as the Total Contract Cost.

Required Bonds Included in the MACC: Because subcontractor payment and performance bonds are required by law for subcontracts over $300,000, the cost of these bonds should be included in the bids submitted by the subcontractors and becomes part of the Maximum Allowable Construction Cost (MACC) that is negotiated between the public agency and the contractor, often before any subcontract bid packages are advertised.

Discretionary Bonds Included in Overhead and Profit: When a contractor decides to require a subcontractor with a subcontract of $300,000 or less to obtain a payment and performance bond, it represents a risk mitigation strategy and business decision of the contractor. Therefore, in my opinion, the public agency should not directly pay for such payment and performance bonds. Instead, the cost of these bonds should be included in the contractor's overhead and profit amount, which is actually bid by the contractor as part of the GC/CM selection process. In Washington State, this overhead and profit cost category is know as the Percent Fee.

State Law Silent on Who Pays for Discretionary Bonds: Washington State law does not specifically dictate how subcontractor payment and performance bonds for projects of $300,000 or less should be paid for, and there may be difference practices and opinions on this issue.

Practical Tips:

Address in RFP: Regardless of the decision made by a public agency about how the cost of bonds for subcontractors with subcontracts of $300,000 or less should be paid for, the Request for Proposals document issued by the public agency should clearly address the agency's position on the cost of these bonds so that all contractors will be pricing the project on the same basis, and to help ensure smooth administration of the project.

Include Cost Breakdown on Subcontract Bid Form: In order to ensure that the cost of the subcontractor's payment and performance bond for subcontracts of $300,000 or less is appropriately tracked and paid for, such subcontract bid packages should include a separate line item for subcontractors to bid for the cost of the bonds. If the public agency allocates these bond costs to the Percent Fee, by including the costs on the subcontract bid form, the public agency can ensure that these costs are not rolled into the Maximum Allowable Construction Cost (MACC), but are separately identified as a cost that the contractor bears as part of the Percent Fee.

Tuesday, February 1, 2011

Bill Would Establish 3% Bidding Preference for Washington State Businesses

In a move that is consistent with actions by many public agencies across the country seeking to protect and stimulate local business growth and stability, House Bill 1355 was introduced into the Washington State Legislature.

3% Bidding Preference: The bill would establish a 3% bidding preference for Washington State businesses in the award of public works, personal service contracts, and the purchase of goods and services by state agencies (including educational institutions).

Applicability of the Preference: If HB 1355 is approve, it would apply:

Only to state agencies and not to local agencies
To contracts awarded on or after January 1, 2012
For contracts less than $1 million
Might not apply to purchases from multistate contracting consortiums if waived by the state

How an In-State Bidding Preference Would Work: Here's an example of how a 3% bidding preference for Washington State firms would work in practice. If the low bid was $100,000 from an out-of-state firm, but the second low bid was within 3% of $100,000 ($103,000 or less), then the Washington State business with the $103,000 bid would be awarded the project at the higher bid amount.

Purpose and Philosophy: The bill notes the purpose and philosophy behind the proposed legislation:

Resources: Here are links to a couple of previous blog entries I've written about what North Carolina and others have done to address the interests of local businesses:

New Prevailing Wages and Changes to Online Approval Process

The Washington State Department of Labor and Industries (L&I) has published updated prevailing wages on February 1, 2011 that will become effective on March 3, 2011.

Wage Changes Prior to March 3: L&I may publish other changes prior to March 3, 2011 that may become effective on March 3 (if approved as an emergency), or that will become effective 30 days after the publication of the corrected wage rate.

Notifying Contractors of Applicable Wages: It is important for public agencies to make sure that the correct prevailing wage rates are either included in the bidding documents for any public works project bidding on or after March 3, 2011, or that the bidding documents reference L&I's website and include other information. See my previous blog entry on incorporation of the prevailing wage rates by reference.

View New Prevailing Wages: To view the March 3, 2011 prevailing wage rates, visit L&I's website.

Revised Online Approval Website: L&I has also redesigned the online Prevailing Wage Intents and Affidavits (PWIA) system that will go into effect on March 1, 2011. Click here for a tour of the changes to the system.

Contractor's "Intents" Must Be Approved Prior to Subcontractors: One of the more significant changes in the PWIA system is that the prime contractor will "need to file, and have approved, their Statement of Intent to Pay Prevailing Wages (Intent) before any sub-contractors can file their Intent for the same project." This change will ensure that basic project information is consistent between the prime contractor and the subcontractors by having the prime fill out the basic information about the project; subcontractors would not fill out certain basic project information but would use the information entered by the prime. Click here for an explanation of the change.

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