Monday, June 20, 2011

What Not to do When Contracting for a Public Works Project

Many public agencies are small and contract for public works construction projects on a very infrequent basis.  As a result, they often are not aware of the requirements that must be followed.   Without carefully researching the requirements, or hiring staff or consultants to help manage a public works project, small agencies put public tax dollars at risk, and they may end up with audit findings.

Audit Finding:  The Skagit County (WA) Fire Protection District No. 3 was recently slapped with an audit finding by the Washington State Auditor's Office for violating three fundamentals of public works contracting: bidding, conflicts of interest, and prevailing wages.

No Sole Source for Public Works:  In 2009, the District declared a $146,055 construction project as a sole source, awarding the contract without any competitive bidding as required.  Under Washington State law, there is no provision for a sole source public works project.  All public works projects must be bid, unless an emergency has been declared waiving competitive bidding, or unless the dollar amount of the project is less than the public agency's bid limit (the amount below which competitive bidding is not required).  The Fire District did not declare and emergency and the amount of the contract was well above the District's bid limit.

Conflict of Interest:  In addition, the contractor awarded the project subcontracted work to a company owned by the District's fire chief, creating a conflict of interest.  To make matters worse, and more confusing, the District actually issued checks directly to the chief's company for work on the project, even though the company was a subcontractor to the general contractor.  

Prevailing Wages:  Finally, the District never collected the required prevailing wage forms from the contractor and subcontractors on the project.  A Statement of Intent to Pay Prevailing Wages was required from the contractor and subcontractors prior to the first payment, and an Affidavit of Wages Paid was required to be submitted by the contractor and subcontractors prior to release of retainage to the contractor.

More Information:  To read the audit finding, click here.

Good Intentions:  Most public agencies have good intentions and try to do what is best.  However, the world of public works contracting is complex and often confusing.  Without a clear understanding of the requirements, a wise public agency will obtain appropriate advice before embarking on a public works project. 
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC

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