Mike Purdy's Public Contracting Blog: October 2012

Wednesday, October 31, 2012

13 Scary Things About Public Works Contracting

On October 31, 2012, I spoke at a public works contracting seminar sponsored by the law firm Foster Pepper, PLLC in downtown Seattle.

In keeping with the fact that the event was held on Halloween, my topic was "13 Scary Things About Public Works Contracting."

13 Scary Things: Here is the list of the 13 scary things I spoke about, offering tips on how to manage each of them:

Definition of Public Works is Confusing
The Low Bid is Too Low
Cash or Check as Bid Guaranty
Bid is Unbalanced
Bidder Isn't Qualified
Forged Payment and Performance Bond
Front Loaded Schedule of Values
Dealing with a Change Order Artist
Prevailing Wages Not Paid
Subcontractors and Suppliers Not Paid
Work Not Completed on Time
Punch List Items Not Completed
Warranty Work Ignored by Contractor

Audio of event: The event was audio recorded and I hope to be able to post a link of it on my blog soon.

Video of 2011 speech: I spoke in 2011 at Foster Pepper's public works seminar on the topic of "Project Management: Turning a Good Contract into a Good Project." Click on the following link to watch the video of that event. http://www.foster.com/rss/FP_Podcasts.aspx?mid=16

Tuesday, October 30, 2012

Workshop: Reducing Construction Change Orders

Interactive Workshop: Reducing Construction Change Orders - Implementing a Neutral Project Facilitation Program

When: Wednesday, November 7, 2012 (9:30 a.m. to 11:30 a.m.)

Where: Snohomish, Washington (Snohomish Fire Rescue Training Auditorium, 1525 Avenue D)

Cost: Free to public agencies; $50 per person for private firms. Seating is limited.

Co-Sponsored by:

Description: This interactive presentation is geared toward helping public agencies develop better construction project administration practices. All construction projects can benefit from improved project team communication, coordination and problem-solving skills and behaviors. Neutrals with special training and sills are often very beneficial in achieving the full benefits from improved project team performance.

Instructors:

Dick Andrews
Ron Leaders

Information and Registration: Click here.

Training Opportunities in October and November

Which Contract Type Should I Use. Sponsored by APWA Contract Administration Subcomittee (CASC). Cost: Free. Click here for more information and to register.

October 31, 2012 (Yakima, WA)
November 8, 2012 (Everett, WA)
November 15, 2012 (Renton, WA)
November 29, 2012 (Camas, WA)

Lean Construction. Wednesday, October 31, 2012 (7:15 a.m. to 9:30 a.m.) Sponsored by: Design-Build Institute of America - Northwest Region. Cost: $65 for members; $90 for non-members. Where" Harbor Club - Seattle (801 Second Avenue, 17th Floor, Seattle, WA). Click here for more information and to register.

Yesler Terrace Development Update by Seattle Housing Authority. Thursday, November 15, 2012 (5:30 p.m. to 8:30 p.m.). Sponsored by: CMAA Pacific Northwest Chapter. Cost: $45. Where: Rock Salt Steaks and Seafood (1232 Westlake Ave. N., Seattle, WA). Click here for more information and to register.

Monday, October 29, 2012

The Problem of Counterfeit Payment and Performance Bonds

Changes in technology have given rise to a number of cases where contractors have forged Payment and Performance Bonds, leaving the public unprotected.

What do bonds do? Most public agencies require Payment and Performance Bonds for public works construction projects. These bonds are important tools to protect the public in the event the contractor either fails to pay subcontractors, suppliers, and workers, or the contractor fails to perform the work.

Check the bonds: Here's a quick list of things to do to help ensure that the Payment and Performance Bonds you receive from contractors are not counterfeit.

Evaluate the contractor's reputation: Have you done business with the contractor in the past? What is their reputation? Are they are new and unknown contractor? If you aren't familiar with the contractor, you may want to investigate the legitimacy of the bonds.

Review the bonds: Are there irregularities or inconsistencies in the bonds? Is the bond form current? Are all of the dates, including those on the Power-of-Attorney document current? The last date on the Power-of-Attorney should be within the last six months to year.

Verify the bonds independently: Contact the actual bonding company backing the bond, not the attorney-in-fact who signed the bond on behalf of the bonding company. Research the contact information for the bonding company independently and don't rely on a phone number provided on the bond. One California contractor set up a separate cell phone number they included on a forged bond in the event a public agency called to verify the bond. Contact the surety to verify that the bond was appropriately issued by the attorney-in-fact.

Examples of bond forgeries: Here are a couple of stories of forged bonds by contractors:

New Jersey contractor jailed for forgery. Click here to read the entry from my blog on June 12, 2011.

California contractor pleads guilty to forging payment and performance bonds. Click here to read the entry from my blog on September 25, 2011.

New York City contractor submits phony bonds to Housing Authority. Click here for details.

Washington state contractor forges bonds. Click here for details.

Sunday, October 28, 2012

Job Opening: Contract Specialist

Washington State Department of Enterprise Services

Position: Contract Specialist 3 (2 positions)

Location: Olympia, Washington

Closing Date: Friday, November 2, 2012 at 11:59 p.m. Pacific Time

Salary: $3,991 to $5,233 per month

Job Summary: These positions will provide professional level of expertise, using mature judgment and expert understanding of procurement and contract laws, policies and best practices, in advising internal and external customers on procurement and contracting for goods and services, including IT.

For More Information and to Apply: Click here.

Job Opening: Senior Buyer

City of Seattle (Washington)

Position: Senior Buyer

Location: Seattle, Washington

Closing Date: Tuesday, November 6, 2012 at 4:00 p.m.

Salary: $33.22 to $38.68 per hour

Job Summary: The Senior Buyer is assigned a contract portfolio, with a group of related commodities and contracts many of which require extensive on-going contract administration. In addition, this position is assigned special projects with multiple issues of considerable scope that require long-term commitments and are of an ongoing duration with policy implications. The Senior Buyer will also be assigned to lead special projects, which may include policy research, WMBE programs or environmental initiatives or other social responsibility initiatives of the City.

For More Information and to Apply: Click here.

Thursday, October 25, 2012

Introduction to Lean in Design

Introduction to Lean in Design

When: November 6, 2012 (7:30 a.m. to 9:30 a.m.)

Where: Seattle, Washington (Sellen Construction Offices, 227 Westlake Avenue N.)

Cost: $35.00

Speaker: Kristin Hill, Principal, InsideOut Consulting

Sponsored by: Lean Construction Institute, Cascadia Community of Practice, Seattle Branch

Information and Registration: Click here.

Wednesday, October 24, 2012

Job Transition

Cathy Robinson

Cathy Robinson, formerly Lead Sr. Buyer with King County (WA) for the last two plus years, has been appointed as Purchasing Manager for Snohomish County (WA).

She previously served as the Purchasing Officer for the City of Shoreline (WA) for almost 15 years.

Cathy is the current vice-president of the Washington State Chapter of NIGP (National Institute of Governmental Purchasing.

She began her new duties with Snohomish County on October 8, 2012.

Tuesday, October 23, 2012

Federal Debarments Increase

The number of federal suspensions or debarments jumped 73% in 2011 over 2009 figures. A total of 3,326 of firms or individuals were suspended or debarred in 2011. Click here for more information.

New database problems: Meanwhile, the new federal debarment database (www.sam.gov) that was launched at the end of July 2012 has still not totally replaced the previous system at www.epls.gov. A current notice on www.epls.gov states that "due to the traffic volume at SAM, EPLS is available for a short time for searching the excluded parties list only." See my previous blog entry on SAM.

Check the database: If your agency receives federal funding, be aware of the requirement to check whether those you intend to contract with are suspended or debarred by the federal government. It's an easy action to take, but many public agencies miss this step, often resulting in audit findings.

Audit findings: The following three agencies in Washington state recently received audit findings from the Washington State Auditor's Office for failure to comply with the federal suspension and debarment requirements (click on the name to read the audit finding):

Monday, October 22, 2012

Creating Bid Preferences That Don't Cost Agencies More Money

One of the criticisms of local bid preference laws is that a local firm may be awarded a project at a higher price than the out of area firm because their bid price was within the bid preference percentage. At a time when government agencies are struggling financially, paying more for projects, even if it promotes use of local businesses doesn't seem like sound public policy.

Match the low bid: Some public agencies have addressed the concern about increased costs associated with preference programs by offering a bid percentage preference to local bidders who must then match the low bid from an out of area bidder in order to be awarded the project. This results in the agency paying no more than the low bid.

South Carolina: Rock Hill, South Carolina has established a bid preference program for local bidders who receive a 5% preference, capped at $25,000. But in order to be awarded the project, the local bidder must match the low bid of a non-local bidder in order to be awarded the project. For more information, click here.

Sunday, October 21, 2012

Tune-up Your Procurement Policies

Procurement Policies, sometimes referred to as Purchasing Policies, help guide public agencies in how they solicit and contract for goods, services, and construction.

Checklist: Here's a quick checklist of issues to pay attention to with your Procurement Policies:

Do you have Procurement Policies? If you don't have Procurement Policies, it's a good idea to develop a document to guide how you intend to manage your procurement and contracting functions.

Where are your Procurement Policies? Are they only gathering dust on a shelf or is the only copy locked in someone's desk? A good practice is to make your Procurement Policies available online and easy to find.

When were your Procurement Policies last updated? Are your Procurement policies up to date? Do you have a regular process to review and update them on an annual basis? Procurement Policies that were adopted years ago may not reflect what your actual practices are and may not comply with applicable laws and regulations.

Are you following your Procurement Policies? Are your agency's actual practices and your Procurement Policies consistent with one another? Which one reflects best practices and compliance with the law? Auditors will generally audit your agency based on your compliance with applicable laws and regulations, and your compliance with your Procurement Policies.

Do your Procurement Policies comply with laws? Are your Procurement Policies in compliance with federal, state, and local laws and regulations?

Have your staff been trained? Do the appropriate staff in your agency know what's in the Procurement Policies? Have they been trained? When was the last time they were trained?

Are Your Procurement Policies clear? Are your Procurement Policies clear, without ambiguity, easy to read and follow so your staff understands what is expected?

Action step: Schedule a regular, annual tune-up of your Procurement Policies. The end of the year and start of a new year is a good time to conduct this tune-up.

Thursday, October 18, 2012

Job Opening: Senior Contracts Administrator for Port of Tacoma

Port of Tacoma, Washington

Position: Senior Contracts Administrator

Location: Tacoma, Washington

Closing Date: Wednesday, October 31, 2012

Salary: $5,002 to $6,502 per month

Job Summary: This position is responsible for the management, oversight and administration of contract services for major public works construction projects, including both pre-award and post-award contract administration functions. Serves as the contracting resource to the project managers for construction, professional and personal service agreements, and provides support and guidance in all functional areas of contract administration.

For More Information and to Apply: Click here.

Wednesday, October 17, 2012

Follow-up on Auditor's Comments on On-Call Public Works Contracts

A number of people have asked me about the source of the State Auditor's Office comments I noted in my blog posting of October 14, 2012 in which they stated their opinion that on-call public works contracts are not authorized by Washington State law.

Their comments come from an October 11, 2012 email from the State Auditor's Office to the Municipal Research and Services Center. In that email, the Auditor stated that the paragraph they wrote is included in their handout to the Washington State Association of Municipal Attorneys (WSAMA).

Please contact me if you would like me to forward a copy of the Auditor's email to you.

Federal Project Readvertised Without Project Labor Agreement (PLA) Requirement

The U.S. Department of Labor has readvertised for bids on a $20-$50 million Job Corps Center in New Hamphire without a requirement that the successful contractor sign a Project Labor Agreement (PLA).

Previous protests stalled project: The project was originally bid in 2009 with a PLA requirement. When a protest was filed the solicitation was cancelled. The project was again advertised in 2011 with the PLA requirement. In June 2012, after another protest was filed,the second solicitation was cancelled.

More information:

October 10, 2012 news release from Associated Builders and Contractors (ABC): "DOL Issues Bid Solicitation on New Hampshire Project Without PLA Mandate"

November 15, 2009 blog posting from my Public Contracting Blog: "Will U.S. Dept. of Labor Modify Small Business Set-Aside and Project Labor Agreement Requirements on NH Project?"

Tuesday, October 16, 2012

Highest State Minimum Wage Rate in the Nation

Washington state will continue to lead the nation with the highest state minimum wage rate in the nation when the rate increases from $9.04 to $9.19 per hour on January 1, 2013.

Indexed to inflation: The state's minimum wage rate increases annually based on changes to the Consumer Price Index, in accordance with the provisions of a voter passed initiative in 1998.

San Francisco's wage rate: San Francisco's minimum wage rate of $10.24 tops Washington state's minimum wage rate.

Prevailing wages: For most classifications of labor, prevailing wages established by the federal and state governments are higher than minimum wage rates. The prevailing wage rate must be paid to all workers on public works construction projects.

More information: Click here to read a news release from the Washington State Department of Labor and Industries on the increase in the minimum wage rate.

Monday, October 15, 2012

States Experiment with Requiring Proposals be Submitted on iPads

At least two states have recently been experimenting with a new twist to RFPs by requiring proposers to submit physical Apple iPads loaded with their proposals.

Examples: Montana and Colorado have been testing the waters with iPad submissions for some bigger projects.

Montana last year: Montana released an RFP for healthcare IT and support services last year that gave proposers the option of submitting proposals loaded onto nine iPads instead of some of the required paper copies.

Current Colorado RFP: Colorado went a step further recently by actually requiring in the RFP that iPads be submitted on seven iPads for a $100 million Medicaid Management Information System project. Here's what the RFP states:

Montana earlier this year: Montana released an RFP earlier this year for an unemployment insurance tax system that called for 13 iPads to be submitted from each proposer with their proposal load onto each iPad.

Who keeps the iPads? One common question concerns what happens to the iPads after the contract is awarded. Many government RFPs contain standard language specifying that the public agency owns all submission materials - but many see a difference between hard copy proposals in binders prepared specifically in response to an RFP and a popular consumer electronic device.

Free iPads for agencies? Should contractors have to give government agencies free tablets (worth around $600 each) in order to submit a proposal? In at least one of the cases cited above, the answer was no. After several questions from proposers, the first addendum to Montana's unemployment insurance tax system RFP changed the ownership clause so that unsuccessful proposers will get their 13 iPads back.

A larger trend? Is this trend likely to gain further traction? Maybe, but probably only for larger procurements where proposals can run into the thousands of pages in length.

Agency benefits: Aside from the potential to acquire free iPads, public agencies gain some of the benefits of electronic proposals (e.g., search and using existing workflows to secure and distribute proposals) but without many of the inconveniences. For large procurements, iPads may be an easier way for evaluators to manage and store proposals than large binders. And, of course, it's a greener way of doing business.

Proposer benefits: Proposers avoid the expenses incurred by printing, binding, and shipping several copies of their proposals - although they also have to purchase iPads that may or may not be returned. For large procurements, the costs associated with the iPads may, in fact, be less expensive for them. The iPad approach also effectively provides proposers with additional time to work on developing the proposal since they don't have to schedule the time-consuming printing process.

More information:

Denver Business Journal article discussing the Colorado iPad submission requirement

The Montana Medicaid RFP providing the option for 9 iPads in place of some paper proposal copies

The current draft of the Colorado RFP appendix that requires 7 iPad submissions

The Montana unemployment insurance tax system RFP requiring that proposals be submitted on 13 iPads

Sunday, October 14, 2012

State Auditor's Opinion on On-Call Public Works Contracts

The Washington State Auditor's Office has recently determined that on-call public works contracts are not authorized in state law, and they are advising public agencies to ensure their public works contracting practices are in compliance with contracting statutes.

Why are on-call public works contracts used? Many public agencies in the State of Washington (and elsewhere) competitively bid on-call public works contracts to deal with small projects that technically meet the definition of a public work in RCW 39.04.010. Unit prices for the specific body or bodies of work anticipated during the contract term are bid and a contract is awarded to the lowest bidder based on estimated quantities identified on the bid form. These on-call public works contracts are used for the following reasons:

Eliminate very small procurements: On-call contracts help ensure that necessary work is performed in a timely manner without having to conduct a separate bidding process for each small project. Sometimes, these projects may be as small as $100 or even less. Other agencies have fairly high dollar thresholds for when public works projects may be used under an on-call contract.

When no agency staff available: On-call contracts provide an efficient mechanism to perform work, especially for small public agencies, that do not have their own personnel to perform the work.

Amounts above "day labor" limits: On-call contracts provide a streamlined mechanism to have small public works performed for agencies who have limits on how much work may be performed with their own personnel.

In the course of managing a public agency, there will always be small projects that meet the definition of a public work but that are unanticipated and which must be dealt with quickly to maintain essential services.

The auditor's opinion: The State Auditor's Office recently has written the following statement regarding on-call public works contracts:

What about Job Order Contracting? The Auditor notes that "most On-Call contracts are not being done under the authority of job order contracting." There are a couple of issues regarding whether Job Order Contracting is a tool that meets the needs of public agencies who currently bid out on-call public works contracts:

What agencies may use Job Order Contracting? Not all public agencies in Washington may use Job Order Contracting. RCW 39.10.420 identifies and limits the public agencies authorized to use this alternative public works contracting method.

Is Job Order Contracting suited for very small projects? Selecting a Job Order Contractor is a more complex process than bidding an on-call public works project, and it requires a level of effort that may not be possible for all agencies to pursue. In addition, applying the Job Order Contracting process to very small public works projects, where most of the work must be subcontracted, may not be as efficient as an on-call contract that is based on unit prices specifically bid for the work required.

Next steps: This is a complex problem. The Auditor's Office has suggested that public agencies may decide to seek changes in state law that would permit the use of on-call public works contracts. Short of legislative changes, at some point it is likely that the Auditor's Office may begin issuing audit findings against agencies that use on-call public works contracts. If your agency or agency association has an interest in working on this issue, please contact me and John Carpita at Municipal Research and Services Center (jcarpita@mrsc.org).

7 Contractors Respond to Seattle's Seawall Replacement RFP

The City of Seattle has received seven proposals from contractors interested in being selected as the contractor on the city's $220 million Elliott Bay Seawall Replacement project under the GC/CM (General Contractor/Construction Manager) project delivery method.

The contractors who submitted proposals are:

Guy F. Aktinson Construction
Hoffman Construction
Mortenson/Manson (JV)
Granite Construction
PCL/Stacy Witbeck (JV)
Skanska
Obayashi/Coluccio/Webcor (JV)

A shortlist of firms to be interviewed is anticipated to be announced on October 19, 2013.

Wednesday, October 10, 2012

Notifying Contractors of Prevailing Wage Requirements

In developing public works bidding documents, public agencies should clearly communicate when the project is subject to prevailing wage requirements. This is important for the bidders so they can develop their bid price accordingly.

State prevailing wages: In Washington state, public agencies have a choice of the following methods for communicating the applicable prevailing wages to bidders:

Include all classifications: Publish all of the prevailing wages with the bidding documents. This includes the Benefit Code Key. These documents are available at the following website: https://fortress.wa.gov/lni/wagelookup/prvWagelookup.aspx.

Include only applicable classifications: Publish only the classifications and wages applicable for a specific project. It is important to be accurate and complete on what classifications might be used on the project.

Reference website: Reference the state's prevailing wages in the bidding documents by referring bidders to the state's website and including the following additional paragraph:

Federally funded projects: If the project is funded in whole or in part with federal funds, the following practices should be implemented:

Federal prevailing wages: The appropriate and complete federal wage determination must be included in the bidding documents. The U.S. Department of Labor publishes prevailing wage determinations for the following types of work: Heavy, Highway, Building, and Residential. Federal prevailing wages may be obtained at the following website: http://www.wdol.gov/.

State prevailing wages: Even though the Washington State Department of Labor and Industries authorizes only referencing their website with the wages, I think the best practice is to include the complete state prevailing wage listing in the bidding documents on federally funded projects.

State vs. Federal wages? Make your bidding documents clear that, in the event of differences between the state and federal prevailing wages on a federally funded project, the contractor will be required to pay the higher wage between state and federal wages.

Tuesday, October 9, 2012

Washington State Conducting Public Works Procurement Study

Based on legislation adopted earlier in 2012, the Washington State Department of Enterprise Services (DES) is conducting a Public Works Procurement Study at the Legislature's direction to review the state's public works procurement process and make recommendations for public works procurement reform to the Legislature. The report is due to the Legislature by December 15, 2012.

Subjects to be studied: The following broad issues have been identified for evaluation:

Bidding / Contracting
Women-owned, Minority, Disadvantaged, Small business access
Self-performance limits / Contracting out requirements
Advertising
Electronic bidding / Electronic signatures
Small Public Works Projects
Job Order Contracting
Low bid process, alternatives to low-bid

Project Management / Change Orders

Project Closeout

Contractor Qualification
Responsibility Criteria / Debarment
Prequalification

General
Best practices / training
Multiple Statutory Frameworks for different types of public owners
Ethics in Public Contracting
Public Transparency / Access to project documents
Streamlining the centralized (DES) public works procurement
Professional Services

More information: Visit the website for the Public Works Procurement Study for more information.

Monday, October 8, 2012

Legislative Committee Recommends Continuation of Alternative Public Works Procedures

The Washington State Joint Legislative Audit and Review Committee (JLARC) issued a preliminary report on September 19, 2012 recommending that the Legislature should reauthorize the use of three alternative public works contracting procedures (Design-Build, GC/CM, and Job Order Contracting) before the existing law in RCW 39.10 expires next year.

JLARC and CPARB: JLARC's review and report is part of the process required by state law for reauthorizing RCW 39.10. In addition, the Capital Projects Advisory Review Board (CPARB) has appointed a Reauthorization Committee that is considering various proposals to recommend to CPARB and the Legislature.

Oregon work group: Oregon has established a Public Construction Contracting Work Group that is evaluating potential changes to their state law regarding CM/GC as a public works project delivery method. CM/CG (Oregon) and GC/CM (Washington) are terms that describe the more generic method known as Construction Manager at Risk.

More information: Click here to read JLARC's report. Click here for more information about CPARB's Reauthorization Committee.

Sunday, October 7, 2012

Additional $1.3 Million in Questionable School District Spending Unearthed

A little over a year and a half ago, a scandal calling into question $1.8 million of spending on consultant contracts swept through the Seattle School District.

What happened then? That investigation, which centered on the District's Regional Small Business Development Program, ultimately led to the firing of the District's superintendent and its chief financial officer, as well as criminal charges against the program's manager, Silas Potter Jr., who is currently awaiting trial on 41 counts of theft stemming from the scandal.

New audit finds more questionable payments: It now seems that the total amount misspent could be much higher, according to a recent report from the Washington State Auditor's Office. In addition to the previous payments, the new investigation calls into question almost $1.3 million of expenditures from Small Works Roster construction contracts awarded by Potter.

Systemic problems found: The recent report identifies problems in a number of key areas that are essential to a healthy Small Works Roster program:

Oversight: The report criticizes the lack of internal controls and oversight. Checks and balances are important for all public procurement and contracting activities.

Documentation: The auditor found that many invoices lacked sufficient details and supporting documentation, and that payments were made when services were not provided.

Policies: The district also lacked Small Works Roster policies and procedures to ensure compliance with applicable laws, such as obtaining quotations from the required number of contractors and always executing written contracts with contractors.

Training: The audit recommended that managers and staff be trained about effective internal controls, and that staff running the program have the experience identified in the position description.

District response: The district initially reported its concerns to the auditor to conduct its investigation, and has since made a number of changes to strengthen the management of its Small Works Roster process.

Additional information:

Seattle Times article on the most recent scandal
Washington State Auditor's report on the issue
My previous blog post on the original scandal

Wednesday, October 3, 2012

May Public Agencies Prequalify Contractors?

A Washington state board recently asked for an interpretation of whether public agencies in the State of Washington are authorized to prequalify contractors.

Contractor concerns: The prequalification question came up in response to concerns expressed by contractors about one city that routinely prequalifies contractors for public works projects.

No clear answer: At its September 13, 2012 meeting, the Capital Projects Advisory Review Board (CPARB) was informed by a representative from the State Attorney General's Office that the question posed was an "unsettled area of law in Washington," that there are good arguments on both sides, and that it was an issue for the courts to interpret in the event of a lawsuit. CPARB was advised that there is no law that authorizes or prohibits prequalification of contractors for all public agencies.

What agencies may prequalify? Some have interpreted the fact that there are only three types of public agencies specifically authorized in Washington state law to prequalify contractors as evidence that the Legislature intended to grant this exemption to typical competitive bidding requirements to only the following:

WSDOT (State Department of Transportation) for highway work - RCW 47.28.070

Public Utility Districts (PUDs) for electrical work - RCW 54.04.085

Cities or towns owning an electrical utility for electrical work - RCW 35.92.350

Further contractor action? It is unclear at this point what action contractors and contractor associations may take to formally challenge the prequalification practices of the city in question.

How to get qualified contractors: The Legislature has provided public agencies with the ability to help ensure that qualified contractors work on public works projects through the use of Supplemental Bidder Responsibility Criteria, as authorized in RCW 39.04.350 (2).

Tuesday, October 2, 2012

Why Two Bonds Are Better Than One

Most public agencies require some form of bond from contractors on public works construction projects. The bonding company (or surety) issuing the bond stands behind the contractor to guarantee that the contractor will:

Perform the work in accordance with the contract documents, and
Pay their subcontractors, suppliers, and workers

Separate and combined bonds both available: Sometimes performance and payment bonds for public works construction projects come in the form of one bond, and sometimes they are obtained as two separate bonds.

Separate bonds protect agency more: Separate performance and payment bonds, each for 100% of the contract amount, protect the public agency more, without additional cost to the contractor (or agency).

Which bond is more important? To understand why separate bonds protect a public agency more than a combined bond, we must first understand the purpose of the performance and payment protections.

Public agencies care more about the protections of the performance bond. In other words, the public agency wants to ensure that a surety is backing the contractor and guaranteeing the successful completion of the project.

A payment bond, on the other hand, is for the protection of others: subcontractors, suppliers, and workers.

What's the problem with a combined bond? While a combined performance and payment bond may seem to be more efficient (one bond instead of two), it is not as effective in protecting public agencies. In other words, for every claim filed (and paid) against the payment protections of a combined bond, there is correspondingly less money available under the bond to protect the public agency and ensure that the contractor successfully performs the work. On a project with multiple payment claims, it may be an indicator that there will be performance problems as well.

Why two bonds are better than one: A public agency's strongest position is to have performance protections from a surety for 100% of the contract amount that does not get reduced by payment claims against a combined bond. Sureties do not charge contractors more to obtain separate performance and payment bonds, and the separate bonds ensure that the public is better protected.

Separate bonds on FHWA funded projects: Washington State's Department of Transportation (WSDOT), through their Highways and Local Programs Department, recently approved the use of separate payment and performance bonds for local agencies on FHWA funded projects. APWA's Division 1 Committee has developed separate sample bond forms that may be used on FHWA funded projects, or projects with other funding. The separate bond forms will be available on the APWA Division 1 Committee's website soon (http://www.apwa-wa.org/committee.aspx?id=5).

Monday, October 1, 2012

Agency Fails to Comply With Federal Funding Requirements

Clark County (Washington) was recently hit with an audit finding from the Washington State Auditor's Office for a failure to follow federal funding requirements.

What went wrong? The contract in question was for $426,273 of renovation work, and was paid for by a grant through the American Recovery and Reinvestment Act (ARRA). Funding from a federal grant brings with it many requirements, two of which the county did not comply with:

Prevailing wages: For federally funded construction projects over $2,000, agencies must comply with the Davis-Bacon Act requiring payment of prevailing wages to workers on the project. The agency must include a provision in the original contract requiring the contractor to pay prevailing wages and must also collect weekly "certified payrolls," which include a statement that the contractor paid prevailing wages along with the actual payroll. (See my many other posts about prevailing wages.)

Debarment and suspension: Contracts exceeding $25,000 with federal funding requires that agencies verify that contractors are not prohibited from doing business with the federal government. This can be accomplished with a clause in the contract, a separate certification, or an independent checking the database of excluded parties issued by the General Services Administration (previously via the Excluded Parties List System (EPLS - and known as SAM), which is currently in the process of being replaced).

Why did it happen? It seems that Clark County's situation was largely the result of communication problems between different departments and individuals collaborating on a new project, along with inadequate training for staff members involved. It is critical that agencies receiving federal dollars clearly assign responsibility for complying with the accompanying requirements to individuals with proper training and understanding of the issues.

Audit finding: Read the full audit finding here.

Wednesday, October 31, 2012

Tuesday, October 30, 2012

Monday, October 29, 2012

Sunday, October 28, 2012

Thursday, October 25, 2012

Wednesday, October 24, 2012

Tuesday, October 23, 2012

Monday, October 22, 2012

Sunday, October 21, 2012

Thursday, October 18, 2012

Wednesday, October 17, 2012

Tuesday, October 16, 2012

Monday, October 15, 2012

Sunday, October 14, 2012

Wednesday, October 10, 2012

Tuesday, October 9, 2012

Monday, October 8, 2012

Sunday, October 7, 2012

Wednesday, October 3, 2012

Tuesday, October 2, 2012

Monday, October 1, 2012

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