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:

Over the past year or so, our Office has met with the Department of Labor and Industries and Municipal Research [and] Services Center on the topic of On-Call contracts.  Much time, research and discussion have gone into these meetings.  Most On-Call contracts are not being done under the authority of job order contracting.  Therefore, we have concluded:  On-Call contracts are not specifically authorized in state law.   These contracts can result in noncompliance with the public works contracting and prevailing wage statutes.  Since the On-Call contracts are not authorized by state law, we recommend local governments establish policies, procedures and internal controls to ensure their contracting processes are in compliance with public works contracting statutes (RCW Chapter 39.04, 39.06, 39.08 and 60.28) as well as prevailing wage statutes (RCW Chapter 39.12).

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).

Mike Purdy's Public Contracting Blog 
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