Prevailing Wages on GC/CM Projects

What is the effective date for determining the applicable prevailing wages on a GC/CM project (General Contractor/Construction Manager)?

The Washington Administrative Code (WAC) adopted by the Department of Labor and Industries does not address GC/CM projects in this regard and so public agencies are left to figure out what is most appropriate.

WAC 296-127-011 (3)(a) states that "for all public works contracts...the applicable prevailing wage rates shall be the rates that are in effect on the date when bids by prime contractors are due for submission to contract awarding agencies. These rates shall remain in effect for the duration of the contract."

The difficulty with this approach is that under a GC/CM contract, the prime contractor does not submit a bid to the public agency, at least not for the full construction amount. Contractors do submit a bid for the percent fee and specified general conditions costs, but this bidding occurs months and often years before construction actually begins, and the contractor's pricing of these items has nothing to do with prevailing wages.

WAC 296-127-011 (4) further states that "if a contract for public work is not awarded pursuant to bids, the applicable prevailing wage rates shall be those that are in effect on the date when the contract is executed. These rates shall remain in effect for the duration of the contract."

GC/CM contracts are not awarded pursuant to bids, but the contractor is selected partially based on qualifications and partially based on the price for the percent fee and specified general conditions work. But to establish the effective date for prevailing wages for a GC/CM contract on the date when the contract is executed doesn't make sense since the contractor may not actually conduct the subcontract bidding until sometime after execution of the contract.

It seems to me that the Department of Labor and Industries should establish a separate WAC to address the effective date of prevailing wages for a GC/CM project. I've had discussions with L&I on this subject in the past, but the issue ended up getting dropped when a key staff member retired.

In the interim, my advice is to establish the prevailing wages as of the bid opening date for each separate subcontract bid package that the GC/CM bids. This most closely parallels the intent of the prevailing wage law. But it's probably also a good idea to include the current prevailing wage rates in the RFP for selecting the GC/CM in order to technically comply with the law, and to describe that the applicable wages will be those in effect on the bid opening date for each subcontract bid package.

Members Needed for CPARB's Project Review Committee

The Capital Projects Advisory Review Board's (CPARB) Project Review Committee is seeking four new members, one from each of the following four groups: counties, cities, construction trades labor, minority/women businesses. The Project Review Committee meets monthly and is charged with reviewing applications from public agencies for use of the Design-Build or GC/CM project delivery system, either on a project-by-project basis or to approve an owner as an experienced public owner.

For more information or to apply, interested parties may contact Nancy Deakins with the Department of General Administration/DSHS , at (360) 902-8181 or by e-mail at deakink@dshs.wa.gov.

Trench Excavation Bill Buried this Session

HB 2009 was introduced in the 2007 legislative session when it passed the House but died in the Senate. It was reintroduced in the 2008 session and has not received much traction and will not move forward this session. This is unfortunate as most industry stakeholders saw the value in eliminating the requirement for contractors to list on the bid for public works projects a separate line item cost for providing shoring for trench excavation. They may be some in the industry who still object to the requirement.

It will probably be introduced again in the 2009 session and hopefully will pass. Until then, public agencies much include a place on the bid form for the bidders to list the cost for providing trench excavation if the trench is more than four feet deep. The requirement is found in RCW 39.04.180.

GC/CM Resources and Training

During the 2007 legislative session, the Washington State Legislature modified the law relating to the use of the General Contractor/Construction Manager (GC/CM) project delivery method for public agencies.

Public agencies interested in learning more about GC/CM can avail themselves of a number of resources:

• RCW 39.10.
  

• I have developed a PowerPoint training presentation summarizing the GC/CM process. Contact me and I'll be glad to send you a copy.
  

• Various GC/CM solicitation and contract documents are available online. The University of Washington's documents may be found on the website of the Capital Projects Office.
  

• I would be glad to provide individualized training and consultation on the GC/CM process.

Determining the Low Bidder

On a public works construction project, frequently a public agency will request bids for not only the base bid, but for additive work that may be awarded in the event that the bids come in below the estimate and budget for the project. The question then arises as to how to evaluate which bidder is the low bidder. Should it be based on the base bid only, or the base bid plus the additive bids the owner intends to award?

While some agencies will base the award decision only on the base bid amounts, I think that probably violates the competitive bidding laws that requires award to the low bidder. Another bidder could very easily argue that if the owner is awarding additives that may actually change the order of who is the low bidder.

For example, see the following scenario, in which the low bidder on the base bid is at $100,000. If the owner bases the award decision only on the base bid and only the base bid is awarded, Bidder 1 is the appropriate low bidder. But if the owner awards Additive 1 also, Bidder 2 becomes the low bidder. If Additive 2 is the only additive awarded, Bidder 1 would be the low bidder. If Additive 1 and 2 are both awarded, Bidder 3 would be the low bidder. Thus, to determine the low bidder only based on the base bid when other additives are awarded is not consistent with competitive bidding requirements.

	Bidder 1	Bidder 2	Bidder 3
Base Bid	$100,000	$102,000	$105,000
Additive 1	$20,000	$15,000	$13,000
Additive 2	$6,000	$5,000	$3,000
Total:	$126,000	$122,000	$121,000

My advice is to evaluate the bids based on the base bid plus any additive bids to be awarded to determine which bidder actually has the low bid. The potential negative of this approach is that an agency may be tempted to manipulate what bidder is the low bidder and actually award the project based on which additive bids are accepted and awarded.

One way to mitigate against this is to prioritize the additive bids in the bidding documents and award the additive bids in that order. This, of course, limits some flexibility of the agency, but does help to preserve the integrity of the bidding process and the perceptions of treating bidders fairly.

Even without prioritized additive bids, awarding just based on the base bid isn't fair or consistent with the intent, if not the letter, of the law that requires award of public works construction projects to the low bid submitted by a responsible bidder.

ESSB 6235 Passes Senate

Engrossed Substitute Senate Bill 6235 passed the Senate on February 19th with a vote of 33 yeas, 15 nays, 1 absent. In the House, it has been referred to the State Government and Tribal Affairs Committee, where, hopefully, it will not see the light of day.

As I've written before, this legislation is in response to the audit conducted by the State Auditor's Office of the Port of Seattle. If approved, it would prohibit government agencies from using cost as a selection criterion in selecting consultants for project management, construction management, and construction supervision related to a public works project. This is not in the public's best interest as no competitive prices are received. Agencies would be required to select the most qualified consultants and then negotiate a price, rather than having a competitive price submitted as part of the selection process. It is not an appropriate means to address concerns about the Port of Seattle's selection of consultants.

Subcontractors List

Washington State law requires that for any public works project estimated to cost $1 million or more, each bidder must submit either with their bid or within one hour after the bid submittal deadline as list of subcontractors who will perform work in any of the following three trades: HVAC, plumbing, electrical. But the requirement in RCW 39.30.060 doesn’t just require listing of subcontractors in these trades. If the bidder intends to perform work in any of these trades, they must list themselves.

Failure of a bidder to submit the subcontractors list as required automatically renders that bid non-responsive and the public agency is required to reject the bid. This is considered as a material irregularity in the bid that the public agency may not waive. RCW 39.30.060 states the following: “Failure of the prime contract bidder to submit as part of the bid the names of such subcontractors or to name itself to perform such work or the naming of two or more subcontractors to perform the same work shall render the prime contract bidder’s bid non-responsive and, therefore, void.”

The law is specifically an anti-bid shopping law, designed to prevent bidders from attempting to get lower bids from subcontractors based on other bids received. If a subcontractor who is listed is later substituted by the contractor without just cause as defined in the law, the substituted subcontractor may have a legal cause of action against the contractor, but not against the public owner.

A couple of things to remember about the law:

• It only applies for projects estimated to cost $1 million or more. If the project is estimated to cost $1 million or more and a bid comes in less than $1 million, the bidder must still submit the subcontractors list. Likewise, if the project is estimated to cost less than $1 million, but bids come in higher than $1 million, the subcontractors list is not required to be submitted.

• It only applies to three trades: HVAC, plumbing, and electrical. It’s not a good idea to add other trades to the list because if a bidder failed to name subcontractors for one of the other trades, the public agency would be faced with a responsiveness issue on the bid.

• The list may be submitted either with the bid or within one hour of the bid submittal deadline, at the option of the public agency. The public agency, however, must state in the bidding documents when the list must be submitted. Providing for the submission of the list one hour after the bid submittal deadline allows the bidder the chance to focus developing its bid price and then submitting the list later.