Seminar: Managing Project Risk in Uncertain Economic Times

Seminar: Managing Project Risk in Uncertain Economic Times

When: March 20, 2009, 8:15 a.m. to 4:00 p.m.

Where: 500 108th NE, Bellevue, Washington

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

Cost: $175 for members; $215 for non-members. Discount for registration prior to March 9, 2009

To reserve space, e-mail Allen Wycoff at AllenWycoff@hillintl.com

To register, send check payable to: CMAA, PNW Chapter to CMAA, c/o Dennis Hess, PO Box 2024, Vashon, WA 98070

Agenda for this CMAA Annual Seminar:

• Economic Outlook (John Mitchell, Economist formerly with US Bank)
• CM Leadership on Managing Project Risk (Tom Bishop, SMAA Chairman of the Board)
• Value Engineering and Cost Risk Assessment as an Effective Tool (Ken Smith, Laurie Dennis)
• Managing Capital Project Risk
• How Owners are Dealing with Budget Reductions and Wild Price Fluctuations (David Dye, WSDOT; Dave Soike, Port of Seattle; Mike Adams, Port of Tacoma)
• The Economy's Effect on the Construction Market for 2009; Bonding, Insurance and Banking Industry Perspective

Listing of Sub-tier Subcontractors Not Required

RCW 39.30.060 is the Washington State law that requires the listing of subcontractors (or the prime contractor) who will be performing the work of HVAC, plumbing, and electrical on public works projects. These firms must be named either with the bid or within one hour of the bid submittal deadline.

The law does not, however, extend to the listing of sub-tier subcontractors. RCW 39.30.060 states that the bidder must list "the names of the subcontractors with whom the bidder, if awarded the contract, will subcontract for the performance of the work" of the three trades noted above.

Because the bidder (or prime contractor) does not subcontract work to sub-tier subcontractors but only to direct subcontractors, these lower tier subcontractors are not covered by the law, and they do not need to be listed.

Emerging Project Delivery Methods

Public works projects have traditionally been procured through the "Design-Bid-Build" model of contracting and risk allocation in which one firm designs the project, the owner bids the project, and the low bidder is awarded the project and builds it.

In Washington State, chapter 39.10 RCW authorizes three alternative public works project delivery methods: General Contractor/Construction Manager (GC/CM), Design-Build, and Job Order Contracting.

Public and private owners in other states and countries are experimenting with other project delivery methods, many of which share common features regarding selection, risk allocation, and contracting.

These alternative project delivery methods include the following:

• Best Value Procurement. I've written about this previously on my blog. There is some interest in Washington State to exploring legislation to authorize limited use of this method.
• Integrated Project Delivery. The owner, designer, and contractor all enter into one cooperative contract for completing the work.
• Performance Contracting for Construction. The U.S. Department of Transportation has been piloting projects using this method, which is similar to Design-Build.
• Alliance Contracting. Often used for complex projects with many unknowns, this method also contemplates a three party agreement between the owner, designer, and contractor.
  

City of Tacoma Seeks Approval to Use GC/CM and Design-Build

The City of Tacoma has submitted applications to the State's Project Review Committee for certification as a public owner to be authorized to use both the General Contractor/Construction Manager (GC/CM) and Design-Build methods of public works project delivery. The members of the Project Review Committee are appointed by the Capital Projects Advisory Review Committee (CPARB).

The City's application for GC/CM is available by clicking here.

The City's application for Design-Build is available by clicking here.

Their applications will be heard by the Project Review Committee at their meeting on Thursday, February 26, 2009.

The meeting starts at 9:00 a.m. Most of the morning will be dedicated to reviewing the City of Tacoma's applications. The meeting is open to the public, and will be held at the Northwest Carpenters Facility at 25120 Pacific Highway South, Kent, Washington.

In the afternoon, the Project Review Committee will hear the application of Mason County PUD #3 to use GC/CM for a specific project.

Under chapter 39.10 RCW, public agencies in the State of Washington may use GC/CM or Design-Build by either obtaining the approval of the Project Review Committee on a project-by-project basis, or obtaining a three year certification approval to use either one or both of these alternative public works contracting procedures.

The Project Review Committee looks carefully at the experience and staffing of the public agency in evaluation applications, and for project specific applications whether the project is also appropriate for either GC/CM or Design-Build.

Seminar: Dealing with Problem Construction Projects

Recognizing a Problem Project Before it Becomes One & What to Do if you Have One

When: Thursday, March 5, 2009, (6:35 a.m. to 9:45 a.m.)

Includes: Breakfast Buffet

Where: Seattle Airport Marriott (3201 South 176th Street, Seattle)

Sponsored by: Construction Seminars Northwest

Cost: $78

For more information and to register click here

Speakers and Topics Include:

• Todd Henry, Simple Guidelines for Avoiding Conflicts
• Clyde Wright, Protecting the Owner When There are Problems
• Jan Sokol, Minimizing the Legal Impacts on Problem Projects
• Todd Seneker, Finding Work in Lean Times While Avoiding Problem Projects
• Roger Lenneberg, Troubled Times - Manage Risk to Increase Profits
• Greg Clark, Early Resolution of Changes - A Key to Avoiding Disputes
• Phil Martinson, Recognizing & Monitoring Problem Projects
• Don Laford, Early Resolution of Changes - A Key to Avoiding Disputes

Optional Choice of one of the following 3-hour Workshops ($150) from 9:45 a.m. to 1:00 p.m.

• How to Grow & Expand Your Construction Company
• Computer Design in 3D - Building Models for Construction
• How to Manage Disputes & Project Risk for Profit

Elements of a Bid

In developing and submitting a bid on a public works project, bidders typically pull together costs for five areas:

1. Labor
   
2. Equipment
   
3. Supplies
4. Subcontractors and rental
5. Risk

In today's unstable pricing world, developing a bid is becoming more difficult as contractors attempt to guess what the market will do in the future. In an effort to win contracts and keep their workers busy, many bidders are sharpening their pencils even more, often reducing or even forgoing profit.

Bidder Responsibility Criteria - APWA Workshop

Workshop: Bidder Responsibility Criteria Tools for Public Works Contracts

When: Tuesday, April 7, 2009 (9:00 a.m. to 3:00 p.m.)

Where: Tacoma Convention Center

Co-Sponsored by:

• Municipal Research and Services Center (MRSC)
  
• APWA Construction Management Committee
• APWA Contract Administration Subcommittee
• Utility Contractor Association of Washington
• APWA Division 1 Subcommittee

For more information and to register, visit the APWA website.

Speakers:

• Michael E. Purdy, University of Washington Contracts Manager
• Mike Myette, Utility Contractors Association of Washington
• John Parnass, Davis, Wright, Tremaine, LLP

Morning session topics:

• How RCW 39.04.350 Came to Be
• Bidder Responsibility vs. Bid Responsiveness
• Mandatory Bidder Responsibility Criteria
• Mandatory Subcontractor Criteria
• Optional Supplemental Bidder Responsibility Criteria
• Amended APWA General Special Provisions (GSPs)

Afternoon session will include writing Supplemental Bidder Responsibility Criteria for mock projects

Seminar: The Business Climate for Capital Projects

Seminar: The Business Climate for Capital Projects

When: Thursday, February 26, 2009 (8:30 a.m. to noon)

Where: Tulalip Hotel & Conference Center (Tulalip, Washington)

Sponsored by: Northwest Construction Consumer Council (NWCCC)

Cost: Free for NWCCC members; $79 for first time attendees from non-member organizations

To register: Call (206) 281-4201 or visit NWCCC’s website

Agenda:

• Economic Analysis of the Pacific Northwest Construction Market
• - Dr. Paul Sommers, Seattle University
  

• Federal & State Stimulus Packages: Where’s the Money Going?
  
• - Tom Saelid, Office of Financial Management, State of Washington
  

• Private Sector: Capital Project Spending Plans for 2009-10
  
• - Facilitated Panel Discussion with representatives from BP, Shell, Boeing, Harris Group, CH2M Hill
  

• Public Sector: Capital Project Spending Plans for 2009-10
  
• - Facilitated Panel Discussion with representatives from Port of Seattle, King County, WA State GA, WSDOT, UW, Sound Transit

DBIA Meeting on I-405 and Other WSDOT Projects

DBIA Breakfast Meeting: I-405 S. Bellevue Project and Future WSDOT Projects

When: Thursday, March 12, 2009, 7:15 a.m. to 9:00 a.m.

Where: Rainier Club (820 Fourth Avenue, in downtown Seattle, Washington)

Sponsored by: Northwest Region of the Design Build Institute of America

Cost: $50 (DBIA members); $55 (non-members)

Speakers:

• Brian Nielsen, WSDOT’s I-405 Construction Manager
• Mark Silverman, Construction Manager from Atkinson Construction
• Pail Mayo, Atkinson Construction
  

For more information and to register, go to the website of DBIA’s Northwest Region

King County Declares Emergency

King County Executive Ron Sims declared an emergency and waived competitive selection procedures to hire The Sazan Group to re-design deteriorating hot water pipes at the Maleng Regional Justice Center in Kent. Sazan studied the issue and issued a report stating that "the pipe appeared to be on the verge of immediate collapse or rupture."

Hiring a firm to conduct design work when they have conducted a study indicating the need for design work does not technically violate any law. It does raise interesting issues of potential conflict of interest, however. On the other hand, with the potential for a catastropic failure of the pipes, the emergency nature of such an action may be appropriate.

Click on the Seattle Times to read a more complete story about the emergency.

PowerPoint of CMAA Speech Available

On Thursday, February 19, 2009, I spoke at the monthly meeting of the Pacific Northwest Chapter of Construction Management Association of America.

My topic was “The Changing Landscape of Public Works Contracting.” I addressed a number of current issues relating to the following:

• Alternative Public Works Contracting
• Legislative Updates
• Bidder Responsibility
• Performance Audits
  

If you would like a copy of my PowerPoint presentation, please contact me and I will e-mail it to you.

Public Works 101 Training

On Thursday, February 19, 2009, I taught an 8 hour overview training class for Sound Transit staff on Construction Contract Management.

It's an A to Z class on public works contracting in the State of Washington that I've developed to help meet the needs of contracting professional throughout the State. Many of the subjects could actually be covered as separate classes, depending on how much information is covered.

Here's the outline of the class:

• Architectural and Engineering Services
• - Selecting a Designer
• - The Designer's Role
• - Negotiating the Contract
• - Important Contract Terms
• - Professional Liability Insurance
• Bidding
• - Is Maintenance a Public Work?
• - Review of Specifications
• - Advertisement
• - Distribution of Bidding Documents
• - Pre-Bid Site Meetings
• - Addenda
• - Subcontractors List
• - Bid Receipt
• - Bid Opening
• - Bid Guaranty
• - Bid Responsiveness
• - Bid Pricing
• - Small Works Roster
• Award
• - Bidder Responsibility
• - Bid Price Errors
• - Additives and Alternates
• - Bid Protests
• - Emergency Public Works
• Contract Execution
• - Payment and Performance Bond
• - Insurance
• - Retainage
• - Signed Contract
• - Notice to Proceed
• - Contract Documents
• Construction
• - Principles of Contract Interpretation
• - Pay Estimates
• - Change Orders
• - Claims
• - Damages and Incentives
• Close-Out
• - Completion Dates
• - Claims Against Bond and Retainage
• - Release of Retainage
• - Preventing Payment Disputes
• Prevailing Wages
• - Definition
• - Effective Date for Prevailing Wages
• - Changes to Prevailing Wages
• - Overtime
• - Fringe Benefits
• - Exemptions from Prevailing Wages
• - Federally Funded Projects
• - Prevailing Wage Enforcement
• Alternative Public Works Contracting
• - General Contractor/Construction Manager (GC/CM)
• - Design-Build
• - Job Order Contracting (JOC)

Please contact me if you're interested in discussing this full day class. I can make adjustments to the class to meet your needs or just teach portions of it in more depth.

Prevailing Wage Audit Findings

The Washington State Auditor's Office issued a finding that the Lewis County Fire Protection District No. 12 did not comply with prevailing wage requirements on an $86,916 public works project for the construction and installation of a radio system. The District did not:

• Include the applicable prevailing wages in the bidding documents and contract.
• Obtain a copy of the the contractor's "Statement of Intent to Pay Prevailing Wages" and "Affidavit of Wages Paid".
• Have documentation demonstrating compliance with retainage requirements.
  

Update on Apprenticeship Legislation

I will be in Olympia this afternoon testifying against SB 5873 that would impose mandatory apprenticeship utilization requirements on public works projects over $1 million for institutions of higher education.

The bill would also require that WSDOT, state agencies, and school districts (already covered by these requirements) meet the percentages by each trade or craft, effectively eliminating the ability of non-union contractors to bid on these public works projects.

Tightening Construction Administration Practices in a Troubled Economy

Training: Tightening Construction Administration Practices in a Troubled Economy

When: Wednesday, February 25, 2009, An all day training workshop

Where: Washington State Convention & Trade Center

Cost: $219 (government entitities); $279 (private firms)

Sponsored by: Contract Solutions Group

Presenters:

• Ron Leaders
• Richard Andrews
• Craig D. Jackson

For more information and to register, visit Contract Solutions Group

Three Risks of Emergency Public Works Contracting

There are three primary risks to declaring an emergency and waiving competitive bidding on a public works project:

1. Protest. To the extent that a public agency waives competitive bidding for a project that doesn't meet the test for an emergency, other contractors who were not selected to perform the work may protest that they were not provided with an opportunity to submit a bid.
   


2. Pricing. By waiving competitive bidding, a public agency must negotiate the cost of an emergency public works project with the contractor. Many public agencies do not have the experience or personnel necessary to effectively negotiate such pricing because most of their work is done through the bidding process where they accept the low bid. If the emergency work is authorized on a time and materials basis, it is important for the public agency to keep close records on the time and materials expended by the contractor to ensure that the appropriate amount is paid. Emergencies, by their very nature, often require payment of a premium amount in order to solve the problem within a very tight time schedule.
   


3. Political. If competitive bidding is waived for a project that does not meet the legal definition of an emergency, political and appointed officials may find themselves subject to criticism and quoted on the front page of the local newspaper. And, of course, there is the additional risk of an audit finding from the State Auditor's Office for an inappropriate declaration of an emergency.
   

There are emergencies...and then there are emergencies. The broken water or sewer pipe in the middle of the night is an emergency that requires immediate action, notwithstanding requirements for formally waiving competitive bidding requirements. Then there are other emergencies that do not have quite the same level of risk involved with not acting immediately. And, of course...there are emergencies that are created by poor planning. These are often difficult to jusify as real emergencies warranting the waiving of competitive bidding.

Job Opening: Sound Transit Seeks Senior Contracts Administrator

Sound Transit is recruiting for a Senior Contracts Administrator (Construction) to be responsible for the procurement, administration and close-out of various complex architectural/engineering and construction contracts for significant capital construction projects.

Closing Date for Applications: February 27, 2009

For more information and to apply, visit Sound Transit's website.

The Changing Landscape of Public Works Contracting

I will be giving a speech on Thursday, February 19, 2009 at the monthly dinner meeting of the local chapter of the Construction Management Association of America on "The Changing Landscape of Public Works Contracting." I will address outstanding issues related to alternative public works contracting, provide updates on pending legislation affecting public works contracting, and discuss how public agencies are implementing supplemental bidder responsibility criteria and how contractors are responding to these criteria.

When: Thursday, February 19, 2009, 5:30 p.m. to 6:30 p.m. (social hour), 6:30 p.m. to 8:00 p.m. (dinner and program)

Where: Rock Salt Steak House, 1232 Westlake Ave N, Seattle

Cost: $40

For more information and to register, click here.

Bill Would Expand Mandatory Use of Apprentices

SB 5873 would mandate that four-year institutions of higher education require, by January 1, 2012, that 15% of the labor hours used on public works projects over $1 million be performed by apprentices enrolled in a state approved apprenticeship training program.

Currently, WSDOT, state agencies, and school districts are covered by the mandatory apprenticeship requirements of RCW 39.04.320.

The bill would also add a requirement for these agencies and higher education that, within certain time periods, the 15% apprentice utilization standard must be met not just on the project as a whole, but by "each trade or craft."

The bill further proposes to add a new mandatory bidder responsibility criterion to RCW 39.04.350 relating the a bidder found to be "out of compliance" by the State Apprenticeship and Training Council with their rules for the five year period before bidding.

All parties agree that apprenticeship is an important and valued method for training the construction workforce and that the workforce is aging and not being replaced by younger workers. However, requiring the use of apprentices on public works projects will not address the longer term and more fundamental societal issue of why young people are not choosing to enter the construction trades. Simply mandating the use of apprentices will not cause individuals to choose to enter apprenticeship programs.

In my opinion, this legislation represents short-sighted and ineffective public policy. Implementing this legislation would restrict fair bidding, increase costs to the taxpayer, decrease business opportunities for minority businesses, and result in lower quality on complex public projects.

The fundamental problem with SB 5873 is that it does not solve the problem of creating a skilled workforce, and in fact, has a number of very negative consequences, including the following:

1. Lack of Fair Bidding. One of the fundamental purposes of public bidding is to provide an open and fair forum for contractors to compete on a level playing field. Open shop contractors, who employ 75% of the construction workers in the State of Washington, only have access to state approved apprenticeship training programs for seven trades through the Construction Industry Training Council (CITC). Thus, implementing the bill would have the effect of excluding open shop contractors from bidding public works projects since the bill would require the 15% apprentice utilization requirement be met for "each trade or craft."
   
   
2. Higher Costs. Implementing mandatory apprenticeship requirements will reduce the number of open shop contractors bidding public works projects, thereby limiting competition and increasing prices to taxpayers on public works projects. Furthermore, the bill would require institutions of higher education to spend additional staffing and administrative resources to implement and manage the use of apprentices, taking dollars away from what would otherwise be used to fund actual construction activity and create more jobs.
   
   
3. Decreases Diversity. The bill would have a negative impact on the economic health of the State's minority and women's business contractors. According to King County Councilmember Larry Gossett, 97% of the minority and women owned businesses in the State are non-union. The bill would exclude these businesses from bidding on public works projects because they would be unable to meet the mandatory apprentice utilization requirements. This would be counter to the policy direction and intent of the Governor and many other elected officials in the State.
   
   
4. Apprentices Not Available. With the lack of people entering the construction trades, there are not enough apprentices available to meet the mandatory percentage utilization requirements of the bill, a fact affirmed by many contractors. Imposing requirements will not increase the supply of apprentices in the marketplace. The marketplace should be allowed to dictate usage or non-usage of apprentices.
   
   
5. Safety Risks. Use of apprentices on complex public works projects increases the risk of injury. The rate of injury to apprentices is higher than that for journey-level workers.
   
   
6. Quality Suffers. The use of apprentices for "each trade or craft" on complex and high risk projects may result in a lower quality final product.

The Changing Bidding Climate

With the uncertain economic downturn facing everyone, many public owners are experiencing a number of changes in public works bidding:

1. More bids are being received for each public works projects than were received when construction was booming.
   
   
2. Many of the bidders are new to public works and are trying their hand in the public arena as other markets, such as residential construction, are drying up.
   
   
3. Many public owners are obtaining significantly lower bid prices on public works projects, much lower than the estimate. The University of Washington opened bids on Wednesday for an elevator upgrade project and received seven bids. The low bid came in at $337,500, almost $100,000 less than the estimate.
   
   
4. Bid prices from different bidders are much more closely packed together, with less of a range of prices. On the UW project mentioned above, the prices ranged from the low bid of $337,500 to a high bid of $379,800, still more than $50,000 less than the estimate.
   

Why are these trends occurring? It's probably a combination of factors.

Some bidders are bidding without much, if any profit, in order to get the project and keep their workers busy and employed. The lower bid prices are also probably a reflection of the fact that owners were paying more than the actual value of the work when times were prosperous and bidders could choose to bid higher and had their pick of projects.

Design-Build Transportation Conference

Conference: Design-Build in Transportation

When: April 1 - 3, 2009

Where: Baltimore

Sponsored by: Design-Build Institute of America (DBIA)

For more information and to register, visit the website of DBIA

Job Transitions - Request for Information

I thought it might be interesting to post each month on this blog a list of people involved in contracting and procurement in the Pacific Northwest who have changed jobs recently.

It could be a way for helping to build community among such professionals in the area. I know of a handful off the top of my head.

If you have transitioned to a new job recently or know of someone who has, please contact me. I'll post the results around the first of each month. Thanks!

A Day in Olympia

I testified today in Olympia on three bills being considered by the Legislature:

• SB 5396 - Retainage cleanup. Testified in favor.
  
• SB 5397 - Alternative public works contracting. Changes agreed upon by the Capital Projects Advisory Review Board. Testified in favor.
  
• HB 1836 - Off-Site Prefabrication data collection. Testified with concerns. The bill is confusing to interpret and contains many internal inconsistencies.

My testimony was as part of my job as Contracts Manager for the University of Washington.

Prevailing Wages on Public-Private Partnerships?

HB 1992 would require that prevailing wages be paid on a variety of projects that are typically termed as public-private partnerships - not public works projects, but projects that have significant financial commitment from the private sector.

The bill would require payment of prevailing wages for projects that involve tax incentives established by a public agency, loans provided by a public agency, sales of public land or property to a private entity for less than fair market value by a public agency, or leases of public land or property to a private entity by a public agency.

Without this financial commitment from the private sector, these projects would not be possible. My concern with HB 1992 is that it would have the impact of making many of these projects not financially feasible, thereby causing the projects to be canceled.

Especially in this economic downturn where all construction projects that help to generate jobs is so important, this bill would have significant negative consequences to the general public and to workers in particular.

Training on Protests and Disputes

Protests and Disputes: What's a Buyer to do?

When: Wednesday, May 6, 2009, 8:00 a.m. to 5:00 p.m.

Where: La Conner County Inn, Two Forks Room, 107 South Second Street, La Conner, WA

Sponsored by: Washington State Chapter of NIGP (National Institute of Governmental Purchasing)

Cost:

• $160 for national NIGP members
• $225 for chapter NIGP members and non-members

Registration deadline: April 6, 2009

For information about the content of the class visit NIGP's website

For hotel information, contact Cathy Robinson at 206-801-2321 or crobinso@shorelinewa.gov

Increasing Bid Limit Thresholds in Washington State

In HB 1198, the Capital Projects Advisory Review Board (CPARB) recommended to the Legislature to increase the public works bid limit thresholds for cities, counties, and higher education and to make the thresholds more consistent between the different types of jurisdictions. There was a public hearing on the bill before the State Government and Tribal Affairs Committee on January 23, 2009.

Another bill was also introduced, HB 1230 that would increase bid limits for water-sewer districts and fire protection districts, and metropolitan park districts. That bill also was considered in a public hearing before the same committee on the same date.

These bills have been consolidated into HB 1847. A public hearing on this bill will be held on February 12, 2009 before the House State Government and Tribal Affairs Committee at 8:00 a.m.

Training: Effective Contract Writing

Effective Contract Writing

When: April 30 - May 1, 2009, 8:00 a.m. to 5:00 p.m.

Where: City of Vancouver, WA, Firstenburg Community Center, 700 NE 136th Avenue, Vancouver, WA

Cost:

• $360 for national NIGP members
• $500 for chapter NIGP members and non-members

Registration deadline: March 27, 2009

For more information and to register, visit the website of the Washington State Chapter of NIGP

For hotel information, contact Cathy Robinson at 206-801-2321 or crobinso@shorelinewa.gov

This training will cover the structure and meaning of enforceable contracts. Visit NIGP's website for more details

Bill to Restrict Use of Alternative Public Works Contracting

HB 1690 would clearly establish the intent of the Washington State Legislature with respect to the use of alternative public works contracting procedures by public agencies. Specifically, the bill would require that "public bodies that want to use an alternative public works contracting procedure may use only those procedures...specifically authorized in chapter 39.10. RCW."

The bill appears to be a response by the Legislature to the University of Washington's use of a developer model contracting procedure, adopted through a new Washington Administrative Code section (WAC 478-350), for the renovation of Husky Stadium.

The bill would specifically restrict the use by institutions of higher education (and other public agencies) in using alternative public works contracting procedures not specifically authorized by the Capital Projects Advisory Review Board (CPARB) and the Legislature.

There will be a public hearing on the bill on Tuesday, February 10, 2009 before the House State Government and Tribal Affairs Committee, at 1:30 p.m.

Training: Basics of Public Works Contract Administration

Basics of Public Works Contract Administration

When: Monday, April 6, 2009, 8:30 a.m. to 4:30 p.m.

Where: City of Kirkland, Peter Kirk Conference Room, 123 Fifth Avenue, Kirkland, WA

Instructor: Charlotte Walther, Contracts & Procurement Administrator, Port of Everett

Sponsored by Washington State Chapter of NIGP (National Institute of Governmental Purchasing)

Cost:

• $150 for NIGP members
• $180 for non-members

Registration Deadline: March 30, 2009

For more information and to register, visit the website of the Washington State Chapter of NIGP

The training will cover the basic process of managing public works contracts from the beginning to the end of the project including the following:

• Contracts Administrator's role
• Coordination with engineers and project managers
• Ensuring Project Manual contains necessary documentation for contract administration
• Posting bid documents
• Bid openings, reviewing bids, and posting bid results
• Awarding the contract
• Reviewing contract documentation (contract, insurance, bonds)
• Administering the contract while project is ongoing
• Project closeout and retainage release
• Small Works Rosters and the bid process
• Limited Public Works process
• Prevailing Wages and reporting
• Bonds: Bid, Performance and Payment Bonds, Retainage
• Certificates of Insurance
• Federally funded projects

Free Training on FEMA Contracting Requirements

Disasters Happen - Are You FEMA Ready?

Four informative sessions at the Excellence in Procurement Summit

When: Thursday, March 26, 2009, 8:30 a.m. - 4:00 p.m.

Where: UW Tacoma, Keystone Building, Carwein Auditorium, 1953 C Street, Tacoma, WA

Sponsored by: Washington State Chapter of NIGP (National Institute of Governmental Purchasing)

Cost: Free

Speaker: Alysha Kaplan, Regional Public Assistance Supervisor, Washington State Emergency Management Division

For more information and to register, visit the website of NIGP's Washington State Chapter

Questions, contact Cathy Robinson at 206-801-2321

Obama Orders Use of Project Labor Agreements

President Barack Obama issued an Executive Order on February 6, 2009 encouraging the use of Project Labor Agreements on federal construction projects over $25 million. The Executive Order revokes previous Executive Orders by former President George W. Bush that prohibited the use of Project Labor Agreements.

Project Labor Agreements are between a government agency and labor unions in which it is agreed that only union labor will be used on the project at both the contractor and subcontractor levels.

Labor & Industries Improves Prevailing Wage Correction Notifications

The Washington State Department of Labor and Industries has instituted positive changes to ensure that public agencies and contractors are appropriately notified of changes in prevailing wage rates, and that the Department is in compliance with their regulations for when corrections become effective.

L&I publishes new prevailing wage rates twice a year, the first business day of February and the first business day of August. Wages become effective 30 days from publication. L&I's regulations also state that corrections to wage rates become effective 30 days after the correction has been published.

In addition to notifying those on L&I's e-mail notification list, they are now publishing on their website a Wage Rate Correction Notice listing (http://www.lni.wa.gov/TradesLicensing/PrevWage/WageRates/Printable/default.asp).

Thus, for the wages published on February 2, 2009 and effective on March 4, 2009, L&I has already issued one correction to prevailing wage rates for Drywall Taper Apprentices. Click here to read the actual correction notice. The correction was published by L&I on February 4, 2009 and it becomes effective on March 6, 2009. This change in practice is now consistent with WAC 296-127-011. Previously, L&I was making corrections effective the same day as the original wage rates that were published.

A user can now click on L&I's website and then further click on the listing for corrections.

Public agencies and contractors do still need to be aware, however, that prevailing wage rates printed from L&I's website should be printed just prior to publication of the bidding document to ensure that the most current wage listing is being included in the documents. This is necessary because, even though L&I now has a notice of corrections online, the main listing of wages does not contain any indication of the date or nature of any corrections that may have been made.

Labor and Industries is to be commended for this positive step in improving the flow of communication to public agencies and contractors.

Regional Contracting Forum

The Regional Contracting Forum will be held this year on March 31, 2009 at the old Union Station at 4th Avenue and Jackson Street, in downtown Seattle.

The Forum is an opportunity for businesses (contractors, consultants, service providers, and vendors) to meet with representatives of public agencies from throughout the Puget Sound area about how to obtain contracts and work with those agencies.

New information and registration has not yet been posted on OMWBE's website, but check it regularly for updates.

Job Opening: Port of Seattle Seeks Manager for Personal Service Contracts

Position: Sr. Manager Service Agreements

Agency: Port of Seattle

Salary: Minimum $83,987, Midpoint $104,969

New filing deadline: Friday, February 13, 2009 (extended from January 9, 2009)

Purpose: To manage the Service Agreement Section of the newly created Central Procurement Office and to ensure Port compliance with all legal and policy requirements associated with the procurement of professional and personal services.

For a complete job description and minimum requirements, click here.

For information on how to apply, click here.

Small Business Preference Legislation

HB 1830 would establish definitions for three different types of small businesses and then permit public agencies using the Limited Public Works process (less than $35,000) under the Small Works Roster law (RCW 39.04.155) to "solicit and award small works roster contracts to small businesses, minibusinesses, and microbusinesses."

The legislation would amend what was passed in 2007 permitting agencies to solicit and award these contracts to "registered contractors with gross revenues under one million dollars annually as reported on their federal tax return."

In its place would be three new categories of businesses: small, mini, and micro that each have definitions under the bill. For each of the three types of businesses, they must be a "business entity, including a sole proprietorship, corporation, partnership, or other legal entity, that is owned and operated independent from all other businesses."

They differ based on the annual gross revenues permitted, all as reported on the federal tax return or Department of Revenue return of the business.

• A microbusiness would have gross revenue of less than $1 million annually.
• A minibusiness would have gross revenue of less than $3 million but more than $1 million annually.
• A small business would have gross revenue of less than $7 million annually.

The bill also would add these three business type definitions to RCW 39.29.006, the definitions section of the Personal Services Contracts section of the law that is applicable to state agencies. But there are no provisions in the bill for applying these definitions in the application of Personal Services Contracts.

For public agencies with bid limits of less than $35,000 (the amount for using the Limited Public Works process and therefore applying these proposed definitions), the bill may have limited value as most of the public work under $35,000 may be performed with in house forces or not through the Limited Public Works process.

Public Works Bills Introduced in Legislature

In addition to the various bills being considered by the Washington State Legislature that I've commented on in earlier blog entries, there are a number of other bills relating to public works projects that have been introduced.

I will comment on them more in the days ahead. For now, however, I want to just list them here and provide a couple of comments on them from my quick skim of them:

• HB 1847 - Changing various bid limit thresholds. I haven't yet had a chance to see how this is different from HB 1198, requested by the Capital Projects Advisory Review Board (CPARB). This is scheduled for consideration at an Executive Session of the House State Government and Tribal Affairs Committee on February 5, 2009 at 8:00 a.m. HB 1230 also relates to changing bid limits for certain types of jurisdictions.
  
  
• HB 1786 - Defining independent contractor for the purposes of prevailing wages. There appears to be some duplication between this bill and HB 1555 on the underground economy as it relates to independent contractors.
  
  
• HB 1648 - Relating to state contracts with veteran-owned businesses.
  
  
• HB 1641 - Authorizing the University of Washington to establish alternative public works contracting procedures, increasing the threshold for Small Works Roster projects to $1 million, permitting award of design-bid-build, design-build, and GC/CM projects over $1 million on the terms most advantageous to the University, and authorizing the University to pre-qualifiy contractors, all only for public works projects not funded with state appropriate funds.
  
  
• HB 1916 - Appears to contain the same provisions as HB 1641 and also authorizes similar procedures for Washington State University.
  
  
• HB 1690 - Authorizing CPARB to approve any alternative public works contracting procedures requested by a university and to recommend to the Legislature whether such practice should be adopted, and restricting all public bodies only to the alternative public works contracting procedures authorized in chapter 39.10 RCW.

If you are aware of other bills impacting public works or other contracting practices in the State of Washington that I haven't commented on here, please contact me or comment on my blog.

New State Prevailing Wages

The Washington State Department of Labor and Industries has published updated prevailing wage rates for use on public works projects.

The new rates will become effective on March 4, 2009.

The rates may be viewed and printed by clicking here on the Labor & Industries website.

Executive Session for 5 CPARB Bills

The House State Government and Tribal Affairs Committee of the Washington State Legislature will hold an Executive Session on Thursday, February 5, 2009 at 8:00 a.m. to consider five bills recommended to the Legislature by the Capital Projects Advisory Review Board (CPARB).

The bills, with the Senate companion bill in parenthesis, are:

• HB 1195 - Regarding payment of undisputed claims (SB 5399)
• HB 1196 - Increasing the dollar limit for Small Works Roster projects
• HB 1197 - Regarding alternative public works contracting procedures (SB 5397)
• HB 1199 - Housekeeping bill on public works retainage (SB 5396)
  
• HB 1200 - Allowing municipalities to negotiate adjustments in public works bids (SB 5398)

The sixth bill recommended by CPARB is HB 1198 regarding changing public works bid limits. This bill is not currently slated for the Executive Session.

The "Underground Economy"

The "Underground Economy" is a term used by the labor union community to refer to contractors and subcontractors who skirt public laws regarding contractor registration, payment of taxes and prevailing wages, and handle transactions in cash.

HB 1555 would address some of the concerns stemming from the underground economy. I find the bill to be unclear and technically flawed in a number of places. Generally, here's a quick summary of the bill from what I can gather:

1. Verify Contractor Registration. Agencies such as cities and others who issue business licenses would be required to verify that the applicant is a registered contractor with the Department of Labor and Industries if such registration is required. It may be difficult for agencies issuing the business licenses to make this determination.
2. Prevailing Wage Exemption. The bill would define what independent contractors do not meet the definition of "laborer, worker, or mechanic" for the purposes of being paid prevailing wages. The bill attempts to define when an individual is really an independent contractor and not subject to prevailing wages. This is a very confusing section. Read it and see what you think. If you have any insight into it, please let me know.
3. Purpose of Retainage. The bill would add the Employment Security Department and the Department of Labor and Industries as trust fund beneficiaries of the retainage. Interestingly, however, the bill does not require that public agencies obtain releases from these agencies prior to release of retainage.
4. Priority of Claims Against Retainage. The bill would insert the Employment Security Department and the Department of Labor and Industries into a tied third place position for the priority of claims against the retainage. First place would still be workers due prevailing wages and second place would still be the Department of Revenue. By inserting these two new departments into the priority list, subcontractors and suppliers would have less clout in terms of tapping into retainage for claims. Subcontractors and suppliers who form the backbone of our economy need better protection against contractors who fail to pay. Also, this section is very awkwardly written. I think my interpretation above is correct, but it's very confusing.

This legislation is technically flawed, confusing, and poor public policy.

There was a public hearing on the bill on January 28, 2009 before the House Commerce and Labor Committee.

Off-Site Prefabrication Data Collection Legislation

HB 1836 would require public agencies in the State of Washington to include in public works specifications requirements for reporting relating to the production of off-site, prefabricated, nonstandard, project-specific items produced for a public works project.

The bill would require contractors, subcontractors, lower-tier subcontractors, and employers "who are not required to register as contractors in the state" to submit, prior to final acceptance by the public agency, a list of the specific items produced, the name of the business who produced it, and other information. The requirement for submission would not apply to a business required to submit a Statement of Intent to Pay Prevailing Wages.

The bill would also require public agencies to include a provision in bidding documents and contracts requiring submission of certified payroll reports for the off-site work upon request by a third party. The payrolls would be sent to the public agency and the State Department of Labor and Industries. It would apply to contractors, subcontractors of any tier and employers responsible for producing such off-site items. It would not apply to those firms required to submit a Statement of Intent to Pay Prevailing Wages.

The legislation appears to have at least one internal conflict. One the one hand, it requires the submission of the lists prior to final acceptance by the public agency. On the other hand, it states that failure to submit the lists will not delay release of retainage by the public agency. However, without final acceptance, the 45 day countdown for release of retainage under chapter 60.28 RCW does not begin.

Practically, the bill would require someone in each public agency to make a determination prior to final acceptance whether such lists of prefabricated items are applicable and must be submitted. The addition of this requirement has the potential to further delay final acceptance of projects. Such delays have a cost to contractors when they do not receive their retainage in a timely manner. The public ends up paying for these inefficiencies in the form of higher bids by contractors.

This subject has long been a concern of labor unions in Washington State. They assert that out of state firms, often just across Washington borders, are producing off-site items for Washington public works projects without having to pay Washington prevailing wages. Under the Everett Concrete Products case that went to the Washington State Supreme Court, the Court held that prevailing wages for such off-site, non-standard items must be paid based on the wages in effect for the county where the items were produced. Please contact me if you'd like me to send you a copy of this court decision. But if the items are produced out of state, Washington prevailing wage laws have no jurisdiction. Labor unions contend that such practices are putting Washington businesses in border cities at a competitive disadvantage and that the State is also losing tax revenue.

The bill is an attempt to collect data to help evaluate the nature of the problems. The legislation would sunset on December 31, 2011.

Bill to Expand Subcontractors List

HB 1837, currently under consideration by the Washington State Legislature, would add additional provisions to the requirement for bidders to include a subcontractors list with their bid on public works projects by amending RCW 39.30.060.

In my opinion, the bill is poorly drafted, ambiguous, and represents poor public policy. It would result in more non-responsive bids and protests on public works projects, resulting in delays and additional costs for public agencies. Especially in these difficult economic times, now is not the time to add more government regulations, especially of the type contemplated. Because the language of the bill is so unclear at some points, it is difficult to fully assess the impact of it on both contractors, subcontractors, and public agencies.

Here is a quick summary of the bill which may be accessed by clicking here:

1) In lieu of only three trades required to be listed on the subcontractors list as is the current law (HVAC, electrical, and plumbing), the bill would require that:

a) All first tier subcontractors who will perform work valued at $50,000 or more be listed.

b) All subcontractors who will perform work valued at $350,000 or more be listed. Presumably, this refers to lower tier subcontractors, but this contradicts section (7) of the legislation that restricts the application of the law to only subcontractors who will contract directly with the prime bidder.

c) "The prime contract bidder must list all subcontract work that it will perform." (Section 2 (1)). This doesn't make a lot of sense. If the prime contract bidder performs work, it is not, by definition, subcontract work.

2) Section (3) is very difficult to understand. Whatever the language is intended to accomplish, it is hard to comment on it here and it would be difficult to implement as a result. It appears to imply that the public agency should be opening subcontract bids in addition to the prime contractor's bids - something that would create havoc in the contracting community for both contractors, subcontractors, and public agencies, and bring work to a standstill. Here's what the bill states: "The public entity shall open all bids submitted by prime contract bidders, alternates, and subcontractors that are required to be listed under this section at the end of the published bid submittal time. Bids submitted by prime contract bidders and their subcontractors may not be opened separately."

3) The bill adds to the list of reasons why a prime contract bidder may not use a listed subcontractor. The additions to the list are, by and large, welcome additions, even if they are not clearly worded, and such wording will create ambiguity in implementation. Clearly, there is an intent to permit bidders to disqualify subcontractors who do not meet certain basic criteria.

a) Section 5 (g) lists one reason as "The listed subcontractor fails to meet the requirement established in RCW 39.04.350 for responsible bidders." This should be a reference instead to RCW 39.06.020 which is where subcontractor responsibility is discussed.

b) Section 5 (i) and 5 (l) both include identical language: "The listed subcontractor did not include the entire cost of the subcontract in the bid submittal."

The bill has been referred to the House State Government and Tribal Affairs Committee. At this point, no hearing has been scheduled for it.