Happy New Year!

Best wishes for a healthy, peaceful, and prosperous New Year!

Annual Meeting of NIGP's Washington State Chapter

The Annual Business Meeting of the Washington State Chapter of NIGP (National Institute of Governmental Purchasing) will be held on Tuesday, January 12, 2010.

Where: City of Seattle - City Hall (600 4th Avenue, Seattle, WA, Bertha Knight Landes Room)

Time: 8:30 a.m. to 3:00 p.m.

Speakers:

• Arun Raha - 2010 Economic Outlook
• Steve Krueger - 2010 Legislative Issues Affecting Purchasing

Cost:

• Chapter Member - $20
• Non-Chapter Member: $50
• National NIGP Member Only: $50

Agenda:

• Annual Business Meeting
• Training
• Honors and Awards

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

Summary of 2009 Training and Speaking by Mike Purdy

It's been a busy year!

Below is a summary of the training and speaking I've done during 2009.

• The Changing Landscape of Public Works Contracting [Construction Management Association of America (CMAA) - Pacific Northwest Chapter]
  
  
• Construction Contract Management [Sound Transit - Seattle, WA]
  
  
• Writing Effective Technical Specifications [City of Bellingham, WA and City of Bellevue, WA]
  
  
• Ethics in Public Contracting [Washington Association of School Business Officials (WASBO)]
  
  
• Public Works Contract Close-out: Bonding, Retainage, and Claims [Washington Association of School Business Officials (WASBO) and KCDA (King County Directors Association)]
  
  
• Developing and Reviewing Scopes of Work [Sound Transit - Seattle, WA and KCDA (King County Directors Association)]
  
  
• Construction Contract Change Orders [Sound Transit - Seattle, WA)]
  
  
• Issues and Trends in Public Project Delivery [Construction Specifications Institute (CSI) - Northwest Region]
  
  
• Bidder Responsibility: Tools for Selecting Qualified Contractors on Public Works Projects [American Public Works Association (APWA) - Washington State Chapter]
  
  
• A Brief Introduction to Job Order Contracting (JOC) [Regional Contracting Forum - Washington State]
  
  
• 2009 Washington State Legislative Updates [American Public Works Association (APWA) - Washington State Chapter]
  

If you are interested in me providing training for your agency or speaking to your association, please contact me.

I'll be posting a list soon of training and speaking that I have scheduled so far for 2010.

Minimum Wages in 2010

The San Francisco law firm of Littler Mendelson PC maintains a helpful "Wage and Hour" blog.

In their December 21, 2009 blog entry, they note that the federal minimum wage rate will remain at $7.25 per hour in 2010.

They also note that Alaska, Connecticut, and Kansas will increase their minimum wages, while Colorado will decrease their minimum wage. The blog entry also notes a number of states that will not be making any changes to their minimum wage rates in 2010.

Click here to see the blog entry with additional details.

NJ Considers Law to Require Union Contractors on Public Works

The New Jersey Legislature is considering a bill that would have the impact of requiring that all contractors on public works projects be union contractors.

The provisions of the bill would mandate that all contractors and subcontractors on public works projects to participate in an apprenticeship program for each trade or classification in which they employ craft workers.

Because unions are the primary sponsors of such apprenticeship programs, the bill would require non-union contractors to sign collective bargaining agreements in order to bid on public projects - in practice, a backdoor Project Labor Agreement (PLA) requirement.

Under the guise of construction workforce development and protection of worker safety, this legislation is an example of efforts by organized labor throughout the nation to eliminate non-union competition. Government agencies should resist such efforts that have the impact of limiting competition on public works projects and increasing costs. All contractors, regardless of whether they are union or non-union, should have the ability to bid on public projects.

For a brief article with more details on the subject, visit the website of Fox Rothschild LLP, a law firm.

To read a copy of the proposed New Jersey legislation, Assembly Bill 4305, click here.

In Washington State, legislation has been expanded over a number of years and now requires various public agencies in the state to require that 15% of the labor hours on public works projects over $1 million be performed by apprentices enrolled in a state approved apprenticeship and training program. RCW 39.04.320 affects the state department of transportation, the state department of general administration, all school districts, and all universities and colleges.

Top 20 Public Contracting Blog Stories of 2009

Out of more than 370 blog entries I've written during 2009, I've highlighted below a list of 20 of the top stories and entries.

I hope you continue to find this Public Contracting Blog helpful. More to come in 2010!

1. State of Washington Delays Implementation of New Retainage Release Law
   
   
2. Retraction of Previously Published Prevailing Wage Rates
   
   
3. Mike Purdy Announces Retirement - Will Continue Consulting
   
   
4. W.A. Botting Files for Bankruptcy
   
   
5. New Washington Public Works Laws Effective July 26, 2009
   
   
6. County in Florida Considers Local Preference Ordinance
   
   
7. Comparing Data from Prevailing Wage Worker Interviews with Certified Payrolls
   
   
8. Report on Accuracy of Cost Estimates for Capital Projects
   
   
9. A Dozen Tips for Public Works Specifications
   
   
10. Lump Sum vs. Not-to-Exceed Contracts
    
    
11. How to Check if a Contractor is Debarred
    
    
12. Revised Standard Design-Build Contracts Released
    
    
13. Allowable vs. Unallowable Overhead
    
    
14. Non-union Contractor Challenges Federal "Project Labor Agreement" Requirement
    
    
15. Qualifications and Price as Selection Criteria
    
    
16. Responsive Bids and Responsible Bidders
    
    
17. $9 Million Bid Transposition Error: Airport Staff Recommends No Correction is Permitted
    
    
18. Is Failure to Acknowledge Addenda a Material Irregularity?
    
    
19. Public Works Bribery Case in Tulsa
    
    
20. 5 Keys to Making Ethical Contracting Decisions
    

If you're not already a subscriber to Mike Purdy's Public Contracting Blog, I encourage you to sign up for a free e-mail subscription. Every time I post a blog entry, you'll receive it by e-mail. To sign up, follow the instructions in the upper right hand corner of the Blog.

Merry Christmas!

Best wishes to you and your family as you enjoy time together during this holiday season!

31 States Permit Design-Build for State Transportation Projects

A total of 31 states permit state transportation departments to use Design-Build.

Another 14 state DOTs have some form of Design-Build authorization, but with some limitations.

There are only 5 states that do not have any such Design-Build authority (Nebraska, Iowa, Indiana, New York, Connecticut).

Source: December 2009, Dateline, The Journal of The Design-Build Institute of America (DBIA)

Contractor Gets 5 Years in Jail in Tulsa Bribery Case

An Oklahoma contractor, Max E. Wolf, will serve four years and nine months in jail for bribing a government employee to approve inflated invoices on City of Tulsa public works projects. Wolf pleaded guilty in September 2009 and was sentenced on December 14, 2009.

Harlan Eugene Yocham of Yocham Enterprises was also sentenced to prison for paying a $7,000 bribe to the same Tulsa employee to approve a "fraudulent and inflated" invoice. Yocham will serve five month in prison and then another five months of home detention.

For more information about the sentencing, visit the website of the Tulsa World.

For additional background information about this wide-ranging bribery scandal that also included others, click here to read other blog entries I've written.

When to Disclose Selection Scores for Qualifications Review

Under some selection methods, a contractor is chosen based partially on qualifications and partially on certain prices they bid. For example, this is true in Washington State when selecting a contractor for either General Contractor/Construction Manager (GC/CM), Design-Build, or Job Order Contracting.

In such a situation, the price is usually requested only from a shortlist of finalists after the qualifications (and maybe an interview) have been evaluated.

It is very important that the scores for the qualifications and interview not be disclosed to the contractors prior to them submitting their prices. If these scores are disclosed to them prior to the submission of the price bid, the contractor is in a position to determine how low they need to bid in order to get the project. This may result in a contractor essentially "buying" the job with a low price, and does not result in a truly competitive selection process.

Be sure that any evaluation committee members or others in your agency who have access to the qualification and interview scores know that this information should remain confidential until submission of the bid prices.

Ohio Ponders Elimination of Multiple Prime Construction Awards

As part of an initiative to plug an $851 million hole in the State of Ohio's budget, the state's Construction Reform Panel has recommended elimination of a practice in which public agencies are required to hire a separate contractor for general construction, heating and cooling, plumbing, and electrical work.

The Ohio Construction Reform Panel noted that using a single prime contractor for a project could result in cost savings due to fewer lawsuits and in projects being completed faster. Click here to read the April 2009 report of the Panel.

Visit the website of the northern Ohio based News-Herald to read an editorial on Ohio's consideration of moving toward a single prime contracting model for construction.

The multiple prime contracting methodology, which is used by only a few states, is counter to trends in the construction industry toward more seamless integration of all parties in the process. This trend toward more efficient systems is characterized by what is known as Integrated Project Delivery (IPD).

Integrated Project Delivery is defined as a "project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication and construction." (AIA California Council)

The multiple prime contracting model also is not consistent with principles embedded in what is known as Lean Construction. Visit the website of the Lean Construction Institute for more information.

High School Project in Spokane Approved to Use GC/CM Process

The Spokane School District (Washington) received approval on December 3, 2009 to use the General Contractor/Construction Manager (GC/CM) alternative public works contracting procedures on the $91 million Ferris High School improvements project.

The approval came from the Capital Projects Advisory Review Board's (CPARB) Project Review Committee.

GC/CM contracting in Washington State is authorized in chapter 39.10 of the Revised Code of Washington (RCW).

To read a copy of the application of the Spokane School District to use GC/CM, please click here.

If your agency is planning to use GC/CM or is currently using it, and you need advice or help, please contact me to discuss how I might be of assistance.

How to handle a bid that is too low

In the world of public works construction contracting, public agencies are required to award the contract to the responsible bidder submitting the low responsive bid.

Bid is Too Low: But what should a public agency do when the low responsive bid (from a responsible bidder) is so low that the public agency is concerned about the bidder's ability to perform the work?

Impact of Economy on Bidding: Over the last year, as our economy has fallen, most public agencies are receiving significantly lower bids, lower than the estimate, as contractors have shaved profit and expenses just to win the job and keep their workers employed.

Low Bid Concerns: Often a bid may be so low that the public agency has concerns about whether the low bidder really understands the complete project, or whether the public agency will be subsequently badgered to approved unjustified change orders.

Meet with the Bidder Before Award: Before awarding a bid that is significantly lower than the estimate, and lower than the range of other bids, the public agency should meet face-to-face with the contractor to review the scope of the work, the contractor's understanding of the work, and the contractor's original bidding spreadsheets. The purpose of this conversation should be to ensure that the bidder is comfortable with their bid. If the owner has concerns, the owner should attempt to convince the bidder to request withdrawal of their bid.

Risks of Low Bid Contracting: A public agency should not be anxious to enter into a contract with the low bidder just because they are the low bidder, if their bid does not cover all of the work. Likewise, a contractor who has left major elements of the work out of their bid should be petitioning the owner to let them withdraw their bid. A project where the margin of profit is so low or non-existent can often be the project that puts a contractor out of business.

Letting the Bidder Withdraw Their Bid: In the event the contractor determines that their bid price is unreasonably low, they may request the owner to let them withdraw their bid without forfeiture of their bid guarantee. Such a request is really in the best interest of all parties. A project that begins with the contractor believing they will lose money on the project is not likely to be a particularly successful project.

Claim of Error: Typically, bidding documents for public agencies will have provisions for how a bidder may claim error on their bid amount. Often, such notice under a claim of error provision must be given to the owner within 24 hours of the bid submittal deadline. However, a meeting with the bidder to review the details of their bid may not occur until after such a deadline. Nevertheless, the public agency has the discretion to accept a request for withdrawal of their bid, even after the claim of error deadline.

No Bid Negotiation: Whenever a contractor requests withdrawal of their bid, either within the claim of error deadline, or after a meeting with the owner to review their prices, it is important to remember that there should be no negotiation or adjustment of their bid price. The bidder has the option of agreeing to perform the work at their bid price or requesting to be relieved of their liability for the bid. Any adjustment to their bid price, even if they would still be the low bidder, results in bid negotiation, something that is prohibited by most state and federal laws governing public works construction projects.

Northwest Chapter of DBIA to Hold Annual Meeting

The annual meeting of the Northwest Region of the Design-Build Institute of America (DBIA) will be held on Monday, December 14, 2009 at noon at the local offices of M.A. Mortenson Construction (14719 N.E. 29th Place, Bellevue, WA).

Nominees for new officers, to be voted on at the meeting, include the following:

• President, Jim Yowan, M.A. Mortenson Company
• Vice President, Eric Smith, University of Washington
• Secretary, Bill Kent, M.A. Mortenson Company
• Treasurer, Sian Roberts, Miller Hull
• Past President, Robynne Thaxton Parkinson, Law Offices of Robynne Thaxton Parkinson

If you are planning to attend the meeting, please RSVP to Hank Sitko at dbianw@comcast.net.

Verification of Subcontractor Responsibility

As many of you know, in 2007, the Washington State Legislature approved a new law dealing with bidder responsibility (RCW 39.04.350).

Mandatory and Supplemental Responsibility Criteria: That law establishes certain mandatory criteria that a low bidder on a public works project must meet prior to a public agency awarding a contract to them. The law also enables a pubic agency to establish relevant supplemental bidder responsibility criteria that are applicable to a project. It is up to the public agency to verify that the low bidder meets both the mandatory bidder responsibility criteria and any of the optional supplemental bidder responsibility criteria that the agency may have established for a project before award of the contract.

Subcontractor Responsibility: What is less well known is that the 2007 legislation also established subcontractor responsibility criteria that the contractor is responsible for verifying prior to execution of a subcontract. If a subcontractor hires lower tier subcontractors, they are responsible for verifying that their lower tier subcontractors meet the subcontractor responsibility criteria.

In addition, RCW 39.06.020 requires that every subcontract contain language including the subcontractor responsibility criteria and the requirement to verify the compliance of the subcontractor. From my recent reviews of a couple of subcontracts from fairly large and well-known general contractors, I've noted that they have not included this language in their subcontracts, even more than two years after the effective date of the new law.

The Capital Projects Advisory Review Board (CPARB) has published Suggested Guidelines for Bidder Responsibility for public agencies and contractors on how to comply with the responsibility laws. It includes suggested language that contractors can include in their subcontracts, and that subcontractors can include in their lower tier subcontracts. To view the entire guidelines, go to CPARB's website and click on Suggested Guidelines for Bidder Responsibility.

The following is the language in CPARB's guidelines:

A. The Contractor shall include the language of this section in each of its first tier subcontracts, and shall require each of its subcontractors to include the same language of this section in each of their subcontracts, adjusting only as necessary the terms used for the contracting parties. Upon request of the Owner, the Contractor shall promptly provide documentation to the Owner demonstrating that the subcontractor meets the subcontractor responsibility criteria below. The requirements of this section apply to all subcontractors regardless of tier.

B. At the time of subcontract execution, the Contractor shall verify that each of its first tier subcontractors meets the following bidder responsibility criteria:

1. Have a current certificate of registration in compliance with chapter 18.27 RCW, which must have been in effect at the time of subcontract bid submittal;

2. Have a current Washington Unified Business Identifier (UBI) number;

3. If applicable, have:
a. Have Industrial Insurance (workers’ compensation) coverage for the subcontractor’s employees working in Washington, as required in Title 51 RCW;

b. A Washington Employment Security Department number, as required in Title 50 RCW;

c. A Washington Department of Revenue state excise tax registration number, as required in Title 82 RCW;

d. An electrical contractor license, if required by Chapter 19.28 RCW;

e. An elevator contractor license, if required by Chapter 70.87 RCW.

4. Not be disqualified from bidding on any public works contract under RCW 39.06.010 or 39.12.065 (3).

Follow-up: If you are a public agency, you might want to check with your contractors and subcontractors about whether they are in compliance. You may also want to do some educational training with your contractors and subcontractors about this requirement. If you are a contractor or subcontractor, review your subcontracts to make sure they are in compliance with the law.

If you need any assistance, or would like me to conduct training on subcontractor responsibility as well as the mandatory and supplemental bidder responsibility criteria, please contact me.

Mike Purdy Announces Retirement

A Career in Public Contracting: In October of 1979, fresh out of MBA school, I began a career in public contracting that now spans more than 30 years – twenty-plus years managing construction and consultant contracts for the City of Seattle, followed by a five year stint as Contracting and Procurement Manager at the Seattle Housing Authority, and for the last four-plus years serving as the Contracts Manager at the University of Washington’s capital projects office.

It has been a rewarding journey and career, and I continue to learn new things everyday.

Retirement: But our lives are more than just careers, and the measure of our days is more than the routines of work. In order to pursue other interests in the second half of my life, I have decided to retire as of February 5, 2010.

Consulting: In my retirement, I plan to stay engaged with public contracting issues and spend more time providing consulting services and training to public agencies and businesses - helping them navigate through the complexities of public contracting.

Blogging: I will also continue to maintain this Public Contracting Blog, providing timely and relevant information to professionals who deal with government contracts.

Writing: I'm also looking forward to spending a significant amount of time writing. There are many ideas I have for books I would like to write that I have dreamed of over the years. Some I have begun writing, while others are only a title or a concept. I hope to bring some of these writing projects to completion and get them published.

Pace of Life: There are seasons in our lives, and this seems like the right time for me to make a change that will bring with it a different pace of life and new challenges. None of us are guaranteed any days, and while I’m still relatively young and healthy, I look forward to re-directing my time and energy into other pursuits.

I look forward to continuing to interact with all of you in the future! Keep in touch!

Qualifications and Price as Selection Criteria

In selecting a consultant, service provider, or contractor (under certain alternative public works contracting methods), both qualifications and price are important evaluation criteria.

It is an art form to determine, on a case-by-case basis, how to weight the points between qualifications and price.

Leaning Toward Qualifications: If the number of points is too heavily weighted toward qualifications, a public agency will get the most qualified firm, but may end up paying more for the service than could be obtained in a more competitively structured solicitation. This would occur, for example, if qualification related criteria was worth 85 points, while price was only worth 15 points.

Leaning Toward Price: On the other hand, if the number of points is too heavily weighted toward price, a company can essentially buy the contract by submitting a low price, even though they may not be the most qualified firm. This would occur, for example, if the points were reversed from the above example, and qualifications were only worth 15 points, but price was worth 85 points.

Factors to Consider: In making decisions on how to most appropriately allocate the weighting of the evaluation criteria, it is important to think about the following:

• What type of service you are attempting to procure.
  
• The local market and who is likely to bid or propose. Are the firms all qualified?
  
• The relative importance of qualifications versus price in meeting your agency's objectives.
• Is the project on a very tight budget?
• Is the agency willing to pay more because of the critical need to obtain the most qualified firm?
  

Qualifications Based Selection: In selecting certain professional services, remember that many government agencies have laws that prohibit the use of price as a selection criterion when selecting architects, engineers, landscape architects, land surveyors, and other licensed professions.

For example, in the State of Washington, chapter 39.80 of the Revised Code of Washington mandates a Qualifications Based Selection (QBS) process for these disciplines without using cost as a selection criterion. Likewise, the federal government's Brooks Act is also a Qualifications Based Selection process where price may not be used as an evaluation criterion.

Price as the Only Criterion: Other than these regulated professions, many laws require that price be either part of the selection criteria or, particularly in the case of goods and supplies and most public works, often the entire basis on which selection is made.

Alternative Public Works Contracting: In the State of Washington, three alternative public works contracting procedures (Design-Build, Job Order Contracting, and General Contractor/Construction Manager (GC/CM)) require selection partially based on qualifications and partially based on price. See chapter 39.10 RCW for more information or contact me.

ARRA Websites

Many public agencies have developed websites dedicated to information on the American Recovery and Reinvestment Act (ARRA). These websites include information on funding received, projects implemented, jobs created, and reporting requirements.

The following are some websites you may want to look at:

• State of Washington (http://www.recovery.wa.gov/)
  
  
• City of Seattle (http://www.seattle.gov/mayor/issues/recovery/)
  
  
• University of Washington (http://www.washington.edu/research/gca/recovery/)
  
  
• King County (http://www.kingcounty.gov/exec/recovery.aspx)
  
  
• State of Oregon (http://www.oregon.gov/recovery/)
  
  
• City of Portland, Oregon (http://www.portlandonline.com/index.cfm?c=49958)
  
  
• State of California (http://www.recovery.ca.gov/)
  
  
• City of Los Angeles (http://recovery.lacity.org/index.htm)
  
  
• State of Nevada (http://www.nv.gov/Recovery/)
  
  
• City of Las Vegas (http://www.lasvegasnevada.gov/information/arra.htm)
  
  
• New York State (http://www.recovery.ny.gov/)
  
  
• New York City (http://www.nyc.gov/html/ops/nycstim/html/home/home.shtml)
  
  
• State of Florida (http://flarecovery.com/documents)
  
  
• State of Texas (http://www.window.state.tx.us/recovery/resources/state.php)
  

More websites later...

Spokane Schools Seeks Approval to Use GC/CM

Spokane Public Schools has submitted an application to the State of Washington's Project Review Committee to use the alternative public works delivery method of General Contractor/Construction Manager (GC/CM) on renovations to Ferris High School, with an estimated construction cost of $77 million.

The Project Review Committee will consider the application at their December 3, 2009 meeting. GC/CM contracting is authorized by chapter 39.10 of the Revised Code of Washington.

To view the application from Spokane Public Schools, click here.

A Dozen Tips for Public Works Specifications

In writing or reviewing specifications for public works projects, here's a quick list of a dozen things to remember:

1. Disputes. Write the specs with potential disputes in mind.
   
   
2. Clarity and Simplicity: Specs should be clear to contractor, public agency, and outside parties.
   
   
3. Say it Once: Address each subject once. Avoid re-writing in the technical specs items covered elsewhere in the contract documents.
   
   
4. Definitions: Use consistently throughout. Identify abbreviations and acronyms.
   
   
5. Make the Contractor Responsible: Assign responsibility to the contractor only, not to subcontractors, installers, or manufacturers. You only have a contract with the contractor.
   
   
6. Avoid Submissions with the Bid: Let the bidders focus on submitting a good bid price, and avoid non-responsive bids when bidders don't submit materials with the bid that shouldn't be part of the bidding process.
   
   
7. Means and Methods: Avoid directing the contractor on how to do the work.
   
   
8. Level of Precision: Avoid unnecessary precision that can result in higher costs.
   
   
9. Verifying Performance: You should be able to verify or check that the contractor met a given specification requirement.
   
   
10. Streamlined Specs vs. Full Sentences: If using streamlined specs, make them clear and include explanatory paragraph that streamlined sentences should be interpreted with the meaning implied. Example of streamlined sentence: "Spread with notched trowel." Example of full sentence: "The contractor shall spread adhesive with a notched trowel."
    
    
11. Use Active Voice: Use active, not passive voice, as it assigns responsibility more clearly.
    
    
12. Avoid Ambiguous Words: Words to avoid include: and/or, any, as appropriate, as a minimum, shall function as intended, etc.

I will be teaching a class on Writing Effective Technical Specifications in Vancouver, Washington on March 3, 2010. Registration will begin sometime in late January or early February for this 5 hour workshop. Cost for early registration: $100. If you are interested in advanced information on the registration, please contact me.