New Public Works Contract Language Required as of September 1, 2010

For public works contracts entered into as of September 1, 2010 or later, public agencies in the State of Washington must include language addressing the requirements of Engrossed House Bill 2805, approved by the Legislature in the spring. 

More Information About EHB 2805:  This new law imposes new reporting requirements for contractors and subcontractors hiring firms from out of state to provide off-site, prefabricated, project specific, non-standard items for a public works project.  I've written about the details of this new requirement in previous blog entries.

Standard Language Available:  The General Administration Department (GA) has developed language that public agencies may use in their public works contracts.  Click here to go to GA's website for the language (see the link for "Off-Site Prefabricated Language - HB 2805").

Practical Tip:  Make sure you have included appropriate language in your public works contracts addressing the requirements of EHB 2805.

Should Payment and Performance Bonds Cover Sales Tax Amounts?

Public agencies in the State of Washington are required, with limited exceptions, to obtain both a Payment Bond and a Performance Bond for each public works project.  

The Question: 

• Is it required that the dollar amount of these bonds include sales tax that is added to each progress payment paid to the contractor? or 
• Is it acceptable for a contractor to submit the bonds without the sales tax amount? 

A lower dollar amount of the bonds may result in a lower bond premium amount the contractor is required to pay to the surety, and thus a lower cost to the public agency.

 

Current Practices:  From what I've gathered, some public agencies require the sales tax amount be included, while others exclude it from the amount of the bonds.

What is the "Full Contract Price"?  RCW 39.08.030 states that the Payment Bond and Performance Bond must be "in an amount equal to the full contract price agreed to be paid for such work or improvement."  Does the "full contract price" include or exclude sales taxes paid separately by the public agency to the contractor? 

While RCW 39.08.030 does not specifically address sales tax, it states that the "full contract price" is for the "work or improvement" defined in the specifications - which I would interpret to be the physical construction work, and not sales taxes.  Based on this, a public agency could make the argument that the amount of the Payment Bond and Performance Bond does not need to include sales tax.

Payment Bond:  RCW 39.08.010 states that under a Payment Bond the bonding company guaranties that the contractor shall "pay all laborers, mechanics, and subcontractors and material suppliers."  Payment to the State Department of Revenue of sales taxes by the contractor from such amounts paid separately by the public agency to the contractor is not listed as one of the protections of the Payment Bond.  The Department of Revenue is a beneficiary of Retainage withheld by public agencies for unpaid taxes, but is not protected by the Payment Bond.  

Another way to look at this issue is to ask whether the Department of Revenue would be successful in collecting from a bonding company for unpaid sales taxes, if the language of the Payment Bond mirrored the language of RCW 39.08.010 in ensuring payment to "all laborers, mechanics, and subcontractors and material suppliers."  It seems unlikely that the Department of Revenue would be able to make a successful argument with the bonding company that unpaid sales taxes should be paid by the bonding company under the Payment Bond.

Performance Bond:  RCW 39.08.010 states that the purpose of the Performance Bond is for the bonding company to guaranty that the contractor "shall faithfully perform all the provisions of such contract." 

There are two ways to understand this.  First, the "provisions" of the contract can be understood to include all of the provisions of the contract documents for performing the physical work.  Second, you could also understand that requirement to pay sales tax is a "provision" of the contract, and that the amount of the Performance Bond should therefore include sales tax.  However, it seems to me that sales tax is more an issue of whether it is paid than whether it is performed.

Options:  A public agency can take one of at least three positions with respect to the amount of the Payment Bond and Performance Bond:

1. Require that the amount of the bonds include sales tax.  If an agency chooses this approach, the language of the Payment Bond should specify that payment of sales taxes is protected under the Payment Bond.   Likewise, the language of the Performance Bond should specify that payment of sales taxes is considered an issue of faithfully performing all the "provisions" of the contract.  I don't know how bonding companies would respond to requests for this supplemental language in the bonds.  Note that under this option, payment of sales tax would be covered under both the Payment Bond and the Performance Bond.
2. Require that the amount of the Payment Bond includes sales tax, but not the amount of the Performance Bond.  This option recognizes that it is easier to make the argument (through added Payment Bond language) that sales tax is covered under the Payment Bond.  This option also recognizes that it is more difficult to make the argument that the Performance Bond should include payment of taxes. Finally, under this option, coverage of sales tax isn't doubled up under both bonds.
3. Require the amount of both bonds exclude sales tax.  This option recognizes the language of RCW 39.08.010 that does not include sales tax as a protected category for the Payment Bond, and acknowledges that payment of sales tax is not a performance issue for the contract, at least as performance is typically understood.

Consult Your Attorney:  Public agencies have a variety of practices on this issue.  You should consult with your attorneys to help you understand the best option for your agency.  It is important for agencies to think deliberately about their comfort level with each of the options. 

Other States:  Obviously other states have different laws relating to Payment Bonds and Performance Bonds, and I would likewise be very interested in hearing how other states address this issue.

Feedback:  I am very interested in hearing what your practice is and what you ultimately decide to require as the amount of your Payment and Performance Bonds.  Please contact me with with your thoughts and questions.

$52 Million Payment on Minnesota Bridge Collapse

The insurance companies for URS Corp., a major engineering and construction firm, have agreed to pay $52.4 million to settle claims brought against URS for their role in the 2007 collapse of the Interstate 35W bridge in Minneapolis. 

Avoiding Further Litigation:  The payment is not an admission of guilt by URS, but a means to settle the claims brought by families of the 13 people killed in the collapse, and the 145 people injured.  

Design Flaws Not Identified:  URS had been hired by the State of Minnesota to assess the safety of its bridges, but apparently did not identify a design flaw in the Interstate 35W bridge that caused its collapse.

Errors and Omissions Insurance:  Presumably, the payment by URS' insurance companies is coming from a professional liability policy purchased by URS, also know as "errors and omissions" insurance.

More Information:  Click below to read my previous blog entries on the bridge collapse:

• November 17, 2008
• August 6, 2007

Practical Tip:  It is important for public agencies to protect the public interest by requiring designers, such as architects and engineers on public facilities, to carry professional liability insurance to cover errors and omissions that may occur during the design process.  Without the protection of professional liability insurance, a public agency would be faced with responding to, and potentially paying, injury and damage claims that may arise due to design flaws on a project.

New General Conditions Adopted in Washington State

The Washington State Department of General Administration (GA) and the University of Washington (UW) have adopted the first major revisions to General Conditions for Washington State Facility Construction in more than a half dozen years.  The revisions are dated July 1, 2010.

Years in the Making:  The revisions are the result of a multi-year initiative and collaboration between GA and the UW that I participated in before I retired from my position as the Contracts Manager at the UW in February 2010.

Consistency Between Agencies:  The revised General Conditions ensure that both GA and the UW are using the same document.  Other agencies in Washington State also use the General Conditions, while some have modified them.  With the publication of the revised General Conditions, hopefully other agencies who have modeled their General Conditions off of the General Conditions for Washington State Facility Construction will adopt the same changes.

Track Changes Version:  If you would like to view a track changes version of the changes between the July 2004 version and the newly adopted version, please contact me and I will e-mail it to you.

View the Revised General Conditions:  To view the revised General Conditions, visit either of the following two websites (same document on both sites):

• Department of General Administration
• University of Washington

Know Your General Conditions:  Regardless of what General Conditions your agency uses, make sure that appropriate staff in your agency know what is in them and how to use them in managing the project.  Systematic training on the provisions included in General Conditions is a necessary and good exercise that helps public agencies in protecting the interests of the taxpayers.

Training: Marketing the Value of Public Procurement

Marketing the Value of Public Procurement

When:  September 8, 2010 (8:00 a.m. to 4:30 p.m.)

Where:  Tacoma, WA

Registration Deadline:  Tuesday, August 31, 2010

Instructor:  David A. Davis

Cost:

• $150 - NIGP National Member
• $150 - WA State NIGP Chapter Member
• $180 - Non-NIGP Member

Information and Registration:  Click here.

Design-Build Owners Forum in Seattle

The Northwest Region of the Design-Build Institute of America (DBIA) is sponsoring an Owners Forum on Design-Build.

When:  Wednesday, September 22, 2010 (8:00 a.m. to 3:00 p.m.)

Where: Doubletree Arctic Club Hotel - Dome Room (700 Third Avenue, Seattle, Washington)

Key Speakers:

• Rebekah Gladson, Associate Vice Chancellor at UC-Irvine and President of the RG Group
• Mike Purdy, Principal, Michael E. Purdy Associates
• Robynne Parkinson, Law Offices of Robynne Thaxton Parkinson PLLC

Cost:

• Owner ($50)
• DBIA Member Practitioner ($195)
• DBIA Non-Member Practitioner ($295)

Information and Registration:  Click here

CSI Joins ConsensusDOCS

The Construction Specifications Institute (CSI) announced that they have joined with other construction industry associations to be a part of the ConsensusDOCS Coalition.

ConsensusDOCS is a collaborative effort of 28 construction industry associations to develop standard construction contract documents that seek input from various interests and attempts to "incorporate best practices and fairly allocate risk to help reduce costly contingencies and adversarial negotiations."

Click here to read a news release on the subject from the Associated General Contractors that also includes a list of the 28 industry associations.

Why Are Public Works Bids Submitted at the Last Minute?

Why do contractors generally submit their bids to public agencies at the last minute?

Preventing Bid Shopping:  Contractors are receiving bids from subcontractors up until just minutes before the bid submittal deadline.  Subcontractors frequently will not provide their bid amounts to contractors until just before the deadline.  They do this in order to prevent what is known in the industry as "bid shopping" or "bid peddling."  

What is Bid Shopping?  Bid shopping is the practice where a contractor goes to a subcontractor and attempts to get them to beat other subcontractor bid prices they have already received.  Subcontractors do not want their bid shopped or undercut by other bids, and thus they wait until just before the deadline before providing their bid to contractors, making it harder to contractors to shop bids.

Last Minute Bid Preparation:  The practice of bid shopping and late submittal of subcontractor bids doesn't encourage careful development of bid prices by contractors, since they are left with precious few minutes to determine the low subcontractor bids, and whether there are any gaps in the scopes of work that have been bid.  

Bidding Errors:  It is during this last minute frenzied exercise of determining the final bid price that errors can occur.  A contractor who is the low bidder who has an error in their bid may choose to accept the contract award even with the error, or they may ask the public agency to relieve them of liability for their bid by filing a claim of error.

Subcontractors List:  The State of Washington has gone on record to state that bid shopping is against public policy and has adopted RCW 39.30.060 that requires bidders to list with their bid (or within one hour of the bid submittal deadline) the names of subcontractors (or to name themselves) who will perform the electrical, plumbing, and HVAC work.  This law applies for public works projects estimated to cost more than $1 million.

Job: Contract Administration Manager at Port of Seattle

Port of Seattle (Washington)

• Position:  Contract Administration Manager

• Summary of Duties:   Perform, lead, and supervise the public works construction contract functions for major or small contracts, and ensure that all bid and contract documents are prepared and executed in accordance with Port of Seattle policies, federal, state and local laws, regulations and agreements.

• Salary:  $70,473 (minimum) - $88,082 (midpoint) annually

• Closing Date:  Thursday, September 9, 2010 at midnight

• For More Information and to Apply: Port of Seattle website

Contractor Registration for Joint Ventures

Washington State law (RCW 39.04.350) requires that bidders be registered as of the bid submittal deadline, and that a public agency may not award a public works contract to a contractor that was not registered as of the bid submittal deadline (one of many mandatory bidder responsibility criteria).

One Firm Registered:  If a joint venture is the entity submitting a public works bid, the joint venture, which is a separate legal entity, does not necessarily need to be separately registered as a contractor as of the bid submittal deadline.  RCW 18.27.065 states the following:

"A partnership or joint venture shall be deemed registered under this chapter if any one of the general partners or venturers whose name appears in the name under which the partnership or venture does business is registered." 

There are two possible situations that may arise:

1. Venturer Name in JV Entity Name:  If ABC Construction was a registered contractor and submitted a bid as "ABC Construction/XYZ Construction, A Joint Venture," the registration of ABC Construction would be sufficient to for the joint venture to be registered, because the name of ABC Construction is included in the name of the joint venture.  
2. Venturer Name Not in JV Entity Name:  If, however, ABC Construction was a registered contractor and entered into a joint venture with XYZ Construction under the joint venture name of "Alphabet Construction, A Joint Venture," the registration of ABC Construction would not be sufficient to register Alphabet Construction as a contractor.  ABC Construction's name would need to be included in the name of the joint venture, or Alphabet Construction would need to be separately registered as a contractor.

Other States:  Laws in other states may have different requirements regarding the contractor registration status of joint ventures.

Will California Require Holocaust Certification on Bids?

The California Senate recently approved legislation (which must still be reconciled with the Assembly approved bill) that would require firms bidding on California's upcoming $45 billion high-speed rail project to certify, prior to submission of a bid, whether the firm "had any direct involvement in the deportation of any individuals to extermination camps, work camps, concentration camps, prisoner of war camps, or any similar camps during the period from January 1, 1942 through December 31, 1944."

Records and Remedial Actions:  Assembly Bill (AB) 619 would require firms who affirmatively certify such a role to state whether they have any records related to the deportations and whether they have taken any remedial actions concerning the deportations.  Firms, at their option, could provide an explanation of any mitigating circumstances relating to their involvement in the deportations. 

Bidder Disqualification Provision Deleted:  As originally drafted AB 619, before it was amended in the Senate, would have also authorized the High-Speed Rail Authority to disqualify any firm with involvement in such deportations if the firm's certifications raised "significant concerns about that entity's corporate character and responsibility."  This provision would have amounted to a bidder responsibility criterion, and was aimed primarily at the French government owned firm SNCF (Societe Nationale des Chemins de Fer Francais).  According to the bill analysis, SNCF "transported 75,000 Jews from France east to concentration camps."

Other Deleted Provisions:  The original bill, sponsored by Assemblyman Bob Blumenfield, before being amended in the Senate, would have also provided the following:

• Authorized the second or third low bidder to sue the low bidder for making a false certification
• Subjected the firm making a false certification to a civil penalty of $250,000 or twice the amount of the contract for which the bid was submitted
• Authorized the High-Speed Rail Authority to debar a firm making a false certification for three years.

What Agencies and Projects Are Exempt From EHB 2805?

The State of Washington Legislature approved Engrossed House Bill 2805 in the spring of 2010.  It requires that contractors and subcontractors report on the Affidavit of Wages Paid form specific information about off-site, prefabricated, non-standard, project specific items they have purchased from out of state for public works projects in the State of Washington.

Two Exemptions to EHB 2805:  The law has the following two exemptions for public works projects that do not have to comply with the requirements:

• Washington State Department of Transportation (WSDOT) public works projects
• Local transportation public works projects

Local Transportation Public Works Projects: While it is fairly easy to understand and interpret "WSDOT public works projects," I've been asked by a number of people what the phrase "local transportation public works projects" means and what public agencies and projects it applies to.

I've asked a number of questions of people involved with this legislation, including labor unions and organizations, the Department of Labor and Industries, and legislative staff.  I also e-mailed a key senator who was apparently responsible for the "local transportation public works project" exemption being added to the legislation.  No one I talked with had an authoritative or clear sense of the meaning of the phrase "local transportation public works projects."  I've researched the legislative history of the bill and didn't find any clues there either.

Interpretation of "Local" and "Transportation":  Thus, it seems to me that it is best to read and understand the exemption broadly, based on the plain wording of the language.

• Local Agencies:  I would interpret the exemption to refer to any "local" agency, meaning any public agency that is not a state agency, including but not limited to cities, counties, transit agencies, port districts, school districts, etc.

• Transportation:  I would interpret "transportation" to include any public works projects dealing with any form of transportation, including but not limited to roads, streets, bridges, ferry and marina facilities, bus and rail facilities, airports, etc.

The exemption would thus apply to any public works project which included improvements to any form of transportation by a local agency.

To the extent that a public works project includes only a small portion of work related to transportation, case-by-case decisions would need to be made regarding the applicability of the reporting requirements of EHB 2805.

Consult With Your Attorney:  Please keep in mind that this is only my interpretation.  Ultimately, you need to rely on the advice of your attorneys, recognizing that auditors and courts may well have a different interpretation.

Include Language in Bidding and Contract Documents:  As a reminder, public agencies are required to include language in their contracts regarding the reporting requirements. 

More Information on EHB 2805:  For additional information on suggested language and further background on EHB 2805, please refer to my previous blog entries on the subject:

• August 11, 2010 - L&I issues Q&A
• July 27, 2010 - contract language available from State General Administration Department
• May 16, 2010 - basic explanation of the law

Are Bid Protests Good or Bad for the Public's Interests?

In these tight economic times, many public agencies are seeing an increase in the number of bid protests, as contractors compete for work, eager to keep their skilled and loyal workers employed.

Federal Bid Protests Increasing:  At the federal level, the number of bid protests increased considered by the U.S. Government Accountability Office (GAO) has been increasing as noted below:

The Question:  Are bid protests good or bad for the public's interests?

Bid Protests Are Important:  Daniel Gordon, Director of the Office of Federal Procurement Policy, thinks bid protests are important, writing that:

"Bid protests play a central fundamental role in protecting the integrity of the procurement system.  Neglecting, or crippling, an effective protest system will lead to a loss of transparency, and the shared experience of many procurement systems is that when transparency is decreased, corruption and related problems increase."

Bid Protests Should Be Discouraged:  On the other hand, Jacques Gansler, former Deputy Undersecretary of Defense for Acquisition, Technology, and Logistics, notes his concerns for delays as a result of bid protests:

"In the NFL, you get penalized if you protest arbitrarily and capriciously.  No one in the defense world loses anything for protesting.  You can hold up the program for several years, try to get on as a subcontractor, negotiate around it.  We need to think of some disincentives for protesting rather than incentives."

Finding the Balance:  Clearly, both have valid positions that reflect the classical tension in public agencies: the importance of the integrity of the procurement process versus expediency in completing the work.  Both are important values.  

The challenge for those in public procurement and contracting is to balance the business needs of the agency with the requirements for running a procurement system that complies with regulations, protects the public's interests, and inspires confidence in the integrity of the system, while at the same time achieving wise financial and business results for the agency and the taxpayers.

Charging for Bid Protests?  I was recently asked whether a public agency could charge contractors a fee for filing a protest - an effort to discourage protests and ensure no project delays.  While it may be possible to do so, I would discourage implementing such a fee as it undermines what should be an open and transparent process.  

Clarity in Bidding Documents:  Bid protests will occur, especially in tough economic times.  Public agencies can take steps to mitigate against protests by ensuring that the bidding documents and solicitation process are clear and free of ambiguity.  Bidding documents should be developed and reviewed with a mindset that asks the question of how might the documents be the subject of a protest, and whether the documents give one party an advantage over others.

NIGP Offers 3 Classes This Fall

The Washington State Chapter of the National Institute of Governmental Purchasing (NIGP) has announced they will be offering the following three classes this fall:

• Marketing the Value of Public Procurement (September 8, 2010, All Day, Tacoma, WA, Instructor: David A. Davis, Cost: $150 for NIGP or WA State NIGP Chapter Member; $180 for Non-NIGP Member)

• CPPB Prep Class (October 4-5, 2010, All Day, Olympia, WA, Instructor: Edward Pabor, Cost: $360 for NIGP National Member, $360 for WA State NIGP Chapter and National Member; $500 for WA State NIGP Chapter Member Only; $500 for Non-NIGP Member)

• Introduction to Public Procurement (November 8-10, 2010, All Day, Bellevue, WA, Instructor: Robin Rickard, Cost: $570 for NIGP National Member, $570 for WA State NIGP Chapter and National Member; $745 for WA State NIGP Chapter Member Only; $745 for Non-NIGP Member)

Monitoring On-Call Purchase Contracts

Public agencies that competitively bid and award on-call or blanket contracts for purchases of specific items should establish internal control mechanisms to ensure that invoice charges do not exceed the bid prices that were awarded to vendors.

Why Overcharges Occur:  Often, vendors may not have a sophisticated system to enable them to actually provide discounted prices to the public agency who awarded them an on-call contract, or they may invoice the agency for higher amounts, hoping that the agency is not monitoring whether the invoiced prices are consistent with the bid prices included in the contract.  Regardless of the reasons, it is important for public agencies to have systems in place to monitor payments and ensure they are consistent with the contract terms.

Audit Finds Overcharges on Office Supply Contract:  The Washington State Auditor's Office recently concluded a special investigation into whether the Department of General Administration was monitoring payments made under the state's office supply contract to Office Depot.  The auditor sampled a 12 week period in 2009 to test whether Office Depot was charging correctly.  They concluded that during the test period, the state paid more than $306,000 above what the contract terms provided.  The contract has been in place for four years, and the auditor noted that a comprehensive review of the $77 million spent to date would have revealed a significantly higher dollar amount of overcharging.  Click here to read the auditor's report.

Practical Tip:  Whether you have on-call contracts or contracts for specific goods, services, or construction, ensure that you have in place a clear process for reviewing and validating charges against the terms of the contract.  Maintain a separation of duties within your agency between those authorized to order goods or work, those who authorize payment, and those who actually make the payments.

Seattle Shifts Contracting and Purchasing to New Department

The City of Seattle recently adopted an ordinance transferring the contracting and purchasing functions from the Department of Executive Administration to a newly created Department of Finance and Administrative Services (FAS).  

The new mega FAS Department will also include certain other functions previously housed in other city departments.  Functions of the former Fleets and Facilities Department, former Department of Executive Administration, Customer Service Bureau, and former Department of Finance have all been transferred to the new FAS Department.

Ordinance 123361 was approved by the Seattle City Council on July 26, 2010, and signed by Mayor Mike McGinn on July 30, 2010.

The Dilemma of Low Bids and Contractor Performance

The Question:  Are public agencies required to award public works construction projects to the low bidder, even if the low bidder has a history of poor performance or a pattern of filing unjustified change order requests and claims?

While there are some tools available to public agencies to help manage the low bid process, those tools must be managed carefully, and even then it may be difficult to disqualify the low bidder.

Not all agencies are authorized to use all of the following tools.  Check your local and state laws to determine if you can use these tools.  The following is a very quick summary introduction to some of the issues involved.

Pre-Qualification:  Under this process, a public agency only accepts bids from contractors who have already gone through a qualifications-based short listing process.  It is often authorized for agencies with specialized work, such as for electrical work.  In theory, it limits the bidding pool only to qualified contractors.

Bidder Responsibility Criteria:  This process is similar to Pre-Qualification except that the review of the contractor's qualifications occurs after the bid submittal deadline instead of before it.  Criteria must be relevant, fair, defensible, and not overly restrictive of the bidding pool.  In Washington State, supplemental bidder responsibility criteria may be used and are outlined in RCW 39.04.350.

References:  Reference checks with previous owners is often a part of a bidder responsibility analysis.  Owners desiring to use references as a means to disqualify a bidder should proceed with caution.  There are often personality conflicts that may have occurred on a previous project that may impact the comments of a reference.  Public agencies should provide bidders who may be disqualified based on reference checks with the opportunity to provide feedback on the comments received.

Performance Evaluation Program:  If implemented correctly, this can be one of the most effective tools for not awarding contracts to contractors with a consistently poor record of performance.  A performance evaluation program should be included in the bidding and contract documents, with clear and relevant evaluation criteria, an appeal process, and how poor performance evaluation scores will be used in making future award decisions.

Think Strategically:  If your agency is facing specific issues about unqualified contractors being awarded projects, it is best to think strategically about the particulars of your situation as well as what is authorized by your state and local laws.  If you would like assistance in thinking through these issues, or in developing a contractor performance evaluation program, please contact me.

Labor and Industries Issues Q&A on EHB 2805

Engrossed House Bill 2805, which passed the Washington State Legislature in the spring of 2010 requires contractors and subcontractors to report certain information on the Affidavit of Wages Paid form about work that was prefabricated off-site, out of the State of Washington, specifically for a public works project.

Q&A Document Published:  The Department of Labor and Industries on August 11, 2010 issued a Q&A document on the new law.  I was not able to locate L&I's document on their website (having only received it by e-mail), so I have placed a copy of it on my website.  You may view if by clicking here.

What Agencies Are Exempt from EHB 2805?  Many agencies have asked what the new law refers to when it states that it does not apply to "local transportation public works projects."  In L&I's Q&A document, they have characterized the exemption as applying to "local transportation agencies" which is not what EHB 2805 states, and is, I think, misleading.  EHB 2805 refers to types of public works projects that are exempt, and that are conducted by "local" agencies.  It does not refer to "local transportation agencies."  I have contacted a key senator who was apparently influential in the exemption language for "local transportation public works projects" to find out more about the intent and scope of that exemption.  I will share what I find out as soon as I hear more information.

More Information:  I've written about this new law a couple of times previously in my blog:

• May 16, 2010 - basic explanation of the new law
• July 27, 2010 - contract language available from State General Administration Department

Training: Contracting for Services in Washington State

Topic:  Contracting for Services in Washington State

Where and When (10:00 a.m. to 2:30 p.m.) - choose one location:

• Everett (September 14, 2010)
• Renton (September 16, 2010)
• Camas (September 21, 2010)
• Yakima (September 30, 2010)

Cost:  Free

Agenda:  

• What's the difference between purchased services, personal services, and professional services?
• What dollar thresholds apply for selection?
• What laws apply to different types of contracts?
• What advice do consultant give for how a public agency should structure and RFP or RFQ?

Sponsored by:  Washington State Chapter, American Public Works Association, Contract Administration Subcommittee

For more information and to register, click here.

Alabama Official Gets 10 Years in Prison for Accepting Bribes

A former Jefferson County, Alabama elected commissioner was sentenced on July 29, 2010 to ten years in prison for accepting bribes from an engineering company in exchange for awarding, without use of competitive selection processes, more than $11 million in sewer-related professional service contracts to the company, U.S. Infrastructure.

According to the U.S. Department of Justice, Sohan Singh of U.S. Infrastructure "regularly gave White $100 bills in white envelopes.  The amount routinely was $2,000, but ranged from $1,000 to $4,000."

Restitution Ordered:  The federal judge who sentenced Gary White also ordered White "to pay $22,000 in restitution to the Jefferson County Commission and to forfeit $22,000 to the government as proceeds of illegal activity."  Whilte must report to prison on August 30, 2010.

Click here to read the press release from the U.S. Department of Justice.

Question:  Does your public agency have controls in place to prevent abuses such as this, and do you have clear consultant selection procedures that include review of the selection process by more than one individual?  Checks and balances in procurement systems are important tools.

GC/CM Training

I provided training for City of Bellingham (WA) staff on Tuesday, August 10, 2010 on the use of the General Contractor/Construction Manager (GC/CM) project delivery method as authorized by chapter 39.10 RCW.  

The City is hoping to use GC/CM for their Post Point Wastewater Treatment Plant Improvements project.

The following is a detailed outline of the training:

What is GC/CM?

• Authority
• Definition
• Overview of Selection Process
• Philosophy
• Role of Project Review Committee (PRC)
• Public Owners Approved by PRC

Why Should GC/CM Be Used?

When Should GC/CM Be Used?

How Do You Select a GC/CM?

• Do it Early
• Schedule Elements
• 3 Step Process
• Request for Proposals (RFP)
• RFP Evaluation Criteria
• Weighting of RFP Evaluation Criteria
• Price Selection Formulas
• Should a Bid Guaranty Be Required?
• Pre-Proposal Meeting
• Receiving and Reviewing Proposals
• Evaluation Committee
• Notification to Proposers After Review
• Content of Evaluation Form
• Interview Preparation
• Sample Interview Evaluation Criteria
• Interview Evaluation Process
• Notification to Proposers After Interview
• Request for Final Proposals (RFFP)
• RFFP Internal Consistency
• RFFP Summary Matrix of Cost Allocation
• Opening GC/CM's Prices
• Score Sheets

Preconstruction Services

• Partnering
• Pricing Options
• Payment Issues
• Contract Issues
• Sales Tax
• Insurance
• Prevailing Wages

What is the "Total Contract Cost"?

• Fixed Amount for Specified General Conditions
• Percent Fee on the MACC
• Maximum Allowable Construction Cost (MACC)
• Percentage for Risk Contingency
• Negotiated Support Services
• How the MACC Works
• Summary of Contingencies

What Are the Owner's Responsibilities?

• Documents
• Constructability
• Budget
• Staffing
• Disputes
• Responding to Claims
• Reporting to CPARB

How Do You Contract for GC/CM Services?

How is Subcontract Bidding Handled?

• Award of Subcontract Bids
• Bonding
• Claim of Error
• Negotiation of Bid Prices
• 4 Options for Subcontractor Selection
• Self-Performed Work by GC/CM
• Subcontractor Eligibility Criteria
• Subcontractor Responsibility
• Subcontractor's Bill of Rights

Managing Construction

• Key Issues
• Who is Responsible for Trade Damage
• Insurance
• Prevailing Wages

 5 Outstanding Issues

• MACC Negotiation
• Early Subcontract Bidding
• Subcontractor Eligibility
• Allocating and Managing Cost Categories
• Subcontractors and Union Membership

If you are interested in discussing me providing this training for you, please contact me. 

Prevailing Wages May Now Be Included by Reference Only in Bidding and Contract Documents

The Washington State Department of Labor and Industries (L&I) announced on August 9, 2010 that public agencies may now comply with the requirement that prevailing wage rates be included in bidding and contract documents by including L&I's website address for prevailing wage rates.  

Major Policy Shift:  This new policy represents a significant departure in L&I's historical interpretation of RCW 39.12.030 in which they have previously argued the law required including a complete hard copy listing of the prevailing wage rates.  

Easy and Green:  The new interpretation of RCW 39.12.030 will make bidding public works projects easier and greener.  It will have a large impact especially on small projects where the prevailing wage rates were often many times longer than the actual specifications.

What Must Be Included?  In making this additional option available for public agencies, L&I issued the following instructions for what public agencies should include in the bidding and contract documents if they choose to include the URL to L&I's prevailing wage rate pages instead of including a hard copy of the wage rates in the documents.  I have also added my comments to some of the items:

• Date:  Identify the exact wage publication date to use.  This is noted on L&I's website as "Effective Date" which is actually more accurate than "wage publication date."  Wages become effective 30 days after publication by L&I.   Remember that prevailing wages are effective as of the bid submittal deadline.  L&I publishes wages twice a year.
• County:  State the county in which the public works project is located.
• Copy Available for Viewing:  Specify that a copy of the prevailing wage rates is available for viewing at the public agency's office.
• Rates Mailed Upon Request:  Note that the public agency will mail a hard copy of the prevailing wage rates upon request.
• Keep Hard Copy for the File:  Retain a printed version of the applicable prevailing wage rates as part of the records of the public works project.  This is important from both an enforcement and audit perspective.

Options:  The new policy is one option for including prevailing wages in bidding and contract documents.  Public agencies have the option of still including a hard copy of the prevailing wages instead of referencing L&I's URL.

Suggested Language:  If your agency chooses to exercise this new policy option made available by L&I, I've included below some language I wrote that you may want to consider to help you as you implement referencing L&I's website address.  Consult with your appropriate decision makers and attorneys to make sure the language meets your needs.  If you have suggested changes to the language, please contact me.

The State of Washington prevailing wage rates applicable for this public works project, which is located in ________ County, may be found at the following website address of the Department of Labor and Industries:  https://fortress.wa.gov/lni/wagelookup/prvWagelookup.aspx.   Based on the bid submittal deadline for this project, the applicable effective date for prevailing wages for this project is _____________. A copy of the applicable prevailing wage rates are also available for viewing at the office of the Owner, located at _____________________.  Upon request, the Owner will mail a hard copy of the applicable prevailing wages for this project.

Residential Wage Rates: If you believe your public works project is subject to residential prevailing wage rates, be aware of the provisions of RCW 39.12.030.  Regardless of whether you include the full wages or reference L&I's URL, for residential projects you must state that the project is subject to residential wage rates.  Note that if a determination is made later that the project is not subject to residential wages but to commercial construction prevailing wages, the public agency must pay the difference in the wage rates.

 

Early Selection of Mechanical and Electrical Subcontractors on University of Washington GC/CM Project

The University of Washington's Bothell Campus, Phase 3 project appears to be the first one in the state to take advantage of a new state law (Senate Bill 6401) that permits a General Contractor/Construction Manager (GC/CM) to select the mechanical and electrical subcontractors early in the project as partners, in much the same manner as public owners select the GC/CM.

Lease Crutcher Lewis, the GC/CM on the UW's Bothell Phase 3 project, placed the required advertisement for an August 17, 2010 public hearing in the Seattle Daily Journal of Commerce on August 3 and 4, 2010.

For more details about SB 6401, visit my previous blog by clicking here.  

I have also developed an outline of the new law that you can view by clicking here to visit my website.

Design-Build Sustainability Course

Design-Build Sustainability Course

When:  September 16-17, 2010 (8:00 a.m. to 4:00 p.m. on Thursday; 8:00 a.m. to 2:30 p.m. on Friday)

Where:  Seattle, Washington (221 Yale Avenue N., Suite 400, Skanska Building USA)

Cost:  $575 for DBIA members; $875 for non-members

Speaker:  Kevin O'Donnell

Sponsored by:  Design-Build Institute of America

For more information and to register, click here.

Multiple Violations of Bid Laws by Fire District

The Ferry/Okanogan County (WA) Fire Protection District No. 13 was the subject of a recent audit by the Washington State Auditor's Office.  

The audit finding noted multiple areas where the Fire District was out of compliance with basic public works bidding requirements on the construction of a new fire hall, including the following:

• Retainage:  Withheld 10% retainage from the contractor, instead of the 5% maximum permitted by RCW 60.28.011.

• Retainage Release:  Released retainage to the contractor without obtaining approval from the State Department of Revenue that taxes had been paid, as required by RCW 60.28.060.

• Change Orders:  Permitted the contractor to complete work on six change orders before the change orders were approved by the District's board.

• Consultant Selection:  Selected a local contractor to provide "architectural and construction oversight" but did not comply with selection procedures of chapter 39.80 RCW, or actually enter into a contract.  If I understand the facts correctly, I don't think the Fire District was required to comply with the consultant selection procedures of chapter 39.80 RCW.  This law only applies when a public agency selects a firm to perform work that must be performed by licensed or registered architects, engineers, landscape architects, or land surveyors.  Providing construction oversight is not solely the purview of architects, and in fact, the Fire District didn't hire an architect, but a local contractor.  The fact that the District failed to execute a contract for the work is a problem.

Small Works Roster:  In addition, the District did not advertise annually for the district's Small Works Roster, nor post a list of contracts awarded annually under the Small Works Roster, as required by RCW 39.04.200.

Training Needed for District:  The Fire District did not provide a response to the audit findings.  The auditor noted that neither the District staff or Board members had adequate knowledge of state bidding laws, and recommended the District obtain training so they could comply with the requirements.

Webinar: Bulletproof Your Bidding Process: Keys to Minimize Liability

I will be teaching at 1 hour webinar on a variety of public bidding issues.

Subject: Bulletproof Your Bidding Process: Keys to Minimize Liability 

When: August 12, 2010 from 1:00 p.m. to 2:00 p.m. (Eastern Time).

Cost:  $199

Outline of Webinar:  Here are some of the subjects I'll be covering.

• Bid receipt and opening issues
• Managing addenda
• Mandatory pre-bid meetings
• Common bid irregularities
• Difference between material and immaterial irregularities
• Bidder responsibility criteria
• What bidding error can be corrected
• Managing requests for bid withdrawal (claims of error)
• Bid protests

More Information and Registration:  Visit the website of Government Educator, who is sponsoring the webinar.

Questions:  Please contact me if you have any questions about the webinar.

City Fails to Check Federal Debarment Status of Non-Profit Agency

The City of Mount Vernon, Washington was the subject of a recent audit finding by the Washington State Auditor's Office for failing to have adequate internal controls in place to verify that recipients of federal funds were not debarred or suspended from federal contracting.

The failure to check debarment status for any contract of $25,000 or more is one of the most common audit findings against public agencies.  

Mount Vernon received over a half million dollars in Community Development Block Grant funds in 2009, of which almost $60,000 went to a non-profit agency.  The City failed to check whether the non-profit was debarred or suspended under federal regulations.  To read the three page audit finding, click here.

 

Checking the Debarment Status:  The debarment check can be accomplished by either obtaining a written certification that the firm (or in this case, non-profit agency) is not debarred or suspended, or by checking the debarment status on the federal government's debarment website:  http://www.epls.gov.

Tip:  If you receive any federal funds for your agency, remember to read and comply with all of the terms of the grant agreement, which may include provisions besides doing a debarment check. 

New Prevailing Wages Effective September 1, 2010

The Washington State Department of Labor and Industries (L&I) published new prevailing wage rates on August 2, 2010 that will become effective on September 1, 2010.  Click here for L&I's prevailing wage page.

Bid Submittal Deadline:  The prevailing wage rates for a project are those in effect on the bid submittal deadline for the project.  Thus, for any project with a bid submittal deadline of September 1, 2010 or later, the new wage rates will need to be included in the bidding documents, by addendum if necessary.

New L&I Website for Rates:  L&I has also implemented a new system for looking up and printing prevailing wages rates.  Click here for instructions and help about using the new system.  From a quick review of the new system, it appears to be more cumbersome for public agencies who are required to print and include prevailing wages in the bidding documents.  I would be interested in hearing what public agencies think of the new system.

Helpful Links

If you've never looked at the Online Reference page on my website, you might want to see if there are any useful links there that can help you in your work.

The following is the general outline of major categories of the links:

• General Reference
• Laws and Regulations
• Business Reference Searches
• Construction
• Construction Standard Specifications
• Prevailing Wages
• Architectural and Engineering
• Rosters and Blanket Contracts
• Procurement and Contracting
• Risk Management
• Government Agencies
• Public Housing Organizations
• Government Associations
• Training and Conferences
• Contracting and Procurement Jobs

Please contact me if you find any broken links, or if you have any suggestions for other useful links to add to the list.

Retainage Release Update from Dept. of Labor and Industries (WA)

The Washington State Department of Labor and Industries (L&I) currently has a backlog of a little over 60 days from the date they receive a request for retainage release from a public agency until they send their approval.  As of last week, L&I informed me they had a little over 600 Requests for Release that had not been acted upon.

Notification Process of Missing Affidavits:  If there are missing Affidavits of Wages Paid for the contractor or any subcontractors, it may take longer for L&I to respond.  L&I is planning to implement soon a new process on notifying parties of missing Affidavits.  Their plan is as follows:

• They will call the subcontractor with a missing Affidavit as soon as L&I staff are aware it is missing.
• After 30 days, if the Affidavit is still missing, L&I will contact the general or prime contractor to notify them that the subcontractor has not filed the Affidavit.
• After 60 days, L&I will contact the public agency to let them know what Affidavits are still missing.

Streamlining Efforts:  L&I is continuing to evaluate their process to try to streamline the review of Requests for Release.  L&I has recently shifted the task of entering Requests for Release into their database to administrative support staff, instead of the two full time staff who review the Requests.  Thus, Requests for Release are being entered into the database quickly.  L&I is also considering other steps to make the process more timely.

What Can Public Agencies Do?  To help expedite L&I's review, if public agencies write the Affidavit of Wages Paid number on the Request for Release form, that will save L&I time and result in quicker processing of the release letters.

Combined Release Form:  L&I is having discussions with the Department of Revenue and Employment Security Department about moving forward with a combined release form for public agencies to complete.