Tuesday, April 26, 2011

Ohio Considers Allowing Alternatives to "Multiple Prime Contracting"

Ohio is one of just a few states that require significant use of "multiple prime contracting," but that may be about to change. Governor John Kasich has proposed loosening the requirement in his new budget.

About Multiple Prime Contracting: Under multiple prime contracting, an public agency divides up a project between multiple contractors, each hired as a separate prime contractor, instead of a single general contractor as the only prime, who then subcontracts for specialized portions of the work. For example, a public agency might hire electrical, plumbing, HVAC, and building construction contractors individually to work on their own portions of a project instead of one general contractor to hire, coordinate, and oversee all the contractors for the project.

Potential Advantages of Multiple Prime Contracting:
  • Less overhead: Without a general contractor, a layer of overhead and profit is eliminated.
  • Smaller pieces of work: The public agency may choose to divide up the work into smaller packages and solicit more bids, opening up the process to more small businesses and potentially lowering costs through decreased competition.
Potential Drawbacks of Multiple Prime Contracting:
  • No Single Point of Contact and Responsibility: Since no single contractor takes responsibility for the project as a whole, the public agency may be on the hook for cost overruns, schedule delays, or oversights that result from coordination between trades or are not attributable to any one contractor.
  • Less Communication: If a multiple prime project is not managed with care and skill, problems and conflicts can arise due to lack of coordination or communication between contractors each working on a small piece of the whole project.
  • Increased Owner Overhead: To support multiple prime contracting, the public agency must maintain systems to support increased estimating, bidding, administration, and management associated with using several contractors for each project. 
Ohio's Experience:  2010 saw the introduction of a pilot program that designated three projects as "Construction Reform Demonstration Projects," which allowed them to use an alternative delivery method (besides the usual multiple prime requirement). Governor Kasich is now seeking to implement the program throughout the state as part of his proposed budget. The measure is currently in committee, but if the measure removing the multiple prime requirement is passed it is sure to have far-reaching implications for Ohio.

More Information:
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC 

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