Mike Purdy's Public Contracting Blog: November 2011

Wednesday, November 30, 2011

Personal Use of Government Credit Cards Prohibited

In a June 2, 2011 informal opinion, the Washington State Attorney General's Office provided its analysis on whether a local government official or employee may use a government issued credit card for personal purchases and then reimburse the agency for the cost.

Summary of Opinion: The Attorney General's opinion summarized its conclusion as follows:

Auditor's Response: The Washington State Auditor's Office has issued the following statement in response to the Attorney General's opinion, noting that they will begin enforcing this provision during 2013 for 2012 year-end audits:

In the News Recently: The Port of Seattle elected commissioners were recently cited in an independent ethics report for having used their port issued credit cards for expenses that were not reimbursable by the port or that were clearly personal expenses. Click here to read my November 1, 2011 blog entry on this subject.

Do You Have a Policy? If your agency issues credit cards to employees:

Do you have clear policies prohibiting use of the cards for personal use?
Do you regularly monitor charges on the credit cards to ensure they are appropriate government expenses?
What are the consequences for failure of employees to use the credit cards appropriately?

Tuesday, November 29, 2011

Washington Revises Prevailing Wage Policy

The Washington State Department of Labor and Industries has revised its policy on "Filing an Affidavit Form 'On Behalf' of Subcontractor."

The new policy, dated November 22, 2011, replaces the policy dated August 17. 2009.

Steps and Conditions for Filing by Contractor: The policy describes the steps that a contractor must take before they may file an "Affidavit of Wages Paid" form on behalf of a subcontractor who has gone out of business, is bankrupt, or has refused to file its own Affidavit. Affidavits must be on file with the public agency awarding a public works project for the contractor and all subcontractors before retainage may be released to the contractor.

What's Different in the Revised Policy? The major change in the revised policy eliminates requiring the contractor to certify that the workers have been paid the prevailing wages by the subcontractor (something that the contractor may have no basis for certifying). Instead, the Assumption of Liability Statement which must accompany a hand filled out Affidavit only keeps the language that the contractor agrees to "accept full liability for any unpaid wages owed" by the subcontractor. There are a few corresponding changes in the policy to address this modification.

Read the Revised Policy: Click here for a copy of the revised policy.

Obtaining an Affidavit for a Missing Contractor: L&I's policy does not address what to do if it is the general or prime contractor who has gone out of business, declared bankruptcy, or refused to file the Affidavit. If you have this situation occur, discuss it with L&I. In the past, prior to any policy by L&I on the contractor filing an Affidavit on behalf of a subcontractor, I have had the bonding company fill out and sign the Affidavit on behalf of the contractor. In my opinion, L&I should expand its policy to provide for the surety to file the Affidavit on behalf of the contractor.

Monday, November 28, 2011

President Obama Signs Bill Eliminating 3% Withholding Tax

On November 21, 2011, President Obama signed a measure that repeals a 2006 law tax withholding law.

The president's action caps years of controversy and delays over the implementation of a law that would have required federal, state, and local agencies to withhold 3% of payments to vendors, contractors, and consultants.

The bill recently passed both the House and Senate with overwhelming bipartisan support.

Sunday, November 20, 2011

A Heart of Thanksgiving

It's easy in the midst of the daily challenges and stresses of life to forget.

It's easy to become consumed by the things we would like to change about ourselves, our finances, our relationships, our nation, and our world.

And so we forget that we have so much to be thankful for. On Thanksgiving Day, we deliberately pause to remember the many good things we have to be thankful for - the things we are grateful for.

I have a good friend who has made it a practice to keep a running list of the things she is thankful for - sometimes little things, sometimes big things. Kimberlee Conway Ireton writes:

It's a good challenge for us to develop a habit and a heart of thanksgiving - not just on November 24, 2011, but on every day of the year. It takes time and a deliberate effort for us to pause each day and remember and give thanks. Being thankful doesn't make our problems disappear, but it does help us keep life in perspective.

Best wishes to you and your loved ones as you gather on Thursday to celebrate the many graces and gifts in your life - all of the things for which you are thankful.

Wednesday, November 16, 2011

Final Vote by Congress Repeals 3% Withholding Tax

The House of Representatives voted on Wednesday, November 16, 2011, to approve the Senate version of the repeal of 2006 withholding tax legislation.

3% Withholding Would Have Been Required: The law would have required all federal, state, and local agencies with expenditures of $100 million or more to withhold 3% of every payment over $10,000 to contractors, consultants, and vendors and send the money to the IRS for payment of income taxes.

Overwhelming Support in Congress: The vote in the House was 422-0. The vote in the Senate on November 10, 2011 was 95-0.

President to Sign Law: The measure now heads to President Obama's desk for his expected signature.

Business and Government Both Pleased: The final votes in Congress are a welcome relief to businesses and public agencies who have lobbied for years to repeal the law before its effective date of January 2013.

Job Opening: Capital Projects Manager

Washington State Department of Social and Health Services (DSHS)

Position: Capital Projects Manager

Location: Olympia, Washington

Closing Date: November 21, 2011 at 5:00 p.m.

Salary: $59,784 to $78,468 annually

Job Summary: As the principal project manager for assigned capital projects, this position provides comprehensive professional project management services for design and construction projects at any of the Department's 20 institutions and state-owned facilities.

For More Information and To Apply: Click here.

Tuesday, November 15, 2011

Continuing Efforts to Increase Use of Minority Businesses on Public Works Projects

It's been more than a dozen years since the voters of the State of Washington approved Initiative 200 that prohibits the use of preferences in government contracting based on ethnicity or gender.

Contractors and Agencies Seeking Solutions: Since the 1998 passage of Initiative 200, many minority and women owned businesses have struggled to obtain work on government contracts - especially during the Great Recession. And many public agencies in the state are wrestling with how to provide opportunities for minority and women owned businesses on public works projects.

Two recent developments illustrate different approaches for increasing the use of women and minority businesses enterprises (WMBE) on public works projects.

City of Seattle's WMBE Inclusion Plan: In late August 2011, the City of Seattle unveiled a new WMBE Inclusion Plan requirement for public works projects exceeding $300,000.

Commitments with the Bid: Bidders must make certain commitments for use of minority and women businesses with their bid. Those commitments are evaluated through a formula to determine whether the bid is responsive or not.

Use of WMBE Expert Required: Bidders must also use an approved "WMBE Expert" who may be an employee of the contractor or a consultant from the list of City approved WMBE Experts.

More Information: For more information on Seattle's new WMBE Inclusion Plan requirements, click on the resources below:

City of Seattle's Description of the WMBE Inclusion Plan
Ahlers and Cressman's September 6, 2011 blog on Seattle's New and Improved WMBE Inclusion Plan
Ahlers and Cressman's November 8, 2011 blog on Deciphering the City of Seattle's WMBE Inclusion Plan

WMBE as an Evaluation Factor on Alternative Public Works Projects: On November 10, 2011, Washington's Capital Projects Advisory Review Board (CPARB) discussed recommendations from its Small Business Task Force.

Small Business Task Force Recommendations: The Task Force recommended making changes to RCW 39.10 by adding required evaluation criteria to be used by public agencies when selecting contractors for either Design-Build or GC/CM (General Contractor/Construction Manager) alternative public works projects. The evaluation criteria would address the contractor's proposal plan for outreach and inclusion of WMBEs on the project, and demonstrate their past history in utilizing WMBEs on public works projects.

Next Steps for CPARB: CPARB was generally supportive of the concept, but charged the Task Force with re-drafting the proposed changes in state law to address issues raised during the discussion. The revised language will be considered by CPARB at its December 8, 2011 meeting. If approved by CPARB, the changes would be recommended to the state legislature for their session that will convene in January 2012.

Update Meeting on Seattle's CSO Reduction Program

Seattle Public Utilities has a $500 million program for reducing combined sewer overflow. Many of the more than 20 capital projects in this program will be contracted through alternative delivery methods, such as GC/CM.

When: November 17, 2011 (5:30 p.m. to 8:30 p.m.)

Where: Seattle, Washington (Rock Salt Restaurant, 1232 Westlake Ave N)

Sponsored by: Pacific Northwest Chapter, Construction Management Association of America

Cost: $45

More Information and Registration: Click here.

Monday, November 14, 2011

Job Opening: Contracting Analyst

Washington State Department of Transportation (WSDOT)

Position: Contracting Analyst (Tolling)

Location: Lacey, Washington

Closing Date: November 30, 2011 at 5:00 p.m.

Salary: $50,304 to $65,976 annually

Job Summary: As a Contracting Analyst in the Procurement and Materials Management Office, this position will provide expert analysis, consultation and technical support to all agency programs ensuring compliance with performance based contracting standards.

For More Information and To Apply: Click here.

Oregon Seminar on Alternative Contracting

Alternative Contracting Methods - Make CM/GC Contracting Work for You

When: November 16, 2011 (7:00 a.m. - 9:30 a.m.)

Where: Portland, Oregon (Buffalo Gap, 6835 SW Macadam Avenue)

Sponsored by: Construction Financial Management Association, Portland Chapter

Cost: Free to members; $40 for non-members

Information and Registration: Click here.

Thursday, November 10, 2011

Senate Repeals 3% Withholding Tax

In a rare and welcome display of non-partisanship, the U.S. Senate voted 95-0 on November 10, 2011 to repeal a 3% withholding tax that was scheduled to go into effect on January 1, 2013.

House to Vote on Revised Bill: The U.S. House of Representatives voted earlier on October 27, 2011 to repeal the withholding tax by a vote of 405-16. But because the Senate added a provision for tax credits for companies who hire unemployed veterans, the revised bill must go back to the House for a final vote before being sent to President Obama, who is expected to sign the measure.

Who Would the Tax Impact: The withholding tax would have required all federal, state, and local governments with expenditures of $100 million or more to withhold 3% from every payment over $10,000 to contractors, consultants, and vendors. Business groups and government agencies both voiced their opposition to the negative financial impact of the law. Some agencies have already begun spending money to change their financial systems to accommodate the requirement.

More Information: For more information, click here for an article from Bloomberg Businessweek.

Wednesday, November 9, 2011

Reminder: Take the Survey on Cost Estimates By November 18

Thank you if you've already completed the survey on how construction cost estimates are developed and made known to contractors!

There are just five questions to the survey.

Fast and Easy: It should take you just a few minutes to complete the survey.

Closing Date: The survey will close at 5:00 p.m. next Friday, November 18, 2011.

Survey Results: I will aggregate the results of the survey and share them on my blog.

Take Survey Now: Please click on the following link to go to the survey: http://www.surveymonkey.com/s/M2W7QKF

Thanks for participating!

The Importance of Managing a Project According to the Contract

One of the keys to a successful project is to manage it according to the terms of the contract. While that may sound like an obvious statement, it doesn't always happen.

Purpose of Contracts: Instead, once the contract is signed, it is often put on the shelf never to be referred to again - unless there are claims and disputes. But the contract and referenced provisions represent the agreement between the parties for performance and payment. It serves as the basis for bidding or negotiation of costs. It allocates the risk between the parties. And it serves as the guide for both parties in making decisions and managing disagreements.

Why Contracts Aren't Enforced: Over the years, I've observed that some public agency project managers are hesitant to enforce contract terms. I think this happens for a couple of reasons:

Knowing the Contract: Project managers sometimes don't manage according to the terms of the contract because they don't have a good understanding of the contract. An agency's legal and procurement/contracting personnel may have developed a strong contract, but if the project manager doesn't know the contract's provisions and the protections it affords the agency, the agency looses a major tool for ensuring a successful project. Public agencies should:

Update: Regularly review and update their standard contracts. This process should involve attorneys, procurement/contracting personnel, and project managers - those who will be responsible for actually managing projects based on the contract provisions.

Train: Establish a regular and systematic training program for those who interact with contractors, consultants, and vendors to ensure they fully understand the terms of the standard contract.

Managing according to the contract is an important part of managing the project. They go hand in hand.

Keeping the Relationship Professional: Project managers are sometimes hesitant to enforce contractual terms because of their desire to maintain an effective working relationship with the contractor. There is a misguided concern that an adversarial relationship will be created with the contractor if the agency enforces the terms of the contract. So a project manager may not review pay requests before approval, may approve payments that are inconsistent with the rates or terms of the contract, may not require documentation of proposed change order costs, may accept change order costs without review and negotiation, or may approve work that doesn't meet the standards described in the contract.

The following are some of the consequences of not managing according to the contract:

Cost: The agency may pay more than what was bid, or more than what is authorized by the contract.

Performance: The contractor's performance may not be consistent with the agency's needs as described in the contract.

Risk: The allocation of risk between the contractor and the agency may be shifted by decisions made outside of the contract - something that undermines the integrity of the competitive bidding process and ultimately affects costs to an agency.

Audits: The agency may receive audit findings for not managing the project according to the contract, and not controlling costs.

Risks of Shifting Allegiances: Establishing a cooperative working relationship with the contractor is important. But the nature of the relationship is that it should be based on business and contractual terms, not personal or professional friendship. When public employees begin to shift their allegiance from their agency and the mandates of the contract to the contractor because of a desire to be friends with the contractor, or a hesitancy to confront business disagreements - a dangerous line is crossed.

Working for a public agency is different than working for a private business. As steward's of the public's money, public employees have a higher standard for ensuring that the terms of the contract are met.

Cooperation and Compliance: It is possible to both cooperate with the contractor and ensure that the terms of the contract are met. But it takes an understanding of the contract, an understanding of the proper role of the project manager, and a willingness to agreeably disagree with the contractor in order to protect the public's interests.

Tuesday, November 8, 2011

Felony Charges and Arrest Warrant Against Former Seattle School District Employee

Silas Potter, the former manager of the Seattle School District's small business program, was charged with nine counts of felony theft by the King County Prosecutor on October 25, 2011.

Arrest Warrant Issued: An arrest warrant was issued on Tuesday, November 8, 2011 when Potter failed to show up in court to plead guilty or not guilty.

Contracting Scandal: Potter, who has since moved to Florida, but may have fled from there, awarded $1.8 million in questionable contracts that were uncovered by the State Auditor's Office. The fallout from the scandal resulted in the school board firing the superintendent and chief financial officer in March.

2 Others Charged: Two others who were part of Potter's scheme to bilk the district out of $250,000 were also charged. They were not school district employees.

More Information:

Seattle Times article, October 25, 2011

Contracting Scandal and Fraud Rocks Seattle School District, February 27, 2011 blog

Contracting Scandal Fallout: Seattle Fires Schools Superintendent, March 2, 2011 blog

Checks and Balances: Public agencies need to ensure they have sufficient internal checks and balances in place, not only in their policies, but in practice, to ensure that public contracting is conducted in a fair, transparent, and honest manner. Supervisors and managers who are responsible for approving awards and contracts should actually read what they are approving, and be actively engaged in understanding their operations.

Monday, November 7, 2011

Pennsylvania Increases Bid Limit Threshold

Pennsylvania recently approved legislation that will increase the bid limit for purchases made by townships from $10,000 to $18,500, effective January 1, 2012.

Efficiency in Purchasing: The legislation is seen as an efficiency measure to make it easier for townships to solicit and obtain services for smaller dollar value contracts without as much administrative effort.

Summary of Requirements: Here's a summary of its impact on dollar thresholds of purchases:

Less than $10,000: Not subject to the state's advertising requirements

Between $10,000 and $18,500: Telephone quotes required

Over $18,500: Advertising required

More Information: Click here to read an article from the Norristown Patch.

Sunday, November 6, 2011

Washington State Seeks to Streamline Procurement

The Washington State Department of Enterprise Services (DES) has been charged by the State Legislature with developing recommendations for changes in how it procures goods and services.

Legislation Directing Streamlining: Here's what Section 105 of ESSB 5931, approved this year, directed DES to do:

Recommendations Developed by DES: After reviewing the various sources mentioned in the legislation, DES has developed a number of recommendations. Those recommendations will be sent to the governor by the end of the year.

DES Seeks Opinions in Online Survey: DES is now seeking input on the recommendations by conducting an online survey, seeking input from state and local agencies, public and private sector stakeholders.

Survey Closes November 10, 2011: The survey, which closes on Thursday, November 10, 2011, can be accessed at the following link: http://www.surveymonkey.com/s/85MQW6H.

Wednesday, November 2, 2011

Turning a Good Contract into a Good Project

I spoke this afternoon in downtown Seattle at a seminar entitled "Public Works Contracting: How to Get the Best Value from a Weak Economy."

It was sponsored by the law firm of Foster Pepper PLLC and was attended by almost 50 people from government agencies across the state (plus another more than 30 by webinar).

My topic was "Project Management: Turning a Good Contract into a Good Project." Here's an outline of my speech:

4 Foundations for a Good Contract

Work with the Designer
Pick the Right Delivery Method
Tune-up Your Bidding and Contract Documents
Allocate and Manage Risk

5 Foundations for a Good Project

Pick the Right Contractor
Evaluate if a Bid is Too Low
Manage the Contract and Project
Negotiate Change Orders
Document for Audits

Other Topics and Speakers: Here are the other topics and speakers:

Low Price - Good Value? Establishing Bidder Responsibility and Performance Capacity (Steve DiJulio)

When Low Price is Not Enough - Utilizing Alternative Procurement Methods (Greg Guedel)

The View from the Other Side - Contractor Perspectives on Facilitating Project Success (Tom Peterson)

Tuesday, November 1, 2011

Port of Seattle Cited for Improper Use of Agency Credit Cards

According to an independent ethics investigator hired by the Port of Seattle, all five elected port commissioners improperly charged personal expenses to a Port issued credit card. Eventually, they each paid the Port back, although some of their payments were delayed by months.

Apparently, the commissioners were not clear about whether their charges were reimbursable as part of the commission duties. Most of the items charged were for food, drink, and travel they thought were related to Port business but that were deemed improper.

More Information: Click here to read a November 1, 2011 Seattle Times article on the subject. Also note the citizen comments on the article.

Lessons Learned:

Clear Policies: Have clear policies related to what are reimbursable expenses for elected officials and public employees, and what may be charged to government issued credit cards.

Ask Questions: If you have been issued a government credit card and are unclear about what it may be used for, ask for clarification.

Monitor Credit Cards: If you have agency credit cards, make sure that someone is monitoring their use to ensure that all charges are appropriate and for official business.

Training: All public agencies, including elected officials and employees, should attend required ethics training on an annual basis. It is critical that public agencies be made aware of and be sensitized to a variety of ethical issues related to their work. The state of North Carolina requires this type of training.

Minority Business of the Year Awards

The University of Washington's Business and Economic Development Center (BEDC), part of the Foster School of Business, will hold their 2011 Annual Minority Business of the Year Awards dinner in December.

When: Thursday, December 8, 2011 (5:30 p.m. to 9:00 p.m.)

Scott Armstrong

Where: Seattle, Washington (Sheraton Seattle Hotel, 1400 6th Avenue)

Cost: $100 per individual

Keynote Speaker: Scott Armstrong, CEO of Group Health Cooperative

Information and Registration: Click here.

Mike Purdy's Public Contracting Blog

http://PublicContracting.blogspot.com

Wednesday, November 30, 2011

Tuesday, November 29, 2011

Monday, November 28, 2011

Sunday, November 20, 2011

Wednesday, November 16, 2011

Tuesday, November 15, 2011

Monday, November 14, 2011

Thursday, November 10, 2011

Wednesday, November 9, 2011

Tuesday, November 8, 2011

Monday, November 7, 2011

Sunday, November 6, 2011

Wednesday, November 2, 2011

Tuesday, November 1, 2011

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