Monday, April 17, 2017

5 New Public Works Bills Passed by Washington Legislature

As part of preparing for a two day class on Public Works Bidding and Contracting that I recently taught, I noted that the Washington State Legislature recently approved five public works related bills that do the following:
  • Increase the dollar threshold for when a payment/performance bond may be waived
  • Grant subcontractors additional rights to have retainage released early through a retainage bond
  • Add an additional criterion to the list of mandatory bidder responsibility criteria
  • Authorize Public Utility Districts to contract for on-call public works projects
  • Authorize transit agencies (public transportation benefit area authorities) to use Job Order Contracting
Waiver of Payment/Performance Bond:  For public works projects of $35,000 or less, RCW 39.08.010 currently provides that "at the option of the contractor," a public agency "may, in lieu of the bond, retain fifty percent of the contract amount..."  In order to bring Washington law in compliance with federal small works bonding requirements, Senate Bill 5734, which passed both the House and Senate unanimously, addresses the following:
  • Changes
  • Project Amount:  Increases the $35,000 threshold to $150,000.  Unlike the payment/performance bond waiver provision applicable only for Limited Public Works Projects (Small Works Roster projects less than $35,000), this provision in RCW 39.08.010 does not require that the project less than $35,000 be bid through the Small Works Roster process.
  • Retainage Amount:  Decreases the 50% retainage to 10% retainage in order to waive the payment/performance bond.
  • Individual Sureties:  Allows a public agency to accept a payment/performance bond from an individual surety or sureties for projects of $150,000 or less, increased from $100,000.  All other sureties must be from an actual bonding company.
  • Prevailing Wage Priority:  Reiterates the already existing requirement of RCW 60.28.040 (5) that unpaid prevailing wages and benefits are the first place priority in the event of multiple competing claims against the retainage.
  • GC/CM:  Adds that this provision for withholding 10% retainage in lieu of obtaining a payment/performance bond on projects of $150,000 or less also applies to a General Contractor/Construction Manager (GC/CM).  This is a curious provision as all GC/CM projects are more than $150,000 and are multi-million dollar projects.  This addition doesn't appear to accomplish anything.
  • Comments
  • Agency Discretion?  Is a public agency required to accept the 10% retainage in lieu of obtaining the payment/performance bond?  The language of the law (both current and new) suggests that it is up to the contractor to make the request, and that the public agency "may" retain the 10% retainage in lieu of a bond.  It appears to provide the public agency with discretion whether to accept the request.  Consult with your attorney regarding how to interpret this issue.
  • Time Period for Releasing Retainage:  Senate Bill 5734 fails to correct an error in RCW 39.08.010 that states that the retainage is held for 30 days "after the date of final acceptance."  Because a subcontractor, supplier, or worker can file a claim against the retainage up to 45 days following final acceptance, an agency that releases the retainage before 45 days following final acceptance is at risk for paying court ordered claims filed between day 31 and 45 following final acceptance.  If an agency intends to use this waiver of the bond/increase of retainage provision, I recommend not releasing the retainage until a minimum of 45 days following final acceptance.  
  • No State Releases for Projects Less than $35,000:  Public agencies should recognize that for projects of $35,000 or less, the three state agencies (Revenue, Employment Security, and Labor and Industries) will not issue a release even though RCW 39.08.010 suggests they will.  See RCW 60.28.
Subcontractors and Retainage Bonds:  Current law (RCW 60.28.011 (6)) allows a contractor to submit a retainage bond to a public agency in lieu of retainage being withheld.  It also provides that if a contractor has submitted such a bond to a public agency, the contractor must, upon request of a subcontractor, accept a retainage bond from them in lieu of withholding retainage.  House Bill 1538 gives subcontractors additional rights to force a contractor to submit a retainage bond to a public agency:
  • Changes
  • Subcontractor Request:  A subcontractor may request the contractor to submit a retainage bond to the public agency for the portion of the subcontractor's retainage.  Currently, the subcontractor must wait for the contractor to take this action.
  • Subcontractor Pays Bond Premium:  The contractor may withhold the subcontractor's portion of the bond premium.
  • Deadline for Contractor to Submit Bond:  Within 30 days after the subcontractor's request, the contractor must submit the retainage bond to the public agency, unless "the bond is not commercially available, or the subcontractor refuses to pay the subcontractor's portion of the bond premium and to provide the contractor with a like bond."
  • Public Agency Discretion:  The public agency shall accept such a retainage bond that meets its requirements for the content of the bond and from an acceptable bonding company, "unless the public body can demonstrate good cause for refusing to accept it."
Additional Mandatory Bidder Responsibility Criterion:  Senate Bill 5301 adds to the list of mandatory bidder responsibility criteria in RCW 39.04.350 that public agencies must check on and validate prior to awarding any public works project.  The new criterion relates to the contractor's compliance with the state's minimum wage laws.
  • Changes
  • New Responsibility Criterion:  The new mandatory bidder responsibility criterion reads as follows: "Within the three-year period immediately preceding the date of the bid solicitation, not have been determined by a final and binding citation and notice of assessment issued by the department of labor and industries or through a civil judgment entered by a court of limited or general jurisdiction to have willfully violated, as defined in RCW 49.48.082, any provision of chapter 49.46, 49.48, or 49.52 RCW."  This language should be added to bid documents of public agencies in addition to the currently existing mandatory bidder responsibility criteria.  Language for bid documents is included in the Suggested Guidelines for Bidder Responsibility published by the Capital Projects Advisory Review Board (CPARB).  CPARB will need to revise the Guidelines to add this new criterion.
  • Documentation of Compliance:  Documentation to demonstrate a bidder's compliance with this new criterion is also included in SB 5301: "Before award of a public works contract, a bidder shall submit to the contracting agency a signed statement in accordance with RCW 9A.72.085 verifying under penalty of perjury that the bidder is in compliance with the responsible bidder criteria requirement of subsection (1)(g) of this section.  A contracting agency may award a contract in reasonable reliance upon such a sworn statement."  The reference to "subsection (1)(g)" will need to be adapted by public agencies to refer to the section of the bid documents that describes the actual criterion.
  • Comments
  • Standard Sworn Statement:  Rather than have each public agency develop their own sworn statement as required in the new law, hopefully either the State Department of Enterprise Services (DES) or the Municipal Research and Services Center (MRSC) will develop a standard that all agencies can give to the low bidder to complete as part of verifying their compliance with this additional mandatory bidder responsibility criterion.
On-Call Public Works Contracts Authorized for Public Utility Districts:  For the last five years, there has been considerable controversy in the state about whether public agencies may utilize on-call public works contracts that do not have a specific project scope.  The State Auditor's Office has noted that these contracts are not specifically authorized in state law, and they have begun issuing management letters as part of their review process.  Public Utility Districts (PUDs), under the provisions of Senate Bill 5036, are now authorized to bid and contract for on-call public works contracts.  This new law provides a possible framework for other types of public agencies obtaining the important and necessary authorization for on-call public works contracting. The bill passed the Senate unanimously and almost unanimously in the House with only one opposing vote.

Transit Agencies Authorized to Use Job Order Contracting:  House bill 1395, which passed the Senate unanimously and the House with only two opposing votes, adds "every public transportation benefit area authority as defined under RCW 36.57A.010" to the list of agencies and agency types authorized to use Job Order Contracting, one of three alternative public works contracting methods authorized in RCW 39.10.

Effective Date:  As of the most recent information, none of the bills have yet been signed by the governor, but it is anticipated he will sign them.  The new laws will be effective sometime in June or July.  This website may be used to obtain up to date information about the bills.

Mike Purdy in the News:  I was recently interviewed by and quoted in the following publications:
Mike Purdy's Public Contracting Blog
© 2017 by Michael E. Purdy Associates, LLC