Key Factors in Deciding on a Unit Price Book for Job Order Contracting

Job Order Contracting (JOC) has been gaining increasing popularity among public agencies as an efficient project delivery tool for public works construction projects.  In JOC, the contractor agrees to a fixed period, indefinite quantity delivery order contract which provides for the use of negotiated, definite work orders for public works, based on an established unit price book.

Types of unit price books:  There are a number of options available for what unit price book to use and there are companies who help guide public agencies in the establishment and management of Job Order Contracting.

• Agency developed:  Some public agencies develop their own unit price book, often using prices based on historical usage data.

• Off-the-shelf industry:  Other public agencies use an already established unit price good such as the estimating guide published by the company RSMeans.

• Customized: Still other public agencies turn to specialist companies such as RSMeans and The Gordian Group to develop a specific unit price book tailored to the agency's needs and location. On July 21, 2014, The Gordian Group announced that it acquired RSMeans from Reed Construction Data.

Lisa Cooley

Evaluating unit price books:  Lisa Cooley, the Program Director for JOC and Custom Cost Engineering at Reed Construction Data, has written a very thoughtful, thorough, and accessible article entitled "The Best Unit Price Book for Your Job Order Contract" in which she explains some of the factors that should drive a decision on which unit price book to use for a Job Order Contracting program.  Ms. Cooley has also written some other helpful articles on the same website.

JOC in Washington state:  Not all public agencies are authorized to use JOC in Washington state. RCW 39.10.420 lists the agencies or agency types that may use JOC.  Other JOC related laws are found in RCW 39.10.430, RCW 39.10.440, RCW 39.10.450, and RCW 39.10.460.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

More Public Contracting Bills Introduced in Washington Legislature

In addition to the bills I commented on in my previous blog from January 21, 2014, the following additional bills impacting public contracting in the State of Washington have been introduced to the Legislature:

Exempt Proposals from Public Records Disclosure:  A bill (House Bill 2578) introduced to the Washington State Legislature would exempt from public records disclosure the proposals submitted by contractors for alternative public works delivery methods (Design-Build, GC/CM, and Job Order Contracting) and related evaluation documents until after a contract is executed or the selection process is terminated. 

Expand Prevailing Wages to Public-Private Partnerships:  Substitute House Bill 1025S would create a new definition of a "subsidized public works" project and would require that prevailing wages be paid on such projects.  Similar bills have been introduced in past years, but have not been successful.  Adoption of this bill would have the impact of limiting the number of public-private partnership projects constructed.  See my previous blog on legislation introduced in earlier years. 

Expand Apprenticeship Utilization Requirements:  House Bill 2526 would establish penalties for contractors failing to comply with the apprenticeship utilization requirements of RCW 39.04.320 for public works projects of the State Department of Enterprise Services, the State Department of Transportation, institutions of higher education, and all school districts.  The bill would also significantly expand requirements for use of apprentices on all public works projects of the state and all municipalities.  Here is a summary of the provisions of this bill:

• Debarment:  HB 2526 would add to the list of reasons for contractor debarment the failure of the contractor to comply with the apprenticeship utilization percentages required by RCW 39.04.320.

• Bidder Responsibility:  HB 2526 would also add to the list of mandatory bidder responsibility criteria in RCW 39.04.350 the failure of the contractor to meet apprenticeship percentage utilization requirements under RCW 39.04.320.

• State Monitoring of Compliance:  The State Department of Enterprise Services would be required to maintain on its website a list of contractors that failed to meet apprenticeship percentage utilization requirements on public works projects.

• Bid Preference for Contractors with Apprenticeship Programs: HB 2526 would provide a 5% bid preference to be used in bid evaluation for contractors with a registered apprenticeship training program approved by the Department of Labor and Industries for trades to be used on the public works project.

• Expand Apprenticeship Utilization Requirements for all Public Agencies: HB 2526 would require that "the bidder must be a party to an apprenticeship agreement for each trade it is employing that has a registered apprenticeship training program" if the "bidder will employ more than one trade on the public work."  This provision appears to have the impact of requiring apprentice utilization for all municipalities, and not just those agencies named in RCW 39.04.320.

Permit Electronic Public Works Bidding for State Agencies:  Substitute House Bill 1841 would permit state agencies to conduct competitive bidding for public works projects electronically or accept electronic signatures as part of the bidding process.

Permit Fire Districts to Perform Public Works Without Bidding:  House Bill 2266 would permit a fire department or regional fire authority to "use fire service personnel, either employed or volunteer, to perform" public works projects less than $20,000 without obtaining competitive bids.

Mike Purdy's Public Contracting Blog
© 2014 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Free Webcast: Beyond Job Order Contracting

Beyond Job Order Contracting

When:  November 6, 2013 (11:00 a.m. to 12:30 p.m. - Pacific Time) 

Cost:  Free 

Description:  Topics for the webcast include:

• Research into JOC effectiveness
• Big data, little data
• JOC best practices
• Top 10 lessons learned in JOC programs
• JOCWorks for estimating through the project lifecycle
• Validating construction costs
• Getting started 

JOC in Washington State:  In Washington, Job Order Contracting is one of three alternative public works contracting methods authorized by Chapter 39.10 RCW.  Only specific agencies and agency types are authorized to use JOC.

Instructors:

• Lisa Cooley, RS Means
• Marck Harclerode, MARTA
• Mike Brown, 4Clicks Solutions

Information and registration:  Click here.

Mike Purdy's Public Contracting Blog
© 2013 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Subcontractors List Not Required on Alternative Public Works Projects

In Washington state, the Legislature has gone on record declaring that the practice of "bid shopping" is against public policy. 

Bid shopping occurs when a contractor seeks to pressure a subcontractor to lower their price below another price the contractor has already received, since a lower overall price increases the chance of the contractor being the low bidder.

When is the Subcontractors List required?  Due to the different nature of contractor selection and bidding on what are known as alternative public works projects (those not solicited through the traditional or Design-Bid-Build method but through methods authorized in Chapter 39.10 RCW), the subcontractors list requirements of state law do not apply on alternative public works.  

What does state law require?  RCW 39.30.060 requires, for projects estimated to cost $1 million or more, that the prime bidder submit a list of subcontractors (for electrical, plumbing, and HVAC) with the bid (or within an hour of the bid submittal deadline).   Here's the relevant language:

Every invitation to bid on a prime contract that is expected to cost one million dollars or more for the construction, alteration, or repair of any public building or public work of the state or a state agency or municipality as defined under RCW 39.04.010 or an institution of higher education as defined under RCW 28B.10.016 shall require each prime contract bidder to submit as part of the bid, or within one hour after the published bid submittal time, the names of the subcontractors with whom the bidder, if awarded the contract, will subcontract for performance of the work of: HVAC (heating, ventilation, and air conditioning); plumbing as described in chapter 18.106 RCW; and electrical as described in chapter 19.28 RCW, or to name itself for the work."

Design-Build:  Under Design-Build, public agencies do not issue an "invitation to bid" as noted in the subcontractor list law cited above, but issue either a Request for Proposals or a Request for Qualifications, in which the Design-Builder is selected based on qualifications and cost or price related factors. Under legislation approved in 2013 by the Washington State Legislature, price may now be negotiated with the chosen Design-Builder once the design has progressed to a point where the price may be determined.  RCW 39.30.060, the subcontractors list law, was written to address Design-Bid-Build projects.  Under Design-Build, subcontractors are generally not even identified at the time a contractor submits their qualifications to the public agency, making submittal of the subcontractors list not possible.

GC/CM:  Like Design-Build, the GC/CM is not selected based on an "invitation to bid," but through a Request for Proposals process.  When the GC/CM is selected, subcontractors have not been identified as RCW 39.10.380 requires that the GC/CM competitively bid all subcontract work after the construction cost has been negotiated.  The subcontractors list law requires the prime contract bidder to submit the list with their bid, but with the GC/CM process, subcontractors submit bids to the GC/CM after the GC/CM has already been selected and has executed a contract with the public agency.

Job Order Contracting:  RCW 39.10.430 (6) is more explicit than the provisions for Design-Build or GC/CM and states that "the requirements of RCW 39.30.060 [subcontractors list] do not apply to requests for proposals for job order contracts."

Legislative changes:  For clarity, chapter 39.10 should be amended to explicitly exempt Design-Build and GC/CM projects from the requirements of RCW 39.30.060.  They are very different project delivery methods and the requirements for the subcontractors list simply do not apply to these methods of selection.

Mike Purdy's Public Contracting Blog
© 2013 by Michael E. Purdy Associates, LLC
http://PublicContracting.blogspot.com

Training for Public Agencies on Changes to Alternative Public Works Contracting

RCW 39.10 Since Reauthorization:  During the 2013 legislative session, the Washington State Legislature adopted changes to the alternative public works contracting statutes (Design-Build, GC/CM, and Job Order Contracting), and reauthorized these methods for another eight years.

When:  September 17, 2013 (9:00 a.m. to noon)

Where:  Seattle-Tacoma International Airport (The Conference Center, 17801 International Blvd.)

Cost:  Free.  Attendees must pay for parking.

Instructors:

• Bob Maruska, CPARB Chair; Assistant Director of Engineering Design Services, Port of Seattle

• Ed Kommers, CPARB Vice Chair; Executive Director, Mechanical Contractors Association of Western Washington

• Dan Absher, CPARB Member; President, Absher Construction

• Eric Smith, Member and Past Chair Project Review Committee, Director, Capital Projects, University of Washington

Information and registration:  Click here.  Limited to 200 attendees so sign up early.

Questions:  Contact Bob Marsuska at (206) 787-3146 or by email at maruska.b@portseattle.org.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Obtaining Qualified Contractors on Public Construction Projects

Traditionally, public agencies have awarded public construction projects to the low bidder.  In theory, this ensures that the public pays the lowest possible cost for such work.  However, the low bid doesn't always result in the lowest price at the end of the project, nor does it ensure that the low bidder is capable of performing quality work.

Agencies seek more flexibility in award:  In response to concerns about low bidders not performing well and arguing for change orders that will increase the contract cost, public agencies have increasingly been developing alternative methods for awarding public construction projects.  These alternative methods come with their own set of challenges and may actually cost more money, depending on how the selection process is implemented.

Design-Bid-Build:  The following three approaches, based on contractors bidding a fully designed scope of work, are sometimes used by public agencies for ensuring that the contractor selected is qualified to perform the work:

Prequalification:  Under this scenario, contractors must be prequalified and meet certain criteria before being permitted to bid on a project.  Some public agencies are not authorized to prequalify contractors.  For those that are authorized to prequalify contractors, it is important that the criteria used to evaluate qualifications be clear, objective, and not overly restrictive of the bidding pool of contractors.

Bidder Responsibility:   In many cases, bidder responsibility criteria are the same as the prequalification criteria.  The only difference is that all contractors may bid a project rather than just prequalified contractors.  The low bidder must then demonstrate they meet the bidder responsibility criteria.  Prequalification analysis occurs prior to bidding, while bidder responsibility evaluation occurs after bidding, but prior to award.  Like prequalification, bidder responsibility inserts an element of subjectivity into the award process.

Best Value:  A best value selection process moves away from price as the only basis for identifying the successful contractor and instead begins to looks more like a Request for Proposals process, where various evaluation criteria are identified, including price.  Not all public agencies are authorized to conduct a best value selection process, and the process is often criticized for its subjectivity with the result that the public agency may contract with the firm who does not have the lowest bid.

Alternative Project Delivery Methods:  The following two alternative project delivery methods are gaining in popularity with public agencies.  Unlike the models used under a Design-Bid-Build approach, the design is not complete when the contractor is selected under the following two alternative methods:

Construction Manager at Risk:  This process is known by many different names (CM at Risk, CMAR, GC/CM (General Contractor/Construction Manager), and CM/GC (Construction Manager/General Contractor)).  Not all public agencies are authorized to use this process which involves selection of a contractor early in the design process, through a Request for Proposals process, partially based on qualifications and partially based on limited pricing (fee and general conditions work).  The selected contractor then works with the designer in providing various preconstruction services (cost estimating, scheduling, constructability reviews, value engineering, etc.) before the construction cost is negotiated between the parties when the design is sufficiently completed. 

Design-Build:  Under this project delivery method, the public agency uses a Request for Proposals process to select one firm to both design and build the project, eliminating or reducing conflicts between the designer and contractor.  The price is either part of the selection process (which brings with it many of the problems of the traditional low bid award), or the price is negotiated between the partieis when the design is sufficiently complete.  

Indefinite Delivery/Indefinite Quantity:  Also known as IDIQ, this method of public construction is basically an on-call process, in which undefined work is bid ahead of time and one contractor is selected, sometimes based on price alone and sometimes based on price and qualifications.  There are two major forms that IDIQ public construction contracts take:

Job Order Contracting:  Under Job Order Contracting, a contractor is selected partially based on qualifications and partially based on their markup percentage for serving as the general contractor for undefined work that will be assigned as the needs arise.  Establishing the cost of a specific project is typically based on an agreed upon unit price book.  Nevertheless, the contractor and agency must still negotiate the specific cost of work to ensure that units and quantities used in the estimate are appropriate.  Job Order Contracting is sometimes criticized for being more expensive than the traditional low bid process, but it is a more efficient process for ensuring that work is performed in a timely manner.

On-Call Contracting:  On-call construction contracting differs from Job Order Contracting in the selection process in that specific units of work are bid as part of the selection process (rather than relying upon a unit price book).  While the contractor in Job Order Contracting may be required to subcontract out major portions of the work, under on-call contracting, the contractor often performs all or most of the work themselves.  On-Call contracting is an effective tool for minimizing multiple invitations to bid for what are typically smaller dollar amount projects.  

General comments:

• How much are bidder qualifications worth?  In most of the methods described above, there is some level of subjectivity involved in the selection process as a public agency evaluates and scores bidders based on qualifications and experience.  The result is that the low bidder may not end up being the selected bidder, or the price may be negotiated.  

• Maintaining fairness and transparency:  In selecting contractors based on factors other than the low price, it is important that the process established be fair and transparent, and that the qualifications and proposals of contractors be rated as objectively as possible.  The low bid process was originally established to avoid public agencies showing favoritism to certain contractors.  Public agencies are now recognizing that the low bidder isn't always the best option for the public.  But in expanding the scope of selection methodologies, there is the risk of shifting back into an environment of favoritism to certain contractors.  These alternative tools must be managed carefully and thoughtfully.

• Not all agencies authorized to use all methods:  Not all public agencies are authorized to use some of the selection methods outlined here.  State laws differ.  In addition, if there are federal funds involved with a project, public agencies need to work closely with the federal department granting the money to ensure that the selection process complies with federal regulations.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

New Public Procurement Laws Approved in 2013 Legislative Session

The Washington State Legislature has approved the following laws impacting public procurement and contracting:

Alternative public works procedures:   Substitute House Bill 1466 reauthorizes the alternative public works contracting procedures of Design-Build, GC/CM, and Job Order Contracting for another eight years.  There were a number of relatively minor changes to the law that I will blog about later.

No retainage on federally funded transportation projects:  Substitute House Bill 1420 fixes a technical problem from previous legislation that was necessary to comply with U.S. Department of Transportation regulations regarding retainage.  While much of the bill represents an improvement, it does have its flaws as I noted in a previous blog entry.

• State agencies protected under payment bond:  Under SHB 1420, no retainage may be withheld on any project funded in whole or in part with federal transportation funds.  Instead, the protection normally afforded by retainage for subcontractors, suppliers, workers, and three state agencies (Revenue, Employment Security, and Labor and Industries) for taxes and premiums must come from the payment bond instead.

• Notify state of acceptance:  Even though no retainage may be withheld on these projects, the public agency must nevertheless notify the Departments of Revenue, Employment Security, and Labor and Industries of final acceptance for such contracts over $35,000.

• Affidavits prior to final acceptance:  For these federally funded transportation projects, the Affidavits of Wages Paid for the contractor and all subcontractors must be submitted prior to final acceptance by the public agency.

• "Shall" to "must":  There are numerous changes throughout the bill modifying "shall" to "must." 

Evaluating the low bid for purchases before taxes: Under Engrossed Substitute Senate Bill 5110, a local government authorized to impose sales and business and occupation taxes may award a contract for supplies, materials, or equipment to a bidder submitting the lowest bid as calculated before the application of local sales and business and occupation taxes.

Water-Sewer Districts - Payment and Performance Bonds:  Senate Bill 5186 will permit Water-Sewer Districts to require that payment and performance bonds on its public works contracts name the water-sewer district as the protected party (obligee) rather than the state.  Prior to passage of this bill, all payment and performance bonds for a Water-Sewer District were technically required to name the state as the obligee.  Up to this point, only cities and towns have had the ability to have themselves and not the state named as the obligee.  While this bill fixes the problem for Water-Sewer Districts, there are a host of other types of public agencies that, by practice, require payment and performance bonds to name the agency as the obligee, notwithstanding the language of RCW 39.08.030.

School Districts - Bid thresholds:  Engrossed Substituted House Bill 1633 increases thresholds for public bidding and performing public works with school district personnel.  The dollar threshold above which bidding for a public work is required will be increased from $50,000 to $100,000.  The dollar threshold below which a school district may use its own staff to perform a public work is increased from $40,000 to $75,000. 

WSDOT - Use of Job Order Contracting:  Under the provisions of  House Bill 1768, the Washington State Department of Transportation (WSDOT) will be added to the list of public agencies authorized to use Job Order Contracting as described in Chapter 39.10 RCW.  With the passage of the bill, WSDOT will be able to use Job Order Contracting for "the administration of building improvement, replacement, and renovation projects only."

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Upcoming Free Training Events

Estimating for Job Order Contracting:  April 18, 2013 (Noon to 1:30 p.m.), Bellevue City Hall (450 110th Ave NE, Room 1E-108), Free.  Sponsored by the Job Order Contracting Users Group.  Instructor: Rory Woolsey, The Gordian Group.  Space is limited to 80 attendees.  Email mschwab@bellevuewa.gov to register and for more information. 

How To Manage Growth Workshop:  April 9, 2013 (5:30 p.m. to 7:30 p.m.), Shoreline City Hall (17500 Midvale Ave. N.), Free.  Sponsored by US DOT and City of Seattle.  Click here for details.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Job Order Contracting Webinar

Job Order Contracting Webinar 

When:  Tuesday, March 12, 2013 (2:00 p.m. to 3:00 p.m. - Eastern Time)

Where:  Your office and computer

Cost: 

• $99 for AGC members
• $129 for Non AGC members

Content:

• Compare Job Order Contracting (JOC) to other well-known delivery methods
• Describe the pricing structure of JOC, identify strategies for developing a coefficient, and understand the basics of line item estimating
• Discuss the JOC delivery order process, including scoping, proposal preparation, and execution
• Identify current JOC market opportunities and dynamics, including market segments, contract structure, unit price books, consultants, etc.
• Determine skillsets and culture to be a successful JOC contractor.

Lisa Cooley

Instructors:

• Lisa Cooley, Founder, Lisa Cooley Associates

• Perfecto Solis, Vice-President of Airport Development and Engineering, DFW Airport

• Leo Wright, Vice-President of Job Order Contracting Division, F.H. Paschen

Sponsored by:  Associated General Contractors of America (AGC)

Information and registration:  Click here.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Free Training on Job Order Contracting

What is Job Order Contracting? 

• Indefinite quantity delivery order contract:  Job order contract" means a contract in which the contractor agrees to a fixed period, indefinite quantity delivery order contract which provides for the use of negotiated, definitive work orders for public works as defined in RCW 39.04.010. 

• Alternative public works:  Job Order Contracting (JOC) is one of three alternative public works contracting methods authorized by state law (RCW 39.10).

• What agencies may use it?  Only specific public agencies or types of agencies listed in RCW 39.10.420 are authorized to use JOC.

When:  February 27, 2013 (Noon to 1:30 p.m.)

Where:  Bellevue City Hall (Council Chambers, 450 110th Ave NE)

Agenda and Speakers:

• JOC and Prevailing Wages (Bea Hart, Department of Labor and Industries)

• An Auditor's Viewpoint on Implementing and Maintaining a JOC Program (Chris Cortines, State Auditor's Office)
  

Cost: Free

Sponsored by:  Job Order Contracting Users Group

Registration required:  E-mail Mayvis Schwab at MSchwab@bellevuewa.gov.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Legislation Introduced to Extend Alternative Public Works Contracting Methods

Legislation was introduced into the Washington State Legislature last week that would extend the use of GC/CM (General Contractor/Construction Manager), Design-Build, and Job Order Contracting for eight additional years beyond the June 2013 expiration date.  

CPARB leadership:  The companion House Bill 1466 and Senate Bill 5349 were the result of months of work by the Reauthorization Committee of the Capital Projects Advisory Review Board (CPARB).  

Nature of changes:  The changes proposed have broad consensus support by various industry stakeholders, and are generally clarifications and clean-up of the law. For a summary of some of the key changes, click here.

JLARC report:  The state's Joint Legislative Audit and Review Committee (JLARC) had been scheduled to meet on January 23, 2013 to consider and approve a proposed December 5, 2012 final report from staff, but the meeting was cancelled.  JLARC's review is part of the legislative process for reauthorizing RCW 39.10.

Hearing Scheduled:  A hearing has been scheduled on SB 5349 before the Senate Government Operations Committee for Monday, February 4, 2013 at 10:00 a.m.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Report Recommends Reauthorization of Alternative Public Works Contracting Laws

JLARC recommendations:  In a December 5, 2012 proposed final report, the staff of the Washington State Joint Legislative Audit and Review Committee (JLARC) has recommended that the three alternative public works contracting methods of Design-Build, General Contractor/Construction Manager (GC/CM), and Job Order Contracting be reauthorized prior to their termination on June 30, 2013.  JLARC will meet in January to vote on adopting the report.

CPARB recommendations:  JLARC's review of RCW 39.10 (alternative public works contracting) was required by the Legislature and their recommendations will be important for the Legislature in considering reauthorization of RCW 39.10.  In addition, the Capital Projects Advisory Review Board (CPARB) made decisions and voted at their meeting of December 13, 2012 on specific language of the proposed reauthorization legislation.  Click here for a markup draft of the RCW 39.10 that CPARB considered along with a number of specific policy issues identified in the comments.  Not all of the items were approved by CPARB.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

State Auditor's Opinion on On-Call Public Works Contracts

The Washington State Auditor's Office has recently determined that on-call public works contracts are not authorized in state law, and they are advising public agencies to ensure their public works contracting practices are in compliance with contracting statutes.  

Why are on-call public works contracts used?  Many public agencies in the State of Washington (and elsewhere) competitively bid on-call public works contracts to deal with small projects that technically meet the definition of a public work in RCW 39.04.010.  Unit prices for the specific body or bodies of work anticipated during the contract term are bid and a contract is awarded to the lowest bidder based on estimated quantities identified on the bid form.  These on-call public works contracts are used for the following reasons:

• Eliminate very small procurements:  On-call contracts help ensure that necessary work is performed in a timely manner without having to conduct a separate bidding process for each small project.  Sometimes, these projects may be as small as $100 or even less.  Other agencies have fairly high dollar thresholds for when public works projects may be used under an on-call contract.

• When no agency staff available:  On-call contracts provide an efficient mechanism to perform work, especially for small public agencies, that do not have their own personnel to perform the work.

• Amounts above "day labor" limits:  On-call contracts provide a streamlined mechanism to have small public works performed for agencies who have limits on how much work may be performed with their own personnel.

In the course of managing a public agency, there will always be small projects that meet the definition of a public work but that are unanticipated and which must be dealt with quickly to maintain essential services. 
 
The auditor's opinion:  The State Auditor's Office recently has written the following statement regarding on-call public works contracts:

Over the past year or so, our Office has met with the Department of Labor and Industries and Municipal Research [and] Services Center on the topic of On-Call contracts.  Much time, research and discussion have gone into these meetings.  Most On-Call contracts are not being done under the authority of job order contracting.  Therefore, we have concluded:  On-Call contracts are not specifically authorized in state law.   These contracts can result in noncompliance with the public works contracting and prevailing wage statutes.  Since the On-Call contracts are not authorized by state law, we recommend local governments establish policies, procedures and internal controls to ensure their contracting processes are in compliance with public works contracting statutes (RCW Chapter 39.04, 39.06, 39.08 and 60.28) as well as prevailing wage statutes (RCW Chapter 39.12).

What about Job Order Contracting?  The Auditor notes that "most On-Call contracts are not being done under the authority of job order contracting."  There are a couple of issues regarding whether Job Order Contracting is a tool that meets the needs of public agencies who currently bid out on-call public works contracts:

• What agencies may use Job Order Contracting?  Not all public agencies in Washington may use Job Order Contracting.  RCW 39.10.420 identifies and limits the public agencies authorized to use this alternative public works contracting method.

• Is Job Order Contracting suited for very small projects?  Selecting a Job Order Contractor is a more complex process than bidding an on-call public works project, and it requires a level of effort that may not be possible for all agencies to pursue.  In addition, applying the Job Order Contracting process to very small public works projects, where most of the work must be subcontracted, may not be as efficient as an on-call contract that is based on unit prices specifically bid for the work required.

Next steps:  This is a complex problem.  The Auditor's Office has suggested that public agencies may decide to seek changes in state law that would permit the use of on-call public works contracts.  Short of legislative changes, at some point it is likely that the Auditor's Office may begin issuing audit findings against agencies that use on-call public works contracts.  If your agency or agency association has an interest in working on this issue, please contact me and John Carpita at Municipal Research and Services Center (jcarpita@mrsc.org).

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Legislative Committee Recommends Continuation of Alternative Public Works Procedures

The Washington State Joint Legislative Audit and Review Committee (JLARC) issued a preliminary report on September 19, 2012 recommending that the Legislature should reauthorize the use of three alternative public works contracting procedures (Design-Build, GC/CM, and Job Order Contracting) before the existing law in RCW 39.10 expires next year.

JLARC and CPARB:  JLARC's review and report is part of the process required by state law for reauthorizing RCW 39.10.  In addition, the Capital Projects Advisory Review Board (CPARB) has appointed a Reauthorization Committee that is considering various proposals to recommend to CPARB and the Legislature.


Oregon work group:  Oregon has established a Public Construction Contracting Work Group that is evaluating potential changes to their state law regarding CM/GC as a public works project delivery method. CM/CG (Oregon) and GC/CM (Washington) are terms that describe the more generic method known as Construction Manager at Risk.

More information:  Click here to read JLARC's report.   Click here for more information about CPARB's Reauthorization Committee.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

At What Limit Should Agencies Be Required to Obtain Competitive Bids?

Competitive bidding exists to:

• Ensure a public agency gets the lowest price
• Protect contractors from agency favoritism in the award of contracts

Cost of competitive bidding:  But competitive bidding, especially for smaller public works construction projects, is expensive and time-consuming for public agencies, and the required process may at times outweigh the public benefits.  At what dollar amount does it make more sense to not require competitive bidding?  Public agencies answer this question differently. 

Competitive bidding thresholds:  Some agencies have established dollar thresholds below which competitive bidding is not required.  For example:

• Ohio increases no-bid threshold:  Beginning on September 28, 2012, the competitive bidding threshold for construction contracts in Ohio will double, from $25,000 to $50,000.  Local agencies may require formal bidding for an amount less than $50,000, but anything over $50,000 will require competitive bidding.  Click here for more details of Ohio's new law.

• Bid limits vary in Washington state:  Bid limits below which agencies in Washington are not required to obtain competitive bids varies depending on the type of agency. For example, some cities are not required to competitively bid a public works project if the cost is $40,000 or less and only one trade or craft is involved.  If the project involves more than one trade or craft, the threshold is $65,000.  The Municipal Research and Services Center of Washington (MRSC) has developed a chart outlining the bid limits for different types of public agencies.

• On-Call public works contracts:  Some public agencies competitively bid for on-call  construction contracts, sometimes referred to as IDIQ (Indefinite Delivery/Indefinite Quantity) or Job Order Contracting.  Under this broad type of contracting, a contractor is selected based on unit prices that have been competitively bid.  When a specific project need arises, the agency and contractor negotiate a lump sum amount for the project based on the unit prices bid.  This can be a very efficient and expedient process for completing work. Some public agencies may not be authorized under their state law to use this contracting method, or may be required to competitively bid all public works construction projects, regardless of cost.

Balance is required:  In establishing competitive bidding thresholds, lawmakers and policy makers must balance a number of potentially conflicting objectives:

• Efficiency in contracting
• Having work performed to meet deadlines
• Obtaining the lowest price (or a reasonable price)
• Developing bidding documents with detailed plans and specifications
• Prevailing wage requirements
• Preventing favoritism and spreading contracting opportunities to many contractors

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

State Charged with Public Works Procurement Process Reform

Under the terms of legislation approved this year, the Washington State Department of Enterprise Services (DES) will be conducting an ambitious review of the state's current public works procurement processes and will make reform recommendations.  

The state's capital budget bill (ESB 6074 - Section 1022) outlined the charge to DES but allocated only $75,000 to complete the quick turn-around study.

Focus of report:  Because of the limited funding for the study, DES may concentrate some of its focus on state agencies, although the legislation broadly applies to the state's "current public works procurement processes."  The report is required to include historical data on:

• Use of change orders
• Use of Job Order Contracting
• How competitive public works contracts are advertised
• Contract closeout procedures

In addition, DES told the Capital Projects Advisory Review Board (CPARB) on May 10, 2012 that the study may address a number of other topics, including the following:

• Best value procurement
• Use of electronic signatures
• Standardizing bidding thresholds for all agencies
• Prequalification of contractors on Design-Bid-Build projects

Labor union concerns:  The impetus for the study came from the state employees labor union (Washington Federation of State Employees) and the impact that some public works processes are having upon their work.  For example, union representatives expressed concern in testimony to the Legislature that some public works change orders are outside the original scope of work of the project and represent work that state employees, and not contractors, should be performing.

Stakeholder input:  In developing its report and recommendations, DES may consult with the Capital Projects Advisory Review Board (CPARB) for advice and assistance, and will also solicit input from various stakeholders. 

Other concurrent studies:  In addition to the study being conducted by DES, two other organizations are conducting reviews of public works contracting, specifically the alternative public works contracting processes authorized by RCW 39.10:

• Capital Projects Advisory Review Board (CPARB)

• Joint Legislative Audit and Review Committee (JLARC)

Public works legislation in 2013:  It is anticipated that next year the Legislature will be reviewing significant legislation addressing public works procurement and contracting procedures:

• CPARB:  CPARB's intent is to recommend legislation to the Legislature in January 2013.  That legislation will take into account recommendations from JLARC as well as CPARB's Reauthorization Subcommittee.  It is anticipated that the legislation will make recommendations for certain changes to the GC/CM, Design-Build, and Job Order Contracting laws, and will authorize continuation of these alternative methods beyond June 2013, which is when the current law expires. 

• DES:  DES is required to submit its report to the Legislature and Governor by December 15, 2012, and to include draft legislation to implement the recommendations in its report.  This legislation will also presumably be considered by the Legislature in 2013.

Overlap between studies:  All three reviews (DES, CPARB, JLARC) will be examining Job Order Contracting processes and practices.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Project Delivery Methods for Public Construction Projects

Let's take a look at some of the project delivery methods that are sometimes used for public works construction projects. 

Design-Bid-Build:  Traditionally, most public works construction projects are advertised and then awarded to the lowest responsible bidder with a responsive bid.  This is known as the Design-Bid-Build model, where there is a separate designer, the agency then bids the project, and it is awarded to a contractor to build it.  

Rosters:  Sometimes, there are variations to the bidding process.  The project may be publicly advertised or the plans and specifications may be provided to only a limited number of bidders on a roster.  But it's still Design-Bid-Build since bidders are submitting prices for constructing the project based on complete plans and specifications.

Design-Build:  In the Design-Build model, the public agency selects one firm to both design the project and to build it.  Here are some features of Design-Build: 

• Ends the blame game:  Eliminates a traditional source of contention with contractors blaming the designer for faulty design when things go wrong, and the designer blaming the contractor for faulty installation.

• Speed:  Can be a fast process for delivering projects.  

• Requires sophisticated owner:  It is a more complex process and requires a fairly sophisticated public agency to manage not only the selection process, but the actual design and construction portions of the work.   

• Not applicable for all projects:  May not be a good project delivery method if the agency and the end users or the public want to have significant input into the design.

• Selection process:  In some instances, the Design-Builder might be selected based on a combination of qualifications, design, and price, while in others they may be selected only based on qualifications, and then work with the agency during the design process.  At the end of design, the parties would negotiate a contract price.

• Industry resources:  The Design Build Institute of America (DBIA) is an industry association that promotes this method and develops best practices.

Construction Manager at Risk: The Construction Manager at Risk method goes by a variety of different names, including GC/CM (General Contractor/Construction Manager), CM/CM (Construction Manager/General Contractor), CM at Risk, and CMAR.  

• Preconstruction Services:  It is a method in which the agency selects a contractor early in the design process to provide consultant input to the design from a contractor’s viewpoint, and to begin planning the project.

• Qualifications and Price Based Selection:  The selection is based on qualifications and limited pricing, such as the cost of general conditions work and the contractor’s overhead and profit.

• Negotiated Price:  When the design documents reach a certain percentage of completion, the agency and contractor negotiate the construction cost.

•  Subcontractors:  In some jurisdictions, there are requirements that all work be competitively bid or that limits the amount of work the contractor may perform with their own forces, while other agencies don’t have such requirements.

IDIQ (Indefinite Delivery/Indefinite Quantity):  Job Order Contracting is one form of IDIQ and is a means for agencies to obtain the services of a contractor on an on-call or as-needed basis for construction, maintenance, and repair work without advertising each specific project.  Typically, the contractor is selected partially on qualifications and partially based on either unit prices or price markups.  Other forms of IDIQ include advertising for bids from contractors  to perform on-call work in a specific specialty area (such as electrical or carpentry).  Selection is usually based on unit prices.

Public-Private Partnerships: In an era with shrinking public dollars for public improvements, some agencies have successfully tapped into the private sector with creative, “one-off” types of partnerships, in which the private sector contributes financially to the project with the prospect of gaining financially.  Examples might include a toll highway built and operated by the private sector, or low income housing projects that benefits from federal tax credits.

Best Value Procurement:  In Best Value Procurement, a contractor is selected based on a combination of their bid of complete plans and specifications for a construction project, and also based on their qualifications.  Evaluation criteria with maximum points are established for both the bid price as well as specifics about the contractor’s qualifications.  As an example, if the bid amount was only worth 15 points out of a total of 100 points, an agency could end up awarding a project to a firm without the low price because they were rated high on their qualifications.  

No Competition:  Some public agencies have dollar thresholds, below which they are not required to obtain bids for a project, but are free to select any contractor.  

Emergency Project:  Other times, competitive bidding is waived in the event of an emergency situation when there is not sufficient time to advertise and award a project.  Emergencies are usually based on a threat to public safety or health, or a situation which would prevent the agency from performing its essential functions and providing critical services.

Work Performed by Agency Staff:  Some public agencies have dollar thresholds, below which their own internal staff may perform public works projects, and that don't have to be competitively bid to contractors.

Other Project Delivery Methods:  There are a variety of other project delivery methods, some of which are not used as frequently.  These include Multiple Prime Contracts and Integrated Project Delivery.

Regulations and Resources:  In assessing the most appropriate project delivery method to use:

• Regulations:  Review your state and local laws to see what methods your agency is authorized to use.

• Staff:  Assess your staff resources and knowledge and whether you have sufficient ability to engage in some of the more complex project delivery methods.

• Project:  Evaluate what project delivery method will be best for a specific project.

Mike Purdy's Public Contracting Blog 
© 2012 by Michael E. Purdy Associates, LLC 
http://PublicContracting.blogspot.com

Speech on Washington State Legislative Updates - PowerPoint

On April 19, 2012, I spoke at the Pacific Northwest Chapter meeting of CMAA (Construction Management Association of America) on the following Washington State legislation affecting public works contracting:

• 2011:  Update on Reciprocal Bid Preference law (RCW 39.04.380) - approved in 2011

• 2012:  Bills that passed and didn't pass the 2012 legislative session

• 2013:  Potential legislation to be considered in 2013

Presentation Available Online:  Click here to view my PowerPoint presentation.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Blog Correction on Job Order Contracting Legislation

This is a correction to my earlier blog posting of April 2, 2012 regarding the Job Order Contracting bill that was approved by the Legislature.  The final version deleted some of the earlier provisions that had been proposed.  The following is a summary of the actual changes.  I'm sorry for the inaccurate information in my earlier blog posting.

Changes to Job Order Contracting:  Engrossed House Bill 2328 unanimously passed both the Senate and House, and was signed by the Governor on March 29, 2012.

• Authorized Agencies:  Permits the following additional agencies to use Job Order Contracting: regional universities, The Evergreen State College, and Sound Transit as a regional transit authority. 
• Work Order Threshold:  Increases the maximum amount of each work order from $300,000 to $350,000.
• Reporting Year:  Standardize reporting to be based on a July 1st to June 30th year, rather than a contract year basis in order to make aggregation of statewide reports easier.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com

Update on Public Works Legislation in Washington State

In my blog postings of January 16, 2012 and February 1, 2012, I described a number of bills that had been introduced into the Washington State Legislature affecting public works contracting.  Here is an update on the status of the bills (along with a couple of others), only two of which passed the Legislature.

Changes to Job Order Contracting:  Engrossed House Bill 2328 unanimously passed both the Senate and House, and was signed by the Governor on March 29, 2012.

• Authorized Agencies:  Permits the following additional agencies to use Job Order Contracting: regional universities, The Evergreen State College, and Sound Transit as a regional transit authority. 
• Work Order Threshold:  Increases the maximum amount of each work order from $300,000 to $350,000.
• Reporting Year:  Standardize reporting to be based on a July 1st to June 30th year, rather than a contract year basis in order to make aggregation of statewide reports easier.

Filing of Affidavits of Wages Paid by Contractor on Behalf of Subcontractor:  Substitute Senate Bill 6421 was unanimously approved by both the Senate and the House, and is awaiting the Governor's signature.  The bill allows a contractor or subcontractor to file an Affidavit of Wages Paid on behalf of a subcontractor if the subcontractor "has ceased operations or failed to file" the Affidavit as required.  

Increasing Use of Design-Build on WSDOT Projects: Second Substitute Senate Bill 5250 passed the Senate by a vote of 47 to 1.  The House did not vote on the bill.  

Allowing Regional Transit Authorities to Use Job Order Contracting:  House Bill 2369 was not voted on by either the Senate or the House.  

Limiting Prevailing Wage Complaints:  Neither the Senate nor the House voted on Senate Bill 6480. 

Requiring Certified Payrolls on Public Works Projects:  Neither the Senate nor the House voted on Senate Bill 6416.

Evaluation Criteria for Design-Build and GC/CM:  Neither the Senate nor the House voted on House Bill 2327.  

Streamlining Small Public Works Projects:  Neither the Senate nor the House voted on House Bill 1970.  

No Retainage on Federally Funded Transit Projects:  Neither the Senate nor the House voted on Senate Bill 6063.  

Small Works Roster and Small Businesses:  Neither the Senate nor the House voted on Substitute House Bill 1173.   

Subcontractor Selection on GC/CM Projects:  Neither the Senate nor the House voted on House Bill 1971. 

2013 Legislative Session:  I expect that some of these bills will be introduced into the 2013 legislative session.  In addition, there will likely be proposed legislation from the Capital Projects Advisory Review Board (CPARB) that will re-authorize alternative public works contracting (Design-Build, GC/CM, and Job Order Contracting) with some changes.  Without new legislation, these alternative public works contracting methods will expire in June 2013.  A CPARB committee is now evaluating and discussing potential legislative changes.

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com