CPARB - Member Issues

 Dan Absher – General Contractor
 “…contractors have a lot of concerns.  I have broken the contractor issues into two categories: Alternative Procurement Issues and General Public Contracting Issues. I believe the legislature intended our Board to focus on Alternative Procurement. As we look at the number of general issues, it should be clear that we cannot possibly engage in meaningful discussions about all those topics within any reasonable timeframe. “

LIST “A” - ALTERNATIVE PROCUREMENT ISSUES 

1

MACC timing on GC/CM Projects

The timing of the setting of the MACC is not consistent among owners and projects. Contractors believe the proper time to set the MACC is when Construction Drawings are complete enough to get firm subcontractor bids (90-100%) complete.

2

Proper Allocation of Risk

Some owners are using GC/CM to improperly shift the risk of escalation, inflation and other market factors to contractors. This is resulting in attempts by public owners to have GC/CM contractors pay for significant portions of public buildings.

3

Opening the Market to Smaller Local Contractors

4

Eligibility Issues

It is important that only owners who are capable of properly managing alternative procurement projects be given the authority to do so. It is also important that the proper projects are selected for alternative procurement for the right reasons.

5

Bonding and Prequalification of Subcontractors

We need to protect the statutory right of the GC/CM to prequalify and bond subcontractors.

6

Study Alternative Procurement methods of the Federal Government and other States

We may learn better ways to procure construction projects by looking at how others do it.

7

Standardizing Specified General Conditions and Reimbursables in GC/CM contracts.

We need to develop a standard best practice for treatment of these overhead items.

8

Early Selection of Mechanical and Electrical Subcontractors on GC/CM Projects

Projects would benefit greatly if the GC/CM were allowed to bring the Mechanical and Electrical contractor on board early to assist during the design phase, as is done in nearly all private projects.

9

Consistency in Selection Processes of Alternative Procurement Projects.

There are a wide range of selection methods employed by owners.

10

Expense and Honorariums on Design/Build Projects

The selection process is too expensive for design-build. Honorariums do not reimburse contractors for actual expenses.

11

Contractor Incentives

Properly applied incentives are a good and valuable tool.

   LIST “B” – GENERAL PUBLIC CONTRACTING ISSUES

1

Notice Provisions in Contracts (Mike M. Johnson Case)

The Mike M. Johnson case inappropriately allows owners to authorize additional work and not pay for it if the contractor slips up on a technical procedural requirement. 

2

Liability for Injuries to Employees on Construction Sites

Stute and other Supreme Court decisions have provided a method for injured employees to circumvent the immunity granted employers under the Workers’ Compensation Act.

3

Proper Allocation of Risk for Escalation and Inflation

4

Protecting and Strengthening the Statute of Repose

The Statute of Repose protects builders, developers, architects and engineers involved in a project’s construction against claims that do not occur within six years after a project’s completion. This statute has led to stability in pricing and availability of liability insurance.

5

General Contractor Liability for Safety Violations of Subcontractors

We need to protect the statutory right of the GC/CM to prequalify and bond subcontractors.

6

General Contractor Liability for Prevailing Wage Deficiencies of Subcontractors

Despite due diligence, General Contractors are held liable for Prevailing Wage deficiencies of its subcontractors even if the subcontractor and its employee conspired to fraudulently avoid paying prevailing wages.

7

General Contractor Liability for labor and materials of Defaulting Subcontractors

Suppliers and workers have statutory payment protection at the expense of the General Contractor. Should owners bear that risk?

8

Address the Expansion of Workers’ Compensation Benefit

The Avundes and Cockle cases have expanded Workers’ Compensation benefits. At the same time employer immunity is becoming obsolete on construction sites. 

9

Develop a Model Procurement Code for the State

Big task, but this would streamline the construction process throughout the state, reducing lawsuits and saving money. The Federal Government has done it, so should Washington state.

10

Mandatory Apprenticeship Quotas

Apprenticeship is the foundation of the construction industry. Quotas and penalties do not create more apprentices. We are on the tip of a workforce shortage, which will result in contractors being improperly penalized for failure to meet apprenticeship quotas.

11

Require Contracting Out for Construction Work

12

Project Labor Agreements

Leave labor agreements to Contractors and Unions. Do not mandate them.

13

Appropriate Fees for Architects and Engineers

14

Repeal the Subcontractor Bid Listing Statute

The computer age has changed the way subcontractor quotes are taken on bid day. Subcontractors can control the timing of and information they include in their bids. It is often not possible to determine which subcontractor is low at bid time because of the amount of exclusions and qualifications in bids.

15

Streamlining and Standardizing the

Environmental Permitting Process

16

Prohibit Public Owners from Contracting with other Public Owners for Construction Work

17

Improving the Small Works Roster Process

18

Developing Proper Standards for Day Labor Limits

19

Owner Abuse of Statutory Retention on Public Contracts

Statutory retention is for the protection of the labor and material suppliers on the project. Owners improperly use it as a tool to secure performance and negotiate final change orders.

 Gerald "Butch" Reifert – Design Industry 

1

Low Bid Contractor Selection

The state currently uses low-bid for most projects.  This often results in inexperienced contractors and is often not in the best interest of the Project. A best value selection process may be better used.  With the new high performance public buildings law (green buildings), having quality contractors is becoming even more important to project success, therefore the low-bid model should not be mandatory. There is interest in looking at a best value model for contractor selection, similar to that used by the federal government. This would allow for past performance, qualifications to perform the work, and other critical factors to be considered along with price. Alternatively, consider other selection options, such as selecting the second lowest bid or true prequalification for contractors

2

Compliance with Qualification Based Selection (QBS) Laws

Some local governments are working on the edge of compliance with state QBS laws for selecting A/E firms. Examples include requesting fees in a “separate envelope” to be opened after the interviews; requesting a “level of effort” in which respondents have to estimate the number of worker hours that would be required to complete the proposed contract. These practices should be investigated and prohibited.

3

Legislative expansion of alternative public works contracting methods

Every year there are many bills introduced in the legislature to expand the alternative public works contracting laws. It would be beneficial if these proposals were referred to CPARB prior to legislative action for an objective review of the issues and merits of the reasons for expansion.

4

Design-Build-Leaseback Procurement

Some local governments are expanding the use of alternative delivery to include methods that do not appear to be authorized. One example is the design-build development of a building that is leased back to the public owner. This is treated as a real estate transaction that skirts the design/construction procurement laws. The CPARB should investigate examples of this practice to determine if it is in compliance with state law.

5

Reauthorization of the Alternative Public Works Procurement Law

Support continuing the alternative public works procurement law so that current projects can be completed and currently authorized agencies can utilize the law. However, it is important to keep its use restricted to larger projects performed by more sophisticated projects and to not expand it to restrict expansion from smaller owners and more simple projects. Any reauthorization should continue tracking data on the projects for future evaluations.

6

Comparable Study of Design-Build

A study of the use of design-build that is comparable to just completed JLARC study of GC/CM.

 Rocky Sharp – Specialty Contractor 

1

Standardize Subcontracts

Sub contracts change from job to job, if there was a standard sub contract that was part of the bid documents the contractor would know up front his risk. 

2

Change Orders

Improve the markup allowed to enable subcontractor to recover cost plus profit. Overhead can be 20% for smaller subcontractors.

3

Contractor Eligibility

Develop a new eligibility form that would not allow CM to insert qualifications that allows them to basically choose who they want.

4

General Conditions

CM to be responsible for general conditions no different than if they were on a DBB project.

5

Project Delay

Allow sub to be compensated for delays that the sub did not cause. Decide on a standard formula for calculating delay costs.

6

Retention

Allow for retention to be released timely. If sub has no issues on project their retention should be released to them.

7

Change Approval

Subs may be directed to work on change order but may not be able to bill for this change for months after they have incurred costs. The sub ends up financing this work.

8

Substantially Complete

This should be after receiving punch list.

 Ed Kommers– Specialty Contractor 

1

Develop Standard subcontract terms and conditions for contracts between GC/CM’s and subcontractors.

Many GC/CM agreements shift unfair risk to subcontractors through a non negotiable bid requirement. Unlike D-B-B, subs have no opportunity to negotiate terms.

1a. Obligate the GC/CM to coordinate work between subcontractors and resolve disputes

Some GC/CM’s require coordination, disputes, scope and scheduling issues to be worked out between subs prior to input from the GC/CM.

1b.Allow subcontractors to recover costs from GC/CM due to delay not caused by subcontractor

Many GC/CM’s only allow additional time or compensation if owner pays. Some delays occur due to poor scheduling by GC or other subs and are not due to Owner decisions.

1c. Allow realistic overhead and profit on change orders

Change clauses often do not recognize the actual costs of change orders, indirect costs or “overhead” of a subcontractor.

1d. Allow realistic and practical lien waivers

Some bond and retainage waivers require sub to waive all additional compensation and claims through date of progress instead of in the amount of the progress payment.

1e. Allow work scope customarily accomplished by subcontractors

Design scope packages to Limit pre purchase of equipment and the break up of mechanical packages. Exclude scope outside of the subs’ normal work and use allowances instead. 

1f. Improve the DRB process to allow representatives selected by the subcontractor and possibly prohibit “informal DRB’s

Subs don’t get to pick DRB members but may have to use the process. Informal DRB’s waste time and money and are not binding and may not even be referred to in the dispute resolution process.

2

Require owners and GC/CM’s response to change order requests within a reasonable period of time.

Many contracts include cumbersome and numerous procedural prerequisites requiring contractors and subs to finance changes. Typically, owners do not have the same requirements to respond, even until substantial completion.

3

Prohibit Incentive Provisions tied to MACC contingency except for schedule milestones and buyout contingency.

GC/CMs may refuse to disburse contingency for its intended uses and keep it to improve their fee.

4

Revise eligibility language and establish scoring criteria or eliminate eligibility all together.

The eligibility language is goofy, vague and encourages GC/CM’s to substitute new language. Scoring should be clear.

5

General Public Works provisions

5a. Revise retainage

Allow retainage to be released or bonded around by subs if wage and trust obligations are met. Prohibit unreasonable use of “schedule of values” to increase retainage.  Retainage statute needs major work.

5b. Provide relief from “Johnson”

Allow extra costs for legitimate changes if Owner is not damaged by lack of notice.

5c. Uniform responsibility criteria

Define specific language to determine bidder responsibility, like DOT/GA

5d. Restrict “Reject all bids” for good cause only

Hey, didn’t we spend all last summer talking about this?

 David D. Johnson – Construction Trades Labor 

1

Responsible Bidder definitions under Design/Bid/Build

While definitions exist for small works and procurement (43.19.1911) and Broader definitions for GC/CM,  no definitive language exists for Design/Bid/Build

2

Bid Shopping (Release of all sub-tier awards)

Current statute only requires announcement of HVAC, Plumbing, and Electrical subcontractors or if the General Contractor will self perform within.  Requirements should be for all first-tier subcontractors to be announced the day of bid opening.

3

Apprenticeship Utilization

Promote apprenticeship utilization by higher education, hospitals, and other state construction projects.  Particularly educational facilities to stay in step with direction of Washington Learns ideology.

4

Turn-key Projects

Transparency in investment of public resources, eliminate process that allows circumventing fair payment of prevailing wages, apprenticeship utilization and tax revenue collection by causing public building to be built, and leased or purchased thereafter, without providing true opportunity for proper wages, conditions, apprentices and lost taxable revenues.

5

Project Labor Agreements (PLAs)

PLAs are a viable tool for public owners to predict the course of their project.  Consider the viability of PLAs in GA Construction Management.

6

Emphasis Local Markets

Discourage outsourcing of public purchases and projects, encourage hiring in-state contractors, labor and materials.

7

Owner/Operator Conditions

Require owner/operator contractors and subcontractors to provide workers compensation insurance  on self and all employees

 Carolyn Crowson – OMWBE 

1

Low Participation of minority firms in public contracting

Lack of genuine outreach and opportunity and inclusion of minority and women owned businesses in public contracting continues to be a problem for ethnic communities and the Washington State economy.   

2

Prime Contractor Planning and Reporting

Without overall subcontractor reporting on outreach strategies, goal setting and participation, it is difficult to plan for and measure the usage of OMWBE certified firms.

3

Prompt Payment of vendors and contractors

Need for a statute revision to require prime contractors to pay subs and suppliers when their work is done, not when the prime’s work is done or when the prime gets paid. Smaller businesses depend on timely payments for cash flow.

4

Right size contracts and subcontracts for small business

Size of contract/subcontracts determines the ability of small business to bid and to be successful.

5

Waive or reduce performance bonds and insurance requirements

For low risk, small subcontracts reduced bonding and insurance makes smaller firms more competitive.

 Olivia Yang – Higher Education 

1

Retain and Expand Authority for Alternative Contracting

Retain authority for WSU and UW past sunset date. 

Expand authority to include regional four year universities

     (WWU, EWU, CWU, TESC)

Include consideration of the following to provided structure transition  for new owners

a) oversight mechanism
b) contracting, coaching or mentoring by more "seasoned" owners
c) standard specifications or spec templates
d) uniform pool of dispute resolution resources

2

Issues for Specific Alternative Contracting

a. specific to GC/CM:

1)      Early selection of major subcontractors during design

2)      Bonding

b.  specific to JOC:

1)      Increase number of contracts per owner, and raise dollar limit per work order

2.a.1) Early selection of major subcontractors during design:

As owners, we believe it would be very helpful to have input of major subcontractors (mech., elec. or others) during design phase, so that the collaboration between designer, contractor and owner can happen before design is developed and bid.

3

Outside of Legislative Recommendation, and  for discussion

a. Different ways of responding to Escalation and Market Conditions

b. When to set the MACC

3.a.  As owners, we would be interested in a best practices discussion, from other owners, and from others, on how to best respond to project impacts during periods of significant cost escalation, and unstable market conditions. We think this discussion may be helpful in informing any discussions directly related to the charge for this board, and in any proposed changes in legislation.

 John Lynch – General Administration 

1

Remove the sunset

Make alternative public works a permanent pert of state statute.

2

Add “Best Value” to APW

Best Value contractor selections would allow the public owner to use qualifications, previous performance, and other factors in addition to price to select construction contractors.

3

Better define APW users

Provide the Legislature a logical and consistent rule for determining which public agencies are allowed to use APW.

4

Allow major sub contractors to participate in GC/CM pre-construction services

Improve mechanical and electrical designs by better value engineering, constructability review, and drawing coordination.

5

Simplify the APW processes

Consider removing public hearings, dollar limits, and other restrictions.

6

Simplify the small works roster and Limited Public Works rules

Using the Small Works Roster should be easier and should save time compared to advertised bidding.

7

Allow alternatives to Payment and Performance Bonds

Payment & performance bonds are expensive and there may be alternatives that provide reasonable protection.

8

Solve the “reject all bids” issue

Establish rules that will reduce the ability for public agencies to reject all contractor bids without good cause.

9

Remove subcontractor listing rules

Existing rules seem to do nothing and can cause bid protests.

10

Remove Trench Excavation price rule for bids

Existing rules seem to do nothing and can cause bid protests.

 Larry Byers – Insurance/Surety Industry 

1

GC/CM Shifting of Risk to Subcontractors

Techniques for shifting greater risk to Sub-contractors and/or not adequately compensating for such risk concern sureties bonding those subcontractors.  These practices make it more difficult for a subcontractor to manage its projects and may strain financial resources, thus increasing the probability of a sub experiencing problems on a job and increasing the chance of a bond claim/loss.

2

GC/CM Subcontractor Selection Standards

Subjective prequalification standards for subcontractors are given greater weight than the ability of the subcontractor to provide a payment and performance bond.  This can reduce competition among subcontractors and eliminate qualified sub-contractors in favor of less qualified contractors.  Vague or imprecise prequalification standards can give the appearance of favoritism or unfair awarding of contracts.

3

Expanding GC/CM to Smaller Projects and Inexperienced Owners.

There have been previous efforts to allow GC/CM on projects below $10 million.  The JLARC study indicates that GC/CM is best suited for “larger complex projects.” 

4

Small Works Roster – Waiving Bonds

SB5249 proposed waiving bonding requirements for contracts under $200,000.  We believe this type of legislation unnecessarily exposes taxpayers to risk of loss from contractors that default on their projects through failure to pay subcontractors and material suppliers and/or failure to build a structure in accordance with the specifications of the contract.  This would also eliminate a very objective and tangible qualification for identifying responsible bidders.  This would open the selection of a contractor based on vague criteria that could be difficult for a bidding contractor to meet.

5

Expanded Use of Job Order Contracts

SBB 5250 proposed to expand the use of job order contracts by the General Administration Department from 2 to 10.  One concern we have in regard to job order contracts is that the amalgamation of numerous small jobs into a single large Job Order Contract may freeze smaller contractors out of the process who lack the capacity to take on large multi-year Job Order Contract commitments.

Gary Ballew – Counties  (of Cities/Counties/Ports) 

1

Expansion of the usage of GC/CM and design/build to all levels of government

RCW 39.10.051 (4) limits the use of alternative procurement methods to Counties with populations greater than 450,000.  This criterion prohibits the use of these procurement tools in 36 of Washington’s 39 Counties.  Allowing smaller public entities (with the necessary capabilities to manage a GC/CM or design build projects) to utilize this procurement tool will expand the available pool of experienced contractors, and provide an enhanced competitive environment throughout the State.

2

Reduction or elimination of limitations based on dollar size

Projects that meet the criteria for being good candidates for GC/CM and design build should be allowed to utilize these construction methods, regardless of size.

3

Removal of the sunset clause for RCW Chapter 39.10.

Design build and GC/CM represent powerful tools for construction of public facilities.  As performance of all levels of government comes under closer scrutiny, the State should seek to expand, not restrict the tools necessary to enhance performance.

 Rodney Eng – Cities   (of Cities/Counties/Ports) 

1

Permanent removal of the sunset clause for RCW Chapter 39.10.

Where GC/CM and design-build have shown to be effective procurement methods for providing high quality products with a high level of cost certainty on complex projects, shouldn’t these procurement methods be made a permanent procurement option?

2

Public bodies authorized to use alternative public works procurement methods.

1.      Design-build and GC/CM are sophisticated procurement methods that need owners with a certain level of skill, experience and understanding of the processes to properly use them.

2.      Not all public bodies should be allowed to use these alternative public works methods, only those with the necessary skills, experience and understanding.

3.      The current size and/or dollar limitations are, at best, only rough methods for defining which owners have the necessary skills, experience and understanding.

4.      Can we develop a more efficient method that allows all public owners with the necessary skills, experience and understanding to utilize alternative public works methods while preventing unqualified public owners from using these processes?

3

Types of projects to use alternative public works methods on.

1.      Not all projects are appropriate for the use of alternative public works methods.

2.      There may be several types of complex projects that are less than $10 million that would benefit from being procured using an alternative public work method.

3.      Should the $10 million threshold be lowered?

4.      Is there a way of refining the definition of the type of “complex” projects that would be appropriate to use alternative public works methods on?

5.      Are design-build and GC/CM different enough that separate criteria should be developed for determining what an “appropriate” project is?  Specifically, if it is determined that dollar thresholds should be retained, should there be different thresholds for design-build and GC/CM?

 Michael Mequet – Ports    (of Cities/Counties/Ports) 

    GC/CM Issues:

1

MEP

Is there a way to bring the electrical & mechanical subs on board for review of documents during the design phase

2

Size of sub package

If a sub package is a high % of the total cost can this package be negotiated rather than competitively bid

3

GC/risk transfer

Stop the prime from transferring GC issues to the sub that the prime is being paid to perform and manage the transfer of risk to subs

4

GC role

Better define GC role during construction

    OTHER: 

5

Other states

What are other states doing in alternative public works contracting

6

Pre-qualifying of primes and subs

The GC/CM rules allow some pre qualifying of subs already, can this be extended to primes

 Wendy Keller – Public Hospital Project Review Board

1

Legislative clarity - for using GC/CM

More specific requirements for & better definition of  how public entities should demonstrate  public benefit like a projects scheduling complexities, operational complexities and a fiscal benefit of using GC/CM or other alternate contracting methods. (Not using the process because the public entity wants to talk with their contractor)

2

Consistent evaluation Criteria  ( of  projects requesting use  of alternate contracting methods )

Prepare some written minimum expectations (for meeting all criteria) for using alternative project delivery methods. Incorporate into legislation requiring a boards / bodies who recommend or approve use of the alternative process to meet these minimum criteria and provide documentation that criteria were met.

3

Minimum Participant Qualifications for Public Entity use of alternative contracting methods.

Public entity should have well developed contract Terms & Conditions which are based on contracts (used by public entities) who completed a project using an alternate contracting method.  Even if project was not successful – lessons learned can be valuable. Public entity should have staff or contracted staff with experience in the process actively working on the project. And, be able to demonstrate & certify their level of project involvement & role prior to authorization to use an alternative process.

4

More Stringent Project Effectiveness Evaluation Requirements

Develop specific criteria for the evaluation of project using alternative contracting methods. Help solve the public benefit question. Require public entities to pay for & complete such evaluation using a qualified evaluator (someone not involved with the project) as a condition of being authorization to use alternative contracting methods.

5

Develop Project Management Training & require participation

Require public entities to have project managers, key staff & decision makers for the project attend at least a basic course before managing a public construction contract (applies especially to alternative contracting methods). Like how/when to set MACC, establish profit levels, use of contingencies etc.

6

Provide Board or Public Authority Training

In addition to creating more specific requirements or criteria for use of alterative processes. Provide training to ensure more consistency in authorizing use of any alternative contracting methods.

7

Address Issues with Subcontracting community

As contract terms, public entity & contractor skills vary – so do how the subcontractors are selected and compensated. There should be a study and some clearer guidelines developed to ensuring fairness and competition which should then be conveyed to all public entities to include within contract documents.

8

Addressing Risk in Contracts for  radical Market Conditions

Applies to all contracting methods. Recommend developing some boilerplate to address more radical changes in market conditions which will balance risk for both contracts and the public entity.

 Dan Vaught – School District Project Review Board 

1

K-12 continue to use alternative contracting options

The K-12 goal is to be able to continue to use alternative contracting options for our capital improvements.

 Representative Kathy Haigh – House of Representatives (D) 

1

Establish Data Collection System that is consistent.

We need to be able to have accountability of construction contracts to make good decisions as we consider expansion of GC/CM

2

Develop specific recommendations to the legislature as we move into session.

The controversy over the next session will be intense since we have not developed data (sec #1) to make this decision the preliminary recommendation will be important.

3

Develop a mission statement with strong consensus by the committee.

A strong mission statement with buy in from the members will give the strength and purpose this committee will need through the next several years.

 Appointment Pending – House of Representatives (R) 

 Senator Phil Rockefeller – Senate (D) 

1

The choice of which method of contracting to use is a key initial decision to be made.

The choice of which method of contracting to use is a key initial decision to be made, assuming that both methods have their place and legitimate role, and the present state law contemplates that both are available.  So what sorts of buffers and safeguards are needed to assure that the non-traditional method is not used when it ought not be used and how can we assure that when invoked there is not only justification, but appropriate use by informed and experienced and properly advised parties on both sides?

 Senator Dave Schmidt – Senate (R)