Rebuilding Ohio s Public Construction Law: Construction Reform in House Bill 153

Transcription

1 Rebuilding Ohio s Public Construction Law: Construction Reform in House Bill 153 October 2011 E. Rod Davisson, Esq., Schottenstein Zox & Dunn Co., LPA 250 West Street Columbus, Ohio [email protected]

2 BIDDING AND PREVAILING WAGE CHANGES

3 MUNICIPAL BIDDING THRESHOLDS Entity Statute Old Threshold New Threshold Village/No Administrator $ 25, $ 50, Village with Administrator $ 25, $ 25, City $ 25, $ 25,

4 PREVAILING WAGE THRESHOLDS Construction Type Old Threshold New 9/29/2011 9/29/2012 9/29/2013 Adjusted New Vertical $ 78, $ 125, $ 200, $ 250, Reconstruction Vertical $ 23, $ 38, $ 60, $ 75, New Horizontal $ 78, $ 78,258.00?? 1/1/2012 Reconstruction Horizontal $ 23, $ 23,447.00?? 1/1/2012 4

5 PREVAILING WAGE Horizontal Construction is Any new construction of a public improvement that involves roads, streets, alleys, sewers, ditches, and other works connected to road or bridge construction When estimating the cost of the improvement for the purpose of determining whether or not it meets the prevailing wage threshold, you must use prevailing wages to calculate the estimate. (No change in existing law). 5

6 NEW CONTRACTING POWERS

7 CODE OF HAMMURABI 1700 BCE If a builder build a house for some one and complete it, he shall give him a fee of two shekels in money for each sar of surface. (800 ft 2 for $10.00) Surgery = 10 shekels ($50.00) If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death. If it kill the son of the owner the son of that builder shall be put to death. Byron s Multiplicative Property of Halfwittedness ½ + ½ = 1 NO ½ x ½ = ¼ YES 7

8 ORC MULTIPRIME (OLD METHOD) Rule in Ohio for more than 100 years Only four states still require (PA, ND, IL, NY) RC Municipal corporation authorized to contract for construction and required to take bids shall require separate and distinct bids for the following classes of work: (1) Plumbing and gas fitting; (2) Steam and hot-water heating, ventilating apparatus, and steampower plant; (3) Electrical equipment. By default creates, at least, a fourth contract with General Trades $5000 minimum Clerk of the Works, Limited Coordination 8

9 COORDINATION AND BIM 9

10 MULTI PRIME (OLD METHOD) Report of the Ohio Construction Reform Panel,

11 TRADITIONAL DESIGN-BID-BUILD Advantages well tested common usage reduced markup clear roles design completed before construction linear approach Disadvantages Cumbersome time consuming multiple responsibility flow-through liability claims process 11

12 NEW POWERS New ORC eliminates the requirement that multiple-prime contracting be used for public improvements, except for Ohio Turnpike Commission Projects. Public authorities will be able to enter into contracts with: Design-Build firms ( D/B firms ); Construction Managers at risk ( CMAR ); and General Contractors. 12

13 DELIVERY TIMELINE Report of the Ohio Construction Reform Panel,

14 DESIGN BUILD

15 DESIGN-BUILD Report of the Ohio Construction Reform Panel,

16 DESIGN-BUILD Greater Cincinnati Plumbing Contractors Association et al. vs. City of Blue Ash, 106 Ohio App. 3d 608 (1995) Upheld use of design-build process Design-build bidding process was a proper exercise of local self-government (Home-rule) power Process followed consistent with Charter Process followed constituted competitive bidding 16

17 DESIGN-BUILD THRESHOLD RC The selection process does not apply if: Fees expected to be less than $50,000 and: Must select from RC list of SOQ s within last year; AND Negotiate using rules of RC Emergency exception 17

18 DESIGN-BUILD: CRITERIA ARCHITECTS/ ENGINEERS RC [RC (I)]"Criteria architect or engineer" means the architect or engineer retained by a public authority to prepare conceptual plans and specifications, to assist the public authority in connection with the establishment of the design criteria for a design-build project, and, if requested by the public authority, to serve as the representative of the public authority and provide, during the design-build project, other design and construction administration services on behalf of the public authority, including but not limited to, confirming that the design prepared by the design-build firm reflects the original design intent established in the design criteria package. Owner shall use criteria A/E Can contract with them through RC Can use employee but must notify DAS CA can not work on project 18

19 DESIGN-BUILD CONTRACTING RC RC (D)(1)(b) Describes qualifications of DB technical training, education, and experience of the design-build firm's personnel and key consultants technical training, education, and experience of the employees and consultants of the design-build firm who would be assigned to perform the services, including the proposed architect or engineer of record. RC (J) Defines Open Book Pricing DB provides the public authority, at the public authority's request, all books, records, documents, contracts, subcontracts, purchase orders, and other data in its possession pertaining to the bidding, pricing, or performance of a contract for designbuild services awarded to the design-build firm. 19

20 DESIGN-BUILD CONTRACTOR SELECTION RC (A) Encourage SOQ with regular updates RC (B) Evaluate SOQ with Criteria A/E RC Requires public announcement of contracts but can be sent to any of the following that Owner considers appropriate: Design-Build firms Associations News Media Any publication or public media (including electronic) 20

21 DESIGN-BUILD SELECTION RC Evaluate SOQ s with Criteria A/E Select and rank no less than three RC (A)(2) Provide additional information RC (A)(2)(h) Request pricing proposal RC (A)(3) Evaluate pricing proposals and hold discussions with each of three RC (A)(4) Rank 21

22 DESIGN-BUILD SELECTION RC RC (A)(5) Negotiate with proposer that is best value RC (B) Follow negotiation rules RC (C) If negotiations fail, notify DB in writing Negotiate with next ranked proposer and repeat if fail MUST USE DAS APPROVED CONTRACTS RC Allows Public Authority to set insurance requirements 22

23 DESIGN-BUILD SUBCONTRACTING RC RC (A) Public Authority may reject CMAR, DB, GC subcontracts if determine not responsible RC (B) Public Authority may authorize CMAR or DB to use design assist with no transfer of liability RC (C) If CMAR and DB self-perform, must submit sealed bid before opening bids for same work 23

24 DESIGN-BUILD SUBCONTRACTING RC RC (A) CMAR and DB establish prequalification criteria Subject to approval of public authority Consistent with DAS rules RC (B) CMAR and DB identify three prequalified bidders (unless exception approved by Public Authority) Public Authority must verify that bidders meet the prequalification criteria 24

25 DESIGN-BUILD SUBCONTRACTING RC RC (C) CMAR or DB solicits proposals from prequalified bidders Requires Open Book pricing method (9.33 or ) RC (D) Not required to award to low bidder MUST USE DAS CONTRACTS 25

26 CONSTRUCTION MANAGER AT RISK

27 CONSTRUCTION MANAGER AT RISK Report of the Ohio Construction Reform Panel,

28 CONSTRUCTION MANAGER AT RISK DEFINED RC 9.33(B)(1) "Construction manager at risk" means a person with substantial discretion and authority to plan, coordinate, manage, direct, and construct all phases of a project for the construction, demolition, alteration, repair, or reconstruction of any public building, structure, or other improvement and who provides the public authority a guaranteed maximum price as determined in section RC of the Revised Code. 28

29 CONSTRUCTION MANAGER AT RISK MISC. RC 9.331(A) Must advertise in newspaper and may advertise by electronic means pursuant to rules adopted by the director of administrative services RC 9.333(B) Requires CM at Risk to provide surety bond under new DAS rules 29

30 CONSTRUCTION MANAGER AT RISK SELECTION RC Advertise 30 days before proposals due RC 9.334(A) Public authority shall evaluate proposals and select no fewer than three CMAR s unless three qualified are not available RC 9.334(B) Public authority shall provide each of the above with: Description of the project Description of how GMP determined (with level of design) Form of CMAR contract Request for pricing proposal RC 9.334(C) CMAR submits pricing proposal RC 9.334(D) Public Authority evaluates the proposals and may meet to discuss proposals with CMAR s 30

31 CONSTRUCTION MANAGER AT RISK SELECTION RC 9.334(E) Rank the CMAR s based on value (pricing and qualifications); RC 9.334(F) Enter into negotiations with the best value (highest ranked) CMAR; and RC 9.334(G)(1) If negotiations fail with the highest ranked CMAR firm must notify that firm in writing of termination of negotiations RC (G)(2) Public Authority can begin negotiations with the next highest ranked CMAR. RC 9.334(H) If fail to reach GMP, can go forward Must use DAS prescribed contracts 31

32 GENERAL CONTRACTING

33 GENERAL CONTRACTING Report of the Ohio Construction Reform Panel,

34 GENERAL CONTRACTING RC (A)(5) "General contracting" means constructing and managing an entire public improvement project, including the branches or classes of work specified in division (B) of this section, under the award of a single aggregate lump sum contract. 34

35 GENERAL CONTRACTING RC Municipalities award under lowest and best standard RC Public Authority may reject GC subcontracts if determines bidder not responsible Must use DAS forms for subcontractsonly No guidance for selection so use RC , ,

36 CHARTER MUNICIPALITIES

37 CHARTER MUNICIPALITIES Q. What does HB 153 mean for you? A. Not much so long as you have the right charter language. Example Purchase of supplies, materials, equipment and printing for the City shall be made pursuant to specifications through open competitive bidding under such rules, consistent with this Charter as the Council may establish by ordinance. Formal advertising, bidding and public opening and tabulation of bids shall be required for all purchases with estimated cost exceeding the limitations provided for by State law. G.C. Charter Section

38 CHARTER MUNICIPALITIES Exercises of authority by a charter municipality that involve powers of local self-government thus prevail over general state laws. It is therefore clear that the Home Rule Amendment to the Ohio Constitution confers a significantly high degree of sovereignty upon municipalities. [T]he powers of local self-government which are granted under Section 3 of Article XVIII are essentially those powers of government which, [i]n view of their nature and their field of operation, are local and municipal in character. Trucco Constr. Co., Inc. v. Columbus, Not Reported in N.E.2d, 2006 WL (Ohio App. 10 Dist.,2006). 38

39 CHARTER MUNICIPALITIES The determination of whether a municipality has superseded a state statute by its home rule power involves a two-part test: (1) whether the municipality has through its charter set forth a reservation of intent to exercise home rule power and (2) whether the municipality has properly exercised that power. (1) Usually comes from the Charter (2) Usually comes from an ordinance Great Plains Exploration, L.L.C. v. Willoughby, Not Reported in N.E.2d, 2006 WL , Ohio App. 11 Dist.,

40 BONDING & IMPLEMENTATION

41 BONDING CHANGES RC Public Contract Bonding Statute Not applicable to RC (CMAR) or RC (DB) RC (A) Treats DB same as Principal Contractor for bond claims for 90 day Statement of Amount Due letter to surety; includes CM in definition of Principal Contractor 41

42 DEPARTMENT OF ADMINISTRATIVE SERVICES RC No later than June 30, 2012, DAS shall adopt rules for: (A) Procedures and criteria for best value selection of CMAR/DB (B) Prequalification criteria for use by CMAR/DB (C) Form contracts for CMAR/DB/GC subcontracts (D) Form contracts for CMAR/DB and Owners 42

43 IMPLEMENTATION RULES PROGRESS

44 D.A.S. PREREQUISITES FOR BECOMING EFFECTIVE Draft Rules Posted for Comments JCARR Filing Public Hearing Effective/ Available Surety Bonding Rule (Design-Build, CM at Risk) 10/11/ /11/2011 (filed) 11/14/ /22/2011 Contract Form Rule (Design-Build, CM at Risk) 10/11/ /11/2011 (filed) 11/14/ /22/2011 Subcontract Form Rule (Design-Build, CM at Risk, General Contracting) 10/11/ /11/2011 (filed) 11/14/ /22/2011 Prequalification (Design-Build, CM at Risk) TBD 11/04/2011 (tentative) TBD TBD Best Value (Design-Build, CM at Risk) TBD 11/04/2011 (tentative) TBD TBD Electronic Advertising (CM, CM at Risk) TBD 11/04/2011 (tentative) TBD TBD Electronic Bidding (Multi-Prime, General Contracting) TBD TBD TBD TBD 44

45 SURETY BONDING (DRAFT RULES) CMAR and DB must provide: Prior to contract separate performance and payment bonds with penal sum 100% of contract sum Requires surety approval of increase as condition for payment of increase 21 days to replace bankrupt sureties Bonds must be on DAS forms 45

46 CMAR CONTRACT FORM (DRAFT RULES) The State of Ohio Standard Requirements for Public Facility Construction (State Architect) Office/ListofStandardRequirementsDocuments.aspx AIA Contract Documents Option 1: Contract form: A133 General conditions: A201 Architect/engineer agreement: B103 or B103 46

47 CMAR CONTRACT FORM (DRAFT RULES) ConsensusDOCS Combined contract form and general conditions: ConsensusDOCS 500 Architect/engineer agreement: ConsensusDOCS 240 CMAA Contract Documents Contract form: CMAR-1 General conditions: CMAR-3 Architect/engineer agreement: CMAR-4 47

48 CMAR CONTRACT FORM MODIFICATIONS When using contract documents under paragraph (B) of this rule for a construction manager at risk project, a public authority shallincorporate applicable requirements of federal, state, or local law and may include supplemental terms and conditions or modify the contract documents to include project-specific terms and conditions. Must use DAS subcontract forms 48

49 DESIGN-BUILD CONTRACT FORM (DRAFT RULES) The State of Ohio Standard Requirements for Public Facility Construction (State Architect s Office) AIA Contract Documents Contract form and terms and conditions: A33 Criteria architect/engineer agreement: B142 Architect/engineer of record agreement: B143 ConsensusDOCS Combined contract form and general conditions: ConsensusDOCS 410 Criteria architect/engineer agreement: ConsensusDOCS 245 Architect/engineer of record agreement: ConsensusDOCS

50 DESIGN-BUILD CONTRACT FORM (DRAFT RULES) DBIA Contract Documents Contract form: Document No. 530 General Conditions: Document No. 535 Criteria architect/engineer agreement: Document No. 501 Architect/engineer agreement: Document No. 540 EJCDC Contract Documents Contract form: D-525 General Conditions: D-700 Criteria architect/engineer agreement: D-500 Architect/engineer of record agreement: D

51 DESIGN-BUILD CONTRACT FORM (DRAFT RULES) When using contract documents under paragraph (B) of this rule for a design-build project, a public authority shall incorporate applicable requirements of federal, state, or local law and may include supplemental terms and conditions or modify the contract documents to include project-specific terms and conditions. Must use DAS subcontract form 51

52 CMAR/DB/GC SUBCONTRACTS (DRAFT RULES) Must use the DAS subcontract form May supplement with public Authority terms if no conflict May supplement with dickered terms if no conflict Subcontract precedence over all parts of contract between contractor and sub If fail to use form, State terms still apply and control 52

53 CMAR/DB/GC SUBCONTRACTS (DRAFT RULES) Required Terms Conditions Concurrent: Flow Down and perform in accordance with Contract Documents Contingent Assignment: Subcontract may be assigned to Owner Intended Third Party Beneficiary: Owner with no subcontractor rights unless assigned Insurance: Subcontractor to maintain insurance in accordance with the Contract Documents Right to Audit: Public Authority right to audit Subcontractor s books (3 years after Work) Indemnity: Subcontractor shall indemnify from all claims for bodily injury or property (other than work) 53

54 CMAR/DB/GC SUBCONTRACTS (DRAFT RULES) Required Terms Prompt Pay: Constructor shall at a minimum make payments to the Subcontractor in accordance with applicable law, including Ohio Revised Code Section Retainage: equal to or less than the percentage retained from the Constructor Warranty: Subcontractor fully warrants and guarantees, for the benefit of the Public Authority, the effectiveness, fitness for the purpose intended, quality, and merchantability of any Work performed or item provided or installed by the Subcontractor 54

55 CMAR/DB/GC SUBCONTRACTS (DRAFT RULES) Required Terms Non Waiver of Lien Rights: No waiver of rights under Section 1311 of the Revised Code Non-Discrimination: Subcontractor to comply with Applicable Law regarding equal employment opportunity, including Section of the Revised Code and all Executive Orders issued by the Governor of the state of Ohio. 55

56 MODIFYING FORM DOCUMENTS Form contracts need to be modified! Know what you need Know the law Coordination is key 56

57 CONSENSUS To the fullest extent permitted by law, the Design-Builder shall indemnify and hold harmless the Owner, Owner's officers, directors, members, consultants, agents and employees (the Indemnitees) from all claims for bodily injury and property damage (other than to the Work itself and other property required to be insured under Paragraph 11.5), including reasonable attorneys' fees, costs and expenses, that may arise from the performance of the Work, but only to the extent caused by the negligent acts or omissions of the Design-Builder, Subcontractors or anyone employed directly or indirectly by any of them or by anyone for whose acts any of them may be liable. The Design-Builder shall not be required to indemnify or hold harmless the Indemnitees for any negligent acts or omissions of the Indemnitees. 57

58 ANOTHER WAY? 13. Defense and Indemnification: The Contractor agrees, to the fullest extent permitted by law, to indemnify, defend, and hold harmless the City and its agents and employees from and against all claims, suits, judgments, proceedings, damages, losses or expenses, proven or not, including attorney s fees, arising out of or relating, directly or indirectly, to its performance of the Work. The Contractor also agrees to pay any and all attorney s fees incurred by the City, its agents, or its employees in enforcing any of the Contractor s defense or indemnification obligations. In any and all claims against the City or any of its agents or employees by any employee of the Contractor, or anyone directly or indirectly employed by the Contractor, or anyone for whose acts the Contractor is liable, the indemnification obligation shall not be limited in any way by any limitation on the amount or type of damages, compensation or benefits payable by the Contractor under Workers Compensation Acts, disability benefit acts, or other employee benefits acts. 58

59 CONSENSUS To the fullest extent permitted by law, the Owner shall indemnify and hold harmless the Design-Builder, its officers, directors or members, Subcontractors or anyone employed directly or indirectly by any of them or anyone for whose acts any of them may be liable from all claims for bodily injury and property damage, other than property insured under Paragraph 11.5, including reasonable attorneys' fees, costs and expenses, that may arise from the performance of work by Others, but only to the extent caused by the negligent acts or omissions of Others. Secret Code: six, one, four, 462, two, two, two, nine 59