PUBLIC CONSTRUCTION PROJECTS AND THE COLORADO PUBLIC WORKS ACT

Transcription

1 PUBLIC CONSTRUCTION PROJECTS AND THE COLORADO PUBLIC WORKS ACT John W. Mill Sherman & Howard L.L.C. PUBLIC WORKS [T]he construction, erection, repair, maintenance, or improvement of any building, road, bridge, viaduct, tunnel, excavation, or other public work. State or any political subdivision C.R.S (Colorado Public Works Act) Photo by I, Producer, courtesy of Wikipedia Commons PUBLIC WORKS (cont.) Needs are large Money is tight Risks are substantial PUBLIC WORKS CONSTRUCTION NATIONAL $ Change from prior year Category 2011 Actual 2012 Forecast Highway and bridge 5% 12% Sewers 2% 9% Water supply systems 15% 7% Source: Dodge Outlook (Midyear Update) 1

2 CAPITAL CONSTRUCTION STATE OF COLORADO State Departments FY State Funds for Capital $51,073,159 Higher Ed $20,624,809 TOTAL $71,697,968 % Change from Prior Year INFRASTRUCTURE NEEDS COLORADO MUNICIPALITIES Category % with Unfunded Need Streets 50% Bridges 24% Drinking water 16% treatment Wastewater treatment 24% Water supply / storage 23% Public buildings 33% Source: Capital Source: CML 2012 State of Our Cities & Towns Survey Report PHASES OF A CONSTRUCTION PROJECT WHAT S THE PROJECT? Need Examples Streets and bridges Water/wastewater Buildings Other CHOICE OF ENTITY Municipality Urban Renewal Authority: C.R.S Special Improvement Dist.: C.R.S Public Improvement Dist.: C.R.S Downtown Dev. Auth.: C.R.S FUNDING: WHERE S THE MONEY? Tax revenues Federal/state funds Certificates of participation Other 2

3 DELIVERY METHOD Traditional: Design Bid Build Integrated Project Delivery: Design/Build DESIGN BID BUILD Public Owner Designer General or Subcontractors Material Suppliers DESIGN BID BUILD (cont.) Architect designs Complete plans and specifications (100%) Public bidding process for statutory cities C.R.S Ample advertisement Solicit competitive bids Lowest responsible bidder Not required for architect/design services DESIGN BID BUILD (cont.) General or builds the project Advantages Lowest cost (?) Disadvantages or s qualifications and experience not most important criteria Longer time (?) Finger pointing: designer blames contractor : contractor blames designer DESIGN/BUILD Public Owner Design/Builder DESIGN/BUILD (cont.) Design and construction by one entity Authorized in 2007 Integrated Delivery Method for Municipal Public Improvements Act C.R.S et seq. Municipalities or municipality created entities Subcontractors Suppliers 3

4 DESIGN/BUILD (cont.) Procedure Under IPD Act Determination IPD is timely or cost effective alternative Request for qualifications to prequalify (optional) Request for proposals to design/build the project (required) Evaluate proposals Accept best value Photo by Frédéric Vincent, courtesy of Wikipedia Commons CONTRACT PROVISIONS Prohibited Required Beneficial PROHIBITED CONTRACT PROVISIONS or delay damages Cannot require contractor to waive/release claims for delay damages caused by public entity owner C.R.S Special rule for public projects Example: changes by owner extend completion date/cause additional general conditions costs PROHIBITED CONTRACT PROVISIONS (cont.) Indemnification Cannot require contractor to indemnify owner for damages caused by negligence/fault of indemnified party (e.g., owner) C.R.S (6) Example: contractor shall indemnify owner for all damages arising from acts of owner or its employees, agents or consultants PROHIBITED CONTRACT PROVISIONS (cont.) Cannot hold retention of over 5% Retention = amounts withheld and not paid to contractor until completion C.R.S Only applies to contracts over $150,000 Pay monthly 95% of value of completed work 4

5 REQUIRED CONTRACT PROVISIONS Full appropriation is required before sign contract for design, construction or both C.R.S must say appropriation equals/exceeds contract amount Noncompliance: contractor can sue public owner/no appropriation is not a defense REQUIRED CONTRACT PROVISIONS (cont.) Added cost change orders prohibited unless: 1. Does not cause total cost to exceed original appropriation; 2. Owner gives written assurance that appropriations have been made to cover costs of additional work; or 3. Added costs covered by a remedy granting provision in contract (changes, differing site conditions, termination for convenience, etc.) REQUIRED CONTRACT PROVISIONS (cont.) Payment and performance bonds required C.R.S (Colorado Public Works Act) must require bonds All municipal projects over $50,000 REQUIRED CONTRACT PROVISIONS (cont.) Illegal Aliens C.R.S et seq. Enacted 2006 must provide that contractor: 1. Does not knowingly employ/contract with an illegal alien 2. Does not contract with subcontractor that fails to certify it does not employ/contract with an illegal alien 3. Uses E verify or state DOL program for new hires Other REQUIRED CONTRACT PROVISIONS (cont.) Colorado Labor Preference All public works contracts must provide for 80% Colorado labor C.R.S BENEFICIAL CONTRACT PROVISIONS Insurance Adequate types/limits of insurance Require completed operations coverage Owner to be Additional Insured on contractor s CGL policy (including for completed operations be careful) 5

6 BENEFICIAL CONTRACT PROVISIONS (cont.) Indemnification or defend/indemnify/hold harmless Owner for damages, etc. due to breach of contract, negligence or fault of or (and its subcontractors, suppliers, employees, etc.) PAYMENT BOND No mechanics liens on public projects Protect subcontractors/suppliers/laborers Owner must approve the bond PERFORMANCE BOND Protects owner from contractor default Penal sum = at least ½ of contract amount Owner must approve the bond Treasury s Listing of Approved Sureties (Department Circular 570): PERFORMANCE BOND (cont.) What triggers surety s obligations? or is in default Owner declares contractor in default Owner terminates the contract (some bonds) Owner has not materially breached its obligations under contract and bond PERFORMANCE BOND (cont.) If contractor defaults, surety may: 1. Complete performance 2. Pay money to owner 3. Deny liability PERFORMANCE BOND (cont.) Critical issues 1. Is contractor in default? 2. Terminate contract? 3. Timely/proper notice to surety and contractor 4. Big deal: get good advice 6

7 OWNER S ROLE DURING CONSTRUCTION Owner s representative Point of contact Attend meetings Make decisions Write letters/ s Watch/listen/read OWNER S ROLE DURING CONSTRUCTION (cont.) Don t be passive Have physical presence on job site Manage consultants Pay contractor Ask questions SUBSTANTIAL COMPLETION Definition Importance: Starts statute of limitations/repose Almost done! NOTICE OF FINAL SETTLEMENT C.R.S Owner must publish notice of final settlement s over $50,000 2X in newspaper of general circulation At least 10 days before final settlement Owner will make final settlement to contractor of specified project on X date Why? So unpaid subs/suppliers can file a claim CLAIMS: THREE KINDS Unpaid Subcontractors/Suppliers/Laborers General or v. Owner Public Owner v. or 7

8 VERIFIED STATEMENT OF CLAIM By unpaid subcontractor/supplier Delivered to owner before date fixed for final settlement Owner pays contractor final amount due minus amount of any timely VSC VERIFIED STATEMENT OF CLAIM (cont.) Within 90 days after date fixed for final settlement: Claimant must file lawsuit in court And deliver lis pendens to owner Day 91: No lis pendens: owner pays contractor balance due Lis pendens: owner withholds $$$ until lawsuit settled or concluded GENERAL CONTRACTOR CLAIMS Nonpayment Delay claims (extended general conditions) Differing site conditions Other 8

9 MUNICIPAL OWNER CLAIMS Claim v. surety on performance bond File lawsuit within 6 months after substantial completion No statutory basis for attorneys fees 8% interest Claim v. contractor for delayed completion Liquidated damages Consequential damages MUNICIPAL OWNER CLAIMS (cont.) Defect claims Statute of limitations: 2 years Statute of repose: 6 8 years C.R.S Warranty claims Statute of limitations: 3 years CONCLUSION Questions Happy hour 9