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 43215 614.462.2700 rdavisson@szd.com
BIDDING AND PREVAILING WAGE CHANGES
MUNICIPAL BIDDING THRESHOLDS Entity Statute Old Threshold New Threshold Village/No Administrator 731.14 $ 25,000.00 $ 50,000.00 Village with Administrator 731.141 $ 25,000.00 $ 25,000.00 City 735.05 $ 25,000.00 $ 25,000.00 3
PREVAILING WAGE THRESHOLDS Construction Type Old Threshold New 9/29/2011 9/29/2012 9/29/2013 Adjusted New Vertical $ 78,258.00 $ 125,000.00 $ 200,000.00 $ 250,000.00 Reconstruction Vertical $ 23,447.00 $ 38,000.00 $ 60,000.00 $ 75,000.00 New Horizontal $ 78,258.00 $ 78,258.00?? 1/1/2012 Reconstruction Horizontal $ 23,447.00 $ 23,447.00?? 1/1/2012 4
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
NEW CONTRACTING POWERS
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
ORC 153.50 MULTIPRIME (OLD METHOD) Rule in Ohio for more than 100 years Only four states still require (PA, ND, IL, NY) RC 153.50 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
COORDINATION AND BIM 9
MULTI PRIME (OLD METHOD) Report of the Ohio Construction Reform Panel, 2009 10
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
NEW POWERS New ORC 153.50 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
DELIVERY TIMELINE Report of the Ohio Construction Reform Panel, 2009 13
DESIGN BUILD
DESIGN-BUILD Report of the Ohio Construction Reform Panel, 2009 15
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
DESIGN-BUILD THRESHOLD RC 153.71 The selection process does not apply if: Fees expected to be less than $50,000 and: Must select from RC 153.68 list of SOQ s within last year; AND Negotiate using rules of RC 153.69 Emergency exception 17
DESIGN-BUILD: CRITERIA ARCHITECTS/ ENGINEERS RC 153.692 [RC 153.65(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 153.65-153.70 Can use employee but must notify DAS CA can not work on project 18
DESIGN-BUILD CONTRACTING RC 153.65 RC 153.65(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 153.65(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
DESIGN-BUILD CONTRACTOR SELECTION RC 153.66(A) Encourage SOQ with regular updates RC 153.66(B) Evaluate SOQ with Criteria A/E RC 153.67 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
DESIGN-BUILD SELECTION RC 153.693 Evaluate SOQ s with Criteria A/E Select and rank no less than three RC 153.693(A)(2) Provide additional information RC 153.693(A)(2)(h) Request pricing proposal RC 153.693(A)(3) Evaluate pricing proposals and hold discussions with each of three RC 153.693(A)(4) Rank 21
DESIGN-BUILD SELECTION RC 153.693 RC 153.693(A)(5) Negotiate with proposer that is best value RC 153.693(B) Follow negotiation rules RC 153.693(C) If negotiations fail, notify DB in writing Negotiate with next ranked proposer and repeat if fail MUST USE DAS APPROVED CONTRACTS RC 153.70 Allows Public Authority to set insurance requirements 22
DESIGN-BUILD SUBCONTRACTING RC 153.501 RC 153.501(A) Public Authority may reject CMAR, DB, GC subcontracts if determine not responsible RC 153.501(B) Public Authority may authorize CMAR or DB to use design assist with no transfer of liability RC 153.501(C) If CMAR and DB self-perform, must submit sealed bid before opening bids for same work 23
DESIGN-BUILD SUBCONTRACTING RC 153.502 RC 153.502(A) CMAR and DB establish prequalification criteria Subject to approval of public authority Consistent with DAS rules RC 153.502(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
DESIGN-BUILD SUBCONTRACTING RC 153.502 RC 153.502(C) CMAR or DB solicits proposals from prequalified bidders Requires Open Book pricing method (9.33 or 153.65) RC 153.502(D) Not required to award to low bidder MUST USE DAS CONTRACTS 25
CONSTRUCTION MANAGER AT RISK
CONSTRUCTION MANAGER AT RISK Report of the Ohio Construction Reform Panel, 2009 27
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 9.334 of the Revised Code. 28
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
CONSTRUCTION MANAGER AT RISK SELECTION RC 9.331 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
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 9.334 (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
GENERAL CONTRACTING
GENERAL CONTRACTING Report of the Ohio Construction Reform Panel, 2009 33
GENERAL CONTRACTING RC 153.50(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
GENERAL CONTRACTING RC 153.52 Municipalities award under lowest and best standard RC 153.501 Public Authority may reject GC subcontracts if determines bidder not responsible Must use DAS forms for subcontractsonly No guidance for selection so use RC 731.14, 731.141, 735.05. 35
CHARTER MUNICIPALITIES
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 5.14 37
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 3825262 (Ohio App. 10 Dist.,2006). 38
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 3833867, Ohio App. 11 Dist.,2006. 39
BONDING & IMPLEMENTATION
BONDING CHANGES RC 153.54 Public Contract Bonding Statute Not applicable to RC 9.334 (CMAR) or RC 153.693 (DB) RC 153.56(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
DEPARTMENT OF ADMINISTRATIVE SERVICES RC 153.503 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
IMPLEMENTATION RULES PROGRESS
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) 10/11/2011 10/11/2011 (filed) 11/14/2011 12/22/2011 Contract Form Rule (Design-Build, CM at Risk) 10/11/2011 10/11/2011 (filed) 11/14/2011 12/22/2011 Subcontract Form Rule (Design-Build, CM at Risk, General Contracting) 10/11/2011 10/11/2011 (filed) 11/14/2011 12/22/2011 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
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
CMAR CONTRACT FORM (DRAFT RULES) The State of Ohio Standard Requirements for Public Facility Construction (State Architect) http://das.ohio.gov/divisions/generalservices/statearchitects Office/ListofStandardRequirementsDocuments.aspx AIA Contract Documents Option 1: Contract form: A133 General conditions: A201 Architect/engineer agreement: B103 or B103 46
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
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
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 420 49
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-505 50
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
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
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
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 4113.61 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
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 153.59 of the Revised Code and all Executive Orders issued by the Governor of the state of Ohio. 55
MODIFYING FORM DOCUMENTS Form contracts need to be modified! Know what you need Know the law Coordination is key 56
CONSENSUS 410 11.1.1 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
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
CONSENSUS 410 11.1.2 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