Bidding, Purchasing and Contracting - omlohio.org

Bidding, Purchasing and Contracting - omlohio.org

Ohio Municipal League: Newly Elected Council Seminar February 24, 2018 Bidding, Purchasing and Contracting Desmond J. Cullimore, P.E., BCEE 614.227.4837 [email protected] Bricker & Eckler LLP 2018 | www.bricker.com Bidding & Purchasing 1. Competitive Bidding 2. Exceptions to Competitive Bidding 3. Selection of Professionals

Design Professionals Construction Manager as Agent Other Consultants 4. Construction Procurement 5. Comparison of Construction Delivery Models Bricker & Eckler LLP 2018 | www.bricker.com Competitive Bidding ORC 735.05: 1. [When an expenditure] for any work . . . 2. . . .exceeds fifty thousand dollars . . . 3. . . .the director shall make a written contract with the lowest and best bidder after advertisement for not less than two nor more than four consecutive weeks in a newspaper of general circulation within the city . . .

Bricker & Eckler LLP 2018 | www.bricker.com Competitive Bidding Advertisement must be made in a newspaper of general circulation within the city or comply with ORC 7.16 Must always comply with relevant city charters! Bricker & Eckler LLP 2018 | www.bricker.com Competitive Bidding Exceptions Key exceptions to competitive bidding: 1. ORC 735.051 case of a real and present emergency arising in connection with the operation and maintenance of the department of public service 2. ORC 735.052 authorization, by ordinance, of purchase of used equipment or supplies at auctions

or sales open to the public 3. ORC 735.053 authorization, by ordinance, of purchase of material, equipment or supplies from another political subdivision Bricker & Eckler LLP 2018 | www.bricker.com Competitive Bidding Exceptions Key exceptions (continued): 4. Purchasing Plans ORC 9.48(B) Joint Purchasing Programs ORC 125.04 State Term Contracts / Ohio Cooperative Purchasing Program ORC 167.01 and 167.081 Councils of Government

Bricker & Eckler LLP 2018 | www.bricker.com Selection of Professionals Design Professionals qualification-based selection process (QBS) outlined in ORC 153.65-153.70 required for architects, engineers, landscape architects, surveyors also applies to criteria architect/criteria engineer required to prepare the initial program/concept for a design-build project QBS required for these services unless the City maintains a file with current qualifications (no more than 1 year old) and the cost of services < $50,000 Bricker & Eckler LLP 2018 | www.bricker.com Selection of Professionals Design Professionals QBS Process in ORC Sections 153.65, et seq.:

requires public notice requesting qualifications for available contract; no time period defined for notice; publish notice in local newspaper; exception for an emergency (ORC 153.71(B)): Where project is determined in writing by the public authority head to be an emergency requiring immediate action . . . QBS process not required Bricker & Eckler LLP 2018 | www.bricker.com Selection of Professionals Construction Manager as Agent Agency Role (CMa) qualification-based selection process required by the ORC (Sections 9.33, et seq.) Other Professionals and Consultants no statutory process required by the ORC.

Bricker & Eckler LLP 2018 | www.bricker.com Construction Delivery Models Prior to HB 153, ORC 153.50 required all projects to be multiprime, with separate prime contracts for construction projects over $50,000 (electrical, HVAC, plumbing, at a minimum). HB 153 eliminated this threshold. ORC 153.50 now requires these separate prime contracts for any project that includes these trades, UNLESS the GC, CMR, or DB model is used. There is no dollar threshold for using one of the 3 new project delivery models. NOTE: The State bidding threshold is $200,000; the threshold for most other political subdivisions is $50,000. Bricker & Eckler LLP 2018 | www.bricker.com Multiple Prime Contract Construction

Manager Owner Architect Privity of Contract Masonry Contractor General Trades Contractor Electrical Contractor

Subcontractor Subcontractor Material Supplier Material Supplier Sub-subcontractor Copyright Bricker & Eckler LLP 2018 | www.bricker.com Bricker & Eckler Single Prime Contract

Construction Manager Privity of Contract Owner Architect General Contractor Masonry Subcontractor Plumbing Subcontractor

Electrical Subcontractor Sub-subcontractor Sub-subcontractor Material Supplier Material Supplier Bricker & Eckler LLP 2018 | www.bricker.com Sub-sub-subcontractor Construction: Competitive Bidding Multiple Prime & General Contractor procured via competitive

bidding Owner engages separate design professional Competitive Bidding Process: Advertise construction contract Receive bids Award of the contract by a city must be to the lowest and best bidder NOTE: Constructors lack of involvement in design limits ability to monitor budget and schedule impacts when making design decisions NOTE: Multiple Prime requires the Owner to coordinate multiple contractors who may not work well together Bricker & Eckler LLP 2018 | www.bricker.com Construction Manager At-Risk

Owners Representative Privity of Contract Owner Architect CMR Masonry Subcontractor Plumbing Subcontractor Electrical

Subcontractor Sub-subcontractor Sub-subcontractor Material Supplier Material Supplier Bricker & Eckler LLP 2018 | www.bricker.com Sub-sub-subcontractor Construction Procurement: CMR CMR statutory procurement process (ORC Sections 9.33 9.335):

Owner engages separate design professional CMR Procurement: Advertise / issue Request for Qualifications (RFQ) for CMR services Time period for advertisement is 30 days Receive Statements of Qualifications (SOQ) Evaluation Committee short-lists 3 most-qualified firms which allows more control over the quality of the firm that will work on your project Bricker & Eckler LLP 2018 | www.bricker.com Construction Procurement: CMR CMR Procurement continued:

Issue RFP to short-listed firms Receive technical/price proposals (may include GMP) Interview firms Select proposal that provides the best value to the public authority (not necessarily the lowest price) Involvement by CMR in design phase can help minimize constructability problems, prevent budget surprises, and identify potential schedule impacts relating to design decisions Bricker & Eckler LLP 2018 | www.bricker.com Design-Build Owners Representative Privity of Contract Owner

DesignBuilder Architect Masonry Subcontractor Plumbing Subcontractor Electrical Subcontractor Sub-subcontractor Sub-subcontractor

Material Supplier Material Supplier Bricker & Eckler LLP 2018 | www.bricker.com Sub-sub-subcontractor Construction Procurement: Design - Build DB procurement process is very similar to CMR DB (ORC Section 153.65 153.99): Owner engages criteria architect or criteria engineer who creates design criteria Advertise / issue RFQ for DB services Receive SOQ Evaluation Committee short-lists 3 most-qualified firms which allows

more control over the quality of the firm that will work on your project Bricker & Eckler LLP 2018 | www.bricker.com Construction Procurement: Design - Build DB Procurement continued: Issue RFP to short-listed firms Receive technical/price proposals (may include GMP but usually will not) Interview firms Select proposal that provides the best value to the public authority (not necessarily the lowest price) Single point of responsibility for both design and construction with maximum predictability of project cost and schedule impacts Bricker & Eckler LLP 2018 | www.bricker.com

Contracting: What Does the Contract Include? Typically a construction contract will incorporate a number of other documents by reference. Once incorporated, those documents are also part of the contract. Make sure you understand what documents are incorporated The Contract Documents consist of this Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda issued prior to execution of this Agreement, other documents listed in this Agreement and Modifications issued after execution of this Agreement; these form the Contract, and are as fully a part of the Contract as if attached to this Agreement or repeated herein. AIA A101 1997 Bricker & Eckler LLP 2018 | www.bricker.com Substantial Completion

The stage in the progress of the Work when the Work or designated portion thereof is sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for its intended use. AIA A201 This is a significant milestone because it typically marks the end to any exposure to liquidated damages for the Contractor, as well as the date the Contractor is eligible for the release of some or all of the retainage. Bricker & Eckler LLP 2018 | www.bricker.com Warranties A warranty is a representation by one party that certain conditions exist. The warranty in the AIA A201 states: The Contractor warrants to the Owner and Architect that materials and equipment furnished under the Contract will be of good quality and new unless otherwise required or permitted by the Contract Documents, that the Work will be free from defects not inherent in the quality required or permitted, and that the Work

will conform to the requirements of the Contract Documents. Work not conforming to these requirements, including substitutions not properly approved and authorized, may be considered defective. Bricker & Eckler LLP 2018 | www.bricker.com Statute of Limitations The statute of limitations is the law that cuts off the period in which a breach of contract lawsuit may be filed. In Ohio, it is 8 years for a construction contract. Discovery Rule Bricker & Eckler LLP 2018 | www.bricker.com Indemnification Basically, its an obligation of one party to compensate, or hold harmless, the other party for a defined loss. Example: To the fullest extent permitted by law and to the extent claims,

damages, losses or expenses are not covered by Project Management Protective Liability insurance purchased by the Contractor in accordance with Section 11.3, the Contractor shall indemnify and hold harmless the Owner, Architect, Architect's consultants, and agents and employees of any of them from and against claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from performance of the Work, provided that such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or death, or to injury to or destruction of tangible property (other than the Work itself), but only to the extent caused by the negligent acts or omissions of the Contractor, a Subcontractor, anyone directly or indirectly employed by them or anyone for whose acts they may be liable, regardless of whether or not such claim, damage, loss or expense is caused in part by a party indemnified hereunder. AIA A201 Bricker & Eckler LLP 2018 | www.bricker.com Liquidated Damages An amount provided in the contract to serve as the measure of one partys damages in the event that the other party breaches the contract.

Enforceable if no penalty. Bricker & Eckler LLP 2018 | www.bricker.com Claims A Claim is a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract. The term "Claim" also includes other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract. Claims must be initiated by written notice. The responsibility to substantiate Claims shall rest with the party making the Claim. AIA A201 For example: Delay, acceleration, inefficiency, etc. Bricker & Eckler LLP 2018 | www.bricker.com

No timely notice = lost opportunities Commencement Problem Occurs Construction Duration Proper Notice of Claim Opportunity to: Owners Lost Opportunity to Mitigate Damages Prejudice

Lost opportunity to: Investigate & evaluate the claim Investigate & evaluate the claim Direct change in the drawings/specs Direct change in the drawings/specs

Adjust schedules Adjust schedules Value engineer Value engineer

Control discretionary spending Control discretionary spending Terminate for convenience Terminate for convenience Bricker & Eckler LLP 2018 | www.bricker.com Late Notice

of Claim Completion Mechanics Lien Claims Ohio Mechanics Lien law is addressed in ORC 1311.25 1311.32 Owner must prepare a Notice of Commencement for each project Expect to receive Notices of Furnishing from subs A lien claim is against the contract funds not against real estate; funds are those allocated for AND earned by, the Principal Contractor Claimants right is to recover funds due under the construction contract, not to foreclose on real estate Different from private construction Bricker & Eckler LLP 2018 | www.bricker.com

Lien Claim Affidavit of Claim Notice to the Owner of a Claim against funds by a subcontractor or material supplier Lien claim must be in affidavit form Filed with Owner within 120 days after date of last work Typically recorded with County Recorder for priority sake, but not required Bricker & Eckler LLP 2018 | www.bricker.com Lien Claim Owner Response Owner must provide notice to the Principal Contractor within FIVE days of receipt Notice must state that Principal Contractor has TWENTY days to dispute the lien Detain the claim amount (if this amount has been earned

and is due) from the Principal Contractors next pay application (RC 1311.28) Place detained funds in an escrow account governed by an escrow agreement negotiated between the Owner and Principal Contractor (RC 153.63) 8% annual penalty for failing to deposit funds in escrow account Bricker & Eckler LLP 2018 | www.bricker.com Summary: Preparing for Project Determine whether competitive bidding is required. Review the city charter for additional requirements and for bidding, purchasing, or procurement processes that differ from the statutory requirements. Determine the project delivery model

Bricker & Eckler LLP 2018 | www.bricker.com Summary: Preparing for Project Understand the role of the Citys construction counsel and design professional. Who prepares the contract documents included in the Project Manual issued to bidders or for soliciting cost proposals? AIA versus modified documents that include Ohio law as it applies to a city project (note State documents include the State in most forms). Bricker & Eckler LLP 2018 | www.bricker.com Summary: Preparing for Project Define the process in the documents issued

with the project information . Define criteria for award, standard for award, and state the process and requirements for submitting pricing (bid or proposal). Be consistent in terminology; avoid using bid or any variation on bid when a proposal or quote process is used. Bricker & Eckler LLP 2018 | www.bricker.com Summary: Preparing for Project Using good documents appropriate to the type of procurement bidding or proposals help the City avoid bad bidding mistakes. Dont forget the Notice of Commencement and Notices to the surety and surety agent after contract award (both are required by the ORC); required for ANY capital project.

Bricker & Eckler LLP 2018 | www.bricker.com Questions? Desmond J. Cullimore, P.E., BCEE Bricker & Eckler LLP 100 South Third Street Columbus, Ohio 43215 [email protected] 614.227.4837 Bricker & Eckler LLP 2018 | www.bricker.com

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