FAQ on Public Improvement Least Cost Contracting Requirements

Transcription

1 LEAGUE OF OREGON CITIES FAQ FAQ on Public Improvement Least Cost Contracting Requirements DECEMBER 2017 Prepared in Cooperation with Bill Kirby, Beaverton City Attorney s Office

2 FAQ Public Improvement Least Cost Contracting Requirements State policy requires public contracting agencies to make every effort to construct public improvements at the least cost to the contracting agency. 1 Under this policy, contracting agencies which include cities must comply with certain analysis and reporting requirements. The following list of frequently asked questions (FAQs) provides answers to questions the League has received from numerous cities on least cost public contracting requirements. The answers are not meant as a substitute for legal advice. League members are encouraged to speak with their city attorneys for specific advice about least cost contracting requirements. All information in this FAQ is current as of December 1, Does the State s Least Cost Policy Apply to All Public Contracts? No. The state s least cost policy applies only to contracts for the construction of public improvements such as buildings and roads. 2 While all cities should have internal policies and procedures to ensure needed goods and services are procured at the least cost to the agency and its taxpayers, the formal policy discussed here applies only to the construction of public improvements and not to the purchase of other goods or services. 2. What Does the State s Least Cost Policy Require? The policy generally requires a city to file certain reports with the Oregon Bureau of Labor and Industries (BOLI) before constructing a public improvement with the city s own equipment and personnel. If the required reports are not filed, BOLI can take administrative enforcement action against the city. 3. What are the Mandated Reporting Requirements? There are two reports a city may need to file with BOLI: A summary of planned public improvements; and A least cost analysis. 1 ORS 279C.305(1). 2 The term public improvement is defined under the Public Contracting Code as a project for construction, reconstruction or major renovation on real property by or for a contracting agency. The definition of public improvement does not include [p]rojects for which no funds of a contracting agency are directly or indirectly used, except for participation that is incidental or related primarily to project design or inspection; or [e]mergency work, minor alteration, ordinary repair or maintenance necessary to preserve a public improvement. ORS 279A.010(1)(cc). FAQ Public Improvement Least Cost Contracting Requirements 1

3 4. What is a Summary of Planned Public Improvements? A summary of planned improvements lists every public improvement project a city expects to undertake during its upcoming budget period. The projects are listed by name, type, location and estimated total on-site construction costs. The list must also state whether the city expects to perform the construction through a private contractor. 3 A city can use BOLI Form WH-118 (available via BOLI s Wage and Hour Division) to make the report. 5. Are there Any Exceptions to the Requirement of Filing a Summary of Planned Public Improvements? Yes, there are exceptions. The most common ones are these: A city does not have to file a summary if no public improvement project is planned for the upcoming budget period, or if the projects that are planned only entail the placing of maintenance patching, chip seals or other seals as a maintenance treatment on highways, roads, streets or bridges. Additionally, a city does not have to list on its summary any public improvement projects that are for resurfacing highways, roads or streets at a depth of two inches or less; or at an estimated cost of $125,000 or less. 6. What is a Least Cost Analysis? A least cost analysis is a report that documents that a city s decision to use its own equipment or personnel to perform construction work on a public improvement project conforms to the state s least cost policy. A least cost analysis is only required if a city intends to use its own equipment or personnel to perform construction work on a public improvement and certain cost thresholds (discussed below) are met. A city can use BOLI Form WH-119 (available via BOLI s Wage and Hour Division) to make the report. 7. When Must a City Submit its Summary of Planned Improvements? A city s summary of planned improvements is due at least thirty days before adoption of its budget, or in the alternative thirty days before the start of construction on a public improvement. 3 ORS 279C.305(2)(a). FAQ Public Improvement Least Cost Contracting Requirements 2

4 A best practice is to prepare and submit the summary of planned projects in connection with your city s budget process. If plans change during the budget period, and a new project is identified for construction, prepare and submit the summary for that project as soon as practical, and in all cases at least 30 days before starting to construct the project. 8. When Must a City Submit its Least Cost Analysis? The least cost analysis must be submitted at least 180 days before construction begins on the public improvement. A best practice is to submit the least cost analysis to BOLI as soon as possible; preferably at the same time the city submits its summary of planned improvements. 9. Is a Least Cost Analysis Required Every Time a City Intends to Use Its Own Equipment or Personnel to Perform Construction Work on a Public Improvement? No. There are exemptions and thresholds that allow a city to undertake some public improvement projects with its own equipment or personnel without having to prepare and submit a least cost analysis to BOLI. Even if an exemption applies or a minimum threshold has not been met, a best practice is nevertheless for a city to perform an internal least cost analysis to ensure it is constructing a public improvement at the least cost to the city and its taxpayers. 10. What are the Thresholds Below Which a Formal Least Cost Analysis is Not Required to be Prepared or Submitted to BOLI? There are two thresholds below which a formal least cost analysis is not required to be prepared or submitted to BOLI: one for paving-related projects and the other for all other public improvement projects. For paving projects (including the resurfacing of highways, roads or streets), if the estimated cost of the project is less than $125,000, then the project is not subject to the least cost analysis requirement. 4 For all other public improvement projects, if the estimated value of construction is $200,000 or less, then the project is not subject to the least cost analysis requirement. 5 4 ORS 279C.305(6). 5 A lower cost threshold exists for road resurfacing work at a depth two or more inches. A city must conduct and submit a least-cost analysis if the estimated cost for resurfacing is greater than $125,000. FAQ Public Improvement Least Cost Contracting Requirements 3

5 11. What Public Improvement Projects are Excluded from the Least Cost Analysis Requirement? Cities are not required to conduct a least cost analysis if: The public improvement is for distributing or transmitting electric power. The public improvement is for placing maintenance patching, chip seals or other seals as a maintenance treatment on highways, roads, streets or bridges. The city did not receive a responsive bid or proposal for constructing the public improvement from a responsible bidder or proposer after soliciting bids or proposals, provided the solicitation (i) occurred within one year before the date which construction began; and (ii) allowed a commercially reasonable time in which to perform the construction How is a Least-Cost Analysis Conducted? A least cost analysis simply compares the estimated cost of contracting with a private contractor to construct a public improvement to the cost of the city constructing a public improvement using its own equipment and personnel. To conduct the analysis, a city must: Estimate the cost of contracting with a private contractor to construct the public improvement, including all necessary and related costs that a private contractor would incur; (such as performance and maintenance bonds); Estimate the costs the city would incur in constructing the public improvement using the city s own equipment or personnel; and Compare the cost of the work if performed by a private contractor with the cost of the work if the city uses its own equipment and personnel What Must a City s Cost Estimate Include? ORS 279C.305(3) provides a list of costs a city is to include in its cost estimate. Many of these costs are equally applicable to the cost estimate the city will prepare for contracting out the work to a private contractor. The city s cost estimate to use its own equipment or personnel must include: The cost of labor, including all benefits the city pays to or on behalf of employees who will work on the contract, workers compensation insurance premiums and the cost of traveling to and from the site of the improvement; 6 ORS 279C.305(5),(6). 7 ORS 279C.305(3). FAQ Public Improvement Least Cost Contracting Requirements 4

6 The cost of equipment, including costs associated with leasing, renting or acquiring and owning the equipment, costs from transporting the equipment to and from the improvement site, costs for depreciation and costs for insuring, operating, storing, repairing and maintaining the equipment; The costs of administration and overhead the city will incur, including insurance, show and office costs that are allocable to the public improvement; The cost of tools and materials; The costs associated with any contracts into which the city must enter; The commercially reasonable value of quality control testing if the city would require quality control testing for the work that a private contractor performed on the public improvement; and Any other necessary and related costs that the city will incur to construct the public improvement with the city s own equipment or personnel. 14. What Else Must a City s Cost Estimate Include? If the estimated cost of the public improvement project exceeds $200,000, the cost estimate must also include plans, specifications and estimates of the unit cost of each classification of construction work that are sufficient to control the performance of the construction work and ensure satisfactory construction quality. 15. How will the Information Reported to BOLI be Used? BOLI will conduct a review of the costs reported in the least-cost analyses to determine whether cities and other contracting agencies must adjust the methodology of calculating the costs. BOLI will review the costs to determine whether the threshold amount and other aspects of the reporting requirements should be adjusted. The review will be conducted every four years beginning in Is a City Required to Track the Actual Cost of Constructing a Public Improvement Using Its Own Equipment and Personnel? Yes. The new policy requires a city using its own equipment and personnel to construct a public improvement to prepare and preserve a full, true and accurate account of the actual 8 ORS 279C.305(7). FAQ Public Improvement Least Cost Contracting Requirements 5

7 costs of performing the work. This includes all the categories of costs that go into the cost analysis submitted to BOLI. 17. What Happens if I Make a Mistake? A contractor or trade association may file a complaint with BOLI. The complaint must be filed within one year of when the alleged mistake was discovered or should have been discovered by the contractor or trade association. The complaint must be accompanied by a $250 filing fee. 18. How Does BOLI Respond to Complaints? If BOLI reasonably concludes that the facts alleged do not constitute a violation or that the complaint is frivolous, or was filed to harass the contracting agency, or for purposes other than to enforce the requirements of the new law, then BOLI must dismiss the complaint. If the complaint isn t dismissed, BOLI has 60 days to conclude an investigation and must either find substantial evidence of a violation or end the investigation and dismiss the complaint. The penalties for violations are progressive. For a first violation, BOLI would issue a warning letter. If another violation occurs within five years, BOLI would require the city to negotiate a compliance agreement with the contractor or trade association that filed the complaint. If the city breaches the compliance agreement or BOLI finds a third violation has occurred within five years of the first violation, BOLI can pursue more substantial remedies, including the issuance of cease and desist orders and the imposition of civil penalties not to exceed $20,000. FAQ Public Improvement Least Cost Contracting Requirements 6