Special PLS Update: Construction Contracts and Change Orders August 22, 2016 Custom Policies for the Tyrrell County Board of Education Sent 3.2.
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1 9030 Facility Construction Adds new information in Section B pertaining to change orders for construction contracts: Specifies a threshold amount for change orders that determines whether Board approval is required. Change orders that do not require Board approval must be reported to the Board in the manner specified. (Strongly recommended) As required by statute, specifies a process for submitting change orders to contracts that are in excess of $300,000. (Required see note 5.) Updates the cross references. Adds information to the footnotes. (Informational only) Session Law G.S. 115C-521 Note: Session Law revised G.S. 115C-521 to require local Boards to adopt a policy governing change orders to contracts for construction or repair work. The policy applies to contracts awarded, extended, or renewed on or after October 1, To assist Boards in meeting this deadline, NCSBA issued a revision to policy 9030 on August 1, That policy remains legally compliant. However, based on feedback we received from school staff and Board attorneys, we issued this more extensive revision, along with corresponding revisions to other related policies. Let me know if for some reason you would like to see that earlier revision. Additional notes for consideration when adopting this policy: 1. The processes outlined here are recommended, but may be modified. 2. The Board may want to specify in subsection B.1.b an amount that is consistent with the authority granted to the superintendent to enter into amendments for other types of contracts, as specified in policy 6420, Contracts with the Board, or grant the same level of authority as given to the superintendent for construction and repair contracts in the newly-revised version of policy 9120, Bidding for Construction Work. To ensure the Board retains sufficient control over its contracts, we recommend that the amount not exceed $50,000 unless your system regularly and consistently engages in construction contracts valued at $25,000,000 or more per year on average. Consult your Board attorney as needed for further assistance in determining an appropriate amount. * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 1 of 6
2 3. The amount specified in the first blank in subsection B.1.c should be the same as specified in subsection B.1.b. 4. The amount specified in the second blank in subsection B.1.c should be the same as the amount of the superintendent s contracting authority designated in the newly revised version of policy 9120, Bidding for Construction Work. (If your Board is not adopting a revision to policy 9120 at this time, then the Board should specify the amount it intends to designate in policy 9120 as being within the superintendent s authority.) The purpose of this provision is to ensure Board approval is obtained for construction and repair contracts where, due to change orders, the total cost may exceed the contracting authority delegated to the superintendent in policy This could occur even though the amount of the original contract and the amount of subsequent change orders are individually within that authority. 5. Subsection B.2 may be modified; however, the policy must address the process by which a proposed change order is submitted by the contractor for approval, including any request for expedited review. Related Policies 6420 Contracts with the Board Modifies Section A to: (1) clarify that approval for construction Note 1: The amount specified in the blank in the last paragraph of Section A should be less than the amount specified in the second * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 2 of 6
3 contracts is governed by policy 9120, not this policy ; (2) distinguish ordinary contract amendments from construction contract change orders ; and (3) add a requirement for reports to the Board of all contracts and contract amendments that exceed a threshold amount set by the Board. (Recommended see Note 1) In Section D, adds a list of the principle Board policies that contain contracting requirements. (Recommended see Note 2) Adds policies to the cross references. paragraph of Section A. See footnote 8 for more information, including alternative language for consideration. Note 2: The list of policies in Section D list could be expanded to include all relevant Board policies, or may be omitted altogether. The Board never adopted this policy so we are sending it for review and adoption. Please provide the information for the blanks. I am sending the PLS version of this policy with footnotes for information Bidding for Construction Work In Section E, modifies requirements for contracts to go to the Board by establishing a dollar threshold for Board approval, to be consistent with the approach used in policy 6420 for other types of contracts. (Recommended see Note 1) In Section F, adds a requirement for reports to the Board of all construction and repair contracts approved by the superintendent that exceed a threshold amount set by the Board. (Recommended - see Note 2) Updates the cross references. Note 1: The amount designated in the two blanks in Section E should be the same. The amount establishes the upper limit of the superintendent s contracting authority for construction and repair contracts. Typically, the amount entered here would be the same as the amount specified in policy 6420, Contracts with the Board, as the upper limit of the superintendent s contracting authority for other types of contracts. The Board may, however, give the superintendent a different level of authority for construction and repair contracts by specifying a different amount here. To ensure the Board retains sufficient control over its contracts, we recommend that the amount not exceed $50,000 unless your system regularly and consistently engages in construction contracts valued at $25,000,000 or more per year on average. Consult your Board attorney as needed for further assistance in determining an appropriate amount. * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 3 of 6
4 Note 2: The reporting requirement is optional but recommended. The amount specified here should be less than the amount specified in Section E. See footnote 21 for more information, including alternative language for consideration. This policy contains changes from 4 updates. In addition to this fall update, strikeout reflects changes from the following updates: September 13, strongly recommended to respond to 1. A new law that forbids the award of a contract subject to G.S to a contractor who does not, or whose subcontractors do not, comply with statutory obligations regarding verification of employment status. G.S applies to purchase contracts with an estimated cost of $90,000 or more, and construction or repair contracts with an estimated cost of $500,000 or more. 2. A new statutory requirement prohibiting discrimination against bidders/contractors for being party to or not being party to an agreement with a labor organization. And required changes to 1. Update enumerated list of services that trigger local preference. 2. Remove an old statutory reporting requirement that has been repealed. September 30, Added provision advising contractors that prequalification may be required prior to bidding. (Recommended if the Board adopts new policy 9115, Prequalification of Bidders for Construction Projects.) Authorizes the use of newspaper and electronic bidding for formal * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 4 of 6
5 bids and empowers the superintendent to determine which method will be used for specific purchases or categories of purchases. (This makes policy 9120 consistent with policy 6430, Section A, which contains identical language.) (Optional) I am sending the policy 9115, Prequalification of Bidders for Construction Projects for Board review with these policies even though it is not included in this fall update. This optional policy is provided for Boards that use or want to use the construction management at risk contracting method; construction managers are required to prequalify contractors using a prequalification process adopted by the Board. The policy is also required if the Board intends to prequalify bidders for construction contracts. (Optional) S.L established new requirements for prequalification of bidders. There are both advantages and disadvantages to prequalifying bidders, so we recommend that the Board discuss this process with the Board attorney before prequalifying bidders for a particular project. November 13, Revises requirements pertaining to E-verify compliance, in accordance with change to state law. (Required The statement described in the policy to be included in construction contracts is recommended to comply with state law, which prohibits the Board from entering into most contracts unless the contractor and its subcontractors comply with the requirements of Article 2 of Chapter 64 of the General Statutes. The Board should consult the Board attorney for guidance in drafting appropriate contract language) April 19, Added provision requiring compliance with the Iran Divestment Act of 2015, which prohibits contracts with * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 5 of 6
6 persons determined to be engaging in investment activities in Iran. (Strongly recommended) Updated legal references. (Required) 9130 Supervision of Construction Contracts Adds a provision noting that change orders for construction contracts are to be managed in accordance with policy 9030, Facility Construction. Deletes requirement that consultant service contracts be approved by the Board in every case, since these contracts would be subject to the approval requirements of policy 6420, Contracts with the Board. Updates the cross references. * Recommended means the provisions are not required by law, but NCSBA considers them good practice. 6 of 6
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