Understanding. Public Construction Contracts. Katherine Lynn, Director

Transcription

1 Understanding Public Construction Contracts Katherine Lynn, Director

2 Working Together

3 Architect Owner Consultants The team shares the vision but each brings different value to the team. Engineers Contractor Subcontractor

4 OWNER State Agency Building Commission Finance State Fire Marshall Risk Management ARCHITECT Engineers Special Consultants CONTRACTOR Subcontractors Suppliers Fabricators Bonding Company Insurance Company

5 Roles and Responsibilities of the Owner Awarding Authority RFP s and A/E selection process Negotiating agreements Determination of low bidder and award of contract Funding Program/project requirements

6 Roles and Responsibilities of Architect Perform work in responsible manner Design to budget Design to code Coordinate design team Inspections for compliance with design Familiarity with Building Commission s procedures Make recommendations to Owner Administer construction contract

7 Roles and Responsibilities of Contractor Familiarity with Building Commission s procedures Bidding Construction in accordance with plans Communication Delays Differing site conditions Other construction issues

8 Role of the Building Commission Regulatory Agency Building codes Compliance with building codes Compliance with ADA Compliance with Energy Code Compliance with State Law Compliance with Manual of Procedures Bidding General Conditions termination, change orders, delays, dispute resolution Standard Articles extra services, billing/invoicing for services

9 Purpose Building Commission created in 1945 Code of Alabama 1975, Title Authorized and directed to adopt, promulgate, and enforce a State Building Code and to keep the code updated and consistent with acceptable architectural and engineering practices

10 Purpose of Building Commission Enforces minimum building code for state buildings, schoolhouses, hotels and motels and motion picture theaters (Title )

11 Purpose of Building Commission Responsible for reviewing plans and specifications for compliance with handicapped accessibility standards prescribed by the State Fire Marshall for public buildings and facilities (Title and )

12 Purpose of Building Commission Enforces minimum energy conservation code for new and renovated state buildings (Title )

13 Powers and Duties of Building Commission Supervises, administers and inspects construction and improvement projects for state agencies and departments, Postsecondary Education, PSCA, and similar authorities

14 Powers and Duties of Building Commission Provides periodic inspections of state funded projects including locally funded K-12 public school projects

15 Building Commission s Manual of Procedures Code Requirements Plan Review and Submittal Requirements Design Professional Services Fee Schedule Forms and Contract Documents Bidding and Award Contract Administration Inspections Special Procedures for PSCA and Other Authorities

16 State Building Code 2009 International Building Code 2009 International Plumbing Code 2009 International Mechanical Code 2009 International Fuel Gas Code 2009 International Fire Code 2011 National Electrical Code ASHRAE (Energy Code) 2008 ICC 500 ICC/NSSA Standard for the Design and Construction of Storm Shelters 2010 Americans with Disability Act Standards

17 Building Commission Procedures Architect Agreement Approval State Agencies Postsecondary PSCA Other Bond Authorities Plan Approval Process Final plans must be approved before bids are received Construction Contract Approval State Agencies Postsecondary PSCA Other Bond Authorities Inspection Process Pre- Construction Required Inspections Certificate of Substantial Completion

18 Mandatory Plan Review Plans and specifications must be approved before receiving bids Plan review process allow 30 days Code of Alabama 1975, Title 41, Section b) It shall be unlawful for any state building or construction or any public schoolhouse which does not conform to the requirements of the building code to be erected or acquired.

19 Mandatory Plan Review Life Safety Issues Fire protection Egress requirements Emergency lighting Adequate plumbing fixtures Adequate ventilation Accessibility Energy efficiency Other code requirements

20 Building Commission s Required Inspections Pre-Construction Conference Notice to Proceed Pre-Roofing Conference Above-Ceiling Inspection Final Inspection Certificate of Substantial Completion Occupancy by Owner Year-end Inspection

21 Building Commission Role by Project Type Type of Project Funding Source Plan Review Approvals Required Contract Review Inspections Reference State Agency State Appendix A-1 County or City School PSCA Appendix A-2 County or City School Local Appendix A-4 Private School Private Appendix A-6 Postsecondary PSCA Appendix A-2 Postsecondary Local Appendix A-3 Higher Education PSCA Appendix A-2 Higher Education Local Appendix A-5 Hotels/Motels Private Appendix A-6 Motion Picture Theaters Private Appendix A-6 Local Government Buildings Local ADA Only Appendix A-7 Pre-Assembled/Portable Buildings for State State Appendix A-8 Lease/Lease-Purchased by State State Appendix A-9

22 OWNER State Agency Building Commission Finance State Fire Marshall Risk Management ARCHITECT Engineers Special Consultants CONTRACTOR Subcontractors Suppliers Fabricators Bonding Company Insurance Company

23 Architectural/Engineering Services

24 Procurement of A/E Services Public Works Law Code of Alabama 1975, Title 39, Section (d) Exempt from competitive bidding Qualifications-based selection process shall not engage in actual construction, repair, renovation, or maintenance of the public works with their own forces, by contract, subcontract, purchase order, lease or otherwise.

25 Qualification and Experience Factors Per Title (3) Specialized expertise demonstrated by the proposed project approach Resources available to perform the work in timely manner Past performance including quality of work, ability to meet schedules, cost control, and contract administration Availability and familiarity with project location Proposed project management techniques Ability and proven history in handling special project contracts

26 BUILDING GROUPS OF THE SCHEDULE Group I: Industrial buildings without special facilities, parking structures and repetitive garages, simple loft type structures, warehouses exclusive of automated equipment, and other similar utilitarian type buildings. Group II: Armories, apartments, cold storage facilities, dormitories, exhibition halls, hangers, manufacturing/industrial plants, office buildings without tenant improvements, printing plants, public markets, and service garages. Group III: College classroom facilities, convention facilities, correctional and detention facilities, extended care facilities, gymnasiums (simple, prefabricated-pre-engineered, minimum types shall be classified under Group II), hospitals, institutional dining halls, laboratories, libraries, medical schools, medical office facilities and clinics, mental institutions, office buildings with tenant improvements, parks, playground and recreational facilities, police stations, public health centers, research facilities, schools (elementary and secondary), stadiums, and welfare buildings. Also, central utilities plants, water supply and distribution plants, sewage treatment and underground systems, electrical sub-stations and primary and secondary distribution systems, roads, bridges and major site improvements when performed as independent projects. When any or all of these types of improvements are incidental to an overall plan of architectural development they will be grouped with the basic architectural service of the overall project unless stated otherwise in the agreement. Group IV: Aquariums, auditoriums, art galleries, college buildings with special facilities, communications buildings, special schools, theaters and similar facilities. Group V: Residences and specialized decorative buildings unless otherwise stated in the agreement. Custom designed furnishings shall be categorized in Group V except when considered incidental to the basic architectural service for a building.

27 SCHEDULE OF BASIC FEE RATES FEE IN PERCENTAGE COST OF THE WORK BUILDING GROUP I II III IV V Up to $100, ,001 to 200, ,001 to 300, ,001 to 400, ,001 to 500, ,001 to 600, ,001 to 700, ,001 to 800, ,001 to 900, ,001 to 1,000, ,000,001 to 1,250, ,250,001 to 1,500, ,500,001 to 1,750, ,750,001 to 2,000, ,000,001 to 2,500, ,500,001 to 3,000, ,000,001 to 3,500, ,500,001 to 4,000, ,000,001 to 5,000,

28 Negotiating the Agreement Basic Services Responsibilities per ABC Form B2-A, Standard Articles Fee Schedule Basic Services Services A Schematic Design (10%) Services B Preliminary Design (15%) Services C Final Design (50%) Services D Bidding and Award of Contract (5%) Services E Construction Administration (20%)

29 Negotiating the Agreement Adjustments to the Basic Fee Increase for major renovation up to 25% of basic fee Does not include reroofing Substantial Duplication Reduction of one-half of Basic Fee for Services A-C for second building (building cost only) No reduction to Services D & E No reduction to Basic Fee for sitework

30 Negotiating the Agreement Additional Services Consulting services such as LEED Certification or geotechnical services or additional services outside of basic scope such as programming or prequalification Extra Services Services required by events beyond the Architect s control (Article 5) Include Schedule of Hourly Rates Reimbursable Expenses Definition of allowable/non-allowable reimbursable expenses (Article 6) Agreements must include Not to Exceed amount and applicable rates

31 Determining A/E Fees Basic Fee (Budget x Fee Percentage) + Additional Services (Consultant s Fee plus markup) + NTE for Reimbursable Expenses = Total Design Fee Adjustments to any of these items requires an amendment to the agreement

32 Payment Schedule for A/E Fees Service A: Schematic (10%) - Due upon approval of Schematic Submittal Services B: Preliminary (15%)- Due upon approval of Preliminary Submittal Services C: Final Design (50%) 90% due upon approval of Final Submittal Services D: Bidding and Award (5%) Remaining 10% of Service C and Service D due upon execution of contract

33 Payment Schedule for A/E Fees Services E: Construction Administration (20%) - % paid to match % on contractor s pay application up to 90%. Final 10% paid when contractor s final pay application is paid. Unawarded Bid Alternates 75% of lowest bid amount of unawarded alternates Reimbursable Expenses Not to exceed State Comptroller s rates (no markup on mileage)

34 Public Works Law

35 OWNER State Agency Building Commission Finance State Fire Marshall Risk Management ARCHITECT Engineers Special Consultants CONTRACTOR Subcontractors Suppliers Fabricators Bonding Company Insurance Company

36 Definition of Public Works Code of Alabama, Title 39, Section (5) PUBLIC WORKS. The construction, repair, renovation, or maintenance of public buildings, structures, sewers, waterworks, roads, bridges, docks, underpasses, and viaducts as well as any other improvement to be constructed, repaired, renovated, or maintained on public property and to be paid, in whole or in part, with public funds or with financing to be retired with public funds in the form of lease payments or otherwise.

37 Public Works Law Requirements Projects over $50K must be publicly advertised (Title 39, Section ) Once a week for three consecutive weeks in newspaper of general circulation in the county If over $500K, once in three (additional) newspapers of statewide circulation Sealed bids taken, opened and read at the place, time and date in advertisement

38 Public Works Law Requirements Exceptions to requirement to publicly advertise Projects under $50K Professional services such as architectural, engineering, project management, etc. (Title 41) Must not engage in performance of any of the work through their own or subcontracted forces Projects declared an emergency affecting health, safety or convenience Homeland Security projects

39 Bidding and Award of Contract Contract Award to Lowest Responsible and Responsive Bidder Definition of Responsible and Responsive per Title (a) A responsible bidder is one who, among other qualities determined necessary for performance, is competent, experienced, and financially able to perform the contract. A responsive bidder is one who submits a bid that complies with the terms and conditions of the invitation for bids.

40 Prequalification Requirements Requirements in Title (b) Advertised in same manner as project Related to the purpose of the contract Related to contract requirements or the quality of product or service Related to the responsibility, including competency, experience and financial ability of bidder Will permit reasonable competition at a level that serves the public interest Recommendations for handling protests

41 Award of Public Works Projects Use of alternates in determining low bidder Used to add or reduce bid to the available funds Funds available announced immediately prior to bid opening Fewest number of alternates taken in order to produce a price within the available funds Determination of lowest bidder

42 Award of Public Works Projects Mistakes in bid No forfeiture of bond if low bidder provides written notice to awarding authority within 3 working days Documentary evidence of calculation or clerical error, inadvertent omission or typographical error Mistake of law, judgment or opinion not valid ground for withdrawal without forfeiture Low bidder prohibited from doing any work on contract in any capacity or bidding if project is rebid

43 Award of Public Works Projects Negotiation of award (AGO ) Actual shortage of funds to award at low bid Awarding authority must disclose shortage of funds and recommend changes Architect must certify no substantial changes, prices reasonable and fair No objection from other contractors Changes are in public interest Redesign/rebid would result in delay, additional cost No collusion, fraud or unjust enrichment Negotiated changes must not exceed 10%

44 Act Prompt Payment Act

45 Prompt Payment Act 2010 revisions to Title 8 Payments under private contracts Time period for processing payment Penalty for late payment Retainage 2011 revisions to Title 39 (Public Works Law) Payments under Public Works projects Time period for processing payments Penalty for late payment Retainage

46 Prompt Payment Act 2014 Revisions Pre-bid meetings must be held at least 7 days prior to bid opening unless the project has been declared an emergency Projects cannot bid unless grant confirmed and matching funds available Contracts must designate person to review progress of completed work and review contractor s documents Designated person must review payments within 10 days after submission

47 Prompt Payment Act 2014 Revisions (cont.) Designated person within 10 days must either forward to owner for payment or return to contractor and disclose error in writing Awarding authority within 10 days must either make payment to contractor or forward to funding agency Payments must be made within 35 days (reduced from 45 days) Interest due on payments made after 35 days except at close of fiscal year or other announced official closures

48 Prompt Payment Act 2014 Revisions (cont.) Interest rates shall be equal to legal amount assessed for late payment of taxes If source of funding is grant or reimbursement which will not be available until contract is executed, this must be disclosed in contract and payment must be made within 10 days of awarding authority s receipt of funds Does not apply to contracts entered into in response to or as result of disaster event

49 Sales and Use Tax Certificates of Exemption for Certain Governmental Entities

50 Provisions of Act Authorizes Alabama Department of Revenue (ADOR) to grant Certificates of Exemption from sales and use taxes to certain governmental entities Enacted May 9, 2013 Applies to any contract awarded on or after January 1, 2014

51 Qualifying Governmental Entities The State of Alabama A county or incorporated municipality of Alabama An Alabama public school An Alabama industrial or economic development board or authority already exempt from sales/use taxes

52 Exemptions from Act Does not apply to the following: Contracts with federal government Contracts for highway, road, bridge construction or repair Any contract entered prior to January 1, 2014, or any change orders or contract extensions to contracts entered into prior to January 1, 2014

53 Bidding of Tax-Exempt Projects Under Act Act , Section 1(g) states the bid form shall provide for an accounting for the tax savings Bid proposal forms for tax-exempt projects must include estimated sales tax savings (refer to ABC Form C-3A) Bid proposal forms that do not include estimated sales tax are non-responsive and must be rejected

54 Applying for Certificates of Exemption The Owner Must submit application for each project Submit Application for Certificate of Exemption (Form ST: EXC-01) to DOR Submit executed construction contract May submit Letter of Intent (coordinate with DOR)

55 Applying for Certificates of Exemption The Contractor Must submit application for each project Submit Application for Certificate of Exemption (Form ST: EXC-01) to DOR Submit executed construction contract May submit Letter of Intent (coordinate with DOR) Submit list of subcontractors (update within 30 days of any change) Submit copy of General Contractor s license Submit copy of State and county business license

56 Applying for Certificates of Exemption The Subcontractor Must submit application for each project Submit Application for Certificate of Exemption (Form ST: EXC-01) to DOR Submit copy of contract with General Contractor Submit copy of General Contractor s license Submit copy of State and county business license

57 Certificates of Exemption for Projects Under $50K Act only allows certificates to be granted to a contractor licensed by the State Licensing Board for General Contractors Contractors working on projects under $50K are not required to have a General Contractor s license Contractor or subcontractor will not be eligible to apply for certificate unless they have a GC s license regardless of the cost of the project or the subcontract

58 Issuance of Certificates of Exemption DOR will issue certificates to the Owner, Contractor and subcontractors Each contractor and subcontractor must have a Consumer Use Tax account Will be assigned by DOR when certificate is issued Contractors and subcontractors must file a monthly consumer use tax return Must report all tax exempt purchases and all taxable purchases Must report online at My Alabama Taxes (

59 Allowable Expenses Sales and Use Tax exemption in Act applies to Purchase of building materials, construction materials and supplies and other tangible personal property that become part of the structure pursuant to a qualifying contract entered into on or after January 1, 2014

60 Non-Allowable Expenses Sales and Use Tax exemption in Act does not apply to Purchase of property that does not become part of the structure (see Rule ) Building materials or supplies not incorporated into the structure

61 Penalties for Misuse of Certificates of Exemption Contractors and subcontractors who intentionally misuse certificates of exemption may be liable for Actual sales or use tax due Civil penalty by DOR of $2000 or two times any state and local sales or use tax due Based on willful misuse may be barred from the use of any Certificate of Exemption on any project for up to two years

62 Timeline and Expiration of Certificates Owner must allow for time to receive certificates in contract performance time Options for proceeding without certificate Owner may continue to appoint the contractor as the Owner s Purchasing Agent using Form ST:PAA1 Requires Owner to be invoiced directly for materials Requires the Owner to pay vendor directly from their funds

63 Expiration of Certificates of Exemption Certificates issued for duration of contract based on completion date on construction contract Must coordinate and request extensions for additional work/time extensions granted by change order Additional time extensions may also be required If contractor does not complete project on time If contractor does not pay for materials until after contract completion date If contract is turned over to bonding company

64 Public School and College Authority (PSCA) Funds

65 PSCA Project Initiation Superintendent sends letter to School Architect outlining scope and funds required School Architect assigns PSCA Number and notifies system and ABC ABC administers project (by law) Funds can be allocated, redirected, etc., only by written communication from local superintendent

66 PSCA Procedures Allocation and approval of PSCA project funds are tied to specific project scope

67 PSCA Procedures PSCA number assigned to funds

68 Allowable Expenses Capitol Improvements Expenditures Professional Services Architect and/or Engineer Surveying Construction Testing Construction Contract Contractor Construction Materials Fixtures, Furnishings and Equipment (FFE) Purchase of property Other miscellaneous expenses

69 Ineligible Expenses Non-capital expenditures Supplies Athletic equipment (uniforms, pads, balls, etc.) Ink cartridges and other dispensable items Personal furnishings such as art, plants, or decorative items Teaching materials (textbooks, software, etc.) Reimbursement of local payments Expenditures not related to the approved project scope

70 Building Commission s Role for PSCA Projects Administers PSCA-funded contracts Reviews plans for compliance with State Building Code Reviews contract documents including Owner- Architect Agreements, construction contracts, change orders, and amendments Reviews and approves PSCA expenditures Inspects projects during construction

71 Current Issues Emergency Contracts Work by Others Current Construction Environment Audit Findings

72 Emergency Contracts Emergency Contracts for Design Services Title (6) Contract let to the extent required to alleviate the emergency Emergency Contracts for Construction Projects Emergency Declaration per the Public Works Law, Title (e) Only allows Owner to proceed without publicly advertising All other requirements still apply

73 Emergency Contracts Emergency Construction Contracts Emergency Declaration Letter by Superintendent Signed Board resolution approving emergency contract Design professional services Not required to be publicly advertised Must have approved plans Must execute contract

74 Work by Others Must comply with Building Commission requirements Full professional design team required Plan review and approval required Architect required to perform inspections Building Commission inspections Definition of Public Works project

75 Current Construction Environment Failure to pay subcontractors Proper termination of contracts Owner s and Bonding Company s Responsibilities

76 OWNER State Agency Building Commission Finance State Fire Marshall Risk Management ARCHITECT Engineers Special Consultants CONTRACTOR Subcontractors Suppliers Fabricators Bonding Company Insurance Company

77 Construction Issues Non-payment of subcontractors or vendors Owner s responsibilities Public Works Law copy of Payment Bond Payment of retainage Pay when paid Instruction to Bidders Para. 13.c. Owner s right to terminate contractor Procedure for termination per General Conditions Notice to Cure Notice of Termination Written Notice to Surety Timeliness of response

78 Owner s Responsibilities Termination for Cause Contracts Under $50K ABC Form C-8, Article 27, A.(2) Notice to Cure Notice of Termination Upon effective date of termination, Owner may take possession of site Finish the work by whatever reasonable method Final resolution if amount required to complete the project exceeds the contract balance

79 Owner s Responsibilities Termination for Cause Contracts Over $50K ABC Form C-8, Article 27, A.(3) Notice to Cure typically issued by the Architect Notice of Termination must be issued by the Owner Demand on the Performance Bond must be issued by the Owner Surety Claims Takeover Agreements

80 Audit Findings Change Orders over 10% Change orders must be within 10% and within scope If over 10% must be due to extraordinary circumstances such as unforeseen circumstances or differing project conditions Allowances Allowance amounts included in contract for work that is over $50K and that will not be bid Is the work over $50K? Can the work be performed as a separate contract? Will the work be performed by the general contractor? Is there intent to exceed the 10% or avoid bidding? Examples: Landscaping, Audio/Visual, FFE

81 Collection of User Fees Effective October 1, 2014, Building Commission will collect a fee for services Plan Review Fee Contract Administration Fee (State Agency or PSCA funded) Permit (Inspection) Fee Required for final plans received after October 1, 2014 and projects bid after October 1, 2014 Payment by check or electronic payment

82 Questions? Alabama Building Commission s website is Contact us at (334) or Alabama Building Commission PO Box Montgomery, AL