11/12/2015. School Construction A Refresher PUBLIC CONSTRUCTION ISSUES INTRODUCTIONS TODAY S PRESENTERS. November 12, 2015

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1 School Construction A Refresher November 12, MASBO Fall Conference DoubleTree Park Place Minneapolis Minnesota Mark Azman Shamus O Meara O Meara, Leer, Wagner & Kohl, P.A. O Meara, Leer, Wagner & Kohl, P.A. mrazman@olwklaw.com spomeara@olwklaw.com O Meara, Leer, Wagner & Kohl, P.A Metro Blvd, Suite 600 Minneapolis, MN olwklaw.com INTRODUCTIONS TODAY S PRESENTERS Shamus P. O Meara, Managing Shareholder, O Meara, Leer, Wagner & Kohl, P.A. Shamus O Meara is the Managing Shareholder with the Minneapolis law firm of O Meara, Leer, Wagner & Kohl where he has represented school districts and public entities for 25 years. Shamus has been through many crises with public officials, including representing two school districts involved with school shooting incidents. He has been recognized as a Minnesota Attorney of the Year and presents nationally on construction, school safety and emergency management topics. Shamus works consults state and national departments of education, school boards associations and many school districts, reviewing construction contracts and emergency management plans to facilitate appropriate programs in schools and on campuses. He has served on the NSBA Council of School Attorneys, and as a safety consultant and expert witness for many educational institutions. Mark R. Azman, Senior Counsel, O Meara, Leer, Wagner & Kohl, P.A. In litigation and transactional matters, Mark Azman represents and advises school districts and public entities, focusing his practice in the areas of construction law and insurance coverage. Mark has handled the day-to-day litigation management of numerous large-scale Minnesota and Wisconsin public school district matters involving school safety, tort liability, employment law, and construction matters. Mark also negotiates and drafts contracts and other agreements on behalf of school districts in the fields of construction, joint enterprise, insurance, employment, and real estate. He also has defended counties, cities and townships in suits involving issues including election disputes, dram shop, employment disputes, feedlots, roads, water law, and zoning. PUBLIC CONSTRUCTION ISSUES Construction Project Initiatives: 1.8 billion in 2015 referenda - majority for capital improvement; Improved economy and construction climate; real property/asset assessment. Project Delivery: Many choices: Traditional; CM (at risk/advisor); Best Value; Program Management; Teaming Arrangements; Professional Services; Servicing/Maintenance; Commissioning/Due Diligence; Statutory Design Build (Energy Efficiency); Security; Innovative Approaches Market Conditions and Competition: Available Skilled Labor; Project Labor Agreements; Prevailing Wage Specialized Projects: Solar Projects; Energy Efficiency; Cell Towers, Leases, Commissioning, etc. Competitive Bidding: Overview, legal update, pitfalls Contracting: Who s on first; who s interests; early evaluations; teaming; dispute resolution; payment issues; termination; timely completion; change orders and changed conditions 1

2 PUBLIC CONSTRUCTION ISSUES Schedule: It takes time to construct buildings; schedule can be impacted by many factors. Early Involvement of all Parties: from school design committee to architect/engineer, contractor, CM; insure that everyone is on the same page. Caution: early cost estimates are commonly wrong Staff Training: The industry needs to improve staff training on how to use the new facility. Including operations (boilers, controls, etc.) Leasing: Many districts are considering leasing the space they occupy; many implications (short term and long term) SUMMARY Delivery Systems Specifications Solar Projects Responsible Contractor Law Bid Protests Contractor Wages Performance, Payment and Bid Bonds Final Payment Competitive Bidding Over $100,000 sealed, advertised bid $25, $100,000 direct negotiation with two or more quotes $25,000 or less open market 2

3 Sealed Bid Promotes efficient use of public funds Lowest responsible, responsive bidder Responsibility Not who is more responsible, but whether a bidder is responsible Evaluation is subjective Factors include: Finances, Integrity, Ability, Prior experience with Bidder, Likelihood of Faithful Performance Sealed Bid (cont.) Responsiveness determined at time bids are opened. bid must conform substantially to the advertised plan and specifications Is there a variance? Is it substantial or material? Does it provide an advantage? Plain duty to reject substantial or material variance bids May not modify bid docs after bids opened Sealed Bid (cont.) Material Variance examples incomplete or qualified bids; improperly completed bids; failure to comply with mandatory subcontractor listing requirements; failure to include mandatory documentation; failure to acknowledge receipt of bid solicitation amendments; failure to include required bid security; bids that are submitted late or delivered to the wrong location; bids prepared without a mandatory site inspection; takes exception to or proposes furnishing alternate work or materials not conforming substantially to specification requirements; failure to properly address required social program preferences or hiring goals or percentages; includes material mistakes; imposes material conditions or qualifications. 3

4 Best Value Can be used for RFP or Sealed Bid Factors Price (mandatory factor) Quality of prior work Timeliness of prior work Technical capabilities Prior projects on budget / ability to minimize cost overruns Customer satisfaction Must have training prior to using Theory: Reduce chances of unqualified contractor Minimize changes orders, claims Greater value Joint / Cooperative Purchasing Cooperative purchasing through State Joint Powers Act Professional Services Architects, lawyers, engineers, accountants, others with technical, scientific or professional training May directly negotiate / utilize RFP process Emergency Contracts In the case of injury to or destruction of buildings, a contract may be made for repairs without first advertising for bids where the public interest would suffer by delay There is little further guidance from government agencies or cases about the evidence sufficient to satisfy the delay standard. Repairs generally means mending defective portions of a structure If reasonable options exist to allow for competitive bidding, then an emergency may not likely exist 4

5 SPECIFICATIONS Proprietary Specifications Generally prohibited, except as to noncompetitive supplies and equipment School Board decides whether noncompetitive or not Prohibition may be limited to supplies and equipment contracts, and not contracts for work or services Violation is a gross misdemeanor If proprietary specs are to be used, consider: There must be a reasonable justification for specifying the product and the selection must serve the best interests of the constituents A specification may particularly describe or name a particular product, and utilize an or equal clause. The specification should describe the desirable features of the product, and include an explicit requirement that any equal must meet or exceed the desired features. SPECIFICATIONS Design versus Performance Design Specification The Bid Documents set forth in precise detail the materials to be employed and the manner in which the work is to be performed The contractor may not deviate from the specifications Performance Specifications The Bid Documents set forth an objective to be achieved, without specific design information, and the contractor must exercise discretion and creativity in selecting the means to reach the objective SOLAR PROJECTS Community Solar Gardens Solar Garden built in District s home county District purchases subscription for energy District receives Bill Credit on utility bill Made in Minnesota Solar Incentive Program Solar array installed on school building School may not own equipment, but agrees to buy energy produced; excess goes to the grid Option to purchase equipment 5

6 RESPONSIBLE CONTRACTOR Responsible Contractor Law Section 16C.285 Applies: to construction contracts > $50,000 on competitive bid and best value projects to bids issued on or after January 1, 2015 Bid docs must include: Definition of responsible contractor Statement that failure to meet criteria or to verify it meets the criteria renders contractor not eligible for the contract Statement that false verification renders that contractor ineligible for contract and may result in termination of awarded contract RESPONSIBLE CONTRACTOR Contractor must submit verification with its bid: compliance with work comp and unemployment comp insurance requirements compliance with Dept of Revenue and Dept of Employment and Econ. Development registration requirements has a valid federal tax id if a foreign corporation, has filed a certificate to transact business in Minnesota has not violated minimum wage/prevailing wage and overtime laws, or misrepresented the employment relationship with a worker has not violated building codes or required an individual to adopt independent contractor status or misclassifies an employee as an independent contractor. Has not had a certificate of compliance of an affirmative action plan revoked Admin or Transportation Depts not assessed monetary sanction for failure to meet targeted group business, disadvantaged business, or veteran owned business goals, for lack of good faith, more than once in the prior three year period NOTE: Occurrences for these items prior July 1, 2014 shall not be considered RESPONSIBLE CONTRACTOR Contractor must submit verification with its bid (cont.): Is not currently suspended or debarred by the Federal or State or any political subdivision of the State [NEW!!] that have authority to debar NEW!! Before signing contract, requires supplemental verification that all subcontractors have submitted verification to contractor of compliance with minimum criteria Highlights of Recent Update Applies to motor carriers, but not design professionals $50,000 contract value excludes Tax Increment Financing Before signing contract, requires supplemental verification that all subcontractors submitted verification to contractor of compliance with minimum criteria Applies to bid documents issues on or after July 1,

7 BID PROTESTS Protester may first submit protest to District Protester would then file in District Court Usually move quickly to obtain TRO / Injunctive Relief Winning contractor mobilizing resources, materials being ordered, and work promptly proceeding Delay can adversely impact the District, the winning contractor, the community and the public, which could be partly the basis to deny a protest Contracts awarded in violation of law are void Damages limited to costs to prepare failed bid, and possibly attorneys fees Voided contractor may still recover payment for work BID PROTESTS Legal Update! Rochester City Lines v. City of Rochester Legislative protest District Court Quasi-Judicial protest Writ to Court of Appeals PREVAILING WAGE Where state funds are used, in whole or in part, wages of laborers, workers and mechanics on projects should be comparable to wages paid for similar work in the community State Funds would include state grants, state aids, but funds should have a direct relationship to the project 7

8 PROJECT L ABOR AGREEMENT Pre-project, collective bargaining agreement with labor organization(s) Establishes terms of employment for specific project Typical provisions: No work stoppages, strikes, picketing or other disruptive activities Establishes wage rates / benefits Worker grievance procedures Contractors agree to PLA (but don t have to be union shops) Contractors pay MN State Building Trades Health Reimbursement Subs must also agree to PLA Pro: safety, skilled labor, reduce labor issues that impede project Con: increased costs; favors unions BONDS Bid Bonds A bid bond is a guarantee that the bidder has the capability to perform and complete the project once that bidder s bid is selected Reduces submission of frivolous bids Can trigger if bid withdrawn or mistaken Payment on the bond typically the difference between the low bid and next lowest bid Commonly 5% of bid Not mandatory BONDS Performance Bonds Protects owner against risk of default Provide funds to complete the project If project is over $100,000, then required Payment Bonds Guarantee that contractor will pay labor and material suppliers and subcontractors if the contractor fails to pay Generally the owner does not make the claim against the bond If project is over $100,000, then required 8

9 FINAL PAYMENT IC134 Contractor Affidavit Withholding tax certification Before final payment, a contractor must submit to the District Form IC134 certified by the MN Department of Revenue Contractors should not make final payment to their subs before receiving the subs certified IC134. FINAL PAYMENT Consent of Surety If the contract is bonded, the contractor must obtain the written consent of the surety prior to final payment The surety can include the issuer of the Performance Bond, the Payment Bond or the Bid Bond FINAL PAYMENT Waiver of Claims Under the General Conditions, final payment can result in the waiver of claims by the owner, except as to liens, unsettled claims, failure of work to comply with contract documents, special warranties 9

10 QUESTIONS Thank You! 2015 MASBO Fall Conference DoubleTree Park Place Mark Azman Shamus O Meara O Meara, Leer, Wagner & Kohl, P.A. O Meara, Leer, Wagner & Kohl, P.A. mrazman@olwklaw.com spomeara@olwklaw.com O Meara, Leer, Wagner & Kohl, P.A Metro Blvd, Suite 600 Minneapolis, MN olwklaw.com 10