07/09/2011

Public works construction law massively altered by state budget bill

State and local governments will soon have a number of new project delivery systems available to them thanks to massive changes in Ohio's public works construction law that are included in the new state budget bill signed Thursday by Governor John Kasich.

So-called "construction reform" was a major plank of the governor's budget proposal as it was introduced and passed by the House of Representatives earlier this spring.  The Ohio Senate watered down the House provisions in the version of the budget bill it passed last month, one of many issues that had to be resolved by a House-Senate conference committee.

The conference committee report recommended last week and approved by both houses reverted to the House language, giving the governor a major victory and setting the stage for huge changes in the way state and local public works projects are built in Ohio.

While the game-changing provisions included in the budget bill do not eliminate Ohio's ancient multiple-prime contracting requirement for public works projects, state and local authorities will have three alternatives to multiple-prime, including:

• General contracting – A public authority will be able to enter into a single construction contract with a general contractor, however, the public authority would have the right to reject any subcontract awarded by the general contractor if it "determines that the bidder is not responsible."

• Design/build – A public authority will be able to enter into a contract with a single entity "for both the design, construction, demolition, alteration, repair, or reconstruction of a public improvement."

The public authority would be required to evaluate the qualifications of competing design/build firms and rank them on this basis, then open contract negotiations with the highest-ranked firm.  The selected firm must submit a price proposal for both design and construction which would serve as the starting point for the negotiation of the design/build fee.

A public authority intending to enter into a design/build contract will be required to retain the services of a "criteria architect or engineer" to assist in the development of the project scope and the evaluation of competing design/build firms.  The criteria architect or engineer also may serve as the public authority's representative throughout the project.

• Construction manager at-risk (CMAR) – A public authority will be able to enter into a contract with a CMAR, who would be required to provide the public authority with a guaranteed maximum price for the project, utilizing an "open book pricing method," whereby the CMAR makes available to the public authority "all books, records, documents and other data in its possession pertaining to the bidding, pricing, or performance" of the contract.

None of these three new project delivery systems will be available to state and local authorities until the Ohio Department of Administrative Services promulgates rules setting out procedures and criteria that public authorities must use in making a "best value selection" of a CMAR or a design/build firm, and establishing the contract forms to be used by CMARs and design/builders when entering into subcontracts.

At a seminar sponsored by ACEC Ohio last week, State Architect Lane Beougher said it would be mid-December, at the earliest, before rules could be written and approved by the Joint Committee on Agency Rule Review.