Public Hospital Districts Public Works Web Conference Association of Washington Public Hospital Districts

Presenters Taya Briley Director, Legal Services Association of Washington Public Hospital Districts Brad Berg Attorney Foster Pepper & Shefelman, PLLC

Goals Provide an overview of legal aspects of public works contracts Consider various public works bidding options Highlight related public works issues Review possible future bidding alternatives Questions and answers

Project at Happy County Public Hospital District No. 1 Rural public hospital district Facility constructed in 1960 Periodic updates and renovations Needs new imaging services department and remodel of adjacent patient wing Estimated cost of $5 million

Typical Project Development Hire architect, engineer, project manager Draw up plans and specifications Estimate cost Bid project Select and hire contractor Build the project

General Requirements of Public Works Contracts

Contracts with Architects and Engineers Publish requirements for professional services in advance –each occasion –general announcement of projected requirements Make request for qualifications Consider qualifications and needs Negotiate with most qualified firm

Licensing Requirements Contractor must be licensed No violations of public works laws within the past two years

Prevailing wage Must be paid on public works contracts Determined by Washington State Labor and Industries age/default.htm

Public Works Contract Requirements: Continued Performance bond –Must cover certain persons –Options for: $25,000 or less $100,000 or less Recommendation that bond cover entire cost of project

Contractor Payments Timely payment –date specified in contract or –30 days after receipt of proper invoice or goods or services Notification if unsatisfactory performance Interest required if payment wrongly withheld

Retainage Retention of funds to –Address claims arising under the contract –Ensure taxes are paid

Release of Funds Contractor may request to reduce amount of retained funds to 100 percent of remaining work at any time After contract work completed –Release of funds to contractor 60 days after request –Continued retention of funds only for certain reasons

District Duties on Contract Completion Notification of Department of Revenue No payments from retained funds prior to Department of Revenue authorization Payment to Department after all liens against retained funds are paid

Public Bidding

Bidding Public Works Projects $50,000Public works projects and materials purchases in excess of $50,000 must be publicly bid Public bidding is not required for purchase of equipment or supplies Publication requirements if work over $25,000 executed by means other than contract

“Bid Splitting” Bids may not be split in order to –avoid complying with public bid statutes –qualify for small works roster or limited works processes

Exemptions to the Bidding Requirements Requirements for purchases of materials may be waived by the board of commissioners if: –Single source of supply –Special facilities or market conditions Requirements may be waived for purchases or public works in event of an emergency

Traditional Bidding Process 13 day notice District provides plans and specifications Bid proposal security required Projects over $1 million-- identification of certain subcontractors required Bids publicly opened at date and time provided in notice

Traditional Bidding Process: Evaluating the Bids Bid is awarded to the lowest responsible bidder or to best bidder No award may be made in excess of estimated cost of the work Board of commissioners can reject all bids

Traditional Bidding Process: Awarding the Contract Once contract is awarded –Bid proposal security returned –Performance bond required for “winner” Security may be forfeited if contract is not entered into within 10 days

Identifying the Successful Bidder Lowest responsible bidder –Based on hospital district’s plans and specifications Best bidder –Based on bidder’s own plans and specifications

Lowest Responsible Bidder In addition to price consider –Ability, capacity, and skill –Reputation, experience, efficiency –Ability to work in specified timeline –Quality of previous work –Previous compliance –Other information

Choosing the Lowest Responsible Bidder Award generally made to lowest bidder meeting statutory factors Establishment of qualifications in the bid proposal is critical Criteria must be related to the project needs

Choosing the Best Bidder Consider the same factors used to select the lowest “responsible” bidder Permits selection of a bidder that submits a superior design even though the price may be higher

Protests May happen for a variety of reasons Once the hospital district has entered into a contract, the protest is considered moot Proposed legislation would prevent a hospital district from entering into a contract for a period of two days

Change Orders Alteration to project not provided for in bid specification Some change orders must be re- bid Determine whether to re-bid on a case by case basis

Questions???

Small Works Roster and Limited Works Options

Small Works Roster Projects estimated to cost under $200,000 Provides simplified alternative to traditional public bidding Small works roster for materials purchases under $15,000

Small Works Roster Components Adopt a resolution and policies Establish roster(s) Meet licensure requirements Fulfill publication requirements Establish master contracts (optional)

Small Works Roster Procedures Telephone, written, or electronic quotations from contractors Invitation for quotation includes scope and nature of work Invite all appropriate contractors on roster or 5 appropriate contractors Work opportunities equitably distributed

Small Works Roster Procedures: Continued Additional requirements for projects over $100,000 Bid quotations are open to inspection Publish list of contracts awarded for real property improvements Model small works roster is available

Limited Public Works Option Projects under $35,000 Limited usefulness for public hospital districts Still a good method to follow Certain contracting requirements waived

Limited Works Procedures Small works roster and advertising requirements do not have to be followed Solicit bids from three contractors on roster Equitably distribute work opportunities Maintain list of contracts awarded

Related Public Bidding Considerations

Hospital District as Landlord: Bidding Requirements A gray area Improvement followed by lease to private party triggers prevailing wage requirements Short term lease and improvements made for public purposes creates a “public works project” Otherwise, case by case analysis

Hospital District as Tenant: Bidding Requirements Work by landlord may not have to publicly bid Greater than fifty percent of project used by hospital district triggers prevailing wage requirements

Hospital District as Tenant: Bidding Requirements, continued Considerations: –Whether improvement is made by landlord to avoid public bidding –Length of lease –Useful life of improvements –Significance of improvements to hospital district –Whether improvement is property of landlord

Contracts for Building Engineering Systems Alternate bidding processes provided in statute Competitive process Request for proposals process

Penalties Remedy for willful and intentional violation: –not less than $300 civil penalty and –joint and several liability for damages to the district Attorneys fees may be awarded to prevailing party in public works dispute

Conflicts of Interest Prohibited A consideration for commissioners and “municipal officers” Contract made in violation of statute is void Officer is subject to civil penalty of $300 and may be subject to forfeiture of office

The Future? Alternative Public Works Options Used by many types of local governments Probably soon available to public hospital districts AWPHD sponsored bill to grant authority to public hospital districts

General Contractor-Construction Manager Option Complicated projects Promotes collaboration Fixed price Example: remodel of occupied hospital wing

Design-Build Option Large standardized project Little design consultation required Example: medical office building

Resources Municipal Research Services Center – –Manuals, examples, forms, information Association of Washington Public Hospital Districts – –Public Hospital District Legal Manual

Questions???

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