St. Louis County Municipal League
Municipal Officials Training AcademyMay 23, 2013
PUBLIC WORKS CONTRACTS:STREAMLINING A COMPLICATED PROCESS
Ryan A. MoehlmanCunningham, Vogel & Rost, P.C.
legal counselors to local government333 S. Kirkwood Road, Suite 300
St. Louis, MO 63122314.446.0800
www.municipalfirm.com
STATE LAW REQUIREMENTS PUBLIC WORKS
• OSHA Training - § 292.675 RSMo. • Participation in Work
Authorization Program § 285.530 RSMo.
• Proof of Lawful Presence - § 208.009 RSMo.
• Prompt Payment Act - § 34.057 RSMo.
• Bond-§ 107.170 RSMo.• Prevailing Wage - § 290.210
RSMo., et seq. • Excessive Unemployment - §§
290.550 - 290.580 RSMo. • American Products -§ 34.353
RSMo.See Exhibit 1 in Handouts
Mandatory Requirements
ContractsRFPs & Other Calls for Bids
§432.070 RSMO requires that …No county, city, town, village . . . or other municipal corporation shall make any contract, unless it is within the scope of its powers or expressly authorized by law, and
the contract is made upon a promise to perform AFTER making of the contract
includes the price term ($$$$$)
A CONTRACT
§432.070 RSMO requires that …And unless the contract:Is in writingdated when made, andsigned by the parties thereto (or their agents authorized by law and duly appointed) and
authorized in writing
A CONTRACT
OSHA TRAINING
All “on-site employees” of contractors & subcontractors working on a public works project must take the 10-hour, OSHA-approved construction safety course provided by their contractor or subcontractor
OSHA Training § 292.675 RSMo
Ladder Stacking Techniques
TRAINING?WE DON’T NEED NO STINKING TRAINING
A one-time requirement that on-site employees must either:
• complete the program within 60 days of beginning work, or
• hold documentation of prior completion of the program
• For each public works project, statute’s requirements must appear in the: • resolution/ordinance
• call for bids for the contract and
• contract
OSHA Training under § 292.675 RSMo What is it?
PROPER BACKHOE OPERATION
Enforcement by MoDOLIREmployee working without OSHA training has 20 days to complete the training before employee is removed from project and penalties accrue.
Penalties = $2,500.00 plus $100.00/day per employee found on site without evidence of training
Penalties forfeited to city/county City/county must withhold penalty amounts assessed by MoDOLIR from payments to contractor.
Notice of these penalty provisions must be included in contract.
OSHA Training - Section 292.675 RSMo
For that extra l i ft .
FORKLIFT COMBOS
WORK AUTHORIZATION
As a condition for the award of any contract or grant in excess of $5,000 by a political subdivision to a business entity: business entity shall, by sworn affidavit & provision of documentation, affirm enrollment &participation in a federal work authorization program with respect to employees working on contracted services.
Affidavit affirming that business entity does not knowingly employ any person who is an unauthorized alien in connection with the contracted services. See Exhibit 2
IMMIGRATION 285.530.2 RSMO
Any bid or response to an RFP for the award of any contract for services in excess of $5,000 shall be accompanied by an affidavit from business entity that:1. Enrolled & participating in, E-Verify, or
other federal work authorization program AND
2. Does not knowingly employ any person who is an unauthorized alien in conjunction with the contracted services.
MoDOLIR REGULATIONS15 CSR 60-15.020
Missouri Department of Labor regulations implication–
City/County should require submittal of affidavit & documentation of participation in a federal work authorization program (i.e. E-Verify) as part of the bid package
Emergency exception. emergency = natural and manmade
disasters: major snow and ice storms, floods, tornadoes, severe weather, earthquakes, hazardous material incidents, nuclear power plant accidents, other radiological hazards, and major mechanical failures of a public utility facility.
Suspends the requirements for 15 working days (3 weeks)
IMMIGRATION 285.530 RSMO
Does NOT apply to:
Permits or licenses issued by the City
Purchase of goods or products
IMMIGRATION 285.530 RSMO
I l legal al iens prohibited from receiving any state or local public benefit
PROOF OF LAWFUL PRESENCE
Prohibits any illegal alien from receiving state or local "public benefits"
Requires all applicants at time of application for public benefits to provide “affirmative proof that the applicant is a citizen or a permanent resident of the United States or is lawfully present in the United States.”
§208.009 RSMO
“public benefit” means any grant, contract, or loan provided by a … local government …
PUBLIC BENEFITS 208.009 RSMO
affirmative proof required “at the time of application” Driver’s license or other document recognized by the federal government as proof of lawful presence
PUBLIC BENEFITS 208.009 RSMO
NO AFFIDAVIT REQUIRED unless applicant cannot supply documentation, then can request “temporary public benefits” upon affidavit
Affidavit only good for 90 daysSee Exhibit 3
PUBLIC BENEFITS 208.009 RSMO
OTHER CONTRACT REQUIREMENTS
HT TP://WWW.LABOR.MO.GOV/PUBLIC_BODIES_GUIDEBOOKExhib it 4
§ 34.057 RSMo.Prompt Payment Act
§34.057.1. ... all public works contracts made and awarded by...any municipality, county..., for construction, reconstruction or alteration of any public works project, shall provide for prompt payment by the public owner to the contractor
PROMPT PAYMENT ACT
Must “make progress payments to the contractor on at least a monthly basis as the work progresses, or, on a lump sum basis according to the terms of the lump sum contract”§34.057.1(1) RSMo.
PROMPT PAYMENT ACT
Retention “shall not exceed 5% of the value of the contract …unless the public owner and the architect or engineer determine that a higher rate of retainage is required to ensure performance of the contract”
But never more than 10%Only if public owner and the architect or engineer determine that a higher rate of retainage is required to ensure performance of the contract Include determination in bid
documents
PROMPT PAYMENT ACT
RetentionMust pay the retainage, less any offsets/deductions authorized in the contract or otherwise authorized by law, after substantial completion of the work and acceptance by the public owner's authorized contract representative
PROMPT PAYMENT ACT
Must be paid within 30 days of the first of the following to occur:1. Completion of the project and
complete filing of all documents required by contract
2. Architect/Engineer certification of completion
3. Certification of completion by the contracting authority
Payment “made” when placed in US Mail
FINAL PAYMENT
PROMPT PAYMENT ACT
If payment is not made within the 30 days & NO GOOD FAITH and Reasonable Cause to withhold payment:Interest at 1½% per month
FINAL PAYMENT
PROMPT PAYMENT ACT
Liquidated damages Unsatisfactory job progress Defective construction work/material
not remedied Disputed work Failure to comply with any material
contract provision Third party claims filed or reasonable
evidence that a claim will be filed; Failure to make timely payments for
labor, equipment or materials; Damage to a contractor, subcontractor
or material supplier; Reasonable evidence that a
subcontractor or material supplier cannot be fully compensated under its contract with the contractor for the unpaid balance of the contract sum;
Citation of contractor or subcontractor for failure to comply with material provision of contract and which result in violation of any federal, state or local law, regulation or ordinance applicable to project causing additional costs or damages to the owner.
REASONS TO WITHHOLD FINAL PAYMENTWhat constitutes “reasonable cause” & “good faith”:
PROMPT PAYMENT ACT§34.057.5
PAYMENT BOND
On every project with estimated costs in excess of $25,000.00 Must require a payment bond from a contractor
Generally equal to contract amount
Provides equivalent protection on public projects as provided by mechanics lien laws
Payment Bond; § 107.170
WARNING: Officials Charged with requiring Payment Bond may incur personal liability for failing to comply with statute. Union Pacific R. Co. v. St. Louis Marketplace, Ltd.
Partnership, 212 F.3d 386, 390-91 (8th Cir. 2000) (Official immunity did not protect city officials, Mayor and Comptroller, who were charged with performing ministerial duty of requiring payment bond from a contractor.)
A public entity may defend, save harmless and indemnify any of its officers and employees, whether elective or appointive…arising out of an alleged act or omission occurring in the performance of a duty under this section.
IF IN DOUBT, REQUIRE PAYMENT BOND
Payment Bond; § 107.170
PREVAILING WAGE
Public Policy of State of MissouriWorkers employed by or on behalf of a public body are to be paid no less than the prevailing wage on public works projects
The prevailing wage rate differs by county and for different types of work.
Prevailing Wage; § 290.210 et seq.
Wage rates must be attached to and made part of the specifications for the work
Must “specify in the resolution or ordinance and in the call for bids for the contract what is the prevailing hourly rate”
Prevailing Wage; § 290.210 et seq.
Sent to Division of Labor Standards before project is bidREQUEST FOR WAGE DETERMINATION FORM PW-3
Prior to beginning any work on a public works project, public body awarding a contract shall notify the Department of Labor, on a form prescribed by the department, of the scope of the work to be done, the various types of craftsmen who will be needed on the project, & the date work will commence on the project.Submit PW-3 for Every ProjectTypical turnaround by MoDOLIR: 2-3 Days
PREVAILING WAGE NOTICE TO MoDOLIR
Filed with Division of Labor Standards when project is awardedPROJECT NOTIFICATION FORM PW-2
Required Ordinance or Resolution ProvisionsMust specify in the resolution or ordinance and in the call for bids for the contract what is the prevailing hourly rate of wages in the locality for each type of workman needed to execute the contract and also the general prevailing rate for legal holiday and overtime work. 290.262.10
Prevailing Wage; § 290.210 et seq.
The public body awarding the contract shall cause to be inserted in the contract a stipulation to the effect that not less than the prevailing hourly rate of wages shall be paid to all workmen performing work under the contract. 290.250.1.
Prevailing Wage; § 290.210 et seq.
REQUIRED CONTRACT PROVISIONS:
§290.290.2. Upon completion of work and prior to final payment, each contractor and subcontractor shall file with the contracting public body an affidavit of full compliance with the Prevailing Wage Law
City/County cannot make final payment until affidavit is filed in proper form and order.
Applies when federal assistance (grants, loans, loan guarantees) used to pay for project over $2,000 and where law under which federal assistance is provided requires it.
Required contract language in 29 CFR 5.5
DAVIS-BACON (FEDERAL) 40 USC §3141
Which Applies to My Federal Funded Project?BOTH – Frank Bros. v. Wisc. DOT, 409 F.3d 880 (7th Cir. 2005)
(1) Davis-Bacon Act did not implicitly preempt application of state's prevailing wage law, and
(2) there was no conflict between federal and state statutory schemes.
Include both Federal and State Wage Determination in Bids Documents for Federally Funded Projects
Federal Wage Determinations available at: http://www.wdol.gov/dba.aspx
FEDERAL DAVIS-BACON V.
STATE PREVAILING WAGE
Excessive Unemployment in Effect Only Missouri laborers & laborers from “nonrestrictive” states allowed to be employed on Missouri public works projects when unemployment rate exceeds 5% for 2 consecutive months
Restrictive states: AK, AZ, CA, CO, CT, DE, DC, FL, ID, IL, IA, ME, MA, MS, MT, NV, NJ, ND, OK, SD, U.S. Virgin Islands, WV and WY
Excessive Unemployment – Sections 290.550 -580
RSMo
See Lakeside Roofing Co. v. Nixon (EDMo. 2012)
Mo. Excessive Unemployment Law held unconstitutional under the Privileges and Immunities and Equal Protection Clauses
Problem:Law Still on the Books, but is Unenforceable
DO NOT Deny Contracts based on Worker Residence
Excessive Unemployment – Sections 290.550 -580
RSMo
American Products - §34.353 RSMo
Each contract made by a public agency for . . . any public works shall contain a provision that any manufactured goods/commodities used or supplied in performance of that contract or any subcontract thereto shall be manufactured or produced in the U.S.
Exceptions Contracts under $25,000 Limited availability of certain American products Acquisition would impose cost increases above a
certain percentageMay opt out by having “executive head” certify in writing that political subdivision has adopted a formal written policy to encourage purchase of products manufactured or produced in the USA Must retain copy of policy for 3 years May want to consider including notice of policy in
bid documents
American Products - §34.353 RSMo
Alternative to Opting OutInclude American Product requirements in
ContractProvide that American Product
requirement shall not apply if statutory exceptions do apply <$25,000; Only one line of a particular good or product made in
USA; Not made in USA in sufficient quantities; USA Product raise price by >10%.
If one of these exceptions apply, contractor must provide City information sufficient to make necessary certifications.
American Products - §34.353 RSMo
OTHER CONTRACT/BID ISSUES
The #1 Question:Do I Have to Bid this
Project Out?
The #1 Answer:Depends.
COMPETITIVE BIDDING
These laws require competitive bidding for construction projects to be awarded by counties, cities, and other political subdivisions: § 49.420, RSMo (county buildings) § 50.660, RSMo (county publ ic works
and buildings) § 68.055, RSMo (port authority
projects) § 88.700, RSMo (public street
improvement contracts by 4 th class cities using special tax)
§ 88.940, RSMo (constitutional charter cities with populations of 75,000-80,000)
§ 91.170, RSMo (initial city water works)
§ 100.170, RSMo (projects financed by revenue bonds where municipality undertakes, obligation)
§ 177.086, RSMo (school distr ict faci l it ies cost ing more than $15,000)
§ 177.161, RSMo (metropolitan school distr icts including repairs, alterations, and additions)
§ 204.350, RSMo (common sewer distr icts)
§ 205.080, RSMo (county publ ic health centers)
§ 229.050, RSMo (construction, improvement, or repair of roads, bridges, and culverts by county commissions, township boards, and road distr icts)
§ 231.250, RSMo (road distr icts) § 233.405, RSMo (incorporated road
distr icts) § 245.150, RSMo (levee distr icts) § 248.110, RSMo (sanitary drainage
distr icts) §§ 249.330, 249.340, and 249.510,
RSMo (sewer distr icts)
COMPETITIVE BIDDING
Look at your Ordinances:Some Ordinances require competitive biddingOften include thresholds (example): >$5,000 = Competitive Bidding required Between $5,000-$2,500 = No bidding, but
Board Approval required <$2,500 = City Administrator can purchase
Must determine what is right for your City
COMPETITIVE BIDDING
Generally enforceable unless they are deemed a “penalty” rather than an estimation (i.e., a reasonable forecast) of the damages an owner will face for failure to complete project on time
“time is of the essence”
Liquidated Damages Clause
In public contracts, a liquidated damage clause will be enforced regardless of whether there is a showing of any actual harm, but rather just on the showing that the contract was breached.Sides Constr. Co. v. City of Scott City, 581 S.W.2d 443, 447 (Mo. App. S.D. 1979)
Liquidated Damages
THINK FIRST…Liquidated damage clause will limit the damages to the amount stated in the contract regardless of whether actual damages far exceed that amount (so long as they are not unreasonably disproportionate).
Liquidated Damages
Performance Bond v.Payment Bond
Payment BondStatutory
Benefits Subcontractors
Ensures Payment (mechanic lien replacement)
Performance BondDiscretionary (but very good idea)
Benefits City
Ensures Completion & Maintenance
Because of Different Beneficiaries and Different Uses of funds from Bonds, generally, Performance Bonds and Payment Bonds should not be combined; require each separately. See Exhibits 5 & 6
“May reject any and all bids, waive technicalities or deficiencies, … may negotiate with any or all bidders or others for more favorable terms or prices, … may award contract to other than bidder submitting the lowest cost bid proposal”
WATCH OUT:Negotiation After Bid Opening not allowed under some federally-funded projects (CDBG)
NEGOTIATION AFTER
BID OPENING
SEE EX. 7 – NOTICE
In determining who is the “lowest and best bidder” on a public works contract, a public authority is vested with wide discretion, and its decision, when made honestly and in good faith, will not be interfered with by the court, even if erroneous.KAT Excavation, Inc. v. City of Belton, 996 S.W.2d 649 (Mo.App. W.D. 1999)
Discretion in Bid Awards
Each public works contract is unique and public officials should consult legal counsel to ensure that each contract and set of bid documents comply with all statutory requirements
REMEMBER
Successful Public Works Bidding and Contracting Will Require Input from and Coordination with:• Public Works Director• City Engineer• City Attorney• City Administrator
• City Clerk• Finance Director• Private
Architects/Engineers• Other Stakeholders
See Exhibit 7 – Checklist for Public Works Bidding/Contracts
While the information in this presentation concerns legal matters, it is not, nor is it intended to be, legal advice; neither is it meant to contradict any legal advice you might have previously received, nor is it a substitute for the particularized advice of your own legal counsel. The information provided is merely for educational purposes and you should not act or rely on such information without seeking the advice of an attorney.
Individuals seeking specific legal advice or assistance should contact a licensed attorney.
Cunningham, Vogel & Rost, P.C.
CONTACT: Paul V. RostCunningham, Vogel & Rost, P.C.legal counselors to local government75 W. Lockwood, Suite OneSt. Louis, Missouri 63119
[email protected]: 314.446.0800
Fax: 314.446.0801www.municipalfirm.com
Cunningham, Vogel & Rost, P.C.