Public Hospital Districts Public Works Web Conference

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

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

3. 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

4. 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

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

6. General Requirements of Public Works Contracts

7. 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

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

9. Prevailing wage • Must be paid on public works contracts • Determined by Washington State Labor and Industries • http://www.lni.wa.gov/prevailingwage/default.htm

10. 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

11. 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

12. Retainage • Retention of funds to • Address claims arising under the contract • Ensure taxes are paid

13. 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

14. 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

15. Public Bidding

16. Bidding Public Works Projects • Public 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

17. “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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. Questions???

29. Small Works Roster and Limited Works Options

30. 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

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

32. 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

33. 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

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

35. 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

36. Related Public Bidding Considerations

37. 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

38. 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

39. 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

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

41. 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

42. 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

43. 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

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

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

46. Resources • Municipal Research Services Center • www.mrsc.org/Subjects/PubWorks/pb/pb.aspx • Manuals, examples, forms, information • Association of Washington Public Hospital Districts • www.awphd.org • Public Hospital District Legal Manual

47. Questions???

48. Thank you for participating!Please fill out the evaluation.