Public Construction Contracting

Oregon Senate Bill 254A and the CMGC method generally garner more attention than is justified. Here is the background.

On a typical non-CMGC project, the general contractor will bid on a complete or nearly complete set of design documents. This is referred to as “design-bid-build.” In public construction, competitive bidding is required by statute to reduce expenditure of taxpayer funds. In the CMGC method, rather than awaiting a complete design, the contractor is chosen early and asked to (1) review the developing design of the architects and engineers, and (2) perform certain other planning and organizational work that theoretically benefits the project. The “early” work is generally considered the “CM” portion of the CMGC scope, while the post-bid or post-GMP (guaranteed maximum price) work is generally considered the “GC” portion.

What is so different about this process? Not much, really, but there are a couple of considerations that differ from traditional design-bid-build. First, because the CMGC is chosen before design is complete, the CMGC is not able to provide concrete pricing at the time it is selected; by the time the design is sufficiently complete to allow pricing, the CMGC has already been chosen. Critics argue (accurately) that this dynamic puts more leverage in the hands of the CMGC during price negotiations because the owner has now invested time and CM dollars in the CMGC and probably does not want to manage a second-round selection process to get a new contractor if the original CMGC’s price is not competitive. While this poses a theoretical problem for owners, the CMGC provides its percentage fee (markup) at the time of selection and is required to competitively bid all subcontractor work, reducing if not eliminating the concerns over cost control and negotiating leverage.

In recent years, the Department of Industrial Relations (“DIR”), the Legislature and the California courts have expanded the application of the prevailing wage law to projects through the broad definition of a “public works,” beyond what most contractors, owners and even counsel would expect.  While most involved in construction anticipate that any work directly for, or direct payment of funds by, a public entity would trigger the prevailing wage laws, several decisions, determinations and recent legislation have significantly expanded the prevailing wage reach over the last several years.

Very recently, the DIR determined that both the shell construction of a Volkswagen auto dealership, and the separate tenant improvements in that shell, were public projects subject to prevailing wage law due to the land transfer by the City to the developer “because the Land is a transfer of an asset of value for less than fair market price”.

Similarly, in May 2012, the DIR determined that a contractor involved in the $95 million privately funded development and construction of a new agricultural facility was subject to prevailing wage law, but for the application of the de minimis doctrine, when the contractor accepted the City’s “in lieu of fees” for the City required infrastructure improvements.  The DIR determined that “[i]t does not matter that Company is performing infrastructure improvements itself or that Company could have elected to simply pay the fee and let the City perform the infrastructure improvement work. Company plans to accept the fee waiver. Therefore, it has received or will receive public funds within the meaning of subdivision (b)(4)”.  For additional applications and coverage determinations, see also the DIR’s most recent determination.  Previously in January 2012, the Legislature eliminated the applicability of the DIR’s 2010 determinations that solar photovoltaic power purchase agreements that include installation of leased equipment on public property were not public works through the passage of Labor Code section 1720.6.  This statute specifically defines a public project in part to be the “construction or maintenance of renewable energy generating capacity or energy efficiency improvements,” if certain elements are triggered.  See the DIR determinations from April 21, 2010, PW Case 2008-038 and 2009-005, for the prior analysis:  (See also Lab. Code, §§ 1720-1720.6.)

The California Labor Commission, also known as the Department of Labor Standards Enforcement, which is a division of the Department of Industrial Relations, is “reinvigorating” its enforcement actions against public contractors that try to dodge the state’s wage and labor laws. Recently, the Commission issued orders and hefty fines to nine contractors for violations totaling over

Oregon’s legislature recently changed ORS 279C.110 to require all public agencies, both state and local, to use qualifications as the basis for awarding contracts for architectural, engineering, photogrammetric mapping, transportation planning and land surveying services.  Before the change, local contracting agencies could use price as a basis for award but state agencies could not.  Once

I previously told you about some upcoming Seattle tunneling projects. Here now is a link to artist renderings of the new SR 520 floating bridge project, which will raise the existing bridge up above the pontoons, making space for maintenance works and storm water treatment and fire suppression utilities underneath:


The photo site has

Parties to construction contracts take notice:  the legislature enacted new consequences and contract restrictions to Oregon’s Prompt Pay Acts starting in 2012.               

On public improvement contracts first advertised or solicited on or after May 28, 2012, the newly revised Act (a) changes the interest penalty rate for a prime contractor’s failure to make timely payment

On January 6, 2011, the Washington State Department of Transportation (WSDOT) signed a contract with Seattle Tunnel Partners for the biggest piece of the SR 99 Viaduct replacement project, the 1.7 mile long tunnel carrying traffic from the south end of the Seattle waterfront to near the Seattle Center.  This is a design-build contract with

In the last two decades, the Idaho State Legislature has authorized design-build contracting for many different types of public projects. It appears that the Legislature will continue this trend for highway projects. In February, a House committee voted to print a bill that would allow the Idaho Transportation Department (IDT) to award design-build contracts for highway projects. 

Here is list of laws that may apply to projects in which the federal government is involved.

These reflections about government involvement are prompted by recent changes to the Federal Acquisition Regulations that give federal contractors an affirmative duty to disclose any “credible evidence” that comes to their attention of (a) the violation of certain

In an effort to stimulate the economy, federal and state government agencies are seeking to promote new construction projects. This trend of government involvement in construction projects is likely to continue. When the government is involved, it is important to know whether this involvement causes public contracting laws to apply.

Governmental involvement in a construction