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Presentation on theme: "PUBLIC WORKS CONTRACTS: Streamlining A Complicated PROCESS"— Presentation transcript:

1 PUBLIC WORKS CONTRACTS: Streamlining A Complicated PROCESS
St. Louis County Municipal League Municipal Officials Training Academy May 23, 2013 Ryan A. Moehlman Cunningham, Vogel & Rost, P.C. legal counselors to local government 333 S. Kirkwood Road, Suite 300 St. Louis, MO 63122


3 Mandatory Requirements
Contracts RFPs & Other Calls for Bids OSHA Training - § RSMo. Participation in Work Authorization Program § RSMo. Proof of Lawful Presence - § RSMo. Prompt Payment Act - § RSMo. Bond-§ RSMo. Prevailing Wage - § RSMo., et seq. Excessive Unemployment - §§ RSMo. American Products -§ RSMo. See Exhibit 1 in Handouts

4 A CONTRACT § 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 ($$$$$)

5 A CONTRACT And unless the contract: Is in writing dated when made, and
§ RSMO requires that … And unless the contract: Is in writing dated when made, and signed by the parties thereto (or their agents authorized by law and duly appointed) and authorized in writing


7 OSHA Training § RSMo 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

Ladder Stacking Techniques

9 OSHA Training under § 292.675 RSMo What is it?
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


11 OSHA Training - Section 292.675 RSMo
Enforcement by MoDOLIR Employee working without OSHA training has 20 days to complete the training before employee is removed from project and penalties accrue. Penalties = $2, 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.

12 FORKLIFT COMBOS For that extra lift.


14 Immigration RSMO 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

15 MoDOLIR Regulations 15 CSR 60-15.020
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: Enrolled & participating in, E-Verify, or other federal work authorization program AND Does not knowingly employ any person who is an unauthorized alien in conjunction with the contracted services.

16 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

17 Suspends the requirements for 15 working days (3 weeks)
Immigration RSMO 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)

18 Permits or licenses issued by the City
Immigration RSMO Does NOT apply to: Permits or licenses issued by the City Purchase of goods or products

Illegal aliens prohibited from receiving any state or local public benefit

20 § RSMO 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.”

21 means any grant, contract, or loan provided by a … local government …
Public Benefits RSMO “public benefit” means any grant, contract, or loan provided by a … local government …

22 affirmative proof required “at the time of application”
Public Benefits 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

23 Affidavit only good for 90 days
Public Benefits RSMo NO AFFIDAVIT REQUIRED unless applicant cannot supply documentation, then can request “temporary public benefits” upon affidavit Affidavit only good for 90 days See Exhibit 3

24 Other contract requirements

25 Exhibit 4

26 Prompt Payment Act § RSMo.

27 Prompt payment act § 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

28 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” § (1) RSMo. PROMPT PAYMENT ACT

29 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

30 Retention Must 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

31 Must be paid within 30 days of the first of the following to occur:
PROMPT PAYMENT ACT Must be paid within 30 days of the first of the following to occur: Completion of the project and complete filing of all documents required by contract Architect/Engineer certification of completion Certification of completion by the contracting authority Payment “made” when placed in US Mail FINAL PAYMENT

32 Interest at 1½% per month
If payment is not made within the 30 days & NO GOOD FAITH and Reasonable Cause to withhold payment: Interest at 1½% per month PROMPT PAYMENT ACT FINAL PAYMENT

What constitutes “reasonable cause” & “good faith”: 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. PROMPT PAYMENT ACT §

34 Payment bond

35 Must require a payment bond from a contractor
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

36 Payment Bond; § 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, (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

37 Prevailing wage

38 Prevailing Wage; § 290.210 et seq.
Public Policy of State of Missouri Workers 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.

39 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”

40 Request for wage determination form PW-3
Sent to Division of Labor Standards before project is bid

41 Prevailing wage Notice to MoDOLIR
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 Project Typical turnaround by MoDOLIR: 2-3 Days

42 Project notification form PW-2
Filed with Division of Labor Standards when project is awarded

43 Prevailing Wage; § 290.210 et seq.
Required Ordinance or Resolution Provisions Must 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. 

44 Prevailing Wage; § 290.210 et seq. Required contract provisions:
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

45 § 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.

46 DAVis-bacon (federal) 40 usc §3141
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

47 federal DAVis-bacon v. STATE PREVAILING WAGE
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:

48 Excessive Unemployment – Sections 290.550 -580 RSMo
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

49 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

50 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.

51 American Products - §34.353 RSMo
Exceptions Contracts under $25,000 Limited availability of certain American products Acquisition would impose cost increases above a certain percentage May 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

52 American Products - §34.353 RSMo
Alternative to Opting Out Include American Product requirements in Contract Provide 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.

53 Other contract/Bid issues

54 Competitive bidding The #1 Question: Do I Have to Bid this Project Out? The #1 Answer: Depends.

55 Competitive bidding These laws require competitive bidding for construction projects to be awarded by counties, cities, and other political subdivisions: § , RSMo (county buildings) § , RSMo (county public works and buildings) § , RSMo (port authority projects) § , RSMo (public street improvement contracts by 4th class cities using special tax) § , RSMo (constitutional charter cities with populations of 75,000-80,000) § , RSMo (initial city water works) § , RSMo (projects financed by revenue bonds where municipality undertakes, obligation) § , RSMo (school district facilities costing more than $15,000) § , RSMo (metropolitan school districts including repairs, alterations, and additions) § , RSMo (common sewer districts) § , RSMo (county public health centers) § , RSMo (construction, improvement, or repair of roads, bridges, and culverts by county commissions, township boards, and road districts) § , RSMo (road districts) § , RSMo (incorporated road districts) § , RSMo (levee districts) § , RSMo (sanitary drainage districts) §§ , , and , RSMo (sewer districts)

56 Look at your Ordinances:
Competitive bidding Look at your Ordinances: Some Ordinances require competitive bidding Often 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

57 Liquidated Damages Clause
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”

58 Liquidated Damages 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)

59 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).

60 Performance Bond v. Payment Bond
Discretionary (but very good idea) Benefits City Ensures Completion & Maintenance Payment Bond Statutory Benefits Subcontractors Ensures Payment (mechanic lien replacement) 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

62 Discretion in Bid Awards
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)

63 REMEMBER 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 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

64 Cunningham, Vogel & Rost, P.C.
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.

65 Cunningham, Vogel & Rost, P.C.
Contact: Paul V. Rost Cunningham, Vogel & Rost, P.C. legal counselors to local government 75 W. Lockwood, Suite One St. Louis, Missouri QUESTIONS? Phone: Fax:

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