Legislative Alerts

Priority Issues.

Letter to the Editor:

The Pennsylvania Department of General Services (DGS) has issued an intent-to-award letter for the construction of a $178 million prison expansion project at SCI German Township in Fayette County.  The problem is the selected firm does not present the best deal for the Commonwealth – not in price, not in value and not in construction schedule.

For SCI German Township, DGS used a selection process known as Best Value Contracting (BVC).  Rather than selecting the lowest price submitted on bid day, BVC evaluates proposals based on (1) price, (2) technical credentials and (3) disadvantaged business enterprise  (DBE) participation, each of which are given weightings of 60%, 35% and 5%, respectively.  When properly used, BVC prevents the bad actors and the unscrupulous contractors from taking projects from reputable contractors simply by having the lowest bid. Regardless of the criteria used to determine best value, the process only works when the government entity evaluates non-price factors in a fair and competitive manner.

Because of the size, complexity and degree of risk, the number of firms qualified to tackle a project the magnitude of SCI German Township is limited.  The list of potential bidders was further reduced to those firms with the financial wherewithal to meet all the technical requirements and cost of preparing a design-build proposal.  Thus, only six qualified firms submitted proposals.

Unfortunately, in reviewing the proposals for this project, the DGS internal review committee made errors in scoring the technical credentials and the DBE participation of the proposer who actually offered the lowest price and best schedule.  As a result, DGS selected a proposer whose price was almost $6 million more and whose schedule was nearly three months longer than the proposer with the lowest cost and shortest schedule.

For instance, the proposer with the lowest price actually lost points for promising to finish the project earlier than required by the bid document.  For the rest of the construction industry, getting the job done early is a good thing, and owners usually reward contractors for such an effort.  Whatever the case, a contractor is never penalized for finishing a project ahead of schedule.

Also, each proposer was required to submit its best estimate of what its participation of DBEs might be.  The lowest proposer estimated that 52% of the work would be done by DBEs while the successful proposer’s number was 55%.  That small difference gained the higher proposal more points in the scoring process.  While we recognize the importance of engaging DBEs, these estimates are exactly that, estimates.  DBE participation percentages are purely subjective guesses and DGS does not and cannot verify the reasonableness of these participation levels.  Nonetheless, DGS input the guesses into the grading process and awarded points accordingly.

All of this caused DGS to select a proposer with a higher price and a longer construction schedule because it scored 1.33 points (out of a total of 1000 points) or 0.133% higher than the proposal with the lowest cost and fastest schedule.  If DGS would have followed proper BVC principles, this would never have been the case.

In our view, there is no value in awarding a construction contract for a project that is going to cost almost $6 million more and take nearly three months longer to build – especially when a technically-qualified alternative proposal clearly exists.  Therefore, we believe DGS senior officials should overrule their internal review committee and award the project to the technically -qualified contractor who offered the best price and best schedule.

Sincerely,

Terrence M. McDonough, Executive Director
General Contractors Association of Pennsylvania
20 Erford Rd, Suite 212A
Lemoyne PA  17043

Brief summary of how the recent PA budget effects GCAP issues.

Finally, the legislature did not act to extend the Education Empowerment Act which included the Mandate Waivers Program. Under the Mandate Waivers initiative, school districts were able to seek relief from Pennsylvania’s archaic Separations Act. Even though the program expired on June 30th, GCAP will keep working with its education and industry partners to find a way to give school districts the option of utilizing single prime when doing so makes the most sense for them. In the meantime, GCAP will continue to dispel the myth that bidding projects both ways ensures the best price in school construction.

GCAP is also monitoring work by the Senate Labor and Industry on HB 400. This legislation is intended to help the Commonwealth identify those bad actors who intentionally misclassify workers as independent contractors to avoid paying taxes, insurance costs and payroll deductions or to hire illegal aliens.

SB 601 – legislation authored by Sen. Pat Browne (R-Lehigh) – will protect contractors from being taxed twice for the same work via a business privilege tax. GCAP continues to work on the bill which would prevent double taxation on companies when they have their permanent base of operations in one municipality and a temporary job site trailer in another.

Also of “budget” importance to Pennsylvania construction was the agreement to invest $600 million in capital construction and renovation projects through the Redevelopment Assistance Capital Projects program (RACP). As a result of legislation passed in conjunction with budget, funding will be made available for dozens of shovel-ready projects across the Commonwealth as well as future construction initiatives of all sizes and duration.

For most of the late spring and early summer, the most pressing issue in Harrisburg was passage of an “on-time” state spending plan for Fiscal Year 2010-11. While not without some last minute twists and turns, the Pennsylvania General Assembly presented HB 2279 (the Commonwealth’s 2010-11 General Fund budget) to the Governor on June 30th. As you have undoubtedly read already, it was the first “on-time” budget for Governor Rendell, and also his last.

Assuming receipt of $850 million in federal FMAP funds – an assumption questioned by some in the State Capitol – HB 2279 keeps state spending almost level when compared to the previous fiscal year. In addition, the budget bill signed by the Governor does not call for any new or increased taxes – especially those that would have been most harmful to companies in the Pennsylvania construction industry. At one point in the process, the discussion had focused on adding state’s sales tax to new items, including professional services (i.e. architectural and legal fees), to help increase state revenues. GCAP and the rest of the Commonwealth’s business community worked hard to educate lawmakers on the tremendously harmful impact such a decision would have.

If FMAP funds do not come, state budgeteers will need to march back to the negotiating table to figure out a way to close an $850 million hole so stay tuned.

Regional Director Walter Palmer, along with GBCA counsel and staff met with the Governor’s Secretary of Legislative Affairs, Colleen Kopp to discuss why GCAP opposes the Commonwealth crafting a PLA for SCI Graterford without having the contractors’ group at the table. Palmer discussed with the Kopp the ways in which GCAP could assist the Commonwealth in negotiating the best terms for a PLA at the Montgomery County prison. For more information about the meeting, please call contact Terry McDonough at 717-731-6272 or email hidden; JavaScript is required.

As a follow-up to testimony provided before the Senate Education Committee, GCAP sent a letter to the Committee reiterating the extremely positive impact a mandate waiver from the Separations Act continues to have on a major construction project at the A.W. Career Center near Pittsburgh.

GCAP confirmed for the Committee that not only did Uhl Construction’s initial bid come in lower than what the school had budgeted, but the single prime delivery method is allowing the school to do additional work that will make the building LEED certified at the silver level while still being on time and UNDER budget.