Direct Contracting for Small Works
This page describes the direct contracting process that may (optionally) be used by public agencies in Washington State for small works roster contracts under $150,000, including rotation, negotiation, and small/certified business utilization.
It is part of MRSC's Small Works Roster Manual, which places an emphasis on the use of the statewide small works roster administered by MRSC Rosters.
Small Works Roster Checklist: Also see MRSC's Small Works Roster Checklist, which provides a two-page overview of the small works roster process – including preparing your project, competitive bids, direct contracting, and post-award.
New legislation: Beginning January 1, 2027, HB 2420 (enacted in 2026) will allow more public works contracts to be awarded using the small works roster process by increasing the small works roster threshold in phases:
- Previous threshold: $350,000
- January 1, 2027 to June 30, 2027: $530,000
- July 1, 2027 to June 30, 2028: $560,000
- July 1, 2028 to June 30, 2029: $590,000
- July 1, 2029 to June 30, 2030: $620,000
- July 1, 2030 and later: $650,000
The direct contracting limit of $150,000 will stay the same. All thresholds shown exclude sales tax. We will update the Small Works Roster Manual once this legislation takes effect.
Overview
For small works contracts with an estimated cost of less than $150,000, excluding sales tax, public agencies may choose by policy to use a "direct contracting" or negotiation process authorized in RCW 39.04.152(4)(b) to award the contract to an individual contractor on the small works roster without competition.
The direct contracting method is an alternative to the competitive small works process that is required for any small works contract with an estimated cost of $150,000 to $350,000. The competitive bidding process may still be used for contracts with an estimated cost of less than $150,000 if desired; public agencies are not required to use direct contracting.
Using the direct contracting method, a public agency can select one contractor from the List of Businesses (“project-specific roster” or “applicable roster”) for the project type/work category, send an Invitation to Direct Contract directly to the next identified contractor (using rotation as described below), and attempt to agree on an award amount.
To use direct contracting, your agency/local government needs procedures describing how you will rotate between different contractors or document efforts to use different contractors for different projects, how award amounts will be determined (including the negotiation process if needed), and a business utilization plan for awarding contracts to small businesses and businesses owned by minorities, women, and veterans (RCW 39.04.152(4)(b)). See MRSC's sample direct contracting procedures as a starting point.
Federal funding: If your small works project uses any federal funding, more stringent requirements will apply. For more information, see our page Planning a Small Works Roster Project.
Business Utilization Plans
Any agency that intends to use direct contracting must first establish a business utilization plan for awarding contracts to small businesses and businesses owned by minorities, women, and veterans. See RCW 39.04.152(4)(b)(iv).
A business utilization plan must be in place before direct contracting. The business utilization plan can be used when preparing projects, analyzing project-specific rosters, or applying a rotation policy.
State statutes do not include specific requirements for the contents of a business utilization plan. A business utilization plan might include an overall goal of a percentage of contract awards going to small, minority, women, and/or veteran-owned businesses. Alternatively, it might include a list of project types that will likely be solicited within a target timeframe and business utilization goals for each of those project types.
It is best practice to develop a plan no more than once per year and include targets and outcomes. MRSC recommends that you post your small works direct contracting business utilization plan publicly on your agency's website.
There is no fine or consequence listed in RCW 39.04.152 for not meeting the targets or outcomes of a business utilization plan. However, if your agency or local government has not adopted a business utilization plan, you may not use direct contracting. See RCW 39.04.152(4)(b)(v).
See MRSC’s sample business utilization plan as a starting point.
Starting Your Direct Contract in MRSC Rosters
Start by opening MRSC Rosters (mrscrosters.org) in your web browser and logging in. If you are not a member, you will need to register. If you are unsure if you or another person from your agency has an account, please contact MRSC Rosters.
After logging in, select “small works,”, enter the project name and information and indicate that the project is estimated to cost less than $150,000. The statewide small works roster will then generate a Project ID and prompt you to move to the next step in the process.
Practice Tip: The project name should be simple yet informative and should be consistent across all agency documents and records – for instance, “City of Bellingham Big Rock Garden Pavilion Renovation [insert year].”
Once you select a project type and primary work category, the MRSC Rosters system will generate a “list of businesses.” This list of businesses is the “project-specific,” “appropriate,” or “applicable” roster that you will use to rotate and identify the next contractor to directly contract with. The list will be organized alphabetically with certified firms listed first.
The platform will save the project-specific roster for each project, but we also recommend you save a copy for your procurement files.
Practice Tip: In the MRSC Rosters platform, certified businesses will appear with an indicator on any project-specific roster. Using L&I data, MRSC Rosters also provides the last date that the public agency awarded work to each of the contractors on the project-specific roster. (This data does not include project types/work categories.)
Rotation and the “Rule of Six”
When direct contracting, you must rotate between different contractors, or document your efforts to rotate, so that you do not repeatedly award contracts to the same contractor. For example, if your agency or local government has multiple roofs to replace or repair, you must try to identify different contractors to work on each roof.
- If there are six (6) or more small contractors on the List of Businesses (project-specific roster): You must negotiate/direct contract with one of those small businesses, and you must rotate through the small business contractors for different contracts. This is the “rule of six.” See RCW 39.04.152(4)(b)(i).
- If there are five (5) or fewer small contractors on the List of Businesses (project-specific roster): You may negotiate/direct contract with any contractor on the project-specific roster and are not required to contract with a small business. To avoid repeatedly awarding contracts to the same contractor, you still need to use rotation. See RCW 39.04.152(4)(b)(ii) and (4)(b)(iv).
See MRSC’s sample rotation policy as a starting point.
Practice Tip: Once you have identified the next contractor through rotation, MRSC recommends that you re-verify that the contractor is a responsible bidder as defined in RCW 39.04.350 before contacting them for direct contracting. You can verify through L&I’s contractor verification portal. Also see SAO's responsible bidder checklist.
Once you have confirmed bidder responsibility, you may want to contact the contractor to confirm their interest in bidding or negotiating on the project before sending them the full Invitation to Direct Contract/Negotiate.
Invitation to Direct Contract/Negotiate
The public agency will send an Invitation only to the next “rotated” contractor. Only contractors accepted to a small works roster before a project-specific roster is generated can be invited to bid and be awarded a small works contract.
This part of the procurement process is done outside the MRSC Rosters system in accordance with local policies and procedures. MRSC recommends direct contracting be conducted by email.
Invitations to Direct Contract/Negotiate should clearly indicate that you are inviting the contractor to direct contract/negotiate as an opportunity under the small works roster direct contracting option and that contractor is the only contractor being invited at this time.
The Invitation to Direct Contract/Negotiate should contain the following information; items with an asterisk (*) are required by RCW 39.04.152(3):
- Project name and number (consistent with agency accounting/contracting and/or platform identification)
- The scope of work* including:
- Existing conditions (as applicable)
- Materials and equipment that will be provided by the public agency* or that the public agency requires
- Current understanding of permitting requirements and authorities having jurisdiction
- The estimated cost*
- Project schedule and deadlines for completing the project
- Information on a site walk and/or pre-bid conference if offered
- Bid due date and time
- Bid/negotiation form, including instructions on how the agency or local government will agree on the award amount
- Instructions for Direct Contracting/Negotiations, including mandatory bidder responsibility criteria and any supplemental bidder responsibility criteria (RCW 39.04.350)
- Where and how to submit bids
- How questions can be submitted and how addendums, if necessary, will be provided and communicated
- General agency contact information
- Sample contract (contract form) that will be awarded, including:
- General conditions
- Agency required forms
- Insurance requirements (could be included in instructions to bidders)
- Bonding requirements (could be included in instructions to bidders)
- Retainage approach (could be included in instructions to bidders)
- Payment procedures
- Any other contract or project requirements
DES Public Agency Templates: The state Department of Enterprise Services (DES) has prepared sample small works roster bidding templates for public agencies under RCW 39.04.152(4), including a bid form, contract, and invitation to direct contract/negotiate for contracts under $150,000, as well as samples for competitive bids between $150,000 and $350,000. Local governments may (optionally) use these templates but must review and change them to meet their own requirements and business processes.
See the DES webpage Forms/Reference Documents: Public Works Bidding (scroll down to the section that says "Small works roster/Bidding templates for public agencies."
Practice Tip: When preparing direct contracting documents it is a good practice to “reserve your right” as an agency or local government to request additional information and other similar owner discretionary measures to ensure a competitive price and responsibility of the contractor.
Negotiation Process
RCW 39.04.152(3) and (7) suggest, but do not require, that an agency or local government can “negotiate” with a directly selected contractor to establish a contract award amount. When direct contracting, a bid may also be accepted without negotiation.
There are no specific requirements or definitions for “negotiating.” Any questions or clarifications sought by a directly selected contractor could be considered “negotiation.” Like a question-and-answer period in a competitive bid process, directly selected contractors should be able to walk a site or ask clarifying questions prior to submitting a bid, or agency or local government staff should be able confirm pricing at a detailed level.
Once an award amount has been agreed and documented and you have reviewed the bid to determine that it is responsive and the contractor is responsible (RCW 39.04.350), you must enter the information into the MRSC Rosters platform.
Practice Tip: Use the direct contracting bid/negotiation form to document the questions, responses, offers, and/or counteroffers so there is a record of how negotiations occurred and how the award amount was agreed upon.
A direct contract bid will include sales tax, which will add roughly 10% to the potential award amount (depending on the local sales tax rate). If a direct contract bid exceeds roughly $165,000 ($150,000 plus sales tax), you may need to revisit the project scope/estimate or use the competitive bidding process instead. You should not try to force a small business to lower its bid just because of the direct contracting bid limit, as bids should accurately reflect the scope and cost of the work. Before negotiating, we recommend you ask the contractor for a bid item or schedule of values breakdown to ascertain where the project estimate and the bid may differ.
The DES model rules, which may (optionally) be adopted by local governments, state that the contracting agency may award contracts for more than the maximum limits in RCW 39.04.152 if the contract cost is not "excessive" or does not constitute a "cardinal change." Their general guideline is that exceeding the statutory bid limit by 10% or less will not constitute a cardinal change. See WAC 200-330-040, which applies specifically to competitive bidding but whose logic should also apply to direct contracts.
Entering Bid/Award Information into MRSC Rosters
After procurement and award is complete (outside the MRSC Rosters platform), the agency or local government will return to the MRSC Rosters system under “Documentation” and manually indicate each contractor’s rotation status together with any negotiation outcome.
The options for each prospective contractor are:
- Declined
- Not responsible
- Bid received
- Not rotated
- Bid not accepted
For the accepted bid, the agency or local government will enter the award amount. Once the information is entered into the system, it is immediately publicly available in accordance with RCW 39.04.152(6).
Practice Tips: If you are unable to agree upon an award amount directly with a rotated contractor, you can document it as “bid not accepted” and then move to the next rotated contractor. You could also switch to the small works competitive process and send the invitation to all the contractors on the project-specific roster.
If no responsive bids from responsible bidders are received, or if you are otherwise unable to select a contractor or award your project, you may cancel your project and procure through another method or start a new project.
If you cancel a small works project, you should write a memo for your procurement file explaining the rationale and your plan to pursue the project later (starting with a different list of businesses) or using a different public works methodology.
Notice of Award and Contract Execution
After an award amount is agreed upon, you will proceed to contract award using your local policies and procedures. You will provide a written Notice of Award to the selected contractor, request insurance and bonding documentation as detailed in the contract, and request contractor signatures on the contract.
Once insurance and bonding documentation are collected and appear satisfactory, and both the agency and the contractor have signed the contract, you will store the executed contract (including the bid) in your procurement files and financial records – often a separate Purchase Order needs to be issued – and send to the contractor a fully executed agreement with a Notice to Proceed letter.
You will also need to provide notification to all other small, women, minority, and veteran-owned contractors on the project-specific roster informing them which contractor was directly selected and awarded the project. See RCW 39.04.152(4)(b)(iii).
Tracking and Reporting Roster Usage
All state agencies and local governments must make small works roster awards, bids, and use of direct contracting “publicly available” and available by request. See RCW 39.04.152(6). “Publicly available” is commonly interpreted as available without a public records request. Many agencies post a spreadsheet or list of small works project awards on their website.
Once per year, the agency must publish a list of all small works contracts awarded, as well as all contractors contacted for a direct negotiation process (even if the contractor contacted for direct negotiation was not awarded a contract). See RCW 39.04.152(7) and RCW 39.04.200.
For public agencies using the statewide small works roster, MRSC Rosters provides project-specific roster, bidding, award, and direct contracting information continuously on the website as entered by users. This meets the requirements of RCW 39.04.200. Public agencies using the statewide small works roster will not be required to post information separately.
