New Legislation Impacts Purchasing, Contracting

Purchasing and contracting procedures for local governments in Washington State changed on July 23, 2017.  A review of major legislative changes is as follows: 

• SB-5734 – Increases the threshold for waiving a payment and performance bond and reduces the amount of retainage held in that process (RCW 39.08.010)
• SSB-5301 – Adds additional certification requirement to the mandatory bidder responsibility criteria (RCW 39.04.350)
• ESHB-1538 – Allows subcontractors the right to request early release of and to post bond for retainage through the contractor (RCW 60.28.011 (6))
• SB-5036 – Authorizes the use of unit price contracting to Public Utility Districts
• HB-1395 – Authorizes transit agencies to use Job Order Contracting (RCW 39.10.420)
• HB-2052 – Capital Projects Advisory Review Board (CPARB) may accept late applications for recertification to use alternate contracting provisions

Impacts on All Local Government Agencies

The first three bills (SB-5734, SSB-5301, ESHB-1538) apply to public work projects for all local government agencies.  Major changes include the following:

•  The new threshold is $150,000 for waiving payment and performance bonds on public works projects. 
• The retainage required to be held for these projects has been reduced to 10%. The actual language states the agency “may” retain 10% in lieu of bonds, which suggests the agency has discretion to say yes or no to this option.

To support local government implementation of SSB-5301, MRSC has released a model Certification of Compliance form that can be modified for use by agencies to meet the requirement of the new mandatory bidder responsibility criteria.

Clarifying SB-5734 and SSB-5301

MRSC has received some questions in relation to SB-5734.

Can the agency hold more than the 10% retainage? 

A:  Withholding more than 10% retainage is not authorized by the statute.  The safer approach is to deny a request to waive a bond where an agency believes 10% retainage is not sufficient protection.  MRSC recommends agencies consult with their legal counsel if other positions are being considered.

If an agency intends not to allow this option, do they still include the information in their solicitation, and if so, do they indicate their policy will be to strictly obtain bonds?

A:  RCW 39.08.010 states that retainage of 10% in lieu of bond is at the option of the contractor but does not address a requirement to include such language in bid documents.  If an agency currently includes this information in their bid documents, they should update the information with the changes.  If the contractor subsequently requests the option, the agency may accept, but this would be communicated on a project-by-project basis.

MRSC also received questions in relation to SSB-5301.

Does the additional certification requirement to the mandatory bidder criteria apply to goods and services, and does it only apply to state agencies based on the reference to RCW 39.26?

A:  The certification requirement applies to goods and services for state agencies only and does not apply to local government agencies.

Would the certification form be required for all public works contracts, including small works roster contracts?

A:  Yes, all public works contracts are awarded to lowest responsible bidder as defined in RCW 39.04.010(5).

Impacts on Public Utility Districts

Public Utility Districts (PUD) are the only agencies authorized to use unit price contracting per SB-5036.  A contract term can be for three years with a possible one-year extension at the option of the PUD.  Solicitations must include an estimate for the quantity of the work or trades, and must specify how work assignments (work orders) will be issued and how payment will be made based on the rate or unit prices awarded.

Unfortunately, the new legislation does not address how to handle bonding and retainage in the unit price context.  PUD’s will need to determine if retainage will be held from each work order payment and when it would be released, such as following the completion of each work order or at completion of the contract.

Impacts on Transit Agencies

HB-1395 grants authority for transit agencies (also known as public transportation benefit area authority) to use Job Order Contracting.

Impacts Pertaining to CPARB Authority

HB-2052 gives CPARB the option of accepting untimely applications to avoid requiring that an agency go through the full certification process again. This exception will not be required if agencies track their certification and get their applications in on time!

Questions? Comments?

If you have questions about this topic or other local government issues, please use our Ask MRSC form or call us at 625-1300 or (800) 933-6772. If you have comments about this blog post or other topics you would like us to write about, please email me at jisaac@mrsc.org.

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