In This Issue
“Construction Reform” Rules Finalized by DAS
Donald W. Gregory, Construction Law Chair
The Ohio Department of Administrative Services (“DAS”) is finishing its legislative mandate to enact rules governing design-build, CM at-risk and general contracting so that these new contracting methods can be implemented in early 2012.
Those new rules can be summarized as follows:
- Surety bonds - After meeting much resistance to the original prospect of permitting less than 100% performance and payment bonds on larger projects, DAS has relented and mandated 100% performance and payment bonds be posted by the design-builder or construction manager at-risk on all projects, regardless of size.
- Contract forms - The State is adopting contract forms aligned closely with the current language in other prime contracts. Political subdivisions like counties and townships are able to utilize trade association forms, including ConsensusDOCS, AIA, DBIA or EJCDC.
- Subcontract forms - Design-builders and construction manager at-risk contractors are to utilize a standard subcontract form, which, among other things, mandates:
- Prompt Pay no later than 10 days upon receipt;
- Retainage shall be at the rate retained by the owner on the contractor; and
- Lien rights cannot be waived. - Prequalification - Design-builders and construction manager at-risk contractors are to adopt prequalification criteria for subcontractors that are subject to the approval of the public authority.
- Best value - Design-builders and construction manager at-risk contractors are to be selected in a subjective two-step proposal process (qualification phase followed by proposals from the 3 short-listed firms). The award is to be based upon “best value” - a combination of pricing and performance considerations to determine the offer deemed most advantageous and of the greatest value to the public authority.
As these rules will soon become effective, we will now see how well they work in the real world.
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Top 5 Ohio Construction Law Developments of 2011
After “walking along the bottom” with another year of construction activity at half pre-recession levels, contractors are only too eager for 2011 to end. A slight uptick in construction work is eagerly awaited in 2012. Here are the top 5 Ohio construction law developments of 2011.
- Design-Build and CM At-Risk Authorized on Public Work
Ohio for the first time has authorized contract delivery systems like Design-Build and CM at-risk, giving public owners more flexibility in contracting and selecting contractors. - More Decisions Require Strict Notice on Claims
While there still are cases finding that written notice is not required when the owner has actual notice and is not prejudiced, more cases have been requiring contractors to strictly comply with notice -- unless waived by the owner. - OSFC Litigation Increases
The OSFC has appeared to abandon its long-standing practice of trying to resolve disputes at mediation, and has become much more adversarial. As a result, more lawsuits and trials are expected for the foreseeable future. - No Payment Bond Protection on Project One
The Ohio Supreme Court supported OSU’s decision not to require payment bond protection on its massive “Project One” construction project. Fortunately, full performance and payment bond protection will be afforded on the State’s new design-build and CM at-risk delivery methods. - Absent Waiver, Article 8 Process Strictly Applied
Some Ohio cases had held that the State’s “Article 8” dispute resolution process need not be satisfied if it would be a useless or vain act. That line of cases has been overruled and contractors are advised to try to follow that process. Ohio law provides that the Article 8 process must be completed in 120 days or it is deemed waived and the contractor is free to file suit.
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Firm News
Mike Madigan spoke to the National Ground Water Association on contract terms in Las Vegas in late November. Don Gregory spoke to the Ohio Contractors Association at its Winter Conference on “Are You Ready to Sign That Contract.”
Congratulations to the Franklin County Courthouse who received ENR’s (Midwest) best government/public building award and to the Scioto Mile for the best landscape/hardscape/urban development. We advised the Columbus Downtown Development Corp. on key construction issues associated with this important downtown revitalization project.
Kegler Brown is hosting a seminar on Construction Reform Finalized: The New Reality on February 14, 2012, and Dealing with One-Sided Public Contracts: Surviving the Death Star on March 22, 2012. Registration is $50 per person and clients attend free.
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