Ohio Construction Reform Underway
Kegler Brown Construction Alert April 15, 2009
The governor, many months ago, appointed a task force on construction reform that has made twenty-five (25) recommendations, some of which would greatly alter construction law in Ohio as we know it. Many of the recommendations are designed to eliminate “once and for all” what public owners think is a “multi-prime mandate” and authorize alternative contract delivery systems such as design-build and construction manager at-risk that are not currently authorized by the public bidding statutes. In addition, there are other reforms designed to bring construction bidding and contracting into the electronic era, including online advertising and bids. In addition, the threshold for competitive multi-prime bidding is proposed to be raised to $200,000, with general contracting allowed up to $600,000 on small projects.
While some of these recommendations can be implemented by Executive Order, many will have to be approved by the Legislature. One can expect that the supporters of this series of recommendations will position themselves to advocate approval in the Legislature with the argument that these changes will maximize federal stimulus money with “shovel ready projects” in the shortest time available. Therefore, one might suspect that a number of these substantive changes will be memorialized in the budget bill anticipated in June of 2009.
While many believe that alternative contract delivery systems should be able to be utilized on public works, others are concerned that trade contractor protections will be lost in the process and there will be something other than a “level playing field” with respect to competition. In particular, trade contractors are rightfully concerned that elimination of the multi-prime system will encourage negative practices like bid-shopping, payment delays (at a minimum going from 30 days for payment from the state directly to a prime contractor to an additional 10 days if the former prime contractor is now a subcontractor), and permitting inequitable subcontract language. Supporters of the reform advocate that pre-qualification of MEP contractors and public bidding of the MEP “subcontractors” will mitigate these concerns.
Interestingly, the panel chose to recommend some consideration of the possible early and equitable release of retainage, yet no Executive Order or legislation was anticipated on that issue to implement any reform. Advocates of retainage reform have long maintained that reduction of the retainage rate or early release of retainage to early finishing contractors could achieve the owner’s intent of completing work while decreasing the contractor’s financing costs, which would ultimately reduce those costs and their bids, directly saving the taxpayer money on construction costs.
The reforms recommended also encourage broader utilization of LEED (Green) standards and the use of Building Information Modeling (BIM), which is not currently permitted under current law.
While the impact of the changes advocated is not yet known, this effort appears to have substantial momentum and could radically change the topography of Ohio public works bidding and construction well into the future.