“Construction Reform” Rules Finalized by DAS

Kegler Brown Construction Newsletter

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.