Governor’s Budget Brings Much Change to Ohio Public Construction Work
Kegler Brown Construction Newsletter April 1, 2011
If, as expected, Governor Kasich’s budget is adopted by the legislature in its current form, prevailing wage law would be dramatically pared back as follows:
- The prevailing wage threshold (other than road work) would be increased from the current $78,000.00 to $5 million.
- All state institutions of higher education would be exempted from prevailing wage requirements (as K-12 presently).
- Prevents both primary and secondary education institutions from requiring prevailing wages (they can no longer “opt in”).
- An improvement by private entity with the benefit of public financing, grants or in-kind support from a public authority would be exempt from prevailing wage.
- Interested parties (i.e. unions) would no longer have a right to sue regarding a violation of prevailing wage law when the Governor’s Director of Commerce fails to rule upon a prevailing wage complaint within sixty (60) days after the complaint is filed.
The impact of these changes would be dramatic and would significantly reduce the impact of prevailing wage law on Ohio public construction projects.
Governor Kasich’s budget would also radically change contract delivery systems in Ohio as follows:
- State institutions and agencies (as well as counties, municipalities and townships) would no longer be required to bid to multiple-prime (MEP) contractors and could utilize CM at-risk, design-build and single prime contracting. Both CM at-risk and design-build could be used without a full competitive bid process, but instead featuring a new proposal selection process.
- The threshold for the competitive bid process would be raised from $50,000.00 to $200,000.00 on all public construction projects.
Those favoring the multiple-prime system say that it reduces unnecessary mark-up, bid-shopping and delays in payment (due to payment directly from the State), while critics complain that it creates coordination problems and increases claims.
Specialty trade contractors that are used to bidding public work as prime contractors will lose control over their own destiny with these changes, as they will no longer be bidding to, or receiving payment directly from, the State. At a minimum, this will delay payment for ten (10) days as the State will need to pay the general contractor or construction manager (30 days) first, who then must pay his subs (10 days) thereafter. Going to a competitive proposal process, rather than a low-bid process, may have significant ramifications for mid-sized Ohio general contractors as well, who will be competing with the large international contractors for the first time in this format.
It appears that, under these alternative contract delivery systems, performance bond protections are preserved for owners and payment bond protections are preserved for subcontractors and suppliers.