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SUBJECTS › PUBLIC WORKS › Washington State Model Design and Construction Management Manual - No Job is Done Until the Paper Sticks to Your Shoe
 
Washington State Model Design and Construction Management Manual - No Job is Done Until the Paper Sticks to Your Shoe

Washington State Model Design and Construction Management Manual

No Job is Done Until the Paper Sticks to Your Shoe

Contents

Introduction

"It was the best of contracts, it was the worst of contracts ..."

Eventually every construction contract comes to an end, whether it was a lot of fun with a great contractor and final contract costs well within allowable contingencies or whether you are no longer speaking to the contractor and dread writing your financial summary for the council or commission. In addition to practical issues of the contract, such as final inspections, punch lists, quantity reconciliations, final pay estimates, etc, you have to jump through statutory hoops held up by the Departments of Revenue, Labor and Industries and Employment Security. While fast final payment and retainage release for the contractor are noble goals, it is more important to be sure that the contractor has paid employees, subcontractors and suppliers as well as applicable sales, use and employment security taxes. If not, the city or county may be liable for these costs.

Final Inspection

Division 1-99 [APWA supplement], of the 1998 Standard Specifications for Road, Bridge and Municipal Construction , describes the process to be followed when a contractor requests a final inspection. Work under the contract must be substantially complete, or very nearly so. This means that the city or county must have full and unrestricted use and benefit of the facilities, both from the operational and safety standpoint and that only minor incidental work, replacement of temporary substitute facilities, or correction or repair work remains to reach physical completion of the work. Minor changes to this procedure are proposed in the 2000 Standard Specifications.

Final inspections should not be done in a vacuum. Affected utilities and all other city or county departments should be invited to inspect the project. You may wish to notify adjoining property owners of the pending project closure and ask if their concerns have been adequately addressed. Samples of final inspection request forms are included in the Reference Documents.

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Substantial Completion, Completion and Acceptance

Definitions of these three terms are critical, as they trigger liquidated damage clauses (if any) and dates for retainage release. Since September 1, 1992, RCW 60.28.011 has applied to retainage releases:

"(a) After completion of all contract work other than landscaping, the contractor may request that the public body release and pay in full the amounts retained during the performance of the contract, and sixty days thereafter the public body must release and pay in full the amounts retained ..."

For projects underway prior to September 1, 1992, RCW 60.28.010(2) applied:

"(2) The moneys reserved under the provisions of subsection (1) of this section, at the option of the contractor, shall be: (a) Retained in a fund by the public body until thirty days following the final acceptance of said improvement or work as completed; "

Many cities and counties still use the date of acceptance by the council or commission as the trigger date for retainage release. Actual completion of the contract usually pre-dates the council or commission meeting at which acceptance occurs, however.

Division 1-99 [APWA supplement] of the 1998 Standard Specifications for Road, Bridge and Municipal Construction (WSDOT/APWA) currently defines these terms:

    Contract Completion Date (APWA only) - The date by which the work is contractually required to be physically completed. The Contract Completion Date will be stated in the Notice to Proceed. Revisions of this date will be authorized in writing by the Engineer whenever there is an extension to the Contract time.

    Final Acceptance Date (APWA only) - The date on which the Contracting Agency accepts the work as complete.

A proposed modification of Division 1-99 in the 2000 Standard Specifications offers these definitions:

    Substantial Completion Date - The date the Engineer determines the Contracting Agency has full and unrestricted use and benefit of the facilities, both from the operational and safety standpoint, and only minor incidental work, replacement of temporary substitute facilities, or correction or repair remains for the physical completion of the total contract.

    Contract Completion Date - The date by which the work is contractually required to be physically completed. The Contract Completion Date will be stated in the Notice to Proceed. Revisions of this date will be authorized in writing by the Engineer whenever there is an extension to the contract time.

    Physical Completion Date - The day all of the work is physically completed on the project. All documentation required by the contract and required by law does not necessarily need to be furnished by the Contractor by this date.

    Completion Date - The day all the work specified in the contract is completed and all the obligations of the Contractor under the contract are fulfilled by the Contractor. All documentation required by the contract and required by law must be furnished by the Contractor before establishment of this date.

    Final Acceptance Date - The date on which the Contracting Agency accepts the work as complete.

Division 1-99 [APWA supplement] currently modifies Section 1-05.12 of the 1998 Standard Specifications as follows [No modifications are proposed in the 2000 Standard Specifications]:

    SECTION 1-05.12 IS DELETED AND REPLACED WITH THE FOLLOWING:

    1-05.12 Final Acceptance (APWA Only)

    The Contractor must perform all the obligations under the Contract before the Completion Date can be established. A Certificate of Completion for the Work issued by the Contracting Agency will establish the Completion Date and certify the Work as complete. The Final Contract Price may then be calculated. The following must occur before the Completion Date can be established and the Final Contract Price calculated:

    1. The physical work on the project must be complete.

    2. The Contractor must furnish all documentation required by the Contract and required by law, necessary to allow the Contracting Agency to certify the Contract as complete.

    A Certificate of Completion for the Work, signed by the Contracting Agency, will constitute acceptance of the Work. The issuance of this Certificate of Completion will not constitute acceptance of unauthorized or defective work or material. Failure of the Contractor to perform all of the Contractor's obligations under the Contract shall not bar the Contracting Agency from unilaterally certifying the Contract complete so the Engineer may calculate a Final Contract Price as provided in Section 1-09.9.

For the purposes of calculating liquidated damages, a city or county will want to use the Substantial Completion Date as defined above. For the purposes of retainage release, a city or county has a choice of using the Completion Date or the Final Acceptance Date (by the council or commission). If the latter date is used, the Certificate of Completion should not be issued until after formal acceptance by the council or commission. The contractor should be advised of this policy in the contract documents.

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Liquidated Damages

Completion of a construction project in the time specified in the contract is a definite and significant portion of the contract value. Section 1-08.9, Liquidated Damages, of the 1998 Standard Specifications begins:

"Time is of the essence of the contract. Delays inconvenience the traveling public, obstruct traffic, interfere with and delay commerce, and increase risk to highway users. Delays also cost taxpayers undue sums of money, adding time needed for administration, engineering, inspection, and supervision."

The rest of this section describes a formula for calculation of `liquidated', as opposed to `actual,' damages due to delays. These liquidated damages apply to each working day beyond the number of working days established for physical completion, and are assessed until the agency establishes a date of substantial completion. For overruns in contract time occurring after the substantial completion date, liquidated damages are to be assessed on the basis of direct engineering and related costs assignable to the project until the actual physical completion date of all the contract work.

If tangible and readily measurable damages occur as a result of delayed completion, the agency should track these costs. Examples would be continuing rent of temporary facilities or equipment, penalties due to contractual arrangements with an adjoining property owner or inability to assign agency personnel to another project. On projects where there is no state or federal funding, the agency will want to reserve the right to assess actual damages, if higher than use of the liquidated damages formula computes.

Listed in the Reference Documents are two discussions of liquidated damage clauses.

Final Pay Estimate

Computation of the final pay estimate should not be a major issue if the inspector and project engineer have kept accurate quantity logs on a daily basis and reconciled them with the contractor's records at least monthly. If the agency is using electronic spreadsheets or a project tracking system to do pay estimates, the final pay estimate should just be the latest iteration of the spreadsheet or tracking system report. It is advisable, however, to perform a check on final quantities independently of the spreadsheet or tracking system by going directly to the daily inspection reports. For a large project, this may not be feasible for every item. In that case, a random check of the larger project cost items may be adequate. Another essential check to perform is to reconcile total costs paid to date with the city or county treasurer/auditor to see if double payments or underpayments have occurred on individual progress payments.

Division 1-99, 1998 Standard Specifications for Road, Bridge and Municipal Construction sets forth guidelines for processing the final payment under the contract. Acceptance by the contractor of the final payment operates as a release to the contracting agency of all claims and all liabilities of the contractor, other than claims in stated amounts as may be specifically excepted in writing by the contractor. If the agency has aggressively pursued an established claims resolution process, the number of such claims excepted should be minimal at this point. Proposed modifications to this section in the 2000 Standard Specifications are minor.

Under Reference Documents are WSDOT's Final Contract Voucher Certificate and Port Angeles work Completion and Acceptance forms.

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Retainage Release

RCW 60.28.011 requires municipal governments to withhold 5% of money due a contractor for a public improvement or work until completion and/or acceptance of the contract. This money is to be set aside as a trust fund for the protection and payment of anyone who performs labor, provides materials, supplies or equipment or subcontracts to the prime contractor. In addition, the State Department of Revenue (DOR) has lien rights against this fund for payment of unpaid taxes under Title 82 RCW and the Department of Labor and Industrial Services (DLIS) has lien rights for non-payment of prevailing wages.

  • Anyone who performs labor, provides materials, supplies or equipment or subcontracts to the prime contractor must file a lien within 45 days of the completion of all contract work.

  • At any time, as noted in RCW 60.28.011(3), the contractor may request that the contract retainage be reduced to 100% of the remaining contract.

  • After completion of all contract work, except landscaping, the contractor may request that the agency release the retainage, except for 5% of the moneys earned for landscaping. The agency is to release these funds within 60 days of this request.

  • The agency is to release all retained funds within 60 days after completion of all contract work (not necessarily acceptance by the council or commission). See above discussion under Substantial Completion, Completion & Acceptance. This requirement, however, is subject to the DOR and DLIS releases described below.

  • The agency should not release the entire retainage until it has received a copy of the approved Affidavit of Wages Paid from the Industrial Statistician of the Department of Labor and Industrial Services (DLIS) regardless of the 60-day limit.

  • Regardless of the 60-day limit, before releasing the entire retainage, again, an agency must fill out Form # RV310020 (1-17-96) Notice of Completion of Public Works Contract and send it to the Department of Revenue DOR. Following its review and approval, the (DOR) sends a letter certifying that all applicable use and sales taxes have been paid and that the Department releases its lien rights (RCW 60.28.051 and RCW 60.28.060).

  • Payment of employment security contributions, penalties and interest under Chapter 50.24 RCW is not, directly, required prior to release of the retainage as are prevailing wages and sales taxes. However, RCW 50.24.130 states that a local agency, as an employing unit using contractors, is "liable for such contributions, interest, and penalties and the commissioner shall have all of the remedies of collection against said employing unit under the provisions of this title as though the services in question were performed directly for said employing unit." Before final payment under a contract, a city should be sure that it has received a Certificate of Payment of Contributions, Penalties and Interest on Public Works Contract (EMS 8449 760 R7-84) from the Employment Security Department. This certificate ensures that contractor and subcontractors have in fact paid any taxes due the Employment Security Department, and that the Department has released its lien on the retainage, per RCW 60.28.040.

  • At the completion of the 45-day limit for filing liens for labor or supplies, the city can release all the retainage if the DOR and DLIS clearances have been obtained and there have been no liens filed.

  • If liens are filed but DOR and DLIS clearances have been obtained, the city should be prepared to release all the retainage except the amount required to satisfy the liens when the 60-day limit for retainage release (RCW 60.28.011(3b)) is up.

Division 1-99, 1998 Standard Specifications for Road, Bridge and Municipal Construction describes contract retainage. This reference in Division 1 will be eliminated and partially included in Section 1-04.8 of the 2000 Standard Specifications. A copy of the WSDOT Release - Retained Percentage form is included in the Reference Documents. A similar document from Port Angeles is also included.

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Archival Documentation

Requirements for as-constructed drawings and for operation and maintenance manuals for contract items such as landscape irrigation systems are part of the larger issue of which contract records are to be archived and which can be destroyed. Section 10-3, Final Records for Projects Constructed by Contract, of the WSDOT Construction Manual contains a very detailed scenario for the collection and disposition of final project records which can be adapted for local agency use. Adaptation is necessary because record retention schedules for local governments may differ from those for state agencies. MRSC has posted the Public Works/Engineering retention schedule on its Web site. The publication Local Government General Records Retention Schedule & Records Management Manual is available from the MRSC Library. Agency policies for archival documentation affecting field inspectors and the contractor must be identified at the pre-construction conference. Inspectors and project engineers should review the contractor's ongoing as-constructed plan notations periodically.

Warranty Review and Releases

Section 1-05.10 of the 1998 Standard Specifications provides that "The Contractor shall furnish to the Contracting Agency any guarantee or warranty furnished as a normal trade practice in connection with the purchase of any equipment, materials, or items used in the construction of the project."

In contracts that involve state or federal money, there can be no requirement, per the preceding quote, that the contractor warrant the overall project for any length of time after completion. Some individual components are warrantable, such as traffic signal equipment and landscaping. In locally funded projects, however, agencies will include language similar to the following in their contract documents:

"The contractor shall provide a material, labor, and equipment guarantee for the work performed for a period of one year from the [completion/acceptance] date, for all work to be free of defective workmanship, or materials. All repairs will be made at no cost to the City." For the purposes of a warranty or guarantee, the agency will want to use the physical completion date or completion date as discussed above under Substantial Completion, Completion and Acceptance.

Tracking the effective dates of warranty periods for all of a project, or for equipment or material items only, for a number of public works projects can be burdensome. Two articles listed under Reference Documents discuss ways to effectively manage warranty programs.

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Contractor Evaluation Program

Contractor evaluation programs can play an important role in strengthening and honing an agency's construction management skills. They serve as a reference for other agency project managers who may work with the contractor on future projects, making those managers aware of the contractor's strengths and weaknesses. Performed consistently and fairly on all projects (of reasonable size), they may serve as a basis for establishing whether a contractor is responsible when future bids are evaluated. In fact, WSDOT's contractor evaluations support its bidder pre-qualification program.

WSDOT's Prime Contractor Evaluation Report is filled out by the project engineer at the end of a project, or annually in the case of long-term contracts. If performance drops below acceptable levels, the reports are done every two months until performance improves. Key headings in the report are:

Administration/Management/Supervision

  • supervision and decision making
  • coordination and communication with subcontractors and suppliers
  • submission of documents and reports
  • adequacy and timeliness of progress schedule
  • public safety and traffic control
  • compliance with laws, ordinances, and regulations
  • maintenance of employee safety standards
  • coordination and cooperation with department personnel on project matters
  • compliance with EEO, affirmative action requirements, and MBE/DBE/WBE
  • public relations with the general public, other agencies, and adjacent contractors

Quality of Work

  • adherence to plans and specifications
  • standards of workmanship
  • completion of final punch-list

Progress of the Work

  • completion of project within allotted time
  • scheduling and execution
  • delivery of materials and supplies
  • operation and use of equipment
  • use of personnel

 

Equipment

  • condition.
  • maintenance

Included in the Reference Documents are contractor evaluation forms from Auburn, Redmond and WSDOT. Also included is Seattle's Contractor Performance Evaluation Program.

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Project Evaluation and Audit

Truly, 'no job is done until the paper sticks to your shoe.' This is especially true of o construction contracts, which will at some point be audited, whether as part of a city- wide audit or a project-specific audit by a funding agency. Audits can be scary, even if your files are well organized and complete. If they are not ... The important things to remember are to cooperate fully with the auditor and to view the audit findings as constructive criticism to help improve your construction management skills on the next project.

Most agencies require at least an informal evaluation of completed construction projects, even if it consists only of a cursory analysis of construction costs in relation to the budget and original contract amount. A one or two page project evaluation summary that considers the following issues or items may be useful:

Adequacy of Design and Contract Documents

  • number, dollar volume and nature of change orders
  • number and nature of field adjustments
  • dollar volume of force account work
  • gaps, errors, omissions and strong points in plans and contract documents
  • quantity over-runs or under-runs
  • final contract cost versus initial contract amount

Contract Time

  • original contract time
  • final contract time and allowed extensions
  • workable days and weather days
  • liquidated damages assessed, if any
Project Team Comments
Public Work Director's Impressions
Elected Official or City/County Manager Comments
Contractor Evaluation (see above)

Last, but not least, let your contractor evaluate your contract management skills. WSDOT has a form for this. Let the contractor evaluate the adequacy of the design and contract documents, your agency's management and contract administration skills, and the knowledge, training, objectivity and fairness of project team members.

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Reference Documents, City/County Codes, and Models

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