Type: Law Bulletins
Date: 07/20/2011

New Contracting Methods Available in Ohio Soon

Public construction contracting in Ohio, unlike the vast majority of states, formerly required use of a multiple prime contracting method first introduced into law over a century ago.  A public owner (other than a home rule city) could only utilize a single prime contractor if that contractor’s bid was for less than the sum total of the received multiple prime contractors’ bids for HVAC, electric, plumbing, and general trades.  In practice, the single prime contractor could rarely win these contests because none of the multiple primes had to include in their bids any price for overall job supervision.  Public owners, particularly Ohio universities, complained that the multiple prime system resulted in cost overruns, delay claims, and project inefficiencies.  Public owners usually engaged a construction manager-advisor to coordinate the multiple primes, adding further cost and complexity.

Former Governor Strickland convened a broad-based Construction Reform Panel (“CRP”) to recommend updates to Ohio’s public contracting laws.  The CRP’s report recommended allowing public owners to utilize Construction Manager at Risk, Design-Build, and Design-Assist project methodologies as well as the multiple prime system, and also recommended a modest increase in the very low threshold below which public owners could hire a sole general contractor without using multiple prime bid packages.  The CRP Panel’s recommendations were not enacted into law in 2009.

In the just-enacted State biennial budget bill (HB 153), the law has been changed.  Three new forms of public contracting are authorized for any public owner, regardless of the size of the project, in addition to the continued permissive use of multiple prime contracting.  They are: 

General Contracting:  This delivery method follows the design-bid-build process, which involves the general contractor (“GC”) providing a lump sum bid to the owner of the completed set of design documents.  The GC holds all subcontracts during construction.

Construction Manager at Risk (“CMAR”):  In this delivery method, the construction manager performs preconstruction services during the design phase, provides a guaranteed maximum price (“GMP”) for the construction before the design is complete, and holds all the subcontracts during construction. This is a completely different construction manager role from the CM-advisor approach previously used with multiple primes.

Design-Build (“D-B”):  In this delivery method, the D-B entity starts early in the design phase, incorporates the architect of record within the team, and provides a GMP earlier to the owner than in the CMAR model.  The design-builder also holds all subcontracts during construction.

In each case, the newly authorized methodologies require compliance with the state’s drug-free workplace and prompt pay laws, and with surety bond requirements to be established by rules issued by the State Department of Administrative Services (“DAS”).  In addition, each CMAR or D-B firm must establish pre-qualification criteria for prospective bidders on subcontracts, in conformity with DAS rules to be issued; at least three prospective bidders must be identified as prequalified on each subcontract; and each subcontractor must be selected under an “open book pricing method.”  Public authorities are also authorized to utilize Design-Assist firms on CMAR and D-B projects, but design liability may not be transferred to the Design-Assist firm.

Certain statutory thresholds were also increased in the bill.  Currently, all projects over $50,000 must be competitively bid.  The new threshold is $200,000, and contracts with CMAR’s and D-B firms are exempted altogether.  These thresholds will be inflation-adjusted by DAS every five years.  Also, the professional design fee cost threshold under which public authorities are exempt from the bidding, evaluation and ranking requirements of current law was raised from $25,000 to $50,000 under most circumstances. 

Much of the new law is dependent on rules to be issued by DAS.  In fact the entire law is ineffective until such time as DAS adopts rules on the required surety bonds.  DAS will be required to adopt rules establishing the forms that must be used by public owners when entering into contracts with CMAR’s, general contractors, and D-B firms, and for those entities’ subcontracts on public projects.

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