PA 06-134—sHB 5695

Higher Education and Employment Advancement Committee

Appropriations Committee

Public Safety and Security Committee

Government Administration and Elections Committee

AN ACT CONCERNING CONSTRUCTION OVERSIGHT AT THE UNIVERSITY OF CONNECTICUT AND THE PREQUALIFICATION OF SUBSTANTIAL CONTRACTORS

SUMMARY: This act establishes two mechanisms to provide independent oversight of UConn 2000 projects: board of trustee audits and an independent committee to review university policies and procedures and compliance with them during the construction process. The act also (1) requires public bidding on UConn 2000 projects costing over $500,000, (2) revises the process for UConn to prequalify contractors to bid on UConn 2000 projects, (3) subjects UConn 2000 projects to department of Public Works (DPW) and Administrative Services (DAS) building construction and contractor prequalification statutes, (4) requires UConn and the Department of Public Safety (DPS) to arrange for UConn staff to ensure code compliance on UConn 2000 projects, and (5) requires UConn to spend all deferred maintenance allocations for that purpose and identify future deferred maintenance needs and costs.

The act requires substantial subcontractors to prequalify with DAS before they perform work on a state or municipal construction contract and makes minor changes to the contractor prequalification laws.

EFFECTIVE DATE: July 1, 2006, except for the provisions concerning reports on deferred maintenance spending and code violations, which are effective on passage; the provisions subjecting UConn to DAS prequalification requirements, which are effective January 1, 2007; and the changes concerning substantial subcontractor prequalification, which are effective October 1, 2007.

FINANCIAL AUDITS ( 1, 2, & 5)

The act requires UConn's Board of Trustees to select and appoint independent auditors to annually audit UConn 2000 projects. The auditors must review all invoices, expenditures, cost allocations, and other appropriate documents and reconcile project costs and verify their conformance to budgets, cost allocation agreements, and applicable contracts. The board must annually review the auditors' reports. No university staff may be present during the board's initial review.

The auditors may serve for five consecutive years, cannot perform any nonaudit services for the university during that period, and may not be reappointed. The board must assure the auditors unfettered access to any documents they need. By law, independent auditors are licensed public accountants who meet the independence standards of the U. S. comptroller general's generally accepted government auditing standards.

CONSTRUCTION MANAGEMENT OVERSIGHT ( 3, 4, & 5)

The act establishes a committee to (1) oversee UConn's construction policies and procedures and (2) review projects for compliance with them. It also requires the UConn trustees to create an office to review construction performance.

Oversight Committee Composition

The act establishes a seven-member Construction Management Oversight Committee. The board of trustees appoints three board members to the committee; the governor and the top six legislative leaders jointly appoint the other four committee members who must have expertise in construction management, construction project management, or architectural design. The board designates the chairman.

All initial appointments must be made by July 20, 2006. Members serve four-year terms. The jointly appointed members' terms are staggered; two initially serve three-year terms. The board must replace any of its members serving on the committee when his board term expires or otherwise ends.

Four members constitute a quorum and at least four members must vote to approve committee actions. The committee must keep a record of its proceedings, which must indicate attendance and all votes each member casts. Otherwise, the committee can decide the form these records take.

Construction Assurance Office

The act requires the UConn trustees to establish a Construction Assurance Office by August 1, 2006. The office is to have paid staff and a full-time director responsible for reviewing UConn 2000 construction performance and reporting at least quarterly to the oversight committee and UConn's president.

Oversight Committee Responsibilities

The act requires the committee to review and approve UConn 2000 policies and procedures and review construction performance under the program. It must approve policies and procedures governing (1) selection of design professionals and contractors, (2) contract compliance, (3) building and fire code compliance, (4) deferred maintenance and annual deferred maintenance budgets, (5) project and program budgets and schedules, and (6) authorization and review of contract changes.

Every two years, the committee must prepare a summary of UConn 2000 construction performance based on reports it receives from the Construction Assurance Office. It must review the university's management of each completed project for conformance with the university's construction policies and procedures. This review must incorporate, at a minimum, information from Construction Assurance Office reports.

The committee must submit all of its summaries, assessments, and reviews to the board of trustees, whose initial review of them must be without university personnel present.

CONTRACTING ( 6-8, 17-20)

Public Bidding Requirements

The act specifically requires public bidding for any UConn 2000 project whose estimated cost is over $500,000. Prior law did not explicitly require public bidding on any UConn 2000 project. And, beginning January 1, 2007, the act subjects UConn 2000 projects to DPW public bidding requirements and procedures for projects costing over $500,000. It accomplishes this by removing the projects' current exemption from these laws.

Generally, the law governing DPW bidding procedures permits UConn to determine how and when bids are to be submitted and the conditions and requirements for them. But these laws also define lowest responsible and qualified bidder, limit officials communicating with bidders before bid opening, require submission of bid bonds, require contract awards within 60 days of bid opening, provide for negotiating with bidders in certain circumstances, and specify subcontractor forms and procedures.

The act permits the board of trustees to approve a no-bid contract over $500,000 if it determines that the contract addresses an emergency. DPW public bidding law requires any agency that seeks an exception to public bidding requirements to certify the emergency nature of the project to the legislature's Government Administration and Elections Committee. If the committee approves an exception, the State Properties Review Board must approve the contract.

The act also extends the UConn 2000 laws governing public bids to construction proposals. These laws include sealing proposals until the public opening, awarding contracts to the contractor submitting the lowest responsible qualified proposal, and rebidding or negotiating with contractors if UConn rejects all initial proposals.

Contractor Prequalification and Evaluation

The act requires DAS to prequalify contractors before UConn can apply its own prequalification requirements and process, which the act modifies. And, beginning January 1, 2007, the act subjects UConn 2000 projects to DAS contractor prequalification requirements and procedures. It also requires, beginning October 1, 2007, that DAS prequalify subcontractors on UConn 2000 projects whose work is estimated to cost more than $500,000.

Prior law required UConn to identify potential responsible qualified bidders for a particular contract and invite them to prequalify by giving them information it deemed appropriate and telling them where and when to respond. The act requires the university to provide notice to contractors by advertising at least once in one or more statewide general circulation newspapers and posting the advertisement on the university website. The advertisements must invite contractors to submit a project proposal or bid, inform them that they must be prequalified by DAS, and provide other information UConn deems appropriate.

As under prior law, the university must prequalify contractors based on their financial, technical, and managerial ability; ability to post surety; integrity; experience in similar projects; and whether the contractor, and its subcontractors, has in the past five years complied with state wage and hour laws and those relating to state contracts.

The act also subjects UConn to the law's contractor evaluation requirements. These require a “public agency” to submit to the DAS commissioner information on the contractor's performance in areas such as timeliness, quality, cost containment, communication, safety, and adherence to labor laws. An agency cannot receive state building funds until it complies.

Construction Management Contracts

The act explicitly permits UConn to enter into “total cost basis contracts,” which it defines as “construction manager at-risk” project delivery contracts through which multiple elements of a project are accomplished. These elements include site acquisition, architectural design, preconstruction activities, project management, and construction. Existing law already allowed UConn 2000 contracts that permit the professional who designed a project, or an architect, professional engineer, or construction manager retained specifically for supervision, to supervise work on the project until it is completed to ensure that it is done according to specifications and contract requirements.

The act prohibits university officials from entering into a construction manager at-risk contract that does not require a guaranteed maximum price (GMP) for construction to be determined no later than the time they receive and approve trade contractor (i. e. , subcontractor) bids. The act prohibits construction from starting until the GMP is set, except for site preparation and demolition work for which contracts have previously been bid and awarded.

Under the act, subcontractor bids on construction manager at-risk projects must be publicly bid. The construction manager must solicit bids by advertising at least once in one or more newspapers with general circulation in the state. Bids must be kept sealed until opened publicly at an announced time and place. After consulting with and getting the university's approval, the construction manager must award contracts to the responsible, qualified subcontractors with the lowest bids. Subcontractors must be prequalified by DAS. The act prohibits the construction manager from bidding on subcontracts.

CODE COMPLIANCE ( 10-12, 15)

The act requires UConn's president and the public safety commissioner to enter and maintain a memorandum of understanding (MOU) that temporarily assigns university public safety staff to DPS to ensure fire safety and building code compliance on certain UConn 2000 projects. The MOU is to cover buildings and projects (1) begun while it is in effect and (2) that are below the state's threshold building limits.

The act permits the commissioner to delegate all or part of his authority to enforce building code compliance to UConn through an MOU. He can already delegate his fire safety code compliance powers to UConn's Storrs Division of Public Safety; the act specifies that this must be done through an MOU.

The act requires the university to report any fire safety or state building code violations found in nonthreshold UConn 2000 projects completed before the act takes effect. The report must include an initial schedule to address the violations, the approximate cost to do this, and proposed funding sources. It must be submitted to the Higher Education Committee by December 1, 2006.

DEFERRED MAINTENANCE ( 6, 9, 13, 14)

The act requires the university to:

1. spend all money allocated to UConn 2000 for deferred maintenance for that purpose,

2. review its deferred maintenance needs and annually submit a deferred maintenance budget to the Construction Management Oversight Committee,

3. account for all deferred maintenance funds spent on UConn 2000 projects before the a`ct's effective date, and

4. inspect all university structures and inventory their deferred maintenance needs and their estimated cost.

The act defines deferred maintenance as repair of structures and infrastructure that was not maintained, repaired, or replaced in the usual course of maintenance and repair. The term excludes repairs performed solely to correct violations of code that were applicable to nonthreshold UConn 2000 projects named in statute that were completed before July 1, 2006.

The university must report its previous deferred maintenance spending and future needs and costs to the board of trustees and the Higher Education Committee by December 1, 2006.

DPW CONSTRUCTION MANAGEMENT CONTRACTS ( 21)

The act permits DPW to enter construction management at-risk contracts for construction, renovation, and alteration projects on state buildings and facilities. It establishes the same GMP and public bidding restrictions on these contracts as it does for UConn 2000 projects.

SUBCONTRACTOR PREQUALIFICATION (16, 22-24)

Beginning October 1, 2007, the act requires substantial subcontractors to prequalify with DAS before they perform work estimated to cost more than $500,000 on a state or municipal construction contract valued over $500,000 that is paid wholly or partially with state funds. The prequalification procedures, range of application fees, and possible penalties for violations are generally the same as those under existing law for prequalified contractors.

The act eliminates a requirement for all applicants, contractors and substantial subcontractors, to include in their application their experience on private and public construction projects over the immediately preceding five years or their 10 most recently completed projects and the names of any subcontractors they used on them. The act reduces, from five years to at least the immediately preceding three years, the period for which the DAS commissioner must review evaluations of applicants' performance on public and private projects.

Application Fee

The act requires the commissioner to adopt regulations establishing a schedule of application fees for subcontractors required to prequalify. Existing law establishes application fees for anyone applying for prequalificaiton. These are based on aggregate work capacity ratings and range from $600 for a rating of $5 million or less to $2,500 for a rating over $40 million. The law also requires an annual prequalification renewal fee, which under prior law had to be the greater of $600 or one-half the initial application fee. The act instead requires it to be at least one-half of the initial application fee, and it eliminates the $600 minimum renewal fee.

Performance Evaluation

By law, public agencies must evaluate the performance of contractors and subcontractors working on public projects. The act allows municipalities to meet this requirement by relying on a contractor's evaluation of his subcontractors.

Bridge and Highway Projects

The act extends the prequalification requirement and process for public buildings to all state public works, except highway and bridge projects.

BACKGROUND

Construction Manager at-Risk

In a construction manager (CM) at-risk project, the owner hires a firm with construction experience, usually during a project's design phase, to manage the entire construction process. The CM provides pre-construction services such as estimating costs, budgeting, reviewing constructability and suggesting construction alternatives (“value engineering”), and scheduling. Once the design is finalized, the CM seeks competitive bids from subcontractors for each project element (e. g. electrical, mechanical, carpentry, roofing). Once the subcontractors' bids are received and verified for compliance with project requirements, scope, and specifications, the CM and the project owner negotiate and set a GMP for construction. The CM assumes the risk to complete the project within the GMP.

The GMP includes the CM's fee, the cost of the work, and contingency funds for the project. The CM is responsible for costs that exceed the GMP, excluding any work not included in the final GMP that the owner authorizes through a change order process.

Threshold Limits

The law requires new construction and additions to most state buildings over a statutorily set “threshold” size to receive a building permit and certificate of occupancy (CO) from the state building inspector. The threshold limits are (1) four stories, (2) 60-feet high, (3) a clear span 150 feet wide, (4) 150,000 square feet of floor space, or (5) occupancy by 1,000 or more people.

A newly constructed or altered state building that falls below these threshold limits needs neither a building permit or a CO. Before such a building can be used, the agency responsible for the project must certify to the state building inspector that it complies with the State Building and Fire Safety codes.

UConn-DPS MOU

The UConn president and the public safety commissioner entered into an MOU on December 1, 2005 through which UConn has assigned six employees to perform building and fire code inspections for nonthreshold buildings that are part of UConn 2000 projects. These personnel report directly to the state building inspector and state fire marshal. The MOU expires on October 31, 2006 and may be extended by mutual agreement for one-year terms.

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