Since my February 2015 article regarding the status of Design-Build contracting in New York, the legislature passed a new bill reauthorizing the use of the Design-Build project delivery system for certain authorized state entities. The new Bill, S4610A-20151, contains essentially the same language regarding Design-Build as the previous authorizing legislation. It was signed by Governor Cuomo on April 13, 2015 and is effective for two years.
If you missed my previous article2, Design-Build refers to a project delivery system allowing for a single agreement for project design and construction between the owner and the general contractor without the need for a separate design contract between the owner and a licensed design professional. In this system, the general contractor is responsible for retaining a licensed design professional of its choosing to perform the required design services on the project. Design-Build contracts would, potentially, be in violation of N.Y. Educ. Law § 7200 if not for the legislative and judicial authorization for its use in public and private contracts.
Those in favor of Design-Build tout its ability to cut costs on public projects while allowing for efficient project delivery. Since Design-Build is here to stay, at least for another two years, construction industry professionals should know that Public Design-Build Projects are governed by a different methodology for contractor selection than that provided in § 103 of the General Municipal Law.
Many construction professionals are familiar with § 103 of the General Municipal Law providing for the award of contracts for public work to the lowest responsible bidder after advertisement for sealed bids. Bill S4610A-2015 provides a different methodology requiring the authorized state entity relating the project to: (1) publicly advertise a request for qualifications; (2) generate a list of entities from the responses to said request from which the state entity will solicit proposals; and (3) the authorized state entity’s selection of the proposal which is the “best value” to the state. In generating the list and awarding the contract, the state must give preference to proposals submitted by and/or including certified minority or women-owned businesses under Article 15-A of the executive law. Furthermore, the authorized state entity may maintain a list of “prequalified” contractors who are automatically eligible to submit proposals on its design-build projects, which list must be continuously open to new entries.3
The Bill defines “best value” not just in terms of cost, but also in terms of quality, efficiency, diversity and reputation. In fact, the Bill sets forth a list non-exclusive considerations for making the “best value” determination including: the quality and timeliness of the contractor's performance on previous projects; the level of customer satisfaction with the contractor's performance on previous projects; the contractor's record of performing previous projects on budget and ability to minimize cost overruns; the contractor's ability to limit change orders; the contractor's ability to prepare appropriate project plans; the contractor's technical capacities; the individual qualifications of the contractor's key personnel; the contractor's ability to assess and manage risk and minimize risk impact; and the contractor's past record of compliance with article 15-A of the executive law. However, the authorized state entity is not bound by these ten considerations. Their only restraint is that the bill calls for the selection of the proposal that “optimizes quality, cost and efficiency, and price and performance criteria… [based on], wherever possible, objective and quantifiable analysis.”
Once the Design-Build proposal of “best-value” is selected, the Bill provides that the contract can either be awarding based the proposal or, alternatively, on a cost-plus not to exceed maximum price or lump sum basis.
Practice Tip: Under this method of contractor selection, instead of a race to the bottom, authorized Design-Build contracts are, at least on the face of the Bill, more likely to be awarded based on merit. On the other hand, it is arguable that this selection method allows authorized state entities to exercise more favoritism than § 103 of the General Municipal Law with the result that Design-Build jobs may be awarded exclusively, or on a majority basis, to a few contractors. Only time will tell as design-build legislation is still relatively young. Ultimately, Construction professionals interested in taking lead on state authorized Design-Build projects should submit proposals intended to highlight not only fair cost, but also the quality workmanship and diversity of the design-build team. Likewise, subcontractors seeking a piece of the Design-Build action should keep a record of successful work to assist their team leads in submitting high-value proposals.
1 Text available at http://open.nysenate.gov/legislation/bill/S4610A-2015
2 Available at http://www.wbgllp.com/legal-alerts.php?id=97
3 An appeals process is available for contractors denied entry to the “prequalified” list