BY DAVID BOWSER
Recently and without much fanfare, the basic relationship between a general contractor and his public entity client has undergone substantial changes; ODOT has released the 2015 Oregon Standard Specifications for Construction. In general, with a few notable exceptions, the changes greatly favor the public agency and impose substantial new burdens on the contractor. These major changes will affect public construction contracts for approximately the next decade.
Why You Should Care
More than any statute, regulation, or judge-made law, the contract is what governs your relationship with your client. It defines your rights and obligations. The contract is the first thing you look at if any issue arises. ODOT, who is a large consumer of public construction, publishes a set of standard specifications that define the client relationship and procedures that govern construction. Many local bodies merely incorporate the ODOT specifications into their contracts. Therefore, if you plan to contract with any Oregon governmental agency for road or bridge work, you most likely will be dealing with the ODOT general specifications.
First the Good News
With a tip of the hat to the old adage that sugar makes it go down easier, not all of the changes are bad for the contractor.
A longstanding complaint of contractors has been that ODOT keeps retainage (typically 5% of the contract price) for the duration of the work and usually after completion. That has changed. Under Specification 00195.50, a new rolling release of retainage will occur. ODOT will now release retainage for completed work on a quarterly basis without the contractor submitting any paperwork.
Contractors were pressed in the past to quickly assemble and file claims as they were required to submit all claims within 15 days of ODOT issuing second notice. That time has now been extended. Henceforth, claims must be submitted within 45 days of second notice under Specification 00199.
Now the Bad News
Unfortunately for contractors, the pro-agency revisions greatly outnumber the pro-contractor revisions. While the following list does not address all of the changes that have been made, contractors should take note of the following.
ODOT has expanded its disclaimer of a contractor’s ability to rely upon subsurface information provided by ODOT in Specification 00120.30. These types of disclaimers are aimed at barring differing site condition claims. However, the disclaimer may be ineffective.
Cost Reduction Proposals
A cost reduction proposal is a procedure by which the contractor can propose methods to the agency to reduce the cost of the project and share a percentage of the savings. Under revised Specification 140.70, ODOT will no longer share savings with the contractor for reducing quantities or deleting work. Since contractors make profit and overhead by doing work, not deleting it, the new incentive is for the contractor to stay quiet and just do the work.
Records, Records, and More Records!
ODOT has added record creation, retention, and production requirements that are, to be frank, quite breathtaking in scope. The new requirements apply to almost every tier in the contracting chain (you must pass through the requirements), including contractors, subcontractors, certain material suppliers, and rented equipment. You have to maintain records regarding your performance of the contract, your ability to continue performance, and any claims arising from performance. Those three subjects cover just about everything that happens on an ODOT project. The records requirement covers everything from bidding to completion. It even mentions by name your general ledger, trial balances, financial statements, and tax returns. It tells you how you have to keep those records, including satisfying GAAP and making production less time-consuming for the agency. Failure to have sufficient records can result in termination for default or waiver of your claims.
Warranties usually last for a defined period and when the clock has run out, it is over. Specification 0017.85 adds a new clause that tolls (pauses) any warranty period until the problem is resolved, at which point time will again begin to run.
A three-week schedule has historically been a brief one-page document that provides basic notice as to what is planned for the next three weeks. Revised Specification 00180.41 greatly increased the required details to include resources to be used, locations, time frames, and closures. You should plan to expend more time preparing three-week schedules.
In Specification 00199, ODOT has imposed new requirements upon claims. There is a form for protesting. Content requirements will be strictly enforced. Timely notice must be identified. In addition, the originating contractor must certify that the subcontractor’s pass through claim is reasonable, independently verified, fully documented, and fully supported. The new record requirements play heavily in this new, expanded process and have their own process to challenge a determination that your records are inadequate.
The changes made to ODOT’s specifications are mostly to the benefit of the public owner: (1) they add unnecessary complexity to the construction process, (2) they favor larger contractors who have systems and trained personnel already in place, and (3) they generally will increase overhead costs for the contractor.