Construction Reform Comes to Ohio

Ohio’s biennial budget legislation, HB 153, was signed into law on June 30, 2011 by Ohio Governor John Kasich.  This bill includes significant reforms to Ohio’s public construction laws, including the elimination of multiple prime contracting requirements, and provisions for Construction Management at Risk and Design-Build project delivery.  Although these reforms officially took place on September 30, 2011, there are a number of rules that the Department of Administrative Services (DAS) must issue pursuant to HB 153 to make its use fully effective for public owners.

The following is a summary of some of HB 153’s provisions:

HB 153 eliminates the Multiple-Prime Contracting Requirement that the current law places on public authorities undertaking public improvement projects.HB 153 now allows alternative delivery methods such as Construction Manager at Risk (CMAR), Design-Build (D/B) and single-prime contracting (Single Prime), in addition to multi-prime contracting.

CONSTRUCTION MANAGER AT RISK
A CMAR is a company with the authority to manage all phases of a construction project, which holds and manages the contracts with subcontractors.  Under HB 153, a public authority will conduct a "Best Value” solicitation process which considers the qualifications of the team as well as their proposed costs related to preconstruction and construction related services, in the selection of the CMAR.  The rules regarding this evaluation process as well as the contract forms to be used are currently being developed by DAS and are expected to be issued by mid-February, 2012.

Under HB 153, the overall risk of project cost overruns are shifted from the public authority as the CMAR must provide a guaranteed maximum price using an open-book pricing method. The CMAR must also provide a fee proposal broken down into a pre-construction fee, construction fee and the portion of the construction fee to be at risk in the guaranteed maximum price. The guaranteed maximum price is the total amount to be paid by the public authority to the CMAR including the cost of all work, the cost of general conditions, the contingency and all associated fees.  In this delivery method, the design professionals are contracted by the public authority.

DESIGN-BUILD
A D/B Firm provides both the design and the construction services for a project. Under HB 153, a public authority will again use a Best Value solicitation process which considers the qualifications of the design and construction components of the team as well as their proposed costs related to design, preconstruction, and construction related services.  The rules and contract documents being developed by DAS for this delivery process are expected by mid-March, 2012.  As in the CMAR process, the D/B Firm must provide the public authority with a guaranteed maximum price, which is the total amount to be paid by the public authority to the D/B Firm which includes the cost of all design and construction work, the cost of general conditions, the contingency, and all associated fees.

In both forms of contracting described above, the CMAR or D/B Firm will establish criteria for the prequalification of prospective bidders on subcontracts based on standards to be created by the DAS. HB 153 requires a CMAR or D/B Firm to identify a minimum of three prospective bidders who have been prequalified for each intended bid package.  Once the list of prequalified bidders has been accepted by the public authority, the CMAR or D/B Firm will solicit proposals from each bidder to be evaluated by both the public authority and the CMAR or D/B firm in an "open book” manner.  Any construction work the CMAR or D/B Firm intends to self-perform will also be solicited from among the pre-qualified bidders, and the CMAR or D/B Firm shall submit a sealed bid to be evaluated by the public authority against the other bids received.

BENEFITS OF THE CONSTRUCTION MANAGER AT RISK DELIVERY APPROACH:
  • Owner retains direct relationship with design team ensuring client-driven design.
  • Owner chooses his construction professionals through a Best Value solicitation process.
  • CMAR accepts risk for project overruns by issuing a Guaranteed Maximum Price for the project.
  • Owner is shielded from the cross claims of multiple prime contractors.
  • Subcontractors are prequalified, resulting in a higher quality workforce.
  • Owner requires less staff involvement than the traditional multiple prime approach.
  • Owner is not required to engage a "criteria architect” to develop the more exhaustive proposal requirements of the Design-Build approach.

BENEFITS OF THE DESIGN-BUILD DELIVERY APPROACH:
  • Provides a "turn key” approach to project development.
  • Owner chooses his design/construction team through a Best Value solicitation process.
  • Owner is shielded from cross claims between contractor and design team.
  • Owner is shielded from the cross claims of multiple prime contractors.
  • D/B Firm accepts risk for total project cost by issuing a GMP for design and construction of the project.
  • Subcontractors are prequalified, resulting in a higher quality workforce.
  • Owner requires less staff involvement than the traditional multiple prime approach.

 
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