CONSTRUCTION PROCUREMENT METHODS

FOR

INDEPENDENT SCHOOL DISTRICTS

 

I.   HISTORICAL OVERVIEW

A.     Prior to the passage of Senate Bill No. 1 (“SB 1”) in 1995, Chapter 44 of the Education Code required school districts in Texas to utilize competitive bidding to procure construction, which involved awarding contracts to the responsible bidder offering the lowest price.  Accordingly, districts were unable to use design-build contracts, but were able to hire construction managers to assist them.  However, such construction managers were prohibited from performing construction themselves.

B.     After SB 1 became effective, school districts had greater flexibility in choosing from several different methods of procurement such as: competitive bidding, competitive sealed proposals, requests for proposals, catalogue purchases, interlocal agreements, and design-build contracts.  A district’s contract award was to the offeror providing the best value to the district, rather than to the lowest responsible bidder.

C.     Senate Bill No. 583, which became effective in September of 1997, took the framework of SB 1 and added detailed procedures regarding the use of design-build contracts, construction managers, and job order contracts in addition to the selection process for contractors via either competitive sealed proposals or competitive bidding.

D.    Chapter 44 has been fine-tuned by means of each subsequent legislative session through 2003.

II.    CONSTRUCTION PROCUREMENT: The following outline highlights the major components of Chapter 44 governing how Texas public school districts can properly construct, rehabilitate, alter, and repair facilities valued at $25,000 or more.

A.     Purchasing Methods (44.031)  Except as provided by this subchapter, all school district contracts, except contracts for the purchase of produce or vehicle fuel, valued at $25,000 or more in the aggregate for each 12-month period shall be made by the method, of the following methods, that provides the best value for the district:

1.       competitive bidding;

2.      competitive sealed proposals;

3.      a request for proposals, for services other than construction services;

4.      a catalogue purchase as provided by Subchapter B, Chapter 2157, Government Code;

5.      an interlocal contract;                                                 

6.      a design/build contract;                                                 

7.      a contract to construct, rehabilitate, alter, or repair facilities that involves using a construction manager;

8.      a job order contract for the minor construction, repair, rehabilitation, or alteration of a facility;

9.      the reverse auction procedure as defined by Section 2155.062(d), Government Code; or

10.   the formation of a political subdivision corporation under Section 304.001, Local Government Code.

B.     Contract Award Considerations (44.031) In determining to whom to award a contract, a district may consider:

1.       Purchase price;

2.      Reputation of the vendor and of the vendor's goods or services;

3.      Quality of the vendor's goods or services;

4.      Extent to which the goods or services meet the district's needs;

5.      Vendor's past relationship with the district;

6.      Impact on the ability of the district to comply with laws and rules relating to historically underutilized businesses;

7.      Total long-term cost to the district to acquire the vendor's goods or services; and

8.      Any other relevant factor listed in the request for bids or proposals.

C.     Publication (44.031)

1.       Notice of the time and place where the bids, proposals, or responses to a request for qualifications (“RFQ”), will be received and opened shall be published in the county in which the district's central administrative office is located, once a week for at least two weeks before the deadline for receipt.

2.      In a two-step procurement process, the time and place where the second-step bids, proposals, or responses will be received are not required to be published separately.

D.    Emergency Exception (44.031)

1.      CH(Legal) policy includes a “blended” restatement of Section 44.031(h), the emergency exception. The restatement is “blended” as a result of the fact that two slightly different versions of Section 44.031(h) were adopted in 1999.

2.      Text of subsection (h) as amended by Acts 1999, 76th Leg., ch. 922, § 1: If school equipment, a school facility, or a portion of a school facility is destroyed, severely damaged, or experiences a major unforeseen operational or structural failure, and the board of trustees determines that the delay posed by the contract methods required by this section would prevent or substantially impair the conduct of classes or other essential school activities, then contracts for the replacement or repair of the equipment, school facility, or portion of the school facility may be made by a method other than the methods required by this section

3.      Text of subsection (h) as amended by Acts 1999, 76th Leg., ch. 1225, § 1: If school equipment or a part of a school facility or personal property is destroyed or severely damaged or, as a result of an unforeseen catastrophe or emergency, undergoes major operational or structural failure, and the board of trustees determines that the delay posed by the methods provided for in this section would prevent or substantially impair the conduct of classes or other essential school activities, then contracts for the replacement or repair of the equipment or the part of the school facility may be made by methods other than those required by this section.

E.     Definition of Facility (44.0315)

“Facility” means real property, including buildings and associated structures and improved or unimproved land.  The term does not include highways, roads, streets, bridges, utilities, water supply projects, water plants, wastewater plants, water and wastewater distribution or conveyance facilities, wharves, docks, airport runways and taxiways, drainage projects, or related types of projects associated with civil engineering construction; or structures that are incidental to projects that are primarily civil engineering construction projects.

F.     Evaluation of Bids and Proposals (44.035) 

1.       The school board must, before advertising, determine which method provides the best value for the district. 

2.      The district shall publish in its request for bids, proposals, or qualifications the criteria that will be used to evaluate the offerors and the relative weights given to the criteria and the district shall base its selection on those criteria.

3.      The district shall document the basis of its selection and make the evaluations public not later than the 7th day after the date the contract is awarded.

G.    Design-Build Contracts (44.036)

1.       The district shall designate an engineer or architect independent of the design-build firm to act as its representative for the duration of the work on the facility. If that engineer/architect is not a full-time employee, then they are selected on the basis of

demonstrated competence and qualifications in accordance with the Professional Services Procurement Act (“PSPA”) (see Chapter 2254 of the Government Code).

2.      The district shall select a design-builder in two phases:

(a)  In phase one, the district prepares a RFQ that includes information on the project site, scope, budget, special systems, selection criteria, and any other information that may assist respondants to the RFQ.  The district shall also prepare the design criteria package that includes more detailed information on the project. 
(i)     The district then evaluates each response in terms of each offeror's experience, technical competence, performance capability, past performance, and other appropriate factors, except cost-related evaluation factors are not permitted.
(ii)   Each offeror must certify that each engineer/architect that is a member of its team was selected based on demonstrated competence and qualifications, in the manner provided by Section 2254.004 of the Government Code.
(iii) The district shall qualify a maximum of 5 offerors to submit additional information and, if the district chooses, to interview for final selection.
(b)  In phase two, the district shall evaluate the information submitted by the offerors on the basis of the selection criteria stated in the RFQ and the results of any interview.
(i)     The district may request additional information regarding competence, qualifications, safety considerations, long-term durability of the project, feasibility of implementing the project as proposed, the ability of the offeror to meet schedules, costing methodology, and other factors as appropriate.
(ii)   The district may not require offerors to submit detailed engineering or architectural designs as part of their proposal response.

(iii) The district shall rank each proposal on the basis of the criteria set forth in the RFQ. The district shall select the design-builder that offers the best value for the district on the basis of the published selection criteria and ranking evaluations. The district shall first attempt to negotiate a contract with the selected offeror. If the district is unable to negotiate a satisfactory contract, the district shall formally end negotiations with that offeror and proceed to negotiate with the next offeror in the order of the selection ranking until a contract is reached or negotiations with all ranked offerors end.
(iv) Following selection of a design-build firm, that firm's engineers or architects shall complete the design, submitting all design elements for review and determination of scope compliance to the district or district's engineer/architect before or concurrently with construction. The district shall provide for the inspection and testing services independently of the design-build firm per the PSPA.
(c)  A payment or performance bond is not required for the portion of the contract that includes design services only. If a fixed contract amount or guaranteed maximum price has not been determined at the time the contract is awarded, the performance and payment bonds must each be in an amount equal to the project budget, as specified in the design criteria package.

H.   Construction-Manager Agent (44.037)

1.       A construction manager-agent (“cm-agent”) provides consultation to the district regarding construction or repair of a facility and represents the district in a fiduciary capacity. A district may contractually require the cm-agent to provide administrative personnel, equipment necessary to perform duties, and on-site management.

2.      Before or during selection of a cm-agent, the district shall designate an engineer/architect to prepare construction documents and to assume full responsibility for complying with the respective practice act. If that engineer/architect is not a district employee, then they are selected per the PSPA.  The district's engineer/architect may not serve, alone or in combination with another, as the cm-agent unless the engineer/architect is hired to serve as the cm-agent under a separate or concurrent procurement process.

3.      The district selects a cm-agent per the PSPA and the district then procures a contractor in any manner allowed by Chapter 44.

4.      Either the district or the cm-agent provides for necessary inspection and testing services per the PSPA.

I.       Construction Manager-at-Risk (44.038)

1.       A construction manager-at-risk (“cm-at-risk”) assumes the risk for construction or repair of a facility at the contracted price and consults with the district both during and after design of the facility.

2.      Before or during selection of a cm-at-risk, the district designates an architect/ engineer to prepare construction documents and to assume full responsibility for complying with the respective practice act. If the architect/engineer is not a district employee, then they are selected per the PSPA.

3.      The district’s engineer, architect, or construction manager-agent for a project may not serve, alone or in combination with another, as the construction manager-at-risk unless the engineer or architect is hired to serve as the construction manager-at-risk under a separate or concurrent procurement conducted in accordance with this subchapter.  This subsection does not prohibit the district's engineer or architect from providing customary construction phase services under the engineer's or architect’s original professional service agreement in accordance with applicable licensing laws.

4.      The district provides for necessary inspection and testing services independently of the cm-at-risk per the PSPA.

5.      The district shall select a cm-at-risk in either a one-step or two-step process. In the one-step process, the district shall prepare only a request for proposals (“RFP”). In the two-step process, the district shall first prepare a RFQ and then an RFP.

(a)  The district’s RFQ or RFP, as applicable, shall include general information on the project site, scope, schedule, selection criteria, estimated budget, and the time and place for receipt of responses. The selection criteria may include the offeror’s experience, past performance, safety record, proposed personnel and methodology, and other appropriate factors that demonstrate the capability of the cm-at-risk.
(b)   If a one-step process is used, the district’s RFP may request fees and prices for fulfilling the general conditions.
(c)  If a two-step process is used, the district may not request fees or prices in its RFQ. In step two, the district may request that 5 or fewer offerors, selected solely on the basis of qualifications, provide additional information, including the cm-at-risk's proposed fee and its price for fulfilling the general conditions.

6.      At each step, the district shall receive, publicly open, and read aloud the names of the offerors, and as appropriate, their fees and prices.

7.      Within 45 days after the date of opening the proposals, the district shall evaluate and rank each proposal submitted in relation to the published criteria.

8.      The district shall select the cm-at-risk that offers the best value for the district based on the published selection criteria and on its ranking evaluation. The district shall first attempt to negotiate a contract with the selected offeror and if unable to do so then the district shall end negotiations with that offeror and proceed to negotiate with the next offeror in the order of the selection ranking until a contract is reached or negotiations with all ranked offerors end.

9.      The successful cm-at-risk shall publicly advertise and receive bids/proposals from trade contractors or subcontractors for the performance of all major elements of the work other than the minor work that may be included in the general conditions.

10.   A cm-at-risk may seek to perform portions of the work itself if they submit a bid/proposal for those portions of the work in the same manner as all other contractors and if the district determines that the cm-at-risk's bid/proposal provides the best value.

11.    The cm-at-risk and the district shall review all contractor bids/proposals in a manner that does not disclose the contents of the bid/proposal during the selection process to a person not employed by the cm-at-risk, engineer/architect, or district.

12.   All bids/proposals shall be made public after the award of the contract or within 7 days after the date of final selection of bids/proposals, whichever is later.

13.   If the cm-at-risk reviews, evaluates, and recommends to the district a bid/proposal from a contractor but the district requires another bid or proposal to be accepted, the district shall compensate the cm-at-risk by a change in price, time, or guaranteed maximum cost for any additional cost that the cm-at-risk may incur.

14.   If a selected contractor defaults in the performance of its work or fails to execute a subcontract after being selected, the cm-at-risk may, without advertising, itself fulfill the contract requirements or select a replacement contractor to fulfill the contract requirements.

15.   If a fixed contract amount or guaranteed maximum price has not been determined at the time the contract is awarded, the performance and payment bonds must be in an amount equal to the project budget, as specified in the RFQ.

J.       Selecting A Contractor Via Competitive Sealed Proposals (44.039)

1.       The district shall designate an engineer/architect to prepare construction documents and to assume full responsibility for complying with the respective practice act. If the engineer/architect is not a district employee, then they are selected per the PSPA.

2.      The district provides for necessary inspection and testing services independently of the contractor per the PSPA.

3.      The district shall prepare a RFP that includes construction documents, selection criteria, estimated budget, project scope, and schedule.

(a)  The district receives, publicly opens, and reads aloud the names of the offerors and monetary proposals. Within 45 days of opening the proposals, the district evaluates and ranks each proposal submitted based on the published selection criteria.
(b)  The district selects the contractor offering the best value to the district based on the criteria set forth in its RFP and its ranking evaluations. The district and its engineer/architect may discuss with the selected offeror options for cost reduction. If the district is unable to reach agreement with the selected offeror, the district proceeds to the next offeror in order of ranking until an agreement is reached or all proposals are rejected.
(c)  In determining the best value for the district, the district is not restricted to considering price alone, but may consider any published selection criteria.

K.     Selecting Contractor Through Competitive Bidding (44.040)

1.       Only specific portions of the Texas Local Government Code are applicable when a district elects to utilize competitive bidding:

(a)  (271.026) Bids must be opened by the governmental entity at a public meeting or by an officer or employee of the entity at or in an office of the entity. Once opened, a bid cannot be changed for the purpose of correcting an error in bid price. However, a bidder can withdraw his/her bid due to a material mistake in the bid.
(b)  (271.027(a)) The governmental entity is entitled to reject any and all bids.
(c)  (271.0275) The governmental entity may take into account the safety record of a bidder, if the district adopts a written definition and criteria for accurately determining the safety record of a bidder, and the district gives notice in its bid specifications that safety records will be considered.

2.      The district awards the contract at the bid amount to the bidder offering the best value to the district according to the established selection criteria.

3.      The district shall select or designate an engineer or architect to prepare construction documents for the project.  The selected or designated engineer or architect has full responsibility for complying with Chapter 1001 and Chapter 1051, Occupations Code, as applicable

L.     Job Order Contracts for Facilities Repair (44.041)

1.       Job order contracts (“JOCs”) are a permissible procurement method for the minor construction or repair of a facility if: (i) the work is of a recurring nature; (ii) delivery times are indefinite; (iii) quantities are indefinite; and (iv) orders are awarded substantially on the basis of pre-described pre-priced tasks.

2.      A district may establish contractual unit prices for a job order contract by:

(a)  Specifying one or more published construction unit price books and the applicable divisions or line items; or
(b)  Providing a list of work items and requiring the offerors to bid or propose one or more coefficients or multipliers to be applied to the price book or work items as the price proposal.

3.      The district advertises for, receives, and publicly opens sealed proposals for JOCs.

4.      The district’s RFP may require information on experience, past performance, proposed personnel, and methodology.

5.       The district may award JOCs to one or more contractors in connection with each solicitation of bids or proposals.

6.      JOCs may be in the form of either a fixed price, lump-sum contract based substantially on contractual unit pricing applied to estimated quantities, or unit price based on the quantities and line items delivered.

7.      The successful contractor provides bonds, if required, based on the amount or estimated amount of each order.

8.      The base term of a JOC is for the period and with any renewal option that the district sets forth in the RFP. If the district fails to advertise that term, the base term may not exceed 2 years and is not renewable without further advertisement and solicitation of proposals.

M.   Right to Work (44.043)

1.       When procuring services, awarding contracts, or overseeing construction:

(a)  A district may not consider whether a vendor is a member of or related to another organization; and 
(b)  A district shall ensure that its bid specifications and subsequent contract do not diminish the right of a person to work because of their membership or relation to any organization.

N.   Contract with Indebted Person (44.044)

(a)  The board of trustees of a school district by resolution may establish regulations permitting the school district to refuse to enter into a contract or other transaction with a person indebted to the school district.
(b)  It is not a violation of this subchapter for a school district, under regulations adopted under Subsection (a), to refuse to award a contract to or enter into a transaction with an apparent low bidder or successful proposer that is indebted to the school district.
(c)  In this section, “person” includes an individual, sole proprietorship, corporation, nonprofit corporation, partnership, joint venture, limited liability company, and any other entity that proposes or otherwise seeks to enter into a contract or other transaction with the school district requiring approval by the board.