State law HB 857: Co-operating to achieve a fair design-build/P3 system for government-funded projects

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North Carolina Construction News staff writer

Industry and government representatives explained at the 2014 North Carolina State Construction Conference how a collaborative initiative resulted in legislation to create a fair and level playing field for public/private (P3) and design-build construction projects.

The panel discussion, led by Paul Boney, senior-vice-president, LS3P Associates, also included NC state assembly representative Dean Arp, aprofessional engineer, David Crawford, executive vice-president of the American Institute of Architects (AIA) North Carolina, Dave Simpson, CAGC’s North Carolina government relations/building director, and Gregory Driver, director of the State Construction Office.

The HB 857 bill “is the result of a large collaboration of all the stakeholders,” said Arp. “It was an impressive effort on the part of all of these people” representative 14 different entities.

The legislation seeks to ensure open public bidding, and includes provisions for a hybrid of qualification based selection (QBS) and price competition, reflecting the different needs/perceptions of designers and contractors.

The idea behind the legislation is to “do away with the un-level playing field, and local bills,” said Simpson.

Dave Crawford representing North Carolina’s architects, said “we saw a train wreck coming.

“There were lobbying efforts for P3 legislation,” he said.  “What we’ve seen in other states, is that the legislation was unfair to everyone in the design and construction industry, and mostly favoured the attorneys.”

Simpson said North Carolina’s contractors wanted to avoid the Virginia P3 model, where unsolicited bids could be proposed, without competition. “It was design/build allowing for unsolicited bids without a new funding source,” he said.  “We took all that into account and kept that in bay.”

The resulting legislation allows for P3 and design/build projects, but makes clear that these must be advertised publicly, and generally require at least three competitive bidders (initially evaluated qualitatively rather than by price) to be in place.

Other provisions separate out in certain circumstances the role of design and specification from building and construction process.

In certain projects, governments can select a design professional “to help the agency or owner to come up with and define the project, or come up with the scope of the project,” said Arp.  “That design professional stays with the owners through the procurement process and all through construction, helping them to define the scope.

“We wanted to create a very bright line . . . you couldn’t be on both sides of the contract. You can’t specify on one side and then win it on the other.

The law allows public/private partnerships, but says in these cases the developer needs to provide at least 50 per cent of financing.  There are concerns about debt.  “The fear as we were developing this legislation, is that you would create off-book debt, long-term capital leases.  We wanted to manage that appropriately, so local governments and agencies are not in trouble.”

Matt Bouchard of Lewis & Roberts in Raleigh has published a comprehensive blog posting describing the HB 857 provisions and opportunities. You can read it in Top 10 Things to Know About North Carolina’s New Design-Build/Public-Private Partnership Law.