DAR File No. 28608

Administrative Services, Facilities Construction and Management

R23-1

Procurement of Construction

NOTICE OF PROPOSED RULE

DAR File No.: 28608
Filed: 04/12/2006, 03:16
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The reason for the change is to increase the level to which the small purchase provisions apply. To quickly detail the changes, this amendment increases (from $50,000 to $100,000) the level of construction contracts at which the full procurement requirements must be met. Above this level, contracts must be advertised and a formal procurement process followed. Also, the current rule allows the director to use whatever method he deems adequate and reasonable to select construction contracts costing $5,000 or less. The amendment increases this level to $10,000. There is a safeguard; existing language in the rule that is not being amended provides that these dollar levels are minimum requirements and the more stringent requirements may be applied to smaller contracts when warranted.

Summary of the rule or change:

This amendment increases (from $50,000 to $100,000) the level of construction contracts at which the full procurement requirements must be met. Above this level, contracts must be advertised and a formal procurement process followed. Contracts costing less than this amount fall into the "small procurement" provisions where the rule provides for two levels of procedural requirements. The current rule allows the director to use whatever method he deems adequate and reasonable to select construction contracts costing $5,000 or less. The amendment increases this level to $10,000. The second level of procedure requires that written quotations or proposals be obtained from at least two firms. The selection is then made similar to the regular processes except that a public advertisement is not required and only invited firms may submit bids or proposals. Under the amended provisions, this second level of procedural requirement applies to construction contracts costing more than $10,000 and up to $100,000. It should be noted that existing language in the rule that is not being amended provides that these dollar levels are minimum requirements and the more stringent requirements may be applied to smaller contracts when warranted.

State statutory or constitutional authorization for this rule:

Subsection 63-56-208(2) and Section 63-56-409

Anticipated cost or savings to:

the state budget:

During the last two years, construction costs have increased by about 25% and they are expected to continue to rise by about 10% per year for the next 2 years. This has caused a substantial number of contracts to move into more stringent procurement requirements which demand a greater level of effort by the Division of Facilities and Construction Management (DFCM) staff. This amendment will return the workload demand for DFCM staff to the level that existed prior to the escalation of construction costs. A similar rule was authorized by the Utah State Building Board on 09/16/2005, that proposed to change the limits regarding the procedures for procurements, as well as the limit for bond requirements. This new change presented to the Building Board on 04/12/2006, still changes the limits regarding procurements but does not change the limit for bond requirements. It is not possible to estimate the actual savings that will accrue from these amendments.

local governments:

As local governments do not operate as construction contractors for DFCM, this rule does not apply to them.

other persons:

The amendments will reduce the costs for construction contractors to pursue contracts with DFCM costing $100,000 or less. The amount of this savings cannot be estimated.

Compliance costs for affected persons:

The effect of the amendments is to decrease the cost to comply with procurement requirements for firms pursuing building construction contracts with the State.

Comments by the department head on the fiscal impact the rule may have on businesses:

The amendments streamline the procurement procedures that must be followed by contractors seeking smaller building construction contracts with the State. This will result in savings that will benefit the contractors and a portion will flow through to the State. D'Arcy Dixon Pignanelli, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Priscilla Anderson at the above address, by phone at 801-538-9595, by FAX at 801-538-3378, or by Internet E-mail at phanderson@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/31/2006

This rule may become effective on:

06/01/2006

Authorized by:

Keith Stepan, Director

RULE TEXT

R23. Administrative Services, Facilities Construction and Management.

R23-1. Procurement of Construction.

R23-1-20. Small Purchases.

(1) Procurements of [$50,000]$100,000 or Less.

(a) The Director may make procurements of construction estimated to cost [$50,000]$100,000 or less by soliciting at least two firms to submit written quotations. The award shall be made to the firm offering the lowest acceptable quotation.

(b) The names of the persons submitting quotations and the date and amount of each quotation shall be recorded and maintained as a public record by the Division.

(c) If the Director determines that other factors in addition to cost should be considered in a procurement of construction estimated to cost [$50,000]$100,000 or less, the Director shall solicit proposals from at least two firms. The award shall be made to the firm offering the best proposal as determined through application of the procedures provided for in Section R23-1-15 except that a public notice is not required and only invited firms may submit proposals.

(2) Procurements of [$5,000]$10,000 or Less. The Director may make small purchases of construction of [$5,000]$10,000 or less in any manner that he shall deem to be adequate and reasonable.

(3) Division of Procurements. Procurements shall not be divided in order to qualify for the procedures outlined in this section.

R23-1-40. Acceptable Bid Security; Performance and Payment Bonds.

(1) Application. This section shall govern bonding and bid security requirements for the award of construction contracts by the Division in excess of $50,000; although the Division may require acceptable bid security and performance and payment bonds on smaller contracts. Bidding Documents shall state whether acceptable bid security, performance bonds or payment bonds are required.

(2) Acceptable Bid Security.

(a) Invitations for Bids and Requests For Proposals shall require the submission of acceptable bid security in an amount equal to at least five percent of the bid, at the time the bid is submitted. If a contractor fails to accompany its bid with acceptable bid security, the bid shall be deemed nonresponsive, unless this failure is found to be nonsubstantial as hereinafter provided.

(b) If acceptable bid security is not furnished, the bid shall be rejected as nonresponsive, unless the failure to comply is determined by the Director to be nonsubstantial. Failure to submit an acceptable bid security may be deemed nonsubstantial if:

(i)(A) the bid security is submitted on a form other than the Division's required bid bond form and the bid security meets all other requirements including being issued by a surety meeting the requirements of Subsection (5); and

(B) the contractor provides acceptable bid security by the close of business of the next succeeding business day after the Division notified the contractor of the defective bid security; or

(ii) only one bid is received.

(3) Payment and Performance Bonds. Payment and performance bonds in the amount of 100% of the contract price are required for all contracts in excess of $50,000. These bonds shall cover the procuring agencies and be delivered by the contractor to the Division at the same time the contract is executed. If a contractor fails to deliver the required bonds, the contractor's bid shall be found nonresponsive and its bid security shall be forfeited.

(4) Forms of Bonds. Bid Bonds, Payment Bonds and Performance Bonds must be from sureties meeting the requirements of Subsection (5) and must be on the exact bond forms most recently adopted by the Board and on file with the Division.

(5) Surety firm requirements. All surety firms must be authorized to do business in the State of Utah and be listed in the U.S. Department of the Treasury Circular 570, Companies Holding Certificates of Authority as Acceptable Securities on Federal Bonds and as Acceptable Reinsuring Companies for an amount not less than the amount of the bond to be issued. A co-surety may be utilized to satisfy this requirement.

(6) Waiver. The Director may waive the bonding requirement if the Director finds, in writing, that bonds cannot be reasonably obtained for the work involved.

KEY: contracts, public buildings, procurement

Date of Enactment or Last Substantive Amendment: [October 18, 2005]2006

Notice of Continuation: June 6, 2002

Authorizing, and Implemented or Interpreted Law: 63A-5-103 et seq.; 63-56-14(2); 63-56-20(7)

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For questions regarding the content or application of this rule, please contact Priscilla Anderson at the above address, by phone at 801-538-9595, by FAX at 801-538-3378, or by Internet E-mail at phanderson@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.