rebound
a building trades organization
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BRIEFING PAPER
SB 5801 and HB 1788
Job Order Contracting
SB 5801 and its companion HB 1788 (Job Order Contracting) propose to change the definition of a “purchase order” such that it will no longer be considered a “contract” for the purposes of adherence to prevailing wage law, 39.12 RCW. The legal ramifications of passing legislation that changes the definition of “Purchase Order” or “Work Order” for the purposes of 39.12.RCW, by arbitrarily establishing these “contracts” as exempt from the definition of a “contract,” will result in serious employment enforcement issues. Additionally, it will have a detrimental fiscal impact on the Prevailing Wage Section of the Department of Labor and Industries. From a public policy perspective, it will preclude the public from access to information that is currently a matter of public record.
Under this bill, only the primary “Job Order Contract,” in designated types of construction projects, is recognized. All sub-contracts meeting certain specified criteria, will be granted by purchase order. It is our understanding that purchase orders, as established in this bill, are no longer considered to be “contracts,” as we understand the term in relationship to 39.12 RCW, and this change will be in direct conflict with WAC 296-127-010(8) which specifically defines a “contract” as:
… [a] purchase order [emphasis added], or any other legal agreement in writing for public work to be performed for an indeterminable amount, which is duly awarded after advertisement and competitive bid.
If “purchase orders” and/or “work orders” are not considered to be contracts as defined by the WAC, then despite the fact that the payment of prevailing wages is required, adherence to the remainder of 39.12 RCW is not. This means that work contracted by purchase orders or work orders would be exempt from the remaining requirements of RCW 39.12. These can include apprenticeship requirements, posting of prevailing wage rates, enforcement and liability for violations, and other related laws.
For example: Without a clear requirement of adherence to all of the terms of 39.12.RCW, contractors may be exempt from filing certified payroll records, which allow the public access to information directly associated with adherence to the law. This occurs because only the prime contract is recognized under this bill. The purchase order and work order contracts are, in plain terms, simple outsource orders.
From a fiscal perspective, any exemption from the requisites of 39.12.040, which requires the filing and approval of Statements of Intent to Pay Prevailing Wage and Affidavits of Wages Paid will result in a negative fiscal impact on the Prevailing Wage/Employment Standards Section of the Department. Estimates indicate that as much as 70% of all revenue provided to the department from required filings comes from contracts for $250,000 or less.
Under the proposed legislation, purchase orders for work costing $200,000 or less would be exempted. Given the difference in exempted project cost and the application of this legislation only to those projects performed as design/build or under the General Contract Construction Method [GCCM], the fiscal impact is lessened from that estimate, but it is no less formidable to the Prevailing Wage Section.
Conservatively estimating that, under this legislation, on 40% of the sub-contract purchase orders would be exempt from filing, the financial impact to the department would be approximately $400,000. This amount can be expected to increase from the time the bill is passed until it sunsets in 2007, as the use of design/build and GCCM methods increase.
The Bill Digest synthesizes the bill as follows:
Provides that public bodies may use a job order contract for public works projects when: (1) A public body has made a determination that the use of job order contracts will benefit the public by providing an effective means of reducing the total lead-time and cost for public works projects or repair required at public facilities through the use of unit price books and work orders by eliminating time-consuming, costly aspects of the traditional public works process, which require separate contracting actions for each small project;
(2) The work order to be issued for a particular project does not exceed two hundred thousand dollars;
(3) Less than twenty percent of the dollar value of the work order consists of items of work not contained in the unit price book; and
(4) At least eighty percent of the job order contract must be subcontracted to entities other than the job order contractor.
The bill’s failure to specifically require adherence to 39.12 RCW creates a dual standard in the administration and enforcement of public works law. Some sub-contractors will continue to be bound by the law while others, simply because they are involved in a Design/Build or GCCM contract, will not. The public’s right to access information about the project will be seriously compromised because public records, which are currently mandatory, will not be required and, therefore, will not exist.
These changes are being made because the government wishes to ease the burden on contractors by lessening the requirements of the public, government contracting process. The background report on the bill states that the practice of Job Order Contracting has been used well in private construction and can save as much as 10% – 20%. The savings are not explained and when viewed in terms of a ten million dollar contract can be as much as $2,000,000. Certainly, a savings of this much money should be better explained so that the public can see exactly how those savings would occur, without harming the integrity of the project, the public’s access to information, and the protection of worker rights on the job.
While the cost savings goal (albeit through undocumented, unjustified estimates of savings) may be commendable, and may ease the way for contractors, it results in a denial to the public of the accountability to which it is legally entitled when its tax dollars fund public contracts, and removes from the workers who build the public works, certain necessary protections under the law. Absent the requirement of filing Statements of Intent there is no need to post prevailing wages on the job site. Workers’ rights are frequently violated and this would further reduce their access to the information.
These issues can be remedied by adding a few words to the current legislation. The language of NEW SECTION 1, Sub (12) in both the House and Senate versions should be revised as follows:
(12)For the purposes of chapters 39.08, 39.12, 39.76, and 60.28 RCW, each work order or purchase orderissued shall be treated as a separate contract.
This simple addition to the existing language fully retains the integrity of all of the goals intended by this legislation. Additionally, it addresses all of the concerns raised in this paper.
- Meeting all of the requirements of RCW 39.12;
- Maintaining the current fiscal level of funding to L&I from the filing of Statements of Intent to Pay Prevailing Wage and Affidavits of Wages Paid;
- Provides for the posting of these records on the job-site;
- Guaranteeing the public that its access to the records necessary for its review of public work is preserved, and that those records will be required to be filed and maintained.
REBOUND, with the exception noted above, favors passage of this legislation; however the exemption from 39.12 RCW must be remedied. We believe that the remedy proposed supra is a simple and appropriate resolution to the elements of concern raised by the proposed legislation.
cc.Greg Boyd, President
Steve Pendergrass, Vice President
Chris Jensen, Secretary
Charlie Val, Treasurer
Dennis Becker, Member
Ted Boskovich, Member
Darrell, Chapman, Member
Bill Kemble, Member
Bart Scherck, Member
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