Editor’s note: Please see the followup post “Some On-Call Contracts ARE Kosher,” written to clarify the below article.
Over the past two to three years, there has been much interest and discussion about on-call contracts by local agencies, mostly related to prevailing wages for these types of contracts. Recently, the State Auditor’s Office (SAO) has determined that, because on-call contracts are not specifically authorized in state law, local agencies may not use them.
On-Call Contracts Defined
What are on-call contracts? There is not an official definition, but MRSC has used this:
On-Call (Work Order) Contracts (OC/WO Contracts) are bid and awarded without a specific public works project or scope of work in mind, but rather are categorized around general types of anticipated work or trades. When a specific scope of work is identified, individual work orders are authorized based on either a not to exceed time and materials basis or on a negotiated lump sum amount, using the unit prices bid by the contractor and the contractor proceeds to complete the work. Most typically, OC/WO Contracts are used for repair, renovation, and maintenance, of public facilities, all of which are included in the definition of public works in RCW 39.04.010, and as further defined by the courts and Washington Administrative Code. These contracts are typically on an annual basis, with optional renewals, (up to the maximum contract amount) although many agencies have multi-year contracts.
In contrast, the typical public works contract as envisioned in the public works contracting statutes has a fixed scope, estimated quantities that lead to a readily determinable project cost, and a specified time frame for completion.
MRSC “White Paper” Retracted
In light of the SAO’s recent determination, MRSC has retracted a March 2011 “white paper” entitled On-Call (Task Order) Maintenance Contracts, which recommended best practices for on-call contracts, again mostly relating to prevailing wages. As the SAO noted, these contracts can result in noncompliance with the public works contracting and prevailing wage statutes, even if there are obvious advantages to using them, such as:
- Reducing the cost and time involved in bidding (either through advertising or through a small works roster) separate public works projects, especially with respect to very small projects that meet the technical definition of a public work, but that cannot be planned for ahead of time.
- Having someone under contract at reasonable prices when the need arises, rather than having to pay sometimes inflated prices for last minute work.
- Reducing the time required to administer very small projects as separate public works projects.
Where Do We Go From Here?
There is a distinct gap in statutes governing public works contracting between job order contracts (JOC), available to only certain public agencies, and typical public works contracts. As Mike Purdy, a noted public works contracting consultant, notes in his blog:
Selecting a Job Order Contractor is a more complex process than bidding an on-call public works project, and it requires a level of effort that may not be possible for all agencies to pursue. In addition, applying the Job Order Contracting process to very small public works projects, where most of the work must be subcontracted, may not be as efficient as an on-call contract that is based on unit prices specifically bid for the work required.
Legislation to address this gap is needed. While MRSC does not lobby for new legislation, we can lend our collective expertise to provide sample and model policy/procedure documents, contracts, and other information to AWC, WSAC, WASWD, and other associations as requested.
In the Meantime
So, what can agencies do with respect to these small projects and comply with state law? Well, each task (work) order that would, in a perfect world, have been under an on-call contract must be treated as a separate public works contract. While this will create more paperwork, agencies should take advantage of every statutory and administrative shortcut available and develop short-form contracts. I’ve developed a set of short form contacts and checklists for projects less than $5,000 and will provide them on request.
Note the following bond and prevailing wage matrix:
|Estimated Contract Cost||Bid Bond Required?||P/P Bond Required?||Prevailing Wages||Notice of Completion|
|Over $300K||Yes||Yes||Separate Paid I&A required||Required|
|Under $300K and more than $35K and using small works roster||Optional*||Yes||Separate Paid I&A required||Required|
|Less than $35K at contractor’s option (RCW 39.08.010)||No||No||Use Combined (Paid) Form but note restrictions at Alternate Processes||Not Required|
|Less than $35K and not using limited public works (LPW) process||No||Yes||Use Combined (Paid) Form but note restrictions at Alternate Processes (Option 2)||Not Required|
|Less than $35K and using LPW process||No||No||Use Combined (Paid) Form but note restrictions at Alternate Processes (Option 2)||Not Required|
|Less than (say) $5,000||No||Risk is Low. Require proof of payment for supplies and equipment rental.||Use Combined (Paid) Form but note restrictions at Alternate Processes (Option 2)||Not Required|
|Less than $2,500||No||Risk is Low. Require proof of payment for supplies and equipment rental.||Use Combined (Free) Form but note restrictions at Alternate Processes (Option 1)||Not Required|
|*May wish to require bid bonds for all projects over, say, $100K|
For projects with an estimated cost below agency bid limits, neither competitive bids nor the small public works roster use is required for these projects. And, (theoretically) only one quote is required. MRSC does not recommend single quotes for anything but really small projects, such as those costing less than $5,000.
System-Wide Maintenance/Repair Contracts
There is another type of contract that is often characterized as “on-call,” but is really not. These are system-wide maintenance activities or repairs that are planned in advance and budgeted. These contracts are usually on an annual basis, with optional renewals, but multi-year contacts are also common. The project scope can be determined by the use of alternate bids or by reference to an annual work plan for system maintenance or a master plan for improvements, but the actual work performed depends on the budget amount available in relation to the bid prices. Examples include:
- Sewer or storm drain “jetting” (cleaning) up to a certain budget amount, but not an exact number of linear feet
- Sidewalk/trail construction or reconstruction in relation to a agency’s pedestrian master plan, not necessarily a fixed quantity and up to a certain budget amount
- Street lighting and signal maintenance and repair in relation to an annual, system-wide work plan.
With appropriate language defining the project scope (see Practical Applications for SAO Audit Findings), these projects can be structured so that they qualify as projects that have readily determinable quantities (and therefore costs) related to a fixed scope, which are what the basic public works statutes (Chs. 39.04, 39.08, 39.12, and 60.28 RCW) envision.
While system-wide contracts are more like traditional public works contracts, some elements of these contracts may resemble on-call contracts if emergency repairs are included in the contract scope. For this reason, an agency should not include emergency repairs or task (work) order language in these contracts.