MISSOURI MUNICIPAL LEAGUE

82ND ANNUAL CONFERENCE 

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STATUTORY REQUIREMENTS FOR PUBLIC WORKS CONTRACTS 

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Erin P. Seele CUNNINGHAM, VOGEL & ROST, P.C. legal counselors to local government 333 S. Kirkwood Road, Suite 300 St. Louis, Missouri 63122 314.446.0800

[email protected] www.municipalfirm.com

September 12, 2016

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MML Annual Conference September 12, 2016

Statutory Requirements for Public Works Contracts Presented by: Erin P. Seele Cunningham, Vogel & Rost, P.C. legal counselors to local government

333 S. Kirkwood Rd, Ste. 300 St. Louis, Missouri 63122 [email protected] www.municipalfirm.com

Topics: 1. Contract Requirements 2. Public Work Requirements • OSHA • Prompt Payment Act • Prevailing Wage • American Products • Payment Bond 3. Additional Contract & Bid Terms • Performance Bonds • Bid Bonds • Excessive Unemployment • Competitive Bidding • Liquidated Damages

Handouts: 1. List of Requirements for Public Works Contracts 2. Checklist for Public Works Contracts 3. MoDOLIR Prevailing Wage Checklist 4. Prevailing Wage Project Notification 5. Request for Wage Determination 6. Affidavit Compliance with Prevailing Wage 7. Contractor’s Wage Survey 8. Contractor Payroll Records 9. Affidavit of Participation 10. Affidavit of Citizenship for Eligibility for Public Benefit 11. Notice to Contractor Sample 12. OSHA FAQs 13. 15 CSR 60-15

Contract Requirements

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A CONTRACT § 432.070 RSMo. requires that …

•

No county, city, town, village . . . or other municipal corporation shall make any contract, unless • it is within the scope of its powers or expressly authorized by law, • it is made upon a promise to perform AFTER making of the contract, • includes the price term ($$$$$), • is in writing, • dated when made, • signed by the parties thereto (or their agents authorized by law and duly appointed), and • authorized in writing.

Immigration

§ 285.530.2 RSMo.

• As a condition for the award of any contract or grant in excess of $5,000 by a political subdivision to a business entity:

• business entity shall, by sworn affidavit & provision of

documentation, affirm enrollment & participation in a federal work authorization program with respect to employees working on contractedservices.

• Affidavit affirming that business entity does not knowingly employ any person who is an unauthorized alien in connection with the contracted services. • See Handout9

MoDOLIR Regulations 15 CSR 60-15.020 Any bid or response to an RFP for the award of any contract for services in excess of $5,000 shall be accompanied by: 1. An affidavit from a business entity that it is:

• •

Enrolled & participating in E-Verify or other federal work authorization program AND Does not knowingly employ any person who is an unauthorized alien in conjunction with the contracted services.

2. Documentation showing participation in a federal work authorization program

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§ 208.009 RSMo. • •

•

Prohibits any illegal alien from receiving state or local "public benefits" Requires all applicants at time of application for public benefits to provide “affirmative proof that the applicant is a citizen or a permanent resident of the United States or is lawfully present in the United States” Proof = Driver’s license or other document recognized by the federal government as proof of lawful presence

Public Benefits § 208.009 RSMo.

•NO AFFIDAVIT REQUIRED unless applicant cannot supply documentation, then can request “temporary public benefits” upon affidavit See Handout 10

•Affidavit only good for 90 days.

City Indemnification of Private Parties? • Violate the constitution?

 Cannot pay private debts – funds spent only for public purpose – [Article 6, § 23; Article 6, § 25]

• Use Attorney General Opinion 138-87 – to indemnify would improperly waive sovereign immunity: 

“To agree to the underlined terms [defend, indemnify, and hold harmless], is to waive the state’s sovereign immunity, ... Only the legislature can waive this immunity.”

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Special Public Works Contract Requirements

OSHA TRAINING OSHA Training § 292.675 RSMo. All “on-site employees” of contractors & subcontractors working on a public works project must take the 10hour, OSHA-approved construction safety course provided by their contractor or subcontractor

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What is OSHA Training under § 292.675 RSMo.? A one-time requirement that on-site employees must either:

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complete the program within 60 days of beginning work, or

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hold documentation of prior completion of the program

For each public works project, statute’s requirements must appear in the:

• • •

call for bids for the contract resolution/ordinance contract

Section 292.675 RSMo. Details • Employee working without OSHA

• •

training has 20 days to complete the training before employee is removed from project and penalties accrue. Penalties = $2,500.00 plus $100.00/day per employee found on site without evidence of training City/county must withhold penalty amounts assessed by MoDOLIR from payments to the contractor. • Notice of these penalty provisions must be included in the contract.

Prompt Payment Act

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Prompt Payment Act § 34.057 RSMo. “… all public works contracts made and awarded by … any municipality, county …, for construction, reconstruction or alteration of any public works project, shall provide for prompt payment by the public owner to the contractor . . .”

Prompt Payment Act as amended in 2014

• Always applied to “contractors” • Since 2014 also applies to:

•

• Professional engineer • Architect • Landscape architect or • Land surveyor

Also -- contractor to subcontractors and material suppliers

Prompt Payment Act Progress Payments

• Must make progress payments to the contractor on at least a monthly basis as the work progresses, or, on a lump sum basis according to the terms of the lump sum contract. § 34.057.1(1) RSMo.

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Prompt Payment Act Retention

• Generally retention is limited to 5% of the value of the contract

• Exception: may retain up to 10% if the contract price is not estimated to exceed fifty thousand dollars

Prompt Payment Act Retention Municipality must: • Approve payment request in full; or • Determine work to be ‘substantially complete.’ Determination that work is not substantially complete requires owner to supply contractor with written reasons within 14 days

•

If not, must reduce retainage by 98% (that is, down to 2%) of retainage within 30 days

Must pay retainage, less any offsets/deductions authorized in the contract or otherwise authorized by law, after substantial completion of the work and acceptance by the public owner's authorized contract representative

Prompt Payment Act Final Payment

Paid within 30 days of the first of the following to occur:

1.

Completion of the project and complete filing of all documents required by contract;

2. 3.

Architect/Engineer certification of completion; or Certification of completion by the contracting authority.

Payment “made” when placed in US Mail

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Prompt Payment Act Penalty

If payment is not made within the 30 days & NO GOOD FAITH and reasonable cause to withhold payment: Interest at 1½% per month.

Prevailing Wage

Prevailing Wage §§ 290.210-.340 RSMo. Public Policy of the State of Missouri

• Workers employed by or on behalf of a public body are to be paid no less than the prevailing wage on public works projects.

• The prevailing wage rate differs by county and for different types of work.

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What is Public Works? (11) "Public works" means all fixed works constructed for public use or benefit or paid for wholly or in part out of public funds. Construction activity • The term includes • construction of buildings, structures and improvements of all types. • all work done in construction or development of a public works project, including, altering, remodeling, demolishing existing structures, installation on the site of the construction of items fabricated off-site, & painting and decorating.... 8 CSR 30–3.020(1).

What is Public Works? “[A]ny work that is encompassed in the plain meaning of the language defining “construction” under section 290.210(1) is work that requires payment of prevailing wages…” Utility Service Co., Inc. v. Department of Labor and Industrial Relations, 331 S.W.3d 654, 660 (Mo. 2011)

Examples of work subject to the Prevailing Wage Act:

• •

Painting and welding repairs of a water tower Id. at 661 Electrical work performed by laborer who was treated by subcontractor as an independent contractor. See State ex rel. Laszewski v. R.L. Persons Const., Inc., 136 S.W.3d 863 (Mo. App. 2004)

• Courts will defer to the MoDOLIR’s regulations relating to the Act

unless unreasonable and plainly inconsistent with the statutes. 331 S.W.3d 654, 659.

Request for Wage Determination Form PW-3 See Handout 5

Sent to Division of Labor Standards before project is bid

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Prevailing Wage Notice to contractors/public

• •

Wage rates must be attached to and made part of the specifications for the work. Must “specify in the resolution or ordinance and in the call for bids for the contract what is the prevailing hourly rate.”

Prevailing Wage Notice to MoDOLIR

Submit PW-3 for Every Project

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Prior to beginning any work on a public works project, public body awarding a contract shall notify the MoDOLIR, on a form prescribed by the department, of the scope of the work to be done, the various types of craftsmen who will be needed on the project, & the date work will commence on the project.

Project Notification Form PW-2

See Handout 4

Filed with Division of Labor Standards when project is awarded

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Prevailing Wage Required contract provisions

§ 290.250.1. RSMo. The public body awarding the contract shall cause to be inserted in the contract a stipulation to the effect that not less than the prevailing hourly rate of wages shall be paid to all workmen performing work under the contract.

Prevailing Wage Payroll and Compliance

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During the course of the project, review all payroll records to ensure prevailing wage law requirements are being met. (See Handout 8) At the completion of the project, acquire a completed Affidavit of Compliance form from all contractors and subcontractors before making final payments. (See Handout 6)

Prevailing Wage Enforcement

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MoDOLIR is responsible for enforcement. § 290.335 Can obtain injunction to stop award of the contract. § 290.335

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Any officer, official, member, agent or representative of any public body, contractor or subcontractor who willfully violates and omits to comply prevailing wage laws shall be punished for each violation by:

• • •

a fine not exceeding five hundred dollars, or by imprisonment not exceeding six months, or by both such fine and imprisonment. § 290.340

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Davis-Bacon (federal) 40 usc § 3141 et seq.

• •

Applies when federal assistance (grants, loans, loan guarantees) used to pay for project over $2,000 and where law under which federal assistance is provided requires it Required contract language in 29 CFR 5.5.

Federal Davis-Bacon v. State Prevailing Wage Which Applies to My Federal Funded Project?

• BOTH – Frank Bros. v. Wisc. DOT, 409 F.3d 880 (7th Cir. 2005). • Davis-Bacon Act did not implicitly preempt application of state's prevailing wage law, and

• There was no conflict between federal and state statutory schemes.

• •

Include both Federal and State Wage Determination in Bids Documents for Federally Funded Projects Federal Wage Determinations available at: http://www.wdol.gov/dba.aspx

American Products

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American Products § 34.353 RSMo.

• Each contract made by a public agency for . . . any public works shall contain a provision that any manufactured goods/commodities used or supplied in performance of that contract or any subcontract thereto shall be manufactured or produced in the US.

American Products Exceptions

• Exceptions:

• Contracts under $25,000; • Limited availability of certain American products; AND • Acquisition would increase cost of the contract by more than 10%. • May opt out by having “executive head” certify in writing that political subdivision has adopted a formal written policy to encourage purchase of products manufactured or produced in the US. • Must retain copy of policy for 3 years • May want to consider including notice of policy in bid documents

American Products Contract Term Recommendation

Alternative to Opting Out • Include American Product requirements in contract

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Provide that American Product requirement shall not apply if statutory exceptions do apply:

• • • •

•

10%.

If one of these exceptions apply, require contractor to provide the city information sufficient to make necessary certifications.

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Payment Bond

Payment Bond § 107.170 RSMo.

• On every project with estimated costs in excess of $50,000.00:

• Must require a payment bond from a contractor

• Generally equal to contract amount

Payment Bond Penalty

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WARNING: Officials charged with requiring Payment Bond may incur personal liability for failing to comply with statute.

•

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Union Pacific R. Co. v. St. Louis Marketplace, Ltd. Partnership, 212 F.3d 386, 390-91 (8th Cir. 2000) (Official immunity did not protect Mayor and Comptroller who were charged with performing ministerial duty of requiring payment bond from a contractor). A public entity may defend, save harmless and indemnify any of its officers and employees.

•

IF IN DOUBT, REQUIRE PAYMENT BOND.

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Other Contract & Bid Terms See Handout 2

Performance Bond v. Payment Bond Performance Bond

Payment Bond

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Discretionary

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Statutory

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Benefits city

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Benefits subcontractors

Ensures completion and maintenance

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Ensures payment (mechanic lien replacement)

Bid Bonds •

No general requirement

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Assurance the bidder will honor its bid

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Usually in the amount of 5-10%

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City usually will release all bid bonds back except to the lowest bidders within a couple days of bid opening

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Best Practice: have policy for return of bid bond in notice to bid so contractors bidding understand and agree to procedure

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Excessive Unemployment §§ 290.550-.580 RSMo.

• Excessive Unemployment in Effect: Missouri laborers & laborers from “nonrestrictive” states allowed to be employed on Missouri public works projects when unemployment rate exceeds 5% for 2 consecutive months.

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Restrictive states: AK, AZ, CA, CO, CT, DE, DC, FL, ID, IL,

IA, ME, MA, MS, MT, NV, NJ, ND, OK, SD, U.S. Virgin Islands, WV, and WY

Excessive Unemployment Warning

• Mo. Excessive Unemployment Law held unconstitutional under the Privileges and Immunities and Equal Protection Clauses. Lakeside Roofing Co. v. Nixon (ED Mo. 2012)

• Problem:

• Law still on the books, but is unenforceable DO NOT deny contracts based on worker residence.

Competitive Bidding

#1 Question:

Do I Have to Bid this Project Out? Answer: Depends.

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Competitive Bidding These laws require competitive bidding for construction projects to be awarded by counties, cities, and other political subdivisions:

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§ 49.420, RSMo (county buildings)

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§ 50.660, RSMo (county public works and buildings)

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Construction Management Services – § 8.679

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§ 88.700, RSMo ( public street

improvement contracts by cities using special tax)

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4 th

class

§ 88.940, RSMo (constitutional charter cities with populations of 75,000-80,000)

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§ 91.170, RSMo (initial city water works) § 100.170, RSMo (projects financed by revenue bonds where municipality undertakes obligation)

• • • • •

§ 177.086, RSMo (school district facilities costing more than $15,000) § 177.161, RSMo (metropolitan school districts including repairs, alterations, and additions) § 204.350, RSMo (common sewer districts) § 205.080, RSMo (county public health centers) § 229.050, RSMo (construction, improvement, or repair of roads, bridges, and culverts by county commissions, township boards, and road districts)

§ 231.250, RSMo (road districts) § 233.405, RSMo (incorporated road districts) § 245.150, RSMo (levee districts) § 248.110, RSMo (sanitary drainage districts) §§ 249.330, 249.340, and 249.510, RSMo (sewer districts)

Discretion in Bid Awards In determining who is the “lowest and best bidder” on a public works contract, a public authority is vested with wide discretion, and its decision, when made honestly and in good faith, will not be interfered with by the court, even if erroneous. KAT Excavation, Inc. v. City of Belton, 996 S.W.2d 649 (Mo. App. W.D. 1999)

Competitive Bidding •

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“May reject any and all bids, waive technicalities or deficiencies, … may negotiate with any or all bidders or others for more favorable terms or prices, … may award contract to bidder other than the bidder submitting the lowest cost bid proposal.” WATCH OUT:

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Negotiation after bid opening is not allowed under some federally-funded projects (CDBG). See Handout 11

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Liquidated Damages Clause

• Generally enforceable unless they are deemed a “penalty” rather than an estimation (i.e., a reasonable forecast) of the damages an owner will face for failure to complete project on time.

• “time is of the essence”

Contract Ethics Reminders There are 3 main statutes describing prohibited transactions (§ 105.452; § 105.454; § 105.458 RSMo.) which generally provide that no appointed or elected official or employee shall:

  

Sell, rent or lease any property, or provide services, to the City in excess of $500 per transaction or $5,000 per year unless competitively bid and provided the bid is the lowest received; Perform any service, act or refrain from acting or attempt to influence a decision by reason of any payment, offer to pay, promise to pay or receipt of anything of actual pecuniary value; Perform any service for consideration one year after termination if such performance is to influence a decision.

CONSTITUTION: Art VII, Section 6 - prohibits any public officer or employee from hiring or naming any relative (of the 4th degree) to any public office, board or employment

REMEMBER Each public works contract is unique and public officials should consult legal counsel to ensure that each contract and set of bid documents comply with all statutory requirements.

See Handout 2

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Free Quarterly Educational Reports and Notices Sent by Email: o Municipal Resources: - Annual Municipal calendar with applicable deadlines - Public Training Academy monthly webinar announcements - Special district requirements and deadlines o New legislation affecting municipalities o New case law affecting municipalities o Links to recent event and educational opportunity resources

3 Ways To Sign Up: 1. Fill-out sign-up sheet (list all officials you would like to receive); 2. Email [email protected]; or 3. Leave a business card View prior reports at: www.municipalfirm.com

QUESTIONS?

CUNNINGHAM, VOGEL & ROST, P.C. legal counselors to local government

For More Information Visit Our Website:

www.municipalfirm.com or contact us at 333 S. Kirkwood Road, Suite 300 St. Louis, Missouri 63122 314.446.0800

[email protected]

These materials and the related presentation are intended for discussion purposes and to provide those attending the meeting with useful ideas and guidance on the topics and issues covered. The materials and the comments of the presenters do not constitute, and should not be treated as, legal advice regarding the use of any particular technique, device, or suggestion, or its legal advantages or disadvantages. Although we have made every effort to ensure the accuracy of these materials and the presentation, neither the attorneys presenting at this meeting nor Cunningham, Vogel & Rost, P.C. assume any responsibility for any individual’s reliance on the written or oral information presented.

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STATUTORY REQUIREMENTS FOR PUBLIC WORKS CONTRACTS This summary addresses statutes that contain mandatory requirements not only for public works contracts, but also for RFPs and other calls for bids for such contracts. While this summary broadly covers a range of pertinent topics, each public works contract is unique and public officials should consult legal counsel to ensure that the documentation for each public works project complies with all applicable requirements. I.

FUNDAMENTAL REQUIREMENTS FOR ALL CONTRACTS

A. Written Contract – § 432.070 RSMo. 1. Section 432.070 provides: No county, city, town, village, school township, school district or other municipal corporation shall make any contract, unless the same shall be within the scope of its powers or be expressly authorized by law, nor unless such contract be made upon a consideration wholly to be performed or executed subsequent to the making of the contract; and such contract, including the consideration, shall be in writing and dated when made, and shall be subscribed by the parties thereto, or their agents authorized by law and duly appointed and authorized in writing. 2. Which means every contract must be: a. Within the scope of the County/City’s powers or expressly authorized by law; b. Supported by consideration (i.e., money, promise to do work, other promises); c. In existence BEFORE work is performed (see also Art. III, § 39 Mo. Const. limiting power “to grant or to authorize . . . any extra compensation, fee or allowance to a public officer, agent, servant or contractor after service has been rendered . . .) (Emphasis added); d. In writing, stating the consideration; e. Dated; and f.

Signed by the parties with authorization (such authorization must be in writing).

3. Case law tells us that: a. Mayor cannot sign before he receives authority. Shadowood Development Co., Ltd. v. City of Lake St. Louis, 668 S.W.2d 647 (Mo. App. 1984) (Sewer construction contract signed by the acting mayor and later “accepted” by motion of board of aldermen did not establish enforceable contract where the board of aldermen had not specifically authorized mayor to contract with companies for sewer construction). b. Requirements are mandatory. Statute requiring that contracts with city be in writing and duly executed is mandatory, not directory, and contract not so made is void. State ex rel. City of Mansfield v. Crain, 301 S.W.2d 415 (Mo. App. 1957); Burger v. City of Springfield, 323 S.W.2d 777 (Sup.1959). c. Can’t pay contractor and contractor is not entitled to be paid for work done without a written contract. There can be no recovery for labor, material and supplies 1 ©

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furnished to a city in the absence of a written contract, or for work already performed. Montague Compressed Air Co. v. City of Fulton, 148 S.W. 422, 166 Mo. App. 11 (1912); Brown Coal Co. v. City of New Madrid, 208 S.W. 109 (App. 1915); Schueler v. Kirkwood, 177 S.W. 760, 191 Mo. App. 575 (1915); Likes v. Rolla, 167 S.W. 645, 184 Mo. App. 296 (1914). d. Partial compliance not enough. Copy of minutes of special meeting of board of alderman of city at which board voted and accepted architect as architect for new civic center, and written contract prepared and signed by architect only, three months after special meeting, did not constitute contract in writing sufficient to bind city, notwithstanding that minutes were signed by mayor and an assistant, where there was no authorizing ordinance. Sorkin v. City of St. Clair, 800 S.W.2d 817 (App. E.D. 1990). e. Attempt to ratify contract may not save it. An oral contract made by county or municipal corporation in violation of this section is void ab initio and cannot be given force by ratification. Fleshner v. Kansas City, 156 S.W.2d 706, 348 Mo. 978 (Sup. 1941). B. Participation in a Federal Work Authorization Program - § 285.530 RSMo. 1. Section 285.530 requires a contractor, as a condition for the award of any contract or grant in excess of $5,000.00 submit affidavit(s) and documentation affirming its enrollment and participation in a federal work authorization program with respect to the employees working in connection with the “contracted services” and that the business does not knowingly employ any person who is an unauthorized alien in connection with the contracted services. 2. Note that while § 285.530 makes such documentation a condition of the “award” of a contract, the Missouri Department of Labor and Industrial Relation’s (“MoDOLIR”) regulations (15 CSR 60-15.020) require that the affidavit be submitted at the time of bidding on a project -- “Any bid or response to a request for proposal (RFP) for the award of any contract for services in excess of $5,000 by any City to a business entity shall be accompanied by an affidavit.” (Emphasis added). 3. First affirmation—contractor is enrolled and participates in a “federal work authorization program”-a. This “federal work authorization program” or “FWAP” refers to the “E-Verify” program administered by DHS and U.S. Citizenship & Immigration Services. 

DHS E-Verify website: http://www.dhs.gov/files/programs/gc_1185221678150.shtm



US CIS E-Verify website: www.uscis.gov/e-verify

b. The contractor must also provide to the contracting public entity documentary proof documentation of participation and enrollment provided to the contractor from E-Verify - supporting the FWAP affidavit. 4. Second affirmation—contractor “does not knowingly employ any person who is an unauthorized alien in connection with the contracted services.” 2 ©

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5. These affidavits are a condition to the award of any contract for services in excess of $5,000, but as directed by the regulations, may need to be provided by all bidders at the time of bid submission. 6. The municipality or county must receive the affidavits and supporting documentation before awarding any contract. To facilitate this, the local government should: a. Include the requirements in the contract/bid documents. b. Include a form affidavit in the bid package to be completed and submitted by bidding contractors as part of their bid submission. 

See Handout 9 “Affidavit of Work Authorization.”



See also requirements for form of affidavit in Handout 13.

By setting out the requirements in the bid documents, any bid that fails to include the necessary affidavits and documentation can be rejected as a non-responsive bid. 7. Contractors need only provide the required “affidavits” on an annual basis (§ 285.530.2): a. Contractor who has provided the affidavits within the past year in connection with a previous project for such entity does not need to provide the affidavits again. b. Text of statute does not, however, extend the same annual-basis-only provision to the required “documentation” showing a contractor’s participation and enrollment in EVerify. 

Consequently, bidding contractors must provide the necessary documentary proof of enrollment and participation in E-Verify for every public works contract upon which it bids.

8. Requirements do not apply to permits or licenses (5 CSR 60-15.010) nor contracts for goods or products (15 CSR 60-15.020). C. Proof of Lawful Presence - § 208.009 RSMo. 1. Prohibits any illegal alien from receiving state or local “public benefits,” and requires all applicants at the time of application for such public benefits to provide “affirmative proof that the applicant is a citizen or a permanent resident of the United States or is lawfully present in the United States.” 2. Definition of “public benefit” includes not only welfare, health, disability, housing, and food assistance benefits, but also “any…contract…provided by a … local government….” (Emphasis added). a. As a result, bidders on public works contracts, as “applicants” for a public benefit, must also comply with the requirements of § 208.009 to be eligible for an award of a public works contract. b. Does not include municipal permit or contracts or agreements between public utility 3 ©

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providers and their customers. § 208.009.2. 3. Affirmative proof can be established through (i) a Missouri driver’s license, (ii) any “documentary evidence recognized by the department of revenue when processing an application for a driver’s license,” or (iii) “any document issued by the federal government that confirms an alien’s lawful presence in the United States.” § 208.009.3. 4. Alternatively, an applicant can receive “temporary public benefits” for 90 days by providing an affidavit “on or consistent with forms prepared by the…local government agency administering the…local public benefits” affirming that the applicant is lawfully present within the United States. a. This alternative temporary affidavit of lawful presence under § 208.009 is different from the mandatory affidavits required under § 285.530 affirming a contractor’s participation in a federal work authorization program and non-employment of illegal aliens. b. This affidavit is not required if the applicant has provided the necessary documentary proof at the time of initial application. 

Section 208.009.4 RSMo.: “An applicant who cannot provide the proof required under this section at the time of application may alternatively sign an affidavit under oath….” (Emphasis added).

5. If the contract awarded is based on an affidavit of lawful presence and the contractor fails to provide the necessary documentary proof of lawful presence within the 90-day period provided by statute, this could potentially be a problem. a. To avoid this problem, the local government should seek guidance from legal counsel and/or the state before awarding a contract that is likely not to be performed in less than 90 days or, if the contract has already been awarded, before continuing under the contract. b. At a minimum, the local government should put in place procedures that ensure that no contract with a contractor who has provided an affidavit of lawful presence extends beyond 90 days without first receiving the necessary verifications from the contractor. 6. Determining who must provide the affirmative proof of lawful presence when the applicant is not an individual, but a business entity, presents its own set of challenges for the local government agency. a. One approach may be to deem the “applicant” to be the person responsible for submitting and signing the corporation’s bid submission within the bid documents. b. This person would then be required to submit the necessary “affirmative proof” along with the contractor’s bid submission. 7. The best practice would be to include language incorporating the requirements of § 208.009 within the bid documents: a. To ensure that bidding contractors are submitting the necessary documentation, and 4 ©

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b. To provide for efficient collection of such documentation by the municipality or county. 8. Bid documents can state that if needed, a form affidavit of lawful presence can be obtained from the municipality upon request. II. BIDDING REQUIREMENTS A. Bidding Requirements (See Handout 11 for sample Notice to Contractors) 1. There is no general statute requirement that cities must use competitive bidding. 2. However, most cities have a competitive bidding ordinance that establishes policies. 3. Often, federal and state grants contain specific bidding requirements – Check specific grant provisions and applicable law. 4. Some specific statutory bidding requirements:                   

Architectural, Engineering or Land Surveying Services (list of 3 on file) – § 8.291 RSMo. Construction Management Services – § 8.679 RSMo. County Buildings – § 49.420 RSMo. County public works and buildings – § 50.660 RSMo. Port authority projects – § 68.055 RSMo. Common sewer districts – § 204.350 RSMo. County public health centers – § 205.080 RSMo. Construction, improvement, or repair of roads, bridges, and culverts by county commissions, township boards, and road districts – § 229.050 RSMo. Road districts – § 231.250 RSMo. Incorporated road districts – § 233.405 RSMo. Levee districts § 245.150 – RSMo. Sanitary drainage districts – § 248.110 RSMo. Sewer districts – §§ 249.330, 249.340, and 249.510 RSMo. Health and Life Insurance for Employees – § 67.150 RSMo. Construction of Initial Waterworks – § 91.170 RSMo. City Depository Services (3rd class cities) – § 95.280 RSMo. Insurance Contracts – § 376.696 RSMo. Contracts with officials and employees of political subdivision over $500 per transaction or $5000 per year – § 105.454/.458 RSMo. LOCAL ORDINANCE – governs other requirements.

B. City Discretion in Awarding Contracts 1. In determining who is the “lowest and best bidder” on a public works contract, a public authority is vested with wide discretion, and its decision, when made honestly and in good faith, will not be interfered with by the court, even if erroneous. KAT Excavation, Inc. v. City of Belton, 996 S.W.2d 649 (Mo. App. W.D. 1999).

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C. Bidding Policy Best Practices 1. Flexibility is the key to ensure efficient use of resources. 

Cities want to be able to waive bidding when it is in the public interest to do so.

2. Suggestions for purchasing ordinances: 

Authorize city to accept bids, reject bids or to negotiate and modify bids, where appropriate;



Broad discretion in awarding bid -- “lowest and best” or “lowest and most responsive”;



Authorize city to waive technical deficiencies in bid; and



Allow city to negotiate with the bidders, where appropriate (caution: may not be allowed when federal funding used). III. UNIQUE PUBLIC WORKS CONTRACT REQUIREMENTS

A. OSHA Training - § 292.675 RSMo. (See Handouts 1-2, 12) 1. All “on-site employees” of contractors and subcontractors working on a public works project must have taken a 10-hour, OSHA-approved construction safety course. 

http://www.osha.gov/dte/outreach/construction_generalindustry/courses.html



See also, Handout 12 – “Required Safety Training – OSHA 10” – from MoDOLIR

2. The OSHA training program is a one-time requirement for each employee. 3. On-site employees must either complete the program within sixty (60) days of beginning work or “hold documentation of prior completion of the program.” 4. For each public works project, the public entity must include the statute’s requirements in the (1) resolution or ordinance and in the (2) call for bids for the contract, as well as (3) in the contract itself. “The public body shall specify the requirements of this section in the resolution or ordinance and in the call for bids for the contract. The contractor to whom the contract is awarded and any subcontractor under such contractor shall require all on-site employees to complete the ten-hour training program required under subsection 2 of this section or such employees must hold documentation of prior completion of the program. The public body awarding the contract shall include this requirement in the contract.” § 292.675.4 RSMo. 5. Violations of § 292.675 are investigated by MoDOLIR. a. Penalties are assessed by MoDOLIR in the amount of $2,500.00 plus $100.00 per day, per employee found working on site without evidence of the necessary training; 6 ©

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b. Penalties are forfeited to the public entity. 6. A non-complying employee has 20 days to complete the training before the employee is removed from the project and penalties start to accrue. 7. The public entity must withhold penalties assessed by MoDOLIR from payments due to the contractor. 8. Notice of the penalty provisions must be set forth in the contract. B. Prompt Payment Act - § 34.057 RSMo. 1. “… all public works contracts made and awarded by … any municipality, county …, for construction, reconstruction or alteration of any public works project, shall provide for prompt payment by the public owner to the contractor . . .” § 34.057.1 RSMo. (Emphasis added) 2. The statute requires the public owner to make at least monthly progress payments to a contractor, professional engineer, architect, landscape architect, or land surveyor (unless the contract provides for lump sum payment). 3. It sets a maximum 10% retainage that can be withheld by a public owner for un-bonded projects, but if project costs are estimated to exceed $50,000, then the retainage cannot exceed 5%. 4. Other requirements include 30-day time limits on payments of monthly invoices and on final payment. 5. Final payment is due within 30 days of the first of the following to occur: a. Completion of the project and complete filing of all documents required by contract; b. Architect/Engineer certification of completion; or c. Certification of completion by the contracting authority. 6. Failure to pay within the statutory time limits will subject the public owner to paying 1.5% interest per month (18% annual rate) on overdue amounts until paid. Public owner may withhold payment only if the withholding is in good faith and there is reasonable cause to withhold payment. Reasonable cause includes but is not limited to:         

Unsatisfactory job progress Defective construction work/material not remedied Disputed work Failure to comply with any material contract provision Third party claims filed or reasonable evidence that a claim will be filed Failure to make timely payments for labor, equipment or materials Liquidated damages Damage to a contractor, subcontractor or material supplier Reasonable evidence that a subcontractor or material supplier cannot be fully 7 ©

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compensated under its contract with the contractor for the unpaid balance of the contract sum 

Citation of contractor or subcontractor for failure to comply with material provision of contract and which results in a violation of any federal, state or local law, regulation or ordinance applicable to the project causing additional costs or damages to the owner

C. Payment Bond - § 107.170 RSMo. 1. Section 107.170 requires public entities to obtain from the contractor a payment bond on every project with estimated costs in excess of $50,000.00. The bond should be in the full amount of the contract and should incorporate the provisions of the statute by reference to ensure compliance. (See Handouts 1-2). 2. “The purpose of Section 107.170 has long been to afford to those furnishing labor or material on public work the same measure of protection as is afforded by the mechanic’s lien law where the building or improvement is not of a public character.” Collins & Hermann, Inc. v. TM2 Const. Co., Inc., 263 S.W.3d 793, 796 (Mo. App. E.D. 2008). Public buildings, lots or other public property owned by a traditional government body and devoted to a public use are not subject to mechanics’ lien. Redbird Engineering Sales, Inc. v. Bi-State Development Agency of Missouri-Illinois, 806 S.W.2d 695 (Mo.App. E.D. 1991). 3. The payment bond is “for the payment of any and all materials, incorporated, consumed or used in connection with the construction of such work, and all insurance premiums, both for compensation, and for all other kinds of insurance, said work, and for all labor performed in such work whether by subcontractor or otherwise.” § 107.170 RSMo. 4. It is critical that public entities require and receive the necessary payment bond from all contractors on public works projects before work commences because failure to do so can result in public officials being held personally liable to the subcontractors and suppliers to whom the general contractor fails to make payment. 

See Union Pacific R. Co. v. St. Louis Marketplace, Ltd. Partnership, 212 F.3d 386, 390-91 (8th Cir. 2000) (Official immunity did not protect city officials, Mayor and Comptroller, who were charged with performing ministerial duty of requiring payment bond from a contractor.)



The statute provides express authority for public entities to indemnify public officials charged with carrying out the requirements of § 107.170 RSMo.

D. Prevailing Wage - § 290.210 RSMo., et seq. 1. The Missouri Prevailing Wage law imposes several requirements on municipalities and other public bodies who let contracts for such projects. (See Handouts 3-8). 2. What constitutes a public works contract: a. (11) "Public works" means all fixed works constructed for public use or benefit or paid for wholly or in part out of public funds. b. Construction activity includes: 8 ©

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•

Construction of buildings, structures and improvements of all types;

•

All work done in construction or development of a public works project, including altering, remodeling, demolishing existing structures, installation on the site of the construction of items fabricated off-site, & painting and decorating.... 8 CSR 30– 3.020(1).

c. Examples of work subject to the Prevailing Wage Act: •

Painting and welding repairs of a water tower. Utility Service Co., Inc. v. Department of Labor and Industrial Relations, 331 S.W.3d 654, 661 (Mo. 2011)

•

Electrical work performed by laborer who was treated by subcontractor as an independent contractor. See State ex rel. Laszewski v. R.L. Persons Const., Inc., 136 S.W.3d 863 (Mo. App. 2004)

3. Local Government’s duties start before a contract is even let. a. “Before advertising for bids or undertaking such construction,” a public body must request MoDOLIR to “determine the prevailing rates of wages for workmen for the class or type of work called for by the public works, in the locality where the work is to be performed.” § 290.250.1 RSMo. (See Handout 5). b. MoDOLIR’s determination of the prevailing wages must (1) be “attached to and made a part of the specifications for the work” in the contract and the public body must specify the prevailing wages (including the rate for holiday and overtime work) in the (2) resolution or ordinance and (3) in the call for bids for the contract. § 290.250.1 RSMo. 4. The contract itself must contain language (1) requiring the contractor to pay no less than the prevailing wage to laborers performing work under the contract, and (2) setting forth the penalties forfeited to the public body for violations of the Prevailing Wage Act, i.e., one hundred dollars ($100.00) per worker, per day. § 290.250.1 RSMo. 5. Public bodies must withhold penalty amounts from payments due to the contractor under the contract. § 290.250.1 RSMo. 6. In addition to all other reporting requirements of §§ 290.210 to 290.340, each public body which is awarding a contract for a public works project shall, prior to beginning the initiation of any work on a public works project, the public body is required to notify MoDOLIR of the: a. Scope of the work to be done, b. Various types of craftsmen who will be needed on the project, and c. Date work will commence on the project. § 290.262.12 RSMo. 7. Payroll Compliance: a. During the course of the project, review all payroll records to ensure prevailing wage 9 ©

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law requirements are being met. (See Handout 8). b. At the completion of the project, acquire a completed Affidavit of Compliance form from all contractors and subcontractors before making final payments. (See Handout 6). E. Excessive Unemployment - §§ 290.550 - .580 RSMo. 1. Provides that “[w]henever there is a period of excessive unemployment in this state, every person who is charged with the duty, either by law or contract, of constructing or building any public works project or improvement for the state or any political subdivision, municipal corporation…shall employ only Missouri laborers and laborers from nonrestrictive states on such project or improvement.” a. List of restrictive states: Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Idaho, Illinois, Iowa, Maine, Massachusetts, Mississippi, Montana, Nevada, New Jersey, North Dakota, Oklahoma, South Dakota, U.S. Virgin Islands, West Virginia and Wyoming. b. Exception: In all contracts involving the expenditure of federal aid funds, §§ 290.550 to 290.580 shall not be enforced in such manner as to conflict with any federal statutes or rules and regulations. 2. Excessive unemployment statutes require that “every contract let by any such person shall contain a provision requiring that such labor be used,” subject to certain exceptions regarding availability of laborers. 3. PROBLEM: Missouri Excessive Unemployment Law held unconstitutional under the Privileges and Immunities and Equal Protection Clauses. Lakeside Roofing Co. v. Nixon (ED Mo. 2012). a. DO NOT deny contracts based on worker residence. 4. Enforcement of these statutes falls to MoDOLIR. § 290.580 RSMo.

F. American Products - § 34.353 RSMo. 1. “Each contract made by a public agency for construction, alteration, repair, or maintenance of any public works shall contain a provision that any manufactured goods or commodities used or supplied in the performance of that contract or any subcontract thereto shall be manufactured or produced in the United States.” § 34.353 RSMo. (Emphasis added). 2. The statute provides an exception for contracts under $25,000 and some other specific exceptions, e.g.,: a. In situations when certain American products are of limited availability, or b. Their acquisition would impose cost increases above 10%. 3. It also provides an opportunity whereby public entities may opt out of the above requirement by having “the executive head of the public agency certif[y] in writing that 10 ©

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[t]he political subdivision has adopted a formal written policy to encourage the purchase of products manufactured or produced in the United States.” a.

To take advantage of this exception, the public entity would have to prepare and formally adopt a written policy encouraging its vendors, contractors, etc. to purchase American products and have such policy certified by the mayor, county executive, as applicable.

b.

Many municipalities may already have such a policy within their purchasing codes or manuals.

c.

The statute requires that such certificate be maintained by the public entity for a period of three years.

4. Even though a provision requiring purchase of American products may not have to be included in a contract where the municipality has taken advantage of the policy exception set forth in § 34.353.3(5) RSMo., public entities should consider including in its bid documents: a. Notice of its policy, and b. A copy of the certificate to evidence that these statutory requirements have been met. G. Transient employers, proof of tax clearance - § 285.232 RSMo. 1. Section 285.232 applies to “any county, city, town, village or any other political subdivision which requires a building permit for a person to perform certain construction projects.” 2. Local Government is to require a transient employer to show proof that the employer has been issued a tax clearance and has filed a financial assurance instrument as required by § 285.230 before such entity issues a building permit to the transient employer. 3. “transient employer” = an employer (as defined in §§ 143.191, 287.030, and 288.032 RSMo.,) making payment of wages taxable under chapters 143, 287, and 288 RSMo., who is not domiciled in this state and who temporarily transacts any business within the state, but shall not include any employer who is not subject to Missouri income tax because of the provisions of 15 U.S.C. 381. 4. If any transient employer obtains a building permit without providing such proof, provides a fraudulently obtained tax clearance or a fraudulent financial assurance instrument or through any misrepresentation or any other fraudulent act or in any way violates the provisions of §§ 285.230 to 285.234, the MoDOLIR shall request a temporary restraining order to stop further performance on the project and ask the court to order that payments due to transient employer be equitably distributed in satisfaction of the transient employer’s obligations pursuant to §§ 285.230 to 285.234. Upon issuance of such order by a court of competent jurisdiction, the person for whom the work is being performed may engage another contractor as provided by law or any provision of contract and the person shall not be deemed to be in violation of the contract with such transient employer removed by the court. Nothing in that section shall be construed to create or constitute a liability to or a cause of action against a city or county in regard to the issuance of any license pursuant to that section. 11 ©

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5. MoDOLIR shall at least quarterly submit for publication in the Missouri Register a list of construction contractors performing work on construction projects in Missouri who are known by MoDOLIR to be deemed transient employers pursuant to § 285.230. The department MoDOLIR shall also update such list monthly and make such list available upon request without cost to any person. IV. ADDITIONAL CONTRACT AND BID NOTES (See Handout 2) A. Performance Bond v. Payment Bond v. Bid Bond 1. Performance Bond: a. Is discretionary b. Benefits the city c. Ensures completion and maintenance d. Can be drawn on to cover costs for city or other contractor to complete project 2. Payment Bond: a. Is statutorily (§ 107.170 RSMo.) mandated on public works contracts in excess of $50,000 b. Benefits the subcontractors, materialmen, etc. c. Ensures payment (mechanic lien replacement) d. Can be drawn on to pay laborers not paid by general contractor 3. Bid Bond: a. Is discretionary (if required by city, usually in the amount of 5-10% of contract amount) b. Benefits the city c. Ensures bidder honors its bids d. Can be drawn upon to cover city costs of rebidding project (Best Practice: have a policy for return of bid bond in the notice to bid so contractors bidding understand and agree to the procedure. B. Liquidated Damages Clause 1. A pre-determined reasonable estimate of the amount of damages the city will incur per day that the contractor fails to complete the project in accordance with contract schedule. 2. Generally enforceable unless they are deemed a “penalty” rather than an estimation (i.e., a reasonable forecast) of the damages an owner will face for failure to complete project on time. 3. In public contracts, a liquidated damage clause will be enforced regardless of whether there is a showing of any actual harm, but rather just on the showing that the contract was breached. Sides Constr. Co. v. City of Scott City, 581 S.W.2d 443, 447 (Mo. App. S.D. 1979). 4. Contract should state: “time is of the essence.” C. No Indemnification BY City 1. NO authority for city indemnification of private parties. 12 ©

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2. Arguments to avoid indemnification: a. One argument: Violates the constitution -- Cannot pay private debts – funds spent only for public purpose. Article 6, § 23; Article 6, § 25. b. Better argument: Agreements to indemnify are waivers of sovereign immunity and only the General Assembly may enact such waivers; Use Op. Atty. Gen. No. 138-87, Webster, 12-18-1987 (“To agree to the underlined terms [defend, indemnify and hold harmless], is to waive the state’s sovereign immunity, that is, the legal prohibition against the state being sued in its own courts for damages from the torts of its officers and agents. Only the legislature can waive this immunity.”) (Emphasis added). D. Ethical Reminders 1. There are 3 main statutes describing prohibited transactions: §105.452, 105.454, and § 105.458 RSMo. a. Generally, the statutes apply to an “elected or appointed official or employee” and members of any “governing body.” b. Generally, no appointed or elected official or employee shall:  Sell, rent or lease any property, or provide services, to the City in excess of $500 per transaction or $5,000 per year unless competitively bid and provided the bid is the lowest received;  Use or disclose confidential information in any manner with intent to result in financial gain for himself, his spouse, his dependent child, or any business within which he is associated;  Use decision making authority for the purpose of obtaining financial gain which materially enriches himself, his spouse or dependent children;  Perform any service, act or refrain from acting or attempt to influence a decision by reason of any payment, offer to pay, promise to pay or receipt of anything of actual pecuniary value;  Favorably act on any matter that is so specifically designed so as to provide a special monetary benefit;  Offer, promote, or advocate for a political appointment in exchange for anything of value to any political subdivision; or  Perform any service for consideration one year after termination if such performance is to influence a decision. c. Best Practice: WHEN IN DOUBT – OFFICIALS SHOULD DISCLOSE AND RECUSE. 2. Nepotism is prohibited by: Art. VII, § 6 Mo. Const. - “Any public officer or employee in this state who by virtue of his office or employment names or appoints to public office or employment any relative within the fourth degree, by consanguinity or affinity, shall thereby forfeit his office or employment.”

a. Applies equally to officers AND employees.

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b. You cannot retroactively “fix” the violation. 

Rescinding the appointment does not cure the violation.



Cannot resign and be reappointed either. State ex rel. Nixon v. Wakeman, 271 S.W.3d 28 (Mo. App. 2008).

c. Intent (or ignorance) is irrelevant. State ex rel. Attorney Gen. v. Shull, 887 S.W.2d 397 (Mo. 1994) (overturned on other grounds).

d. Degrees of Family Relation: 

  

A husband is related by marriage (affinity) to his wife’s relatives in the same way that she is related to them by blood (consanguinity) and she to his family in the same way, but the kindred of the spouses are not related to one another (e.g., a brother of the husband is not related to a brother of the wife). Half relationship is the same as a whole relationship. Step relationship is the same as a blood relationship. A relationship by marriage (affinity) terminates if death or divorce occurs. Child Grandchild

First Degree Parents

Second Degree Brother/Sister Grandparents

Third Degree Great Grandchild Niece/Nephew Great Grandparents

Aunt/Uncle

Fourth Degree Great, Great Grandchild Grand Niece/Nephew First Cousin Great Aunt/Uncle Great, Great Grandparents

NOTICE & DISCLAIMER These seminar materials and the related presentation are intended for discussion purposes and to provide those attending the seminar with useful ideas and guidance on the topics and issues covered. Although we have made every effort to ensure the accuracy of these materials and the presentation, neither the attorney presenting this seminar nor Cunningham, Vogel & Rost, P.C. assumes any responsibility for any individual’s reliance on the written or oral information presented. Materials and presentations do not constitute legal advice and information provided may require consultation with applicable professionals to appropriately apply to specific circumstances. 14 ©

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