Capital construction projects are both challenging and exciting for school districts. The process is long and arduous—often years pass before the first brick is ever laid. Financing options, bond referendums, community input meetings, architect drawings, more community input meetings—these are all aspects of a process that can derail even the most well-thought out capital construction campaign.
All South Carolina school districts are “political subdivisions” as defined in the State’s Consolidated Procurement Code (“State Code”). S.C. Code Ann. § 11-35-310(23). However, unlike state agencies, school districts may implement their own procurement code. School districts are only subject to the general rule imposed by S.C. Code Ann. § 11-35-50, which requires that procurement procedures “embody sound principles of appropriately competitive procurement.”
School districts with annual expenditures exceeding $75 million must submit to minor constraints in their procurement code. In these larger districts, there are two options: (1) the district may adopt the State Code in its entirety; or (2) the district may implement its own code that requires approval and review every three years by the South Carolina Office of Procurement.
The governmental procurement process in South Carolina provides much autonomy to local school boards to spend their money as they deem appropriate. The South Carolina Supreme Court in Sloan v. Greenville Hosp. Sys., 388 S.C. 152, 694 S.E.2d 532 (2010), ruled that “local procurement codes need not mirror the State Code, Local Model Code, or any other code.”
Since school districts are not bound by the particulars of the State Code, the South Carolina Office of Procurement has published a Model Code for school districts which should be referenced if a board decides to draft its own procurement code. The Model Code also may be consulted as a reference where a district’s own procurement code does not address a specific issue.
For major capital construction projects, the absence of an updated and technically correct procurement code can shackle the procurement process. Simply put, if a district does not have a procurement code that addresses current trends in the construction industry, outdated construction practices can seep into the building phase, costing districts time and money.
(1) Model School District Procurement Code, https://procurement.sc.gov/schoolscodes
Types of Project Delivery Methods
The first step in procurement for a major construction project is to determine the project delivery method. Careful consideration should be given to how much or how little control the district wants to retain, the stringencies of budget caps, the complexity of the project, and the types of professionals needed or wanted to complete the project. Below is a summary of the common types of delivery methods found in the Model Code.
This is the most traditional project delivery method. Here, the district selects an architect to design the project. After the design documents are complete, the district issues invitations to bid and lump sum bids are submitted to the district by general contractors. Generally, under this method, the general contractor with the lowest responsive bid is awarded the contract. This approach provides the district with a defined project scope and single point of responsibility for construction while allowing for aggressive bidding. However, this method generally is longer in duration and does not take contractor quality into account. This method is favored where the district wants to maintain control over each phase of the construction process and where price is the leading factor driving the project to completion.
Construction Management at Risk (CMAR)
Under this method, the Construction Manager (“CM”) serves as the General Contractor (“GC”) while assuming the risk for construction at the contracted or guaranteed maximum price (“GMP”). The CM is responsible for the project cost and schedule as well as for providing design phase services in evaluating cost, constructability, and services. Selection of the CM is based on criteria including qualifications, experience, and price. The CM then chooses the architects and subcontractors to work on the project without significant input from the district. While this approach provides flexibility and a faster schedule delivery, this method may limit competitive bidding. Most notably, this can be an expensive process because the district is paying a premium for the CM to take on the risk of the project.
Here, the district contracts with a single entity to provide both design and construction services. The architect and GC generally work for the same development firm. This approach allows the district to be heavily involved throughout the process. Generally, the selection of the entity is based on a proposal that the district determines offers the best overall value. The district is required to hire an independent architect to serve as its representative for the duration of the project in an oversight capacity. This independent architect is an added expense not seen in the other delivery methods. Like CMAR, this approach allows for selection flexibility and a faster delivery schedule. However, there is a potential for the loss of checks and balances because the architect and GC work for the same firm.
After the delivery method has been determined, a district must decide how it wishes to secure proposals from interested vendors. Source selection is the process the district uses to take its project to market.
Competitive Sealed Bids
Under the Competitive Sealed Bid (CSB) approach, price is the sole determining factor at every phase. This source selection method is often associated with design-bid-build. This type of source selection is good for small or voluminous procurement items. Quality of the bidder is not heavily considered, and the lowest bidder is awarded the project without much scrutiny of their experience and qualifications.
Competitive Sealed Proposal
Like CSBs, Competitive Sealed Proposals (CSP) look at price as a determining factor but also take other significant factors, such as qualifications, experience, and references, into consideration. A CSP requires the district to put out a Request for Proposal (RFP) to which interested bidders will respond. This method is most appropriate when the project requires special skills or experience, but price is still the number one factor in seeing the project to completion. This method allows the district to include additional qualifications, such as the credentials of those who will work on the project, as part of the bid. In that scenario, only those bidders who meet the additional qualifications will be considered. After the prescreening of the qualified bidders, the lowest bidder must be awarded the contract.
The least utilized type of source selection is the Qualifications Only option, where the district is procuring professional services, such as auditors, attorneys or engineers. Using this type of selection, the district sends out a Request for Qualifications (RFQ) to which interested bidders may respond. The RFQ solicits the scope of work and does not involve fees. The district then ranks the bidders based solely on their qualifications. Differences in cost are not considered until the district has ranked each bidder. Once the highest ranked bidder is selected, negotiations of fees and terms commence. If the highest ranked bidder and district do not agree on cost, the district goes on to the next highest ranked bidder until there is consensus on cost. Generally, after three unsuccessful bidders walk away from negotiations, the district starts the process over.
Careful examination of your district’s procurement code can save a great deal of time and money throughout the procurement process. By strategically using the flexibility of statutes and district procurement codes, a major construction project can be tailored in a way to meet the specific needs of your community. If you have any questions about your district’s procurement code or process, please do not hesitate to contact our firm.