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Significant Procurement Reforms on the Governor’s Desk in Wisconsin

Thursday, June 27, 2013  

The Wisconsin legislature sent AB 40, the budget bill, to the Governor’s desk for signature.  The bill contains some significant procurement reforms, including mandatory bonding for subcontractors, and the so-called forced marriage provisions for general contractors and subcontractors.

Under the bill as passed, all construction contracts in excess of $185,000 must be let through single prime contracting, which eliminates the current multiple prime contractor system.  AB 40 contains a new process under which the Department of Administration ("Department”) will administer a registration process for all contractors that bid on public works projects.  The Department must certify bidders as qualified and as responsible bidders.   The bill sets forth the requirements to be certified as qualified and responsible.  Among the factors considered in the certification as a responsible bidder is whether the bidder is bondable for the term of the contract and is able to obtain a 100% payment bond and a 100% performance bond.  

Under any single prime contract, the Department will identify the mechanical, electrical or plumbing subcontractors that have submitted the lowest bids and are certified as qualified and responsible contractors.  The Department will identify such subcontractors in a competitive bidding process.  Prime contractors that are bidding on the job must include the subcontractors that the Department has identified in their bids.  The prime contractor awarded the job must enter into contracts with the mechanical, electrical and plumbing subcontractors that the Department identified.  Such subcontractors must provide the prime contractor with a separate 100% payment bond and a separate 100% performance bond with the prime contractor as the sole obligee.  The Department must reject the bid of any prime contractor that includes contractors other than those that the Department has identified.

There is a new competitive bidding method in the bill.  AB 40 requires the Department to post on its website the names of all the subcontractors bidding on job, along with their bid amounts, within 48 hours of the deadline for the bids.  No more than five days after the deadline, the Department must post the lowest qualified and responsible bidders.  The prime contractors then have five days to submit their bids using those subcontractors. Within 48 hours of the deadline for prime contractors to submit their bids, the Department must post the names of the bidders along with their bid amounts.

Under current law, the Department can require the prime contractor to submit a list of subcontractors for Department approval before the award of the bid is approved.  Subcontractors must be approved before they are hired.  The list of subcontractors can be changed if the Department determines it is in the state’s best interest.

The bill also would revise the current procedures for retainage and payments to the contractor. Current law provides that retainage is not withheld after the project reaches 50% completion, unless the architect or engineer certifies that the project is not proceeding satisfactorily.  Instead, the Department of Administration would make the determination on the progress of the project with regard to the withholding of retainage.  Current law provides that upon substantial completion, an amount retained may be released to the contractor.  AB 40 provides that an amount must be released less the value of any required corrective work or uncompleted work.

The Governor is expected to sign AB 40 into law this weekend.  The Wisconsin Governor can veto specific provisions in the bill and approve the rest.  The union trade groups in Wisconsin were behind these procurement provisions and actively supported them.

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