MINUTES OF THE meeting
of the
ASSEMBLY Committee on Government Affairs
Subcommittee
Seventy-Second Session
April 8, 2003
The Subcommittee on Government Affairswas called to order at 6:42 a.m., on Tuesday, April 8, 2003. Chairman Tom Collins presided in Room 3143 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Subcommittee are presented in the traditional legislation style.
SUBCOMMITTEE MEMBERS PRESENT:
Mr. Tom Collins, Chairman
Mr. Pete Goicoechea
Mr. Mark Manendo
SUBCOMMITTEE MEMBERS ABSENT:
None
GUEST LEGISLATORS PRESENT:
None
STAFF MEMBERS PRESENT:
Susan Scholley, Committee Policy Analyst
Eileen O'Grady, Committee Counsel
Pat Hughey, Committee Secretary
OTHERS PRESENT:
Lori Ashton, Representative, Southwest Regional Council of Carpenters
Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas Chapter
Jim Keenan, Nevada Public Purchasing Study Commission
Justine Chambers, Contract Coordinator, Carson City Development Services, Engineering-Contracts Division
Ted Olivas, Assistant Director, Clark County Finance Department
Renny Ashleman, State Public Works Board
Dan O’Brien, P.E., Manager, State Public Works Board
Frank Rothwell, C.P.M., Purchasing/Contracts Manager, City of Sparks
John Simmons, Construction Manager, City of Henderson
Chairman Collins:
The Assembly Government Affairs Subcommittee on A.B. 295 and A.B. 540 is now called to order. Will the secretary call the roll? [Roll taken.]
Assembly Bill 295: Revises provisions governing criteria for determining qualification of bidders on public works of local governments. (BDR 28‑747)
Assembly Bill 540: Revises provisions governing bidders and subcontractors on contracts for public works. (BDR 28-361)
Chairman Collins:
I’m going to first call up Lori Ashton. We’ve got a new amendment proposed. I understand this is A.B. 295 with parts of A.B. 540 inserted to combine them into one bill. Is that correct?
Lori Ashton, Representative, Southwest Regional Council of Carpenters:
Yes. [Introduced herself.] I believe the directive from the Chairman of Assembly Government Affairs was to try to come up with a merger of A.B. 540 into A.B. 295. I called Ted Olivas, who seemed to have some problems last week, but he did not return calls. Everybody that was anybody had my phone number. Nobody bothered to contact me last week in an attempt to make that merger.
On Sunday, I drafted what has been distributed to the public and to the Subcommittee members [Exhibit C]. I’d also like to quantify that since 1999, the Clark County School District held a hearing and had adopted language, and again in 2000 or 2001, there were hearings. Clark County, the City of Las Vegas, and the State Public Works Board also held public hearings. Industry representatives were present, and they developed the application criteria based on the four criteria that exist in current statute.
In reviewing A.B. 295 and A.B. 540, I tried to compare them with every application that currently has gone through public hearings and is being utilized for prequalification, to make sure that nothing had been left out. The public bodies want to go to objective criteria instead of subjective, and if they want to spell it out, this is the criteria. It seems to me that the criteria should match exactly what they’ve already held public hearings on to adopt. This is where the language came from.
Chairman Collins:
So, A.B. 295 and A.B. 540 are putting into statute some of those requirements that are currently being followed by all local governments?
Lori Ashton:
Of Clark County, the City of Las Vegas, Clark County School District, and the State Public Works Board. I have copies of all their applications here. I didn’t feel we should go backwards. If we’re going to have objective criteria, then any and all that has previously been through public hearings and put into place should be included within the bill.
Chairman Collins:
The intention of this language is to clean up some of the horrendous overruns, cost delays, and project delays that have taken place, primarily, in Clark County?
Lori Ashton:
If a public body chooses to prequalify, what the language is doing is saying that, objectively, this is all they can look at. By implementing prequalifications, some may attest that it’s not. But, prior to prequalification in the Clark County School District, there were overrun costs and project delays, and project bids were $2 million to $3 million apart. Since the implementation of prequalification, bids are now hundreds of thousands of dollars less, and schools are on time and within budget. It’s still an option whether a public body chooses, other than the state, to adopt prequalification criteria.
Chairman Collins:
You’re proposing enabling legislation, permissive language, to allow local government and state government, if they choose, to implement these standards for criteria for prequalification of a bidder. Your cause is to address better production and work being done in the state of Nevada, and less cost to the taxpayer. Is that your intention?
Lori Ashton:
Right, but in this statute, the state “must.” That hasn’t changed. It’s the choice of counties, cities, or public entities whether they do it or not.
Chairman Collins:
So the state must adopt prequalification standards?
Lori Ashton:
Which they have.
Chairman Collins:
Which they already have in place, and this language codifies it?
Lori Ashton:
It just codifies into law what’s there. That’s why I said before we went through everything, that there were changes I put into this proposed merger for the objective criteria, because after reviewing all the applications, I felt it was ridiculous to omit what they’ve already initiated through public hearings. That’s where there is some clarification in those sections.
Chairman Collins:
Public hearings have put into place some government regulations, and you want to see that that’s codified into our statutes.
Lori Ashton:
That is correct.
Chairman Collins:
You have met with several people to work on this, and some have not met with you, but you’ve been discussing this the last few days since the hearing?
Lori Ashton:
Yes. Since I brought it all forward and met with several of them, we were working on some last detail. I proposed it to Jeannette Belz. She brought one forward which is just some cleanup, but that was basically to amend A.B. 295. I don’t believe anybody else has come forward trying to merge the two, which I believe was the directive given by the Chair, to find a way to merge the two languages, and not to just come up with another amendment to A.B. 295.
Chairman Collins:
I believe that’s correct. Do you want to verify that, Mr. Manendo?
Assemblyman Manendo:
Yes. I thought it would expedite the process a little bit if we had two bills that we could just put into one.
Chairman Collins:
If you want to proceed and go through where you added or changed A.B. 295.
Lori Ashton:
I took A.B. 295 as the base, looked at the amendments we had proposed to A.B. 295, the amendments we had proposed to A.B. 540, and A.B. 540 itself, and tried to merge the two [Exhibit C]. Do you want the deletions, or just the language insertions?
Chairman Collins:
What were you deleting?
Lori Ashton:
I started at the very beginning. Currently, it is NRS [Nevada Revised Statutes] 338.1377 because they addressed only the criteria statutes. In order to keep it [Exhibit C] flowing in the semblance of A.B. 540, I deleted NRS 338.1277, making NRS 338, “is hereby amended by thereto a new section to read as follows,” which is the way it was stated in A.B. 540.
Chairman Collins:
A.B. 295 is 3 pages. A.B. 540 is 14 pages. The amendment [Exhibit C] you’ve given us is 6 pages. Would this be the total bill that’s left of these two?
Lori Ashton:
That would be my proposal.
Chairman Collins:
Very good. Go right ahead, then.
Lori Ashton:
[Exhibit C] By adding:
Thereto a new section to read as follows:
1. The State Public Works Board or the governing body of a local government may:
(a) Qualify applicants to be subcontractors on a contract for public work based on the criteria set forth in NRS 338.1375 or NRS 338.1377; or
(b) Deem subcontractors to meet the criteria set forth in NRS 338.1375 or NRS 338.1377 unless the Board or public body receives verifiable information indicating that a subcontractor does not meet that criteria. Upon receipt of such information, the Board or governing body shall conduct an investigation to determine whether the subcontractor fails to meet the criteria. If the Board or governing body determines that the subcontractor fails to meet the criteria, the Board or governing body may disqualify the subcontractor for a period not to exceed 2 years.
I’d like to stop and reference for the Subcommittee and members of the audience. NRS 338.1375 or NRS 338.1377 is the objective criteria that’s proposed in this by either the state or the public bodies. Being that there can’t be any frivolous accusations made, and if information is received that the subcontractor has potentially violated any of those criteria, it would be the fiscal responsibility of the entities to investigate it and not throw it in a drawer.
Going from there:
2. A person may request a hearing to be conducted in the manner provided in NRS 338.1381 to appeal:
(a) a denial of his application for qualification pursuant to paragraph (a) of subsection 1 as a subcontractor; or
(b) His disqualification pursuant to paragraph (b) of subsection 1.
That’s the end of that section. Do you want to go through any questions of the Subcommittee at this time, or continue through the bill?
Chairman Collins:
I think we’re with you there, because you’re reading that word for word. What I’d like you to do is go to each paragraph or each change and state, section by section or paragraph by paragraph, why you made the change, rather than reading the whole thing.
Lori Ashton:
In NRS 338.1375, page 2, of Exhibit C, that addition of, “or pursuant to NRS 338,” and I don’t know what the section will be. This is referencing the qualification or disqualification of subcontractors. Number 1 is the State Public Works Board is adopting regulations for the qualifications of the bidder, and this is the inclusion to allow them to look at the subcontractors.
What we proposed in NRS 338.1375, which deals with the State Public Works Board, and as with NRS 338.1377, which is the governing bodies, is to make sure that there was a mirror image of the criteria. In our A.B. 540, we had proposed all of the language from number 1 through number 13. In reviewing it and trying to merge the two bills, it comes through that number 13 was actually number 11.
What was omitted was the performance history of the applicant. That’s the bold that’s in number 2 of the two bills. Number 10 was the complaints against the applicant or the applicant’s principal personnel; this is the state, federal, or Nevada State Contractors’ Board. This is dealing with settlements, arbitration decisions, and the type of thing that is already, through public hearing, in their criteria. This is laying out the criteria for the state in specific objective form.
Chairman Collins:
Could you give us a better definition of the “performance history” of an applicant, so we’d have an understanding of what the intention of that means?
Lori Ashton:
“Performance history.” It would probably be better to utilize what they already have, and that’s why I didn’t know how objective they wanted to get. It may not have been a failed project, but they may have had to remove a subcontractor and replace him. They may have had some time delays or some problems with passing inspections. What they talk about when they use “performance history” is they incorporated it in both failed and successful projects, and I think they look at the type of systems and the type of construction that’s done.
Chairman Collins:
“They” meaning?
Lori Ashton:
The agencies. The state is looking at the type of construction, design professionals, final contract amount, and substantial completion date. They’re looking at the basic projects and performance history—who did they work with, et cetera.
Chairman Collins:
“Performance history” then would be if they were late on a job, if they were fined, if they were on time. These agencies are currently under their regulations doing a report card on previous projects. Is that basically what you’re saying?
Lori Ashton:
That’s correct. In these criteria, they do look at successful projects. They do look at failed projects. But I thought without the inclusion of the performance history it was sort of cut-and-dried. “Yes, I failed a project,” or “Yes, I successfully completed it,” but without the verbiage of performance history. They don’t get to look at the merits of either a successful or a failed project. I guess that’s why I felt it was important to include the performance history, so they can take a look at the project itself, whether it was a failed one or it was successful. They can take a look at all the logistics and dynamics of the projects.
Chairman Collins:
Is everybody with us so far up to that point?
Lori Ashton:
[Continuing to refer to Exhibit C.] Section 5, NRS 338.1377, and this was in discussions with LCB [Legislative Counsel Bureau]. In the first statement it says, “except as otherwise provided in NRS 338.1383”—which is if you choose not to adopt criteria—“the governing body of each local government that sponsors or finances a public work.” The language in A.B. 295 said, “Shall adopt by ordinance,” and according to discussions with LCB, if you do not hold hearings and you do not have public involvement, “adopt” would not be the correct verbiage, and that’s where I had inserted the word, “implement.”
In other words, in these proposed statutes, they’re going to objective criteria. There’s no leeway to insert your own as there was under the previous subjective criteria. Therefore, I doubt if it’s important. I can put “adopt.” I mean, “adopt” or “implement,” it doesn’t matter. I don’t want to split hairs on verbiage.
The rest of the language in NRS 338.1377 mirrors the objective criteria that are currently in place in their application forms, and it mirrors what we merged into NRS 338.1375. That, without belaboring it and going through everything, is a mirror image of what we previously went through.
Chairman Collins:
So, the rest of Section 5 on NRS 338.1377 is all mirrored language of local ordinances currently in place?
Lori Ashton:
That is correct. It’s not really ordinances. It’s their applications and qualification plan.
Chairman Collins:
And that goes all the way through to?
Lori Ashton:
[Continuing to refer to Exhibit C.] Section 5, NRS 338.1379. NRS 338.1379 is where it talks about when a governing body has chosen to utilize prequalification. What we inserted is number 1:
The State Public Works Board and the governing body of a local government that sponsors or finances a public work shall not accept a bid on a contract for a public work unless the person who submits the bid has qualified to bid on the contract pursuant to this section.
I believe there’s some misunderstanding by the governing bodies that this means it is nonpermissive, but in [NRS] 338.1375 and [NRS] 338.1377, it references [NRS] 338.1339. If you have chosen to adopt this criteria, then this is what you must follow. I think the insertion of this is necessary because, otherwise, what it allows a governing body to do is to frivolously use prequalification. If you have chosen, by statute, to use prequalification, then you should use prequalification, whatever parameters you set. If you were going to prequalify on a project-by-project basis, then that is what you need to do.
By inserting this, it’s saying that on this project you’ll prequalify and on this project, you won’t. If that isn’t in there, they could do that at their whim. They could prequalify contractors for a year under the criteria and then, halfway through it, choose to say they’re not going to utilize prequalified contractors. I think there’s a responsibility to the public that, if you initiate prequalification, you need to follow it.
Chairman Collins:
Since the contractors in this state are licensed on a statewide basis, meaning if they become a contractor, they can work statewide as long as they buy the local business license, if it’s necessary in a particular community, and that they would have to meet the same standards if that community required a prequalification. If that community doesn’t require a prequalification, then they can just use any contractor they want to.
Lori Ashton:
That’s correct. NRS 338.1379 is referenced in those two criteria statutes. It is our interpretation that if a public body chooses to adopt it, then they need to follow it for whatever they have adopted it to encompass. That is what this clarification is saying in that section.
Going on to number 3: “Upon receipt of an application submitted pursuant to.” That was clarification language suggested by LCB.
Under NRS 338.1379.2, we put the verbiage “A.” Number 3 was the inclusion of the word “submitted.” That was suggested by LCB as clarification. Going on down to (a), “meets the criteria set forth in NRS 338.1375 or NRS 338.1377,” which is the objective criteria, so you’re mirroring that and spelling it out.
In A.B. 295, NRS 338.1377, they deleted “the hearing process in which the industry representatives, labor representatives, and other parties were notified of a hearing prior to the adoption of the criteria.” Now that we’re going to the objective criteria that spell it out for the public bodies, there was no more notification being given. That is why there is the inclusion of, under number 3(b) of Exhibit C: “Within 5 days after receipt of such an application, provide notice of the receipt of the application to,” and then it lists out numbers 1, 2, and 3, which are construction trades, labor unions, interested parties. That means there is some way for the public to know that they have decided or chosen to implement prequalification.
Chairman Collins:
Why would this notification be necessary?
Lori Ashton:
In the previous process, there was a hearing prior to a public body implementing their prequalification plan, and the industry, labor representatives, and the public was available to discuss. In all of those plans, there was discussion about notifying the public, interested parties, and labor unions, of applications that were received.
Chairman Collins:
So it’s not on every bid, but it’s when a local body chooses to follow these criteria for prequalifying, a list of those contractors on the prebid list would be sent out or these groups would be notified.
Lori Ashton:
It’s on people applying. For those entities that adopt the prequalification, it’s a notification. Before, such as when we worked with Clark County or the City of Las Vegas, there was notification to all of those. It was listed in that statute. Now, if we’re going to go away from it and give them objective criteria and somebody chooses to implement it, there’s no more process for a hearing on the front end of the development. The only way that anybody would know that an entity was using prequalification would be to be noticed that an application had been received.
Chairman Collins:
If a local entity or agency chose to use this, then they would notify these groups and also if they chose to stop using this procedure as well. How often can they get on and off the boat?
Lori Ashton:
I don’t know that there’s anything codified in law right now that says. It says that a public body—if you go to number 7—can do it on a specific project, on more than one project over a 12-month period, or on more than one project over a 24-month period. I don’t know if I’m very comfortable with that, but it is telling a public body they can adopt criteria annually, biennially, or project-by-project. If you adopt an annual criteria, I would venture to say that you must follow it for that year, and then you choose to extend it or not. If you choose to do it biennially, I would assume that it would be important to keep it in place for that two years, and then review it. But, currently, there’s nothing in statute that prohibits them from starting and stopping, except what they have already instituted.
Chairman Collins:
So, they could choose to not do this at all, or they could choose to do it on a single specific project, so it doesn’t cover a time period of all jobs they do, but it could just meet a specific project. If a community had a large project, they could use this for that purpose only, and not on any of their other jobs? [Lori Ashton answered that Chairman Collins was correct.] This language enables that? [Lori Ashton again answered that Chairman Collins was correct.]
Assemblyman Goicoechea:
But that wouldn’t pertain to the State Public Works Board, right?
Lori Ashton:
No, the state is mandated by statute that they must do prequalification.
Chairman Collins:
This is only addressing local governments?
Lori Ashton:
Local governments. Having said that, number 4:
In conducting an investigation pursuant to subsection 3, the State Public Works Board or the governing body may consider any verifiable information about the applicant relating to whether the applicant meets the criteria set forth in NRS 338.1375 or NRS 338.1377, that is discovered by or provided to the Board or governing body.
Now that we’re going to objective criteria and the concern of industry representatives is that frivolous information would be given. This quantifies that the only information a public body or the State Public Works Board may look at is what falls under the guidelines of that criteria. The reason I feel it’s important to allow the governing body to receive information from industry representatives is that currently, by law, the Nevada Labor Commissioner is only required to maintain wage and hour violations for two years. Most applications and criteria go back five years.
Without input from the industry, whether it be another contractor, a private citizen, or a labor or a contractor group, you need to allow them to look at information that someone may have other than the public representatives such as the State Contractors Board, the Nevada Labor Commissioner, or the Department of Labor.
Section 5, number 5 of Exhibit C states:
The State Public Works Board or governing body shall make a determination of whether an applicant meets the criteria set forth in NRS 338.1375 or NRS 338.1377.
In other words, they’ve got the information, they’re going to review the information, and then they’ll make their determination. So, having failed on a project does not necessarily mean that someone will automatically be disqualified. That’s why you need to allow them the ability to look at all of the information surrounding that project.
Going to number 7 of Exhibit C:
The State Public Works Board or the governing body may determine an applicant is qualified to bid.
This gives them their latitude again of project-by-project, 12 months, or 24 months.
Chairman Collins:
Under number 7, if a, b, and c just said, “on a specific project or more than one project,” wouldn’t that cover any calendar length of time?
Lori Ashton:
Let’s say we’re just going to build a hospital, and it’s the only hospital we’re going to bid, and that’s where, prior to building the hospital, we’re going to prequalify potential bidders for that. In b, where it states “on more than one project,” it means that you’re qualifying a contractor for 12 months. For any project that may come up during that 12 months, he or she may be qualified.
Chairman Collins:
I ask why the 12 months or the 24 months? The contractor renews his license once a year, so I can see where that might make sense, but why 24 months?
Lori Ashton:
First of all, you have to expend some time and energy in reviewing applications. So, to put them on a list for two years, unless there was information that came, you’re basically looking at a contractor and his wherewithal to complete public projects, so it’s just that the public body doesn’t have to review this every single year. Unless information comes forward that says he’s a bad guy, they can set it up for two years and this contractor will be qualified. Obviously, they would make sure he has his bonding and funding annually.
Chairman Collins:
Let me ask it a different way. If it said, “on a specific project,” on a, and then on b, it said, “on more than one project,” or they could say with no time limit. In other words, until they decided to stop using a prequalification, they could put this in place and just let it be on all projects.
Lori Ashton:
I don’t know that we worked it out. I know when we came back last session, it said they could determine them to be qualified, and the interpretation by the AG’s Office [Nevada Office of the Attorney General] and district attorneys was that it meant that public bodies could only adopt criteria for a single project. Last legislative session we came back saying, “No, there’s some permissiveness here that you can do it on a specific project, you can do it annually, or you can do biennially.”
I don’t think we went any further than that to state the process by which you quantify it, whether you can do it indefinitely, or whether you have to review it annually. I don’t know that all the logistics were there, and I think we were trying to be very permissive for the public bodies. My assumption would be that, if I chose to do an annual prequalification, this would mean that every year I’m going to determine whether I’m going to continue with it, and if I chose to do a biennial qualification, I would keep it in place for two years and then choose whether or not to continue with the process. Those may be some issues we need to work on in detail later, but I don’t think we should split hairs at this late hour.
Chairman Collins:
I just wanted to make sure that we fit any and all situations.
Lori Ashton:
I agree. Again, we put in number 8, “…and the governing body shall not use any criteria other than the criteria set forth in.” Again, the industry wanted the objective criteria, not the subjective. We do not have a hearing. Exactly what criteria they can use is spelled out. Then, we eliminate number 6 because we encompassed it in number 8.
Assemblyman Goicoechea:
This whole process seems cumbersome, and it’s going to take quite a bit of time to go through it and determine whether that bidder is qualified. Under number 7, on page 6 of Exhibit C, I would suggest that if that’s where we’re headed, you talk about a specific project, and they would remain qualified until such time as you came up with information under this criteria that said they weren’t. You wouldn’t want to go through this subcontractor list on an annual basis or on every project, if that’s where you were headed and you were going to predetermine if they were qualified or not, just because of the length of time it’s going to take to go through them.
Chairman Collins:
Which would leave a contractor on until he wasn’t qualified. Is there an issue there?
Lori Ashton:
I would say that a lot of the representatives of the industry, not the public bodies themselves or the contractors’ association, but I know for sure that labor would just as soon say that it is the responsibility of all public bodies to prequalify contractors. It’s the public entities that don’t want to prequalify. They don’t want to take that responsibility.
I would agree with Mr. Goicoechea that you should go through the effort and you should prequalify them until information came forward for which they could be removed. It’s the public bodies themselves that don’t want to take that responsibility. In a lot of areas, they would prefer to send out the bid, leave it up to the bid documents to determine a contractor, and fight them in court after the fact. Prequalification is a very viable tool for public bodies because it deletes the bad from becoming vested bidders in the bidding process.
Assemblyman Goicoechea:
I think you misunderstood me. That would only be in a case that you decided you were going to prequalify. I agree that, especially the smaller government entities, probably don’t want to enter into this process at all because it looks very cumbersome, and it’s going to take some time to do it. But, at the point you do go take the effort to prequalify this subcontractors list, I don’t think it’s something you’re going to want to do on a project-by-project basis or annual basis, and I would think that you would leave the list whole until such time as information came forward that said the subcontractor should be deleted.
Chairman Collins:
Does anything keep a governing body from using another group’s list? I see people nodding their heads, so maybe there is.
Lori Ashton:
My understanding of the statute would be, if you choose to put the prequalification in place, that you would manage it how you choose to manage it.
Chairman Collins:
What I’m looking for is the possibility that could Henderson, for example, use Clark County’s list simply by putting in their bid process that they will accept that list, or the State Public Works Board’s qualified list of contractors. Is there anything prohibiting that in this legislation, or any other that you know of?
Lori Ashton:
My interpretation of this, and you probably should refer to LCB on it, but I believe it’s individual. If the governing body chooses to prequalify, then this is the process they must do. I don’t think the process includes the ability to look at somebody else’s prequalification list, but I may be wrong.
Chairman Collins:
Ms. O’Grady, if they chose to use a prequalification process, could they use another entity’s or the state’s list of contractors?
Eileen O’Grady, Committee Counsel:
I don’t believe they can under the statute, because under NRS 338.1379, it requires the governing body and the State Public Works Board to receive applications, and then to investigate the applicant. I think if they use another list, they wouldn’t be investigating or they wouldn’t be receiving applications.
Assemblyman Goicoechea:
The other thing that would drive this is the project size and the bonding capability of the particular subcontractor. You almost have to take these on a project-by-project basis. You would probably have 4 or 5 subcontractors that would technically be subcontractors, but in most cases it amounts to, they’d be general contractors, because of their bonding capability and the size of the project they can handle.
Chairman Collins:
Most communities might not adopt this until they have a few millions dollars in overruns, and then they would ask why they didn’t do it. If they don’t ever build anything that big, they don’t need it.
Thanks, Lori. We’ve got several people who want to speak, and so I’m going to call some of them up. Maybe you could take notes, if you want to change something. As you’ve heard, the Chairman of the Government Affairs Committee would like to merge these two pieces of legislation, A.B. 295 and A.B. 540. If you would like to critique the document that’s been proposed as an amendment, that would be okay. I’d also like you to not say the same thing that somebody else has said. Steve Holloway, if you’d like to come up first. Have you had time to look at this amendment and listen to what was discussed this morning?
Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas Chapter:
[Introduced himself.] Yes, I have reviewed this amendment. There are parts we are opposed to.
Let me distinguish between the two bills, and then you’ll better understand why we would oppose certain elements of this particular amendment. A.B. 295 proposed to expand and make more objective the criteria that is being used on a permissive basis by certain government agencies to prequalify contractors who bid on a public works job. [Chairman Collins asked Steve Holloway if by the word “certain,” he meant the state only.]
Not all agencies in the state use those criteria. It’s whether prequalifying contractors or not is permissive under the current statutes. That was the intention. When the prequalification criteria was initially adopted six or eight years ago, it was adopted as an alternate means of qualifying contractors on public works. The traditional method is still there. You can also utilize the design/build method of contracting, which leads to an entirely different set of qualification criteria.
What we were talking about in A.B. 295 was simply expanding the existing criteria, so the construction industry and the various public works agencies have met for over two years on that to come up with criteria that was acceptable to both. Again, we’re only talking about prequalifying general contractors, the guys that actually bid on the public works job.
Chairman Collins:
Don’t the subcontractors bid?
Steve Holloway:
The subcontractors bid to the general contractor. They do not bid to the public works agency. There is no contractual relationship between the public works agencies and the subcontractor, except in a case where you have a specialty job.
That’s what A.B. 295 does. A.B. 540 attempts to expand those criteria and uses a lot of the same criteria that is set forth in A.B. 295 for general contractors, but it also proposes to prequalify subcontractors and to have the public works agency prequalify those subcontractors. The public works agency has no contractual relationship with those subcontractors. Consequently, we are opposed to that provision, both in A.B. 540 and in this amendment [Exhibit C].
Chairman Collins:
You’re opposed to anything addressing contractors?
Steve Holloway:
Anything that would require or make permissive for the agency to prequalify subcontractors. We don’t care if they use these criteria to disqualify certain subcontractors if a complaint is brought, but we don’t want to see . . .
Chairman Collins:
Who are you saying you don’t care if they use?
Steve Holloway:
We don’t care if the public works agencies are allowed to use the criteria to disqualify certain subcontractors, but we don’t want to see them going through this very cumbersome process to prequalify all of the subcontractors that may bid to a general contractor on a public works job. It will be an administrative nightmare.
Chairman Collins:
You don’t oppose local governing bodies that hire for public works projects disqualifying a subcontractor, but you don’t want it in criteria that they prequalify a subcontractor?
Steve Holloway:
That’s exactly right. Under the current law, they may disqualify a subcontractor now. This just says that they would use these criteria to do it.
Assemblyman Goicoechea:
Typically on a public works project—I’m not talking about state public works, but local government—we would advertise for bid, the bid would come in, the general contractor would submit his subcontractor list, and I think what I’m hearing Mr. Holloway say is, if you look at that subcontractor list, you could use this criteria to disqualify a subcontractor on that list.
Steve Holloway:
If you felt you had reason to do so, yes.
Assemblyman Goicoechea:
I agree with you. You can’t prequalify every subcontractor in the state of Nevada on the assumption that you have a general contractor and he’s going to list one of those subcontractors. It would be very cumbersome. I think if you had to have all your subcontractors prequalified it will stop everyone from using this process.
Chairman Collins:
That goes back to the question. The subcontractors are listed, even though they’re not in a direct contract. I’m in that same boat in my business; I’m talking as a personal contractor. I don’t have a signed contract with 95 percent or more of the mostly residential developers that I work with. I’m chosen because I’m on a prequalified list by those developers, and that is based on a trenching contractor who has a signed contract with those developers. I’m a subcontractor of a subcontractor. However, because I’m on this prequalified list, some developers say, ”You choose that company and we will—“ If you’re using that company or in other cases, there are trenching companies who work for developers that are told by the developer, although they don’t have a direct agreement, we don’t want so-and-so on the job, even though they’re on a prequalified list.
I can see where prequalifying is beneficial because they get it done on time. That’s what everybody is after, getting a finished product, getting it done on time, and the price is all the same. I can see where this is beneficial, but it’s also optional. They don’t have to choose A, B, or C, but by knowing ahead of time that a certain subcontractor is going to be on that job, they know they’re going to get it done on time, and they’re going to get it done right the first time. If that’s where this is going, that’s why—and this doesn’t affect me—I don’t do public works projects. I’ve tried to stay away from them for several reasons.
Sorry for the personal comments, but I had to add that in because it helps me understand, and maybe all of you can see where this could be of good use. Since the general contractor lists those subcontractors, and this proposed amendment [Exhibit C] doesn’t say anywhere that they have to use this process, what’s wrong with allowing them to try it? What are the difficulties?
Steve Holloway:
There are several difficulties and I’m sure the public works agencies will agree with my characterization of these difficulties. I must first reiterate that the statutes already allow a public works agency to disqualify a subcontractor for various reasons. This does not interfere with the contractual relationship between the contractor and his subcontractors. Prequalifying subcontractors would. Prequalifying subcontractors would also create an administrative nightmare for any public works agency that attempts to do so. It would create an inordinate workload. There is a big difference between prequalifying 10 to 15 general contractors and attempting to prequalify all of the subcontractors that may wish to bid on a particular public works job. When you have one general contractor on one small building job, you may have 40 subcontractors on that job. That’s a lot of companies to prequalify.
Chairman Collins:
We’ve passed the buck back and forth from the general contractor to the subcontractor. Who is responsible, who has to pay their workers compensation before they get paid? We’ve done all that stuff over the years, so I’m just looking at permissible language that might keep the folks in Clark County and throughout the state from having those overruns and delays. With that permissive language, that’s why we’re taking the time to hear this. But you believe it would be too cumbersome?
Steve Holloway:
I also don’t believe it would address the problem you’re trying to get at. If you were to look at most of the problems on a major project like the justice facility, I don’t think you would find that the subcontractors were at fault on that. I think that when the smoke clears, and when the court decisions are rendered, you’re going to find that most of the problems on that project were just poor planning, but that’s just my opinion.
Chairman Collins:
And that’s not to be used in the case, right? Disqualifies and disclaimers? I appreciate your comments, Steve.
Jim Keenan, Nevada Public Purchasing Study Commission:
[Introduced himself.] Generally we echo Mr. Holloway’s comments about it not being a good idea to prequalify subcontractors at all. Specifically in the amendment [Exhibit C], the only thing I know that we agreed to was to discuss a list of criteria to be carried over into A.B. 295. We are opposed to the original A.B. 540, its amendment [Exhibit C], and all the remaining criteria that are carried over into A.B. 295. Specifically, some of the criteria are subjective, whether they claim to be objective or not. The idea that you can deem subcontractors to be qualified has several flaws in it. Only general contractors should choose subcontractors. We are concerned that if these criteria are applied in any way to subcontractors, even voluntarily as discussed in testimony, the general contractor can later say, “You wouldn’t let me use the one I wanted. You picked him. His failure is now your responsibility.”
The criteria appear to be a closed list. In other words, you can only use the criteria that are listed, and we believe this violates a Nevada Supreme Court decision, Faust v. Donrey Media Group in 1979, which says:
It is well settled in public contract award procedure that a board determination of a bidder’s responsibleness is discretionary. At least in the absence fraud or abuse of discretion, that determination cannot be challenged. Prequalification is another form of findings of responsibility or nonresponsibility.
In addition, mention was made of one of the entities down south. I have an e‑mail from the Clark County School District addressed to me, dated last week, commenting on the amended version of A.B. 540, but coincidentally those same comments apply to many of the provisions carried over into the amended version of A.B. 295. I checked last night for any more recent e-mails and do not have it, and the Clark County School District is opposed to those provisions other than expanding the list of criteria.
Chairman Collins:
What part did you like? Can you pick that out?
Jim Keenan:
In all honesty, no sir, other than we did agree to sit down with anyone and discuss an expanded list of criteria. Some of the criteria here are acceptable, some are not. About half of the criteria carried over from A.B. 540 are acceptable, some are not. I’ll go line by line:
I believe those are the 13 criteria that are in the amendment [Exhibit C] before you today.
Justine Chambers, Contract Coordinator, Carson City Development Services, Engineering-Contracts Division:
[Introduced herself.] We don’t prequalify, so I don’t want to address the prequalification. But we do object to subsection (b) of [NRS] 338 that says if someone complains to our Board of Supervisors that a subcontractor is unacceptable, that we have to investigate. This could be an immense project for our city. We could have people coming to our Board every week complaining about subcontractors that we have to investigate, and our position is that we don’t have a relationship with the subcontractor, and we do not want to prequalify them. This is on page 1, Section 1(b) of Exhibit C. Even though it says this is optional that you can qualify subcontractors, if someone complains to your Board, you’re going to have to investigate. To me, this isn’t optional. It’s not optional to us that we’re going to have to investigate if someone does complain. It opens us up to a lot of extra work, and I could see that this would have a fiscal impact.
Chairman Collins:
While they’re conducting an investigation on everyone?
Justine Chambers:
Yes. Exactly.
Chairman Collins:
How difficult would that be?
Eileen O’Grady:
I think Section 1 is optional. If they choose to do this, they’d have to investigate, but if they don’t, then they wouldn’t have to investigate. It’s just optional to the governing body.
Justine Chambers:
The way I read this is if someone comes to your board and says that this subcontractor is objectionable, then you have to investigate whether you prequalify subcontractors or not.
Chairman Collins:
We were just told that’s a no. What else do you object to?
Justine Chambers:
That’s my primary objection.
Ted Olivas, Assistant Director, Clark County Finance Department:
[Introduced himself.] The original intent of A.B. 295 was to add criteria that we could use to more objectively look at contractors. That was it. It was criteria that we worked with the general contracting industry in southern Nevada to develop. The 10 criteria in A.B. 295 were what we could agree to. What we couldn’t agree to was the subcontractor issue. In this amended version, we talk about qualifying subcontractors or deeming subcontractors not appropriate. NRS 338.141 already gives us that ability.
We hire general contractors who are responsible to manage the entire project. We rely on the general contractor to run the program. We don’t want to get in the general contractor’s business. They have relationships with certain subcontractors as a part of their business. Some we may like, and some we may not like. If we don’t like someone, the law allows us to make a substitution.
Chairman Collins:
Where in the law does that?
Ted Olivas:
NRS 338.141. That’s a provision that applies to everyone. A.B. 295 didn’t change the process for the state because, when we wanted to add criteria, we said we’re not the state, so we’re not going to tell them how to do it, but we think that the local governments should have some additional criteria. We tried to very narrowly define what we thought was appropriate for selecting contractors for the local governments.
I don’t know how the state feels about this, but our intent was very clear, to give us some additional teeth to look at general contractors. We’re a “non-home rule” entity. We can only do what’s in the law. Currently, there are four criteria. We said we need to have more. We went to the industry and asked what makes sense. We could never agree about the subcontractor issue, and that’s why it never made it into A.B. 295. We already have the ability to do that. I think we all agree that, if you choose to use the prequalification process, additional criteria are better. We need to have more teeth in this.
Chairman Collins:
Can you agree with the criteria that Jim Keenan mentioned?
Ted Olivas:
We thought the criteria that we developed were objective, and was something that, when we went through this process, would not cause disputes. We could ask these questions: do you have a license or not? Have you been convicted of a violation of discrimination? Have you successfully completed a project? We thought that these were fairly objective criteria to look at. At the A.B. 295 hearing, Mr. Goicoechea brought up one of the criteria, about the contractor developing one of the projects, and the intent was that they would complete a public or private project of similar size, complexity, and scope. We didn’t want to eliminate anybody, but we also don’t want to be a proving ground for some contractor. We thought these were objective criteria.
Chairman Collins:
The state licenses the contractor, and you give them a business license to perform in your county? [Ted Olivas answered that this was correct.] I’ve got a book in my office that I’d like to show you, the Clark County Building Administrative Code. Specifically, it says Clark County will require, when any work is done in electrical, mechanical, and plumbing, that a licensed individual be in charge of running, performing, and leading that work, yet your building department doesn’t enforce that.
The point I’m trying to make to Clark County today is that you have provisions that would reduce construction defects, reduce delays, and reduce unqualified workers working on your projects, yet you fail to enforce that simple ordinance. We, as a state Legislature, represent those people that you represent as well. We’re looking for legislation to assist you in building projects in a timely manner in Clark County, as well as the rest of the state, that do not go over budget, and are not substandardly built in the state of Nevada. That’s why we’re taking the time to address legislation like this. Do you get my point?
Ted Olivas:
Yes. I’m a finance guy. I’m not a building department guy. But what I can tell you is, the public works projects that we have, we look at the subcontractor list and make sure that they’re properly licensed. We rely on the State Contractors’ Board to make that determination. From that perspective, we do look at the subcontractors and make sure that they’re properly licensed. In terms of the building code, I’m sorry, I can’t comment.
Chairman Collins:
The same ordinance I mentioned is also applicable to Las Vegas, North Las Vegas, Henderson, Mesquite, and Boulder City, and I don’t know that I’ve ever seen any of those entities address that constant violation either.
Assemblyman Goicoechea:
What you’re saying is, the 10 criteria in A.B. 295 are the ones that you support? [Ted Olivas answered that this was correct.] And that would only be for prequalifying general contractors? [Ted Olivas said that the answer was yes.]
Renny Ashleman, State Public Works Board:
We have furnished you with copies of S.B. 491 and our proposed amendments to S.B. 491 [Exhibit D]. [Chairman Collins clarified that the Subcommittee was discussing A.B. 540 and A.B. 295.] I understand that, but that will simplify my speech if you want to shorten it. [Chairman Collins indicated that Renny Ashleman should proceed.]
That is the vehicle the State Public Works Board has. We are trying not to become enmeshed in the local government’s approach to this. In that bill [S.B. 491], we ask that we prequalify subcontractors who do more than 5 percent of the given job. It’s the same way that Lori Ashton is approaching this. If there’s a complaint or if we decide we want to do it at our option, we already have criteria. We’ve set them up by regulation. We had no problem with the public hearings getting those adopted. We’d like to follow those as to our criteria for prequalification, and the bill S.B. 491, unlike these bills [A.B. 295 and A.B. 540], has a lot of other things as to procedure and timing that are important. In the interest of time, you may want to amend those into yours, or you may want to amend us out of whichever vehicle you take and let us take them up in S.B. 491 and then bring them over to you. We just wanted to inform you of that situation.
Chairman Collins:
Where is S.B. 491?
Renny Ashleman:
It’s in Senate Government Affairs at the current time.
Chairman Collins:
Has it had a hearing?
Renny Ashleman:
Yes, it has.
Chairman Collins:
Is it going to pass?
Renny Ashleman:
Yes, in some form and with our amendments, we hope. The workshop is tomorrow afternoon.
Dan O’Brien, P.E., Manager, State Public Works Board:
I don’t want to cover any area that Renny Ashleman did, but as was discussed earlier, the State Public Works Board has no choice. We must qualify. We don’t have a problem with that. We established the criteria through regulation. These changes do apply to the State Public Works Board and we have not had a chance to go through every one of these and see the ramifications, but there are some significant ramifications if we’re included in it. We do not have any problem with A.B. 295. It applies to local government, and we want to stay out of local government’s business. We went down that road two years ago and realized that with anything we proposed, we have to be careful that we don’t infringe into the local government’s business. We don’t have any problem with A.B. 295. We just do not believe the State Public Works Board should be included in that.
We have our own bill that cleans up some of the problems that we found over the last year, once we started to qualify bidders. The process of qualifying subcontractors, we realize, is a horrendous administrative process, so our proposed amendment shows that subcontractors will be presumptively qualified, and we would then be able to challenge or object to them if we have history of a problem.
Otherwise, they would be qualified, and we wouldn’t be going through that huge process. If we had to prequalify every subcontractor that was out there, the list is horrendous. It’s a very large number of subcontractors, so we determined what the best way would be, and we have very few problems.
Chairman Collins:
Wouldn’t that be limited to those that applied?
Dan O’Brien:
No, it would be just all subcontractors then.
Chairman Collins:
You read that as those that apply, not all contractors?
Dan O’Brien:
No, it would be all subcontractors that a general contractor would be using. If, for some reason, we have a history of a problem with a subcontractor, then we could object to them and make them go through the qualification process.
Renny Ashleman:
Let me give you a little insight. Of the three or four general contractors that we had problems with, we probably spent over a hundred hours in hearings and preparation, so it’s quite a process for us.
Frank Rothwell, C.P.M., Purchasing/Contracts Manager, City of Sparks:
[Introduced himself.] We generally concur with the Nevada Public Purchasing Study Commission’s recommendations from Mr. Keenan. Our interest was in curtailing some of the redundant paperwork that our bid process covers with respect to addressing some of the issues that were brought up.
John Simmons, Construction Manager, City of Henderson:
[Introduced himself.] I am here to oppose the language “or the governing body of the local government may.” I believe that it is very important that local government agencies, or whomever, has a contract with a general contractor. That’s where it should be, with the general contractors themselves. There is no contract with subcontractors.
One that I would like to make for the record is that Lori Ashton knows that the City of Henderson is in the process of prequalifying general contractors, and it may happen around July or August of this year. Ms. Ashton did not contact me. She knows my number, but we have not talked about this.
I’d like to take a different spin that, in the contract language that you put together for the general contractor, the accountability, and the responsibility for a general contractor and the way that we craft them is that, if you require a percentage of work of the general contractor for work to be by their own forces, we have found that it eliminates a lot of the problems with subcontractors and puts more responsibility on the general contractor. We would rather that it be left that way and let us govern our contracts that way.
If this is going to go through, and I made a note that the contracts have 5 percent listings and a 1 percent listing, I am curious if this is in reference to only the 5 percent, which would be subcontractors, and not the 1 percent? I’d like that to be clarified. Another form of working with the subcontractor is in the form of partnering. That has worked very well. That could stay the same as it is today. Again, I see no reason that we should go down to the subcontractors and prequalify them.
Chairman Collins:
The City of Henderson tore down the junior high school where I went to school and they built a building that had a lot of problems with it during this construction phase. Just a few years ago, I guess you had some problems with subcontractors in the City of Henderson. If this was in place five years ago, maybe you wouldn’t have had this problem?
John Simmons:
Perhaps if the City of Henderson was running it, we wouldn’t have had that problem.
Lori Ashton:
Jeannette Belz didn’t get a chance. She submitted an amendment that is more just a clarification of number 13, which was number 11. I don’t have a problem with that one.
I’d like to make two quick comments. First of all, they seem to be overly concerned with the prequalification of subcontractors. This language does not mandate that they do do it. Second, subcontractors do 90 percent of public works projects and to not be able to address them is ludicrous. The third thing is they talked about making objective criteria. We were fine with the subjective. It allowed the parameters of the latitude for public bodies to adopt whatever they needed under those criteria to look at. It is those other entities that now want to make it very objective. If we’re going objective, we need to be very specific and not dilute it, but expand it.
Chairman Collins:
Thank you all for attending this morning and for your participation, enlightenment, and shared information. We will recess this hearing until 6:30 a.m., Thursday morning [April 10, 2003].
RESPECTFULLY SUBMITTED:
Pat Hughey
Committee Secretary
APPROVED BY:
Assemblyman Tom Collins, Chairman
DATE: