Prior to 1995, public school districts and institutions of higher education (i.e., junior colleges, community colleges, senior colleges, universities, medical schools, etc. See Appendix 3 for complete definition.) were required to utilize competitive bidding for the award of their construction contracts. These public owners were permitted to award construction management contracts in connection with the construction of school projects, however, the construction manager was prohibited from self-performing or bidding on any of the actual construction work for the project. Additionally, design-build contracts were not permitted to be utilized for the construction of school projects.

In 1995, the Texas Legislature passed Senate Bill No. 1, an omnibus public education reform bill, intended to decentralize authority and return control of the management of schools to the local school districts. S.B. 1 added a new section (Section 44.03 1) to the Texas Education Code, modifying the basic purchasing statutes for school districts and introducing the concept of "best value procurement" for contracts of $25,000 or more. School districts were granted the flexibility of choosing any of a list of available methods of contracting that included competitive bidding, competitive sealed proposals, request for proposals, catalogue purchase procedures, interlocal contracts, or design-build contracts.

Before the passage of S.B. 1, school districts were required to award construction contracts to the responsible bidder offering the lowest price. S.B. 1 departed from that traditional basis for awarding contracts by allowing school districts to use any of a variety of different contracting methods to obtain the "best value" for the school district. In determining what constitutes the "best value" to the district, in addition to the purchase price, school districts may consider the following additional factors:

• the reputation of the vendor and of the vendor's goods or services;
• the quality of the vendor's goods or services;
• the extent to which the goods or services meet the district's needs;
• the vendor's past relationship with the district;
• the impact on the ability of the district to comply with laws and rules relating to historically underutilized businesses;
• the total long-term cost to the district to acquire the vendor's goods or services; and
• any other relevant factor that a private business entity would consider in selecting a vendor.

In utilizing these various methods of contracting, school districts are now permitted to consider any of the aforementioned discretionary evaluation factors in determining to whom to award a contract. Although the passage of S.B. 1 achieved the legislative purpose of affording school districts much greater flexibility in how they contracted, the new legislation did not provide adequate guidance to the school districts on what procedures should be utilized to implement the various available contracting methods. This lack of legislative guidance prompted a series of Attorney General Opinion Requests seeking clarification and underscoring the need for further direction from the Texas Legislature.

The 1997 Texas Legislature has passed Senate Bill No. 583, which becomes effective September 1, 1997. The legislation establishes more specific procedures for school districts to follow in utilizing design-build contracts and establishes procedures for school districts to follow in entering into contracts with constriction managers-agents, construction managers-at-risk, contractors pursuant to competitive sealed proposals, contractors pursuant to competitive bidding, and job order contracts. Additionally, S. B. 583 expanded the availability of these various contracting methods by authorizing institutions of higher education to enter into these various types of contracts pursuant to procedures that essentially mirror those required of school districts.

The purpose of this handbook is to provide the reader with an initial source of information regarding the construction contracting methods applicable to school districts and institutions of higher education as a result of the changes in law implemented by the 1997 Texas Legislature. This handbook is not intended to address every issue that may arise in connection with the award of contracts by school districts and institutions of higher education and it is not designed to be a substitute for sound legal advice. Rather, this handbook is intended to provide you with a basic framework of information regarding the laws governing the award of construction contracts by school districts and institutions of higher education that will be effective as to a contract for which requests for bids, requests for proposals, or requests for qualifications are published on or after September 1, 1997.

In using this handbook, you will notice that it is divided into two sections:

1. Construction Contracting For School Districts; and
2. Construction Contracting For Institutions of Higher Education.

Also provided are Contracting Method Summary Sheets that summarize the various contracting methods authorized for school districts and institutions of higher education. Finally, set forth in Appendices are the provisions of Senate Bill No. 583, as incorporated into their respective chapters of the Texas Education Code, along with the pertinent parts of other important statutes that are referenced in S.B. 583.

A. COMPETITIVE BIDDING FOR CONSTRUCTION SERVICES

Competitive bidding has been the traditional method by which school districts have selected contractors to build projects. S.B. 1 authorized school districts to utilize several different methods for procurement of construction contracts, but (according to a Texas Attorney General Opinion) did not change the process of competitive bidding if competitive bidding was selected as the contract method. Section 2 of S.B. 583 adds a new Section 44.040 to the Education Code, which retains the concept of selecting a contractor through competitive bidding, but makes some changes in competitive bidding procedures.

Foremost the change embodied in new Section 44.040(c), which provides that the school district should award to the bidder offering the "best value" according to the selection criteria established by the school district. This is a fundamental change from the concept of being required to award to the lowest bid. The lowest price alone may not necessarily offer the "best value", depending on the criteria the school district adopts. Those criteria may include any of the following criteria listed in Section 44.031 (b):

• the purchase price;
• the reputation of the vendor and of the vendor's goods or services;
• the quality of the vendor's goods or services;
• the extent to which the goods or services meet the district's needs;
• the vendor's past relationship with the district;
• the impact on the ability of the district to comply with laws and rules relating to historically underutilized businesses;
• the total long-term cost to the district to acquire the vendor's goods or services;
• and any other relevant factor that a private business entity would consider in selecting a vendor.

A school district may choose to make price the primary or even sole criteria if it determines that price will provide the "best value"; but is not compelled to do so, as has been the case under the traditional Texas competitive bidding procedures.

New Section 44.040(b) states that certain sections of the Local Government Code (which address competitive bidding on certain public works contracts) will apply to contracts competitively bid by school districts. (See Appendix 9 for text of these sections.) It is noteworthy that Section 271.027(b) of the Local Government Code was purposely omitted from the provisions made applicable to competitive bidding by school districts under this new Section of the Education Code. Section 271.027(b) of the Local Government Code is the provision that requires the contract to be awarded to the lowest responsible bidder and provides for a hearing if the contract is going to be awarded to a bidder who is not the lowest bidder. The intentional

omission of this provision of the Local Government Code from the new school district competitive bidding procedures, coupled with the requirement to award the contract at the bid amount, to the bidder offering the "best value" in relation to the school district selection criteria, eliminates the necessity of awarding to the lowest bidder; but does require that the successful bidder's contract be at the amount bid by the successful bidder (i.e., not a negotiated contract amount as would be allowed in the competitive sealed proposal process).

Under the competitive bidding process, and unlike the new competitive sealed proposal process, the school district is not authorized to discuss the bids with bidders for purposes of securing clarifications and changes or to negotiate with the selected bidder for cost reductions in the price of the contract to be awarded by the school district. As indicated above, once the school district selects the successful bidder, the contract is to be let at the "bid amount" (Section 44.040(c)).

Notice of the bid deadline and place where bids are to be received must be advertised in the county where the school district's central administrative office is located at least once a week for at least two weeks before the deadline for receiving bids if the contract is for $25,000 or more. Competitive bids under the new law must be opened publicly. The safety record of a bidder may also be considered by the school district (Section 271.0275 of the Local Government Code) as part of its selection criteria.

The contract amounts that trigger bonding requirements were unchanged by the Texas Legislature in 1997. A payment bond is still required on public works contracts in excess of $25,000 and a performance bond is required for public works contracts in excess of $100,000. However, House Bill No. 3158 ("H.B. 3158") amended Article 7.19-1 of the Texas Insurance Code to impose stricter requirements concerning the surety companies authorized to issue surety bonds given to public owners on public works projects pursuant to the requirements of Chapter 2253 of the Texas Government Code. Under the provisions of the new subsection (c) of Article 7.19-1 of the Texas Insurance Code, if the amount of the bond (whether payment or performance) exceeds S I 00, 000, then the surety must also hold a certificate of authority from the United States Secretary of the Treasury to qualify as a surety on obligations permitted or required under Federal Law; or have obtained reinsurance for any liability in excess of $100,000 from a reinsurer that is authorized and admitted as a reinsurer in the State of Texas and who is a holder of a certificate of authority from the United States Secretary of the Treasury to qualify as a surety or reinsurer on obligations permitted or required under Federal Law. Public owners and contractors may rely upon the Treasury list of companies holding certificates of authority that is published in the Federal Register by the U.S. Department of the Treasury covering the date on which the bond was executed in determining whether the surety on the bond or the reinsurer holds a certificate of authority in compliance with the aforesaid new requirement for bonds in excess of $100,000.

Under the competitive sealed proposals procurement method, the school district selects or designates an Architect/Engineer to prepare construction documents for the project. The school district then issues a Request For Proposals ("RFP") for construction of the project based on contractor selection criteria established by the school district. Selection of the contractor is to be based on a combination of price and other selection criteria determined to provide the best value to the school district. S.B. 1 introduced the concept of competitive sealed proposals (Section 44.03 1 (a)(2) of the Education Code), but did not provide any detail as to the procedures that a school district should follow when utilizing this contracting method. S.B. 583 fills that void by setting forth procedures a school district shall use in selecting a contractor for construction services by competitive sealed proposals.

Section 2 of S.B. 583 adds a new Section 44.039 to the Education Code that sets forth the procedures that a school district must follow in selecting a contractor for construction, rehabilitation, alteration or repair services for a school district facility. The process involves basically four steps and allows an optional prequalification step.

The first step is for the school district to select or designate an engineer or architect to prepare construction documents for the project. If the engineer or architect is not a full-time employee of the school district, the school district must select an engineer or architect on the basis of demonstrated competence and qualifications as provided by Section 2254.004 of the Texas Government Code. (Professional Services Procurement Act set forth in Appendix 5).

The second step, which could be done during, before or after completion of the construction documents, is for the school district to prepare a RFP which will include the following information,

• construction documents,
• selection criteria,
• estimated budget,
• project scope,
• schedule, and
• other information that contractors may require to respond to the RFP.

Section 44.039(d) requires the school district to set forth its contractor selection criteria in the RFP. Selection criteria may include the following:

• price (which could, depending on the school district's desires, include a lump sum or percentage fee, general conditions, a guaranteed maximum price, a lump sum bid or no guaranteed maximum price at all),

• experience,

•  
• past performance,
• safety record,
• proposed personnel,
• methodology, and
• other factors demonstrating the capability of the offeror.

School districts are required to advertise in the county in which the school district's central administrative office is located the time by when and place where proposals will be received at least once a week for at least two weeks before the deadline for receiving the proposals.

Prequalification of offerors before proposals are submitted is an optional step for the school district. The new law provides that a prequalified offeror may be rejected later on the basis of subsequently developed information. A failure to prequalify will not bar an offeror from responding and being found by the school district to offer the best value to the school district.

Under Section 44.039(f), the school district is required to (1) receive and publicly open the proposal and (2) to read aloud the names of the offerors and the monetary proposals, if any, stated in each proposal. Under Section 44.035(b), the school district may discuss proposals with offerors after the opening, to allow for clarification and changes. Thus, the major difference between the competitive sealed proposal method and traditional competitive bidding is that postbid negotiations may take place and a contract may be awarded at a price or on terms different than those originally submitted. In a traditional competitive bidding situation, the school district must award, if at all, to one of the bidders on the exact same basis as was originally bid. The statute provides that the school district shall take steps to prevent non-monetary information from competing proposals being disclosed to other offerors. The school district has forty-five days after the proposal opening to evaluate and rank each proposal submitted in relation to its published selection criteria.

The final step is for the school district to select the offeror that offers the best value based on its published selection criteria and its ranking of the proposals. Then, under Section 44.039(g), the school district and its architect or engineer may discuss options with the selected offeror for cost reduction. If the school district is unable to come to terms with the first ranked offeror, discussions are to terminate and the district must proceed to the next ranked offeror and repeat the process until a contract agreement is reached or all proposals are rejected.

Both Sections 44.035(a)) and 44.039(h) make it clear that in determining the "best value" the school district is not limited to price, but may consider a combination of all the other factors stated in its published selection criteria.

Section 44.039(c) requires that the school district provide or contract for, independent of the contractor, the inspection, materials testing and verification testing services necessary for acceptance of the facility by the school district.

S.B. 583 added Section 44.037 to the Texas Education Code, expressly authorizing school districts to use the construction manager-agent contract method for construction, rehabilitation, alteration, or repair of a facility.

Section 44.037(b) defines a construction manager-agent as a sole proprietorship, partnership, corporation, or other legal entity that provides consultation to the school district regarding construction, rehabilitation, alteration, or repair of a facility. A construction manager/agent is intended to represent the school district in a fiduciary capacity and may not self-perform any portion of the actual design or construction of the project, with the exception of the general conditions as provided by the contract. Section 44.03 15(6) defines "general conditions", when used in the context of a contract for the construction, rehabilitation, alteration, or repair of a facility, to mean on-site management, administrative personnel, insurance, bonds, equipment,

utilities, and incidental work, including minor field labor and materials.

Once a school district has determined that the construction manager-agent contract method provides the "best value" to the school district and before or concurrently with selecting the construction manger-agent, the school district must select or designate an engineer or architect for the preparation of the design and the construction documents for the project. This architect or engineer shall have full responsibility for complying with the statutes governing the practice of architecture (Article 249a, V.T.C.S. set forth in Appendix 6) and engineering (Article 3 27 1 a, V. T. C. S. set forth in Appendix 7), as applicable. If the architect or engineer is not a full-time employee of the school district, then the school district must select the architect or engineer who will be responsible for preparation of the design and construction documents on the basis of demonstrated competence and qualifications in accordance with the procedures set forth for contracting for professional services of architects or engineers in Section 2254.004 of the Texas Government Code.

School districts are required to select a construction manager-agent on the basis of demonstrated competence and qualifications in the same manner as they are required to select engineers or architects. In selecting a construction manger-agent, the school district is required to utilize the same two-step process set forth in Section 2254.004 of the Texas Government Code that is utilized for the selection of architects or engineers. The school district must:

1. first select the most highly qualified provider of construction manager-agent services on the basis of demonstrated competence and qualifications; and
2. then attempt to negotiate with that provider a contract at a fair and reasonable price.

If a satisfactory contract cannot be negotiated between the school district and the most highly qualified provider of construction manager-agent services, then the school district MUSC

If a school district chooses the construction manager-agent method for construction of a school project, then the school district must also obtain a general contractor, trade contractor(s), or subcontractor(s) to serve as the prime contractor(s) for their specific portion(s) of the work on the project. The general contractor, trade contractor, or subcontractor must be obtained through contracting methods that are in accordance with applicable law (i.e., any of the contracting methods authorized by Section 44.03 1).

Finally, the school district has the option of obtaining inspection and testing services independently or through the construction manager-agent. Regardless of whether the school district, or the construction manager-agent on behalf of the school district, is the party contracting for the inspection and testing services, all of the testing of construction materials engineering, inspection services, and verification testing services necessary for acceptance of the facility by the school district must be procured in accordance with the two step procurement process set forth in Section 2254.004 of the Texas Government Code, as discussed above.

In addition to the construction manager-agent method of contracting, S.B. 583 expressly authorized school districts to use the construction manager-at-risk method for contracting for the construction, rehabilitation, alteration, or repair of facilities. However, the procedures for selection of a construction manager-at-risk and the scope of work covered by such a contract are substantially different from those for a construction manager-agent.

A construction manager-at-risk is intended to assume the risk for construction, rehabilitation, alteration, or repair of a facility at the contracted price in the same manner as a general contractor; but also provides consultation to the school district regarding construction during and after the design of the facility. The school district must, before or concurrently with selecting a construction manager-at-risk, select or designate an architect or engineer who will be responsible for the preparation of the design and construction documents for the project. This architect or engineer, who will have full responsibility for compliance with the applicable statutes governing the practice of engineering (Article 3271a, V.T.C.S.) and architecture (Article 249a, V. T. C, S.) as applicable, if not a full-time employee of the school district, must be selected on the basis of demonstrated competence and qualifications utilizing the two-step process set forth in Section 2254.004 of the Texas Government Code.

In selecting the construction manager-at-risk, the school district is required to utilize the competitive sealed proposal process. The school district must prepare a Request For Competitive Sealed Proposals ("RFCSP") that includes the following:

• general information on the project site,
• project scope,
• schedule,
• selection criteria,
• estimated budget,
• the time and place for receipt of proposals, and
• any other information that may assist the district in its selection.

The RFCSP may require offerors to submit information regarding the construction manager's proposed fee and the price for fulfilling the general conditions. The selection criteria for evaluating the proposals and selecting the best offeror must be stated in the RFCSP. The selection criteria may include the following:

• proposed fee and price for general conditions, the offeror's experience, past performance,
• safety record,
• proposed personnel and methodology, and
• any other factors demonstrating the capability of the construction manager.

The school district has the option of prequalifying potential offerors before proposals are submitted in response to the RFCSP. S.B. 583 does not give specific guidance on what procedures should be utilized for prequalification; however it is clear that prequalification may not be a conclusive determination that an offeror offers the best value to the school district. Similarly, a prequalified offeror may be rejected on the basis of subsequently discovered information. Additionally, the failure to prequalify apparently does not bar a potential offeror from subsequently submitting a proposal, nor does it prevent the school district from subsequently determining that such an offeror offers the best value to the school district as a construction manager-at-risk.

Pursuant to the requirements of Section 44.03 I (g), the school district is required to publicly advertise the time by when and place where the proposals for construction manager-at-risk services will be received. This public notice must be published in the county in which the school district's central administrative office is located, once a week for at least two weeks before the deadline for receipt of proposals.

After the deadline for receipt of proposals has expired, the school district is required to publicly open and read aloud the names of the offerors and the monetary proposals, if any, for each proposal. The school district is then required to evaluate and rank each proposal submitted based upon the selection criteria set forth in the RFCSP. This evaluation and ranking by the school district must be completed within forty-five days after the date of the opening of proposals. The school district shall select the offeror that offers the best value to the school district based upon the ranking evaluation performed pursuant to the selection criteria published in the RFCSP.

If the school district is unable to negotiate a contract agreement with the selected offeror, the school district must terminate further discussions and then proceed to the next offeror in the order of the selection ranking until a contract agreement is reached or all proposals are rejected. S.B. 583 does not specify what type of pricing (i.e., firm fixed price, cost plus fixed fee, cost plus fixed fee with guaranteed maximum price, etc.) should be utilized in the contract between the school district and the construction manager-at-risk. The school district may utilize any form of pricing it deems appropriate (Le., lump sum, cost plus a fee with or without a guaranteed maximum price, flat fee or percentage fee, etc.).

The construction manager-at-risk does assume the contractual risk for completion and delivery of the completed facility at the contracted price in the same manner as a general contractor. However, the construction manager-at-risk is initially responsible for self performing only the general conditions and any minor work that may be included in the general conditions for the project. The "general conditions" for the project are defined in Section 44.03 15(6) to mean on-site management, administrative personnel, insurance, bonds, equipment, utilities, and . incidental work, including minor field labor and materials, including minor field labor and materials.

The construction manager-at-risk is required to publicly advertise and solicit either competitive bids or competitive sealed proposals from trade contractors or subcontractors for the performance of all major elements of the work on the project other than the general conditions. The construction manager-at-risk is permitted to seek to perform portions of the work required to be publicly advertised. If the construction manager-at-risk submits its own bid or proposal for any of these portions of the work, it must do so in the same manner as all other trade contractors or subcontractors competing for such work. The school district has the final determination as to whether the construction manager-at-risk's bid or proposal provides the best value for the school district,

It is important to note that Section 44.0380) specifically requires the construction manager-at-risk and the school district or its designated representative to receive and open trade contractor or subcontractor bids or proposals in a manner that does not disclose the contents of the bid or proposal during the selection process. Thus, there is no requirement for a "public opening of bids or proposals, nor is there a requirement that the names of the bidders or offerors be publicly disclosed. The only requirement imposed upon the construction manager-at-risk and the school district is that all bids or proposals shall be made public within seven days after the date of final selection.

If during the course of receiving, reviewing and evaluating the bids or proposals, the construction manager-at-risk recommends to the school district a bid or proposal from a trade contractor or subcontractor, but the school district requires another bid or proposal to be accepted, then the school district is obligated to compensate the construction manager-at-risk by a change in price, time, or guaranteed maximum cost for any additional cost and risk that the construction manager-at-risk may incur because of the school district's requirement that another bid or proposal (other than the one recommended) be accepted.

Tile construction manager-at-risk may not perform the inspection and testing services for the project. The school district is required to provide or contract for, independently of the construction manager-at-risk, the inspection services, the testing of construction materials engineering, and the verification testing services necessary for acceptance of the facility. These inspection and testing services are to be obtained by the school district in accordance with the two-step process for obtaining architectural or engineering services as set forth in Section 2254.004 of the Texas Government Code.

The traditional method for contracting for the construction of public works in Texas is to have separate contracts for the design and construction of the public work. Under the design contract, detailed design and construction drawings and specifications are prepared by the design professional and then these documents are used as the basis for using competitive bidding to award the separate construction contract to a single prime contractor or multiple prime contractors. Under the design-build method of contracting, the public owner awards a single contract to the design-builder to design and construct the public work. Thus, the design-builder under-takes responsibility for both the design and construction of the project.

Until recently, public owners in Texas were not permitted to utilize the design-build approach for construction of public works. In the last decade, the Texas Legislature has granted some limited authority to various governmental entities to deviate from the traditional method of awarding separate contracts for the design and construction of a public project. In 1995, with the passage of S.B. 1, the Texas Legislature granted public school districts broad authority to use the design-build method of contracting for construction of school projects valued at $25,000 or more. Unfortunately, little guidance was given to school districts on what procedures to use to implement the design-build method of contracting. The 1997 Texas Legislature, with the passage of S.B. 583, established detailed procedures for school districts to follow in awarding design-build contracts for construction of school projects.

Section 44.036 of the Texas Education Code sets forth the requirements that must be satisfied by school districts when awarding design-build contracts for facilities. A "design-build contract" is defined in Section 44.036 to mean a single contract with a design-build firm (a partnership, corporation, or other legal entity or team that includes an engineer or architect and builder qualified to engage in building construction in Texas) for the design and construction of a facility (real property, including buildings and associated structures and improved or unimproved land). School districts may use the design-build method of contracting for the construction, rehabilitation, alteration, or repair of a facility. In using the design-build contract method, tile contracting school district and the design -build firm must follow the procedures set forth in Subsections (c) - (j).

The school district may, but is not required to, designate an engineer or architect to act as its representative. If tile school district does not have an engineer or architect as a full-time employee, then any engineer or architect selected by the school district to act as its designated representative must be selected on the basis of demonstrated competence and qualifications in accordance with the provisions of the Professional Services Procurement Act set forth in Chapter 2254 of the Texas Government Code. (See Appendix 5.)

After it has been determined by the school district that the design-build contract will provide the best value for a school project, the school district must utilize a process consisting of two phases for the selection of a design-build firm. Initially, the school district must prepare a Request For Qualifications ("RFQ") that includes general information on the project site, project scope, budget, special systems, selection criteria, and any other information that would assist potential design-build firms in submitting proposals for the project. The RFQ must be publicly advertised. Section 44.03 1 (g) requires notice of the time by when and place where the responses to a RFQ will be received to be published in the county in which the school district's central administrative office is located, once a week for at least two weeks before the deadline for receiving responses to the RFQ.

The two-phase process for evaluating and selecting a design-build firm is as follows:

1. Phase One - The school district is required to solicit and evaluate information from each of the offerors regarding the following,

• the offeror's experience;
• the offeror's technical competence;
• the offeror's capability to perform;
• the past performance of the offeror's team and members of the team;
• and other appropriate factors submitted by the team or firm in response to the RFQ.

Each offeror must certify to the school district that each engineer or architect that is a member of its team was selected based on demonstrated competence and qualifications. The school district is not permitted to solicit cost-related or price-related information for evaluation purposes in the initial responses to the RFQ.

After the school district has evaluated the initial information submitted in response to the RFQ, the school district shall qualify a maximum of five potential offerors to submit additional information regarding technical proposals, implementation, and costing methodologies in response to a formal Request For Proposals ("RFP") based upon a design criteria package prepared by the school district. The "design criteria package" is a set of documents that provides sufficient information to permit a design-build firm to prepare a response to a school district's RFP and identify the criteria the school district considers necessary to describe the project and may include, as appropriate, the following information:

• the legal description of the site;

• survey information concerning the site;
• interior space requirements;
• special material requirements;
• material quality standards;
• conceptual criteria for the project;
• special equipment requirements;
• cost or budget estimates;
• time schedules;
• quality assurance and quality control requirements;
• site development requirements;
• applicable codes and ordinances;
• provisions for utilities;
• parking requirements; and

• any other applicable requirements.
  
  

2. Phase Two: After the school district has issued an UP to the qualified potential
   offerors identified in Phase One, the school district is required to evaluate the
   proposals submitted by such offerors on the basis of demonstrated competence
   and qualifications, taking into consideration the following factors:
   

• the safety and long-term durability of the project;
• the feasibility of implementing the project as proposed;
• the ability of the offeror to meet schedules;
• the costing methodology of the offeror; or
• any other appropriate factors set forth in the RFP.
  

A school district may not require offerors to submit detailed engineering or architectural
designs as a part of their proposal. The school district is required to select the design-build firm

that submits the proposal offering the best value for the school district.

After the school district has selected the successful design-build firm pursuant to the two phase process outlined above, then the engineers or architects of that design-build firm will complete the design for the school project, submitting all of the design elements to the school district's engineer or architect (if one has been designated) for review and determination of scope compliance before or concurrent with construction. S.B. 583 is very clear that the design-build firm must utilize an engineer and/or an architect, to the extent applicable or necessary, to ensure compliance with the engineering design requirements and all other applicable requirements of the statutes governing the practice of engineering (Article 3271 a, VJ C. S.) and architecture (Article 249a, V.T.C.S.) in Texas.

The school district may not allow the design-build firm to perform inspection and testing services in connection with the construction being performed under the design-build contract Instead, the school district must provide or contract for, independently of the design-build firm.

the inspection services, the testing of construction materials engineering, and the verification of testing services necessary for acceptance of the facility by the school district. These inspection and testing services are required to be obtained in accordance with the provisions of the Professional Services Procurement Act, set forth in Section 2254.004 of the Texas Government Code.

The design-build firm will be required to furnish payment and performance bonds for the project, consistent with the requirements of Chapter 2253 of the Texas Government Code. However, Section 44.036(j) of the Education Code clearly states that a payment or performance bond is not required for, and may not provide coverage for, the portion of a design-build contract that includes design services only. This provision does not affect the school district's ability to seek recovery under the contract from the design-build firm for errors, omissions, or defects in the design services.

Finally, at the conclusion of construction of the project, the design-build firm is required to supply a signed and sealed set of construction documents for the project to the school district. This set of construction documents will serve as the "record set of construction documents" for the school district, setting forth the final design of the project.

Section 2 of S.B. 583 adds a new Section 44.041 to the Education Code that adds a contracting method that was not introduced by S.B. 1. This is the concept of a "job order" contract. Contracts that qualify for award under this procurement method are those: ( 1) for the minor repair, rehabilitation or alteration of a facility; (2) the work called for by the contract must be of a recurring nature, but delivery times and quantities are indefinite; and (3) the orders are awarded substantially on the basis of predescribed and prepriced tasks (e.g., unit prices), Examples of the type of work that would qualify for job order procurement would be ceiling tile replacement, door hanging, side walk construction and repainting.

New Section 44.04 1 (b) requires school districts to advertise for, receive and publicly open competitive sealed proposals for job order contracts based on time and material rates for the various types of work. The rates agreed to under a job order contract must be in effect for not less than six months nor longer than two years.

The RFP must be advertised in the same manner as competitive sealed proposals for construction services. Under the RFP, the school district may require offerors to submit information beyond just rates, including experience, past performance, proposed personnel and methodology,

Tills new law authorizes tile school district to award job order contracts to one or more of the offerors. The school district is not required to award a contract to whomever submits the lowest rates. Instead, the school district may award on the basis of a combination of price and other factors including:

• experience,
• past performance,
• proposed personnel,
• methodology,
• safety record, and
• other appropriate factors.

Under Section 44.035(b), which is applicable to competitive sealed proposals generally, the school district may discuss proposals with offerors after proposals have been opened to allow for clarification and changes. In doing so, the school district must take precautions to ensure that information from competing proposals is not disclosed to other offerors.

Under a job order contract, specific work projects are authorized by the execution of an order by the school district and the contractor. Section 44.04 1 (e) states the order may be either a fixed price, lump sum order or a unit price order based on estimated quantities. If the amount or estimated amount of the job order is in excess of $25,000, then the contractor must post a payment bond on the job order. If the job order is $100,000 or more, a performance bond is also required. Note, however, that the bonds are provided on each specific Job order and not on the overall job order contract. This may be helpful to smaller contractors with limited bonding capacities. Given the nature of job order work, it is possible that many job orders may not be of a size that would require performance bonds.

In sharp contrast to the new provisions applicable to competitive bidding for school district construction contracts, S.B. 583 basically requires that construction contracts be awarded by the traditional competitive bidding process unless they are awarded pursuant to one of the five methods provided in Sections 51.779 - 51.784.

In fact, new Section 5 1.788(a) states that unless a contract is awarded under one of the five methods authorized, it must be awarded on the basis of competitive bids with the award going to the lowest responsible bidder. This is somewhat different than the school district's authority to award the contract offering the "best value" based on a combination of price and other factors. If the board of an institution of higher education is going to award to a bidder other than the lowest bidder, any bidder making a lower bid must be notified of that recommendation and given an opportunity before the award to present evidence to the board or its designated representative as to the responsibility of that bidder. In essence, the traditional method of competitive bidding is preserved for institutions of higher education by S.B. 583. Of course, an institution of higher education may opt to use one of the five authorized alternative contracting methods.

Section 3 of S.B. 583 adds a new Section 5 1.783 to the Education Code that sets forth provisions governing an institution of higher education's selection of contractors through competitive sealed proposals. The provisions of Section 5 1.783 mirror exactly the competitive sealed proposal procedures established for school districts (See discussion in II.B.) with one minor difference. That difference relates to the public notice requirements of Section 5 1.783(e), which simply states that the institution's board shall publish notice of the RFP in a manner prescribed by the board.

S,B. 583 added Section 5 1.781 to the Texas Education Code, expressly authorizing institutions of higher education to use the construction manager-agent contract method for construction, rehabilitation, alteration, or repair of a facility. The procedures applicable to construction manager-agent contracts for institutions of higher education are the same as those set forth in Section 43.037 applicable to school districts. The only exception is that the public advertisement requirements applicable to school districts are not applicable to institutions of h1uller education. S. B. 583 does not specify any public notice requirements with respect to public advertisement of an RFQ or RFP for construction manager-agent services.

S. B. 583 added Section 51.782 to the Texas Education Code, expressly authorizing institutions of higher education to use the construction manager-at-risk contract method for construction, rehabilitation, alteration, or repair of a facility. The procedural requirements for institutions of higher education, when contracting for construction manager-at-risk services, are identical to those requirements imposed upon school districts in Section 43.038. The only exception to this requirement is the public advertising requirements imposed by Section 44.03 1 (g) upon school districts. S.B. 583 does not contain any specific requirements concerning public advertising in connection with the solicitation of construction manager-at-risk services by an institution of higher education other than the RFP shall be published in a manner prescribed by the board of that institution.

Prior to the passage of S.B. 583, institutions of higher education in Texas (See Section 61.003) in Appendix 3 for the definition of "institutions of higher education") were required to use competitive bidding for the award of all construction contracts. The 1997 Texas Legislature dramatically changed the way institutions of higher education contract for construction services by eliminating the requirement for competitive bidding by repealing Section 5 1.907 of the Education Code. (See Appendix 4 for the text of repealed Section 5 1.907) S.B. 583 grants institutions of higher education essentially the same flexibility in contracting for construction services that is now given to school districts in Texas. One of the contracting methods authorized by the new Subchapter S to Chapter 51 of the Education Code is the design-build contract.

Section 51.780 was added to the Education Code by S.B. 583. This provision authorizes institutions of higher education to utilize design-build contracts for facilities in exactly the same manner as school districts, as set forth in Section 44.036 of the Education Code. (See discussion in 11. E ). The only procedural difference between school districts and institutions of higher education is that the public advertisement requirements applicable to school districts are not imposed upon institutions of higher education. Section 5 1.780(e) allows the board of an institution of higher education or its representative to publish the request for qualifications in a manner prescribed by the board.

Section 5 1.784 of the Education Code, added by Section 3 of S. B. 583, authorizes institutions of higher education to award job order contracts. The provisions for this contracting method are identical to job order contracting by school districts. (See discussion in II. F.)

1. Contractor Competitive Bidding

2. Contractor Competitive Sealed Proposals

3. Construction Manager-Agent

4. Construction Manager-At-Risk

5. Design-Build

6. Job Order Contracts For Facilities Repair

• SCHOOL DISTRICT’S
  CONSTRUCTION CONTRACTING REQUIREMENTS
  CONTRACTOR COMPETITIVE BIDDING

1. Advertising/Public Notice Requirements - Once per week for two weeks prior to bid or proposal submission deadline; in county where District's central administrative office located.
2. Solicitation/RFP Information Requirements - District to utilize A/E for design and preparation of construction documents for the project.
3. Owner A/E Services Required - A/E required to prepare the design and construction documents for the project.
4. Contract Award Criteria - At the bid amount to the bidder offering the best value to the District according to the selection criteria established by the District.
5. Contract Pricing - Lump sum fixed-price.
6. Inspection And Testing - District to independently obtain inspection and testing services using two step procurement process for selection of A/E services.
7. Bonding Requirements - Payment bond for contract in excess of $25,000, performance bond (in addition to payment bond) for contract in excess of $ 100,000.
8. Subcontracting Requirements - None.
9. Contractor Self-Performance Limitations - None.
10. Bid/Proposal Disclosure Requirements Or Restrictions - Public bid opening and bids read aloud.
11. Term Of Contract Limitations - None specified.
12. Prequalification Of Bidders/Offerors - Nothing specified.

1. Advertising/Public Notice Requirements - Once per week for two weeks prior to bid or proposal submission deadline; in county where District's central administrative office located.
2. Solicitation/RFCSP Information Requirements - RFCSP to include construction documents prepared by independent A/E, selection criteria, estimated budget, project scope, schedule, and other information necessary for contractors to respond to RFCSP.
3. Owner A/E Services Required - A/E required to prepare the construction documents for the project.
4. Contract Award Criteria - District to evaluate and rank each proposal based upon published selection criteria which may include pricing, experience, past performance, safety record, proposed personnel and methodology, and other appropriate factors demonstrating capabilities of offeror.
5. Contract Pricing - No limitations.
6. Inspection And Testing - District to independently obtain inspection and testing services using two step procurement process for selection of A/E services.
7. Bonding Requirements - Payment bond for contract in excess of $25,000 performance bond (in addition to payment bond) for contract in excess of $100,000.
8. Subcontracting Requirements - None required.
9. Contractor Self-Performance Limitations - None.
10. Bid/Proposal Disclosure Requirements Or Restrictions - Proposals publicly opened and names of offerors and monetary proposals, if any, read aloud. Information from competing proposals may not be disclosed to other offerors.
11. Term Of Contract Limitations - None specified.
12. Prequalification Of Bidders/Offerors - Prequalification of offerors permitted; prequallfication decision not a conclusive determination regarding ultimate rejection or acceptance of subsequently submitted proposal.

1. Advertising/Public Notice Requirements - Once per week for two weeks prior to bid or proposal submission deadline; in county where District's central administrative office located.
2. Solicitation/RFP Information Requirements - Description of the types and classifications of the work.
3. Owner AIE Services Required - None specified.
4. Contract Award Criteria - District may award contracts to one or more contractors based upon pricing, experiences, past performance, proposed personnel and methodology, safety record, and other appropriate factors.
5. Contract Pricing - Fixed price or unit price time and material rates for various types and classifications of work.
6. Inspection And Testing - Nothing specified.
7. Bonding Requirements - Bonds are provided on individual job orders, not on overall job order contract job order in excess of $ 100,000.
8. Subcontracting Requirements - None required.
9. Contractor Self-Performance Limitations - None.
10. Bid/Proposal Disclosure Requirements Or Restrictions - Proposals publicly opened, however, information from competing proposals not to be disclosed to other offerors.
11. Term Of Contract Limitations - A minimum of six months, but no greater than two years.
12. Prequalification Of Bidders/Offerors - Nothing specified.