New Law Greenlights Design-Build Contracts for NJ Local Governments

New Law Greenlights Design-Build Contracts for NJ Local Governments

New Jersey Gov. Phil Murphy recently signed legislation that establishes procedures for school districts and local governments to award design-build contracts

New Jersey Gov. Phil Murphy recently signed legislation that establishes procedures for school districts and local governments to award design-build contracts, under which a single contractor is responsible for all the design and construction work required to complete the project.

“I am grateful to my legislative partners for advancing this bill to bring greater efficiency and effectiveness to the State’s procurement processes. Design-build provides State and local contracting units the ability to have an open and transparent dialogue with their contractors and greater control of projects from their inception point through completion,” Gov. Murphy said in a signing statement. “Importantly, the use of design-build will allow contracting units to select the bidder whose bid will be most advantageous to the contracting unit based on price and other factors integral to the design-build process.”

Design-Build Contracts

In the design-build method of project delivery, one entity works under a single contract with the contracting unit to provide both design and construction services. This system allows the contracting unit to deal with a single source throughout the duration of the job, rather than coordinating between numerous entities.

State contracting typically utilizes a design-bid-build approach, under which design and construction are performed by separate entities under separate contracts. While current law does not expressly prohibit the use of design-build by State and local contracting units, the general statutory scheme for construction contracting discourages its use by calling for separate plans, specifications, and bids for each aspect of a construction project. Moreover, New Jersey bidding laws generally mandate that construction contracts above a specified amount be awarded to the lowest responsible bidder after public advertising for bids and bidding. Design-build projects are rarely, if ever, structured to award the project to the lowest bidder because cost is only one factor in the design-build approach, which places primary emphasis on design and quality.

In his statement, Gov. Murphy highlighted that the New Jersey Schools Development Authority (SDA) has used the design-build delivery methodology in connection with its school construction projects for more than a decade. Many of its procedures were used to craft the new law. Nonetheless, the Governor acknowledged that changes may be needed as the use of design-build contracts is expanded to all contracting units.

“As with any novel idea, we understand that as contracting units implement the design-build process, further changes to the framework established in the bill may be warranted based on our collective experiences,” Gov. Murphy added. “This bill represents a critical first step in rethinking the traditional design-bid-build model used by contracting units to achieve greater efficiencies in completing construction and renovation projects.”

Assembly Bill 1285

Assembly Bill 1285, known as the “Design-Build Construction Services Procurement Act,” establishes procedures for State and local contracting units to award design-build contracts. Under the new law, contracting units may enter into design-build contracts if they determine in their discretion that the design-build approach meets their needs better than the traditional design-bid-build approach.

When proceeding with a design-build contract, the contracting unit must either appoint a licensed and prequalified design professional, or designate an employee of the contracting unit licensed in architectural, engineering, or surveying services, to provide technical advice, construction review services, and professional expertise on behalf of the contracting unit. The contracting unit must also develop, with the assistance of the design professional or designated employee, performance criteria and a scope of work statement that defines the project and provides prospective design-builders with sufficient information regarding the contracting unit’s requirements. The scope of work statement must include: evaluation factor criteria and preliminary design documents, general budget parameters, and general schedule or delivery requirements to enable the design-builders to submit proposals.

Local contracting units must then establish evaluation factors for proposals, which must include: specialized experience and technical competence, training certification of professional and field workforce, principal location of the company, capability to perform, safety modification rating, past performance of the individual members of the design-builder’s team in their respective capacities, including the architect-engineer and construction members of the team, and other appropriate technical and qualification factors.

After soliciting proposals from design-builders, the contracting unit must utilize a technical review committee to review them. Based on the proposal, the technical review committee must select the most highly qualified design-builders and request those design-builders to submit a second proposal and sealed bid, which is then evaluated by the technical review committee. The contracting unit separately evaluates the submissions and awards the contract in accordance with the law’s provisions. Assembly Bill 1285 also outlines the procedures for awarding of a contract. Among other requirements, all design-build construction projects must comply with the “New Jersey Prevailing Wage Act” and are encouraged to adhere to the Leadership in Energy and Environmental Design Green Building Rating System.

The new law also requires that certain State contracting units adopt rules and regulations to govern the award of design-build contracts by those contracting units. The Office of the Secretary of Higher Education must adopt rules and regulations to govern the award of design-build contracts by state colleges and county colleges. Additionally, the Department of Community Affairs must adopt rules and regulations to govern the award of design-build contracts by certain local contracting units.  The law also requires the Department of Education to adopt rules and regulations to govern the award of design-build contracts by school districts.

For more information about New Jersey’s new design-build contract law or the legal issues involved, we encourage you to contact a member of Scarinci Hollenbeck’s Government Law Group at 201-896-4100.

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