John Osborn is a partner in the New York City and Westchester County law firm of John E. Osborn PC, which represents school districts, universities, hotels, and other real estate owners. His e-mail address is josborn@osbornlaw.com.

CMs Help N.Y. Schools Avoid Wick’s Law Issues

School districts in New York are turning to construction managers to help coordinate complicated multi-prime contractor projects.

by John E. Osborn

Public school construction in New York is fraught with impediments.

One of the most significant is the existence of reform-resistant bidding laws, in particular the Wick’s law requiring projects to have four separate prime contractors to execute the major trades. Another is the inexperienced nature of many decision-makers who guide the capital planning process for school districts.

The bidding laws are a constant source of industry debate, but there has been little movement toward change. And the infrequent capital project efforts of New York’s typically small school districts make it unlikely that the decision-makers – most of whom are local residents serving on school boards – will ever be savvy about construction.

But school districts in New York have an option that can serve as an antidote to typical construction woes – introducing a skilled construction manager to manage the process.

While the public bidding laws bar school districts from hiring a general contractor to oversee all of the separate prime contractors required by the Wick’s law, school districts can hire a construction manager as a consultant to oversee the construction process as the owner’s agent. Typically, the school district solicits proposals, conducts interviews, and hires the construction manager under a negotiated contract.

While a construction manager can add professional oversight expertise to an owner’s capital projects team, the school district should make sure it spells out the consultant’s responsibilities in the contract.

Among the tasks to assign to the construction manager role are:

• having a daily field presence onsite

• closely observing the means and methods utilized by the low-bid trade contractors

• examining initial project cost estimates

• approving requisitions and change orders in conjunction with the architect

• managing the schedule, chairing weekly job meetings, and authoring job meeting minutes

• monitoring compliance with site safety requirements

• and generally acting as the “eyes and ears” of the school district.

In many cases, the method has worked. Various construction managers have developed an intricate familiarity with school district bidding requirements and the paperwork required by the New York State Department of Education, while bringing experience and expertise to the process that neither the architect nor in-house school representatives could offer.

In our recent experience, two prime examples of the construction manager’s strategic value stand out.

The first involves the bankruptcy of the general construction prime contractor on a Westchester County project. After a great deal of effort to avoid defaulting, the general construction contractor was unable to pay its general liability insurance and therefore could no longer work on the project, which was in midstream.

Once that occurred, the surety company for the contractor’s performance and payment bond began its traditionally slow-moving investigation into the cost to complete the project. We stepped in to convince the bonding company to allow a construction manager to submit a lump-sum bid and compete with other general contractor bidders. The construction manager was able to provide the lowest bid.

Rather than tangling with the bonding company over cost overruns, the school district was able to finish the project on an acceptable budget and schedule, without litigation.

The second example was a Long Island school project where significant delays had entitled the low-bid contractors to end their contracts and void their lump-sum prices.

We enlisted a construction manager that knew the trade contractors, was credible to the local construction industry, and was well versed in cost estimating. It was able to convince the contractors to come back to the project with reasonable contract adjustments. Although initial default issues had entered litigation, the construction manager helped bring the project to successful completion.