Legal Q&A: Contracting and Competitive Bidding for Summer Road Maintenance

Now is the time of year for local governing bodies to begin implementation of the summer road maintenance program. Every municipality faces the issue each year, since RSA 231:3, I mandates "All Class V highways shall be constructed, reconstructed, and maintained by the city or town in which they are located... ." It is a very difficult program to administer, as there are many types of tasks to be performed the tasks are expensive and they often require the use of outside contractors. The governing body must master the engineering aspects of the issues, the law of municipal contracting, and the law of state and federal environmental permitting. In addition, they must understand that they are in competition with others to obtain a limited supply of material and labor for projects that must be performed within a limited time period.

Q. What is a "summer road maintenance program"?

A. It really has several goals. First is to maintain in good order the local road system as it presently exists. This includes activities such as "pot hole" repair, pavement patching and crack sealing, roadside ditch maintenance, shoulder maintenance, road grading, sign maintenance, traffic control device maintenance (including pavement markings), safety fence and guard rail installation and maintenance, management of the hazard tree program, street sweeping, and culvert flushing.

The second goal is to work toward system improvement and upgrade, and includes activities such as providing input regarding drainage, new roadways, water lines, and sewers. The selection criteria for improvement and upgrade include the current condition of the road, traffic count, funding, and the need for contiguous utility work, whether with subsurface sewer, water, or gas lines, or above ground lines for telecommunications or electrical service.

The program also maintains street records and plans; assigns 911 addresses; provides road, sewer and drainage information for surveyors, engineers, and homeowners; supervises environmental permitting relating to sewer, drainage and road projects with state and federal agencies; prepares bid documents involving road, sewer and drainage projects; and provides field construction inspection for road improvement projects as they are built.

Q. Why did you say that now is the time to begin implementing the summer program? We barely have the snow plows detached and stored.

A. Because most municipalities have a large part of this maintenance effort performed by private contractors who provide the equipment, materials and crews to undertake the larger excavation projects, installation of new pipes and drainage structures, and the paving and resurfacing projects. The contractors have only a limited time in which to perform the work before next winter, and they want to have firm contracts for their summer projects before hiring temporary workers, obtaining material commitments, and obtaining expensive trucks, excavators, cranes, graders, trenching and boring equipment, pavement grinders, and pavers.

Q. What do you mean a limited time?

A. Much of this work is very dependent upon the weather. The ground must be thawed, which means the season starts no earlier than April or May. Line striping and other pavement markings cannot be applied in the rain or when the road is wet. Paving cannot occur while it is raining, nor when the temperature drops below about 50 degrees, which means that the hot asphalt paving materials cannot even be made once the season ends around November 1. There is a limited supply of all of these materials. Once the basic supply is committed, any projects that are offered to the market late wait until the end of the season, and can obtain only whatever labor, materials and equipment services that remain when the bulk of the seasonal work is complete. The end of the season also means that the quality of all of these factors may be called into question, since crews are smaller, the conditions to apply material are tougher, and the necessary equipment may have broken down or need maintenance or parts.

Q. Can't we just call our local contractors, ask for a price, and select the person we think will do a good job?

A. Unlike the state government, which is required by RSA 228:4 and :4-a to use competitive bidding procedures to award most contracts of this type, municipalities are not required to use competitive bidding in their purchasing programs unless the town has voted to adopt the provisions of RSA 31:59-a through -d (creating the position of "Purchasing Agent" and requiring competitive bidding).

Another exception to the general rule is found in RSA 95:1, which prohibits any person holding a public office from providing goods, commodities or other personal property in any amount in excess of $200 to the political subdivision where he or she holds public office except by open competitive bidding. Violation of this statute is a misdemeanor and carries automatic removal from office by the court. This law often will affect the road agent position, whether elected or appointed, since all holders of this office must give their oath and bonds to the selectmen for the faithful performance of their duties. The local road agent often individually or in a related legal entity owns the equipment needed, has employed persons to perform the work, and has access to necessary local materials such as sand and gravel. If the municipality wishes to use these goods it must obtain them through competitive bidding.

Q. So, unless we are affected by these statutes, we can just call local persons, obtain a price, and have the work done?

A. Yes, but this type of purchase has additional factors involved that suggest using a more formal procedure. Here are some of the important questions to consider.

  1. Do you have experience with this vendor, and are you sure that the vendor has the necessary equipment and expertise to perform the work? This may not be a large issue when you are paving five spaces in front of the library, but can this same person repave five miles of residential streets?
  2. Specifications. Have you adequately defined the work that you wish to have performed? Especially with road work, even small changes in the specifications yield large differences in price.
  3. Contract protections. Have you required the vendor to provide a performance bond, or specified liquidated damages for failure to perform the work? Without these protections, you may be moved to the end of the season for no other reason than the vendor need not worry about penalties for working late in the season.
  4. Subcontractors. Have you required a payment bond, certificates of insurance and lien waivers from materialmen and subcontractors? That is, you want to be sure that when payment is made to your vendor, all of the others in the supply chain have been or will be immediately paid as well.
  5. Health and safety and other legal compliance. Even if your vendor is a true independent contractor, you want to be assured that the worksite is safe both during the day and when closed overnight and on weekends, all protective measures have been used, and that all laws prohibiting discrimination and other illegal conduct have been observed. Not only do you wish to prevent harm, you want to be sure that public funds are being used in compliance with all applicable laws and regulations.
  6. Price. The prices of the materials tend to go up or down significantly between the time the work is proposed and when it is completed. The longer the gap in time, the greater the risk of price problems. Thus, you may need to plan and allow for adjustments based upon the price of fuel and the price of asphalt materials. Without an adjustment clause and penalties for late work a vendor may have the incentive to just not perform the work at all, rather than lose all profits to fluctuations in material and fuel prices.

Q. You have me concerned. How do we go about getting more control over this process?

A. The best way is to recognize how the industry works in the limited time it has available each year to obtain contract commitments and perform the work. The larger municipalities in the state, as well as the state Department of Transportation, have well-defined bid processes and very detailed contract documents that speak to all of the areas identified above, as well as many others. Their documents are available on their websites and can be used as a model to create bid documents even in smaller locations. Since these small municipalities are in direct competition with larger organizations for access to the capacity the industry brings to each season, the use of consistent documents will likely bring in more vendors to the bidding process.

Thus:

  1. Start your contract process early enough to identify the areas where you want to work, and obtain good preliminary estimates of what services and material specifications are needed to either repair or upgrade the area. You may need to use either your own engineering staff or a consultant engineer to obtain this information.
  2. Assure that all of the required state and federal environmental permitting for the area is either complete, or nearly complete. This removes an important variable in the bidding process, and will also help to define exactly the services needed for the job.
  3. If you have multiple areas of work, make the work sites as close together as possible in both location and in time in order to reduce the cost to mobilize equipment and to transport materials each day. This will also assist in the related costs of work site safety, temporary traffic control, and the inconveniences of temporary travel closures.
  4. Use a competitive bidding process that includes clear specifications, industry standard contract provisions, and reasonable bonding and penalty requirements. You want the prospective bidders to understand that you are serious about performing the work, serious about quality, and serious about obtaining a reasonable price for the work.

Local officials in NHMA-member municipalities may contact NHMA Legal Services attorneys for more information on this and other topics of interest, Monday through Friday, from 8:30 a.m. to 4:30 p.m., by calling 800.852.3358, ext. 3408. School officials should contact the New Hampshire School Boards Association attorney at 800.272.0653.