You Passed Your Bond Now What? a Part 2: Conflicts of Interest, Procuring Key Team Members, and Citizens Bond Oversight Committees
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1 You Passed Your Bond Now What? a Part 2: Conflicts of Interest, Procuring Key Team Members, and Citizens Bond Oversight Committees January 18, 2017 Presented By: William B. Tunick Lauren M. Charneski SAN FRANCISCO LONG BEACH SAN DIEGO NOVATO CHICO SACRAMENTO SAN LUIS OBISPO This training is provided for educational, compliance and loss-prevention purposes only, and absent the express prior agreement of DWK, does not create or establish an attorney-client relationship. The training is not itself intended to convey or constitute legal advice for particular 1 issues or circumstances. Contact a DWK attorney for answers to specific questions. Overview Avoid Conflicts of Interests Foundational Ethics Laws Conflicts and Consultants after Davis Best Practices for Avoiding Conflicts Procurement in Depth Best Practices for Procuring District s Key Team Members Lease-Leaseback Updates Citizens Bond Oversight Committees Managing Your Established Committee 2 1
2 Conflicts Of Interest Legal Updates and Best Practices for Avoiding Conflicts 3 Avoiding Conflicts of Interest Foundational Ethics Laws Conflicts and Consultants after Davis Best Practices for Avoiding Conflicts 4 2
3 Why Do We Care It s the Law! Integrity, accountability, transparency Public relations (appearance of impropriety) Impair ability to contract with vendors/contractors/consultants 5 Why Do We Care 6 3
4 Foundational Ethics Laws Bribery Political Reform Act (PRA) (Govt. Code, et seq.) Government Code Section 1090 Prohibitions on incompatible offices and activities Common law prohibition on conflicts of interest 7 PRA Requirements Around Gifts A gift is generally anything a public official receives without paying/working for the item/benefit. Gifts to a public official are legal if: Reported by the public official if $50 or aggregating $50 or more from a single source in a calendar year. (Form 700.) Do not exceed more than $470 in a calendar year from a single source. Gifts may also create a conflict of interest. 8 4
5 PRA - Conflicts of Interest No public official may make, participate in making or in any way use or attempt to use his/her official position to influence a governmental decision in which he/she knows or has reason to know he/she has a disqualifying financial interest. A financial interest can include: Source of income Source of gifts Real property interest Business interests/investment Personal financial effect Can require recusal from the decision. 9 Government Code Section 1090 Prohibition: (1) A public official (2) May not participate in the making of a contract (3) In which the public official has a financial interest Recusal not effective for board member with financial interest. Can result in a void contract. 10 5
6 Davis Ruling On Section 1090 When is a private consultant/contractor a public official? Corporation could be a consultant subject to Section Allegations that the contractor served as a professional consultant with a hand in designing and developing the plans and specifications for the project were sufficient to state that contractor was: an employee for purposes of Section 1090; and, participated in making the contract. 11 FPPC Advice Following Davis Chadwick Advice Letter (2015): Consultant who prepared master plan for golf course could not perform build phase. Limited to those with capability of exerting influence over decision. Chadwick Advice Letter (2016): Consultant who prepare traffic master plan, could not contract for subsequent as-needed consulting work. Green Advice Letter (2016): Subconsultant who provided technical expertise was not prohibited from bidding on subsequent project work. 12 6
7 Best Practices To Avoid Potential Conflicts Educate employees (and consultants). Set expectations for all consultants regarding gifts. Refuse gifts of any kind during procurement process. Be careful about contracting with any individual/entity with any relationship with a District official. Think through potential Section 1090 limitations for consultants performing planning work. Consultants should not be involved in RFP process if seeking proposed work. 13 Procurement Best Practices Architects, Program Managers, Construction Managers 14 7
8 Procuring Your Team Who you select is a critical factor for success Architect Program Management (PM) Professional Services Construction Management (CM) Professional Services selection must be based on demonstrated competence and professional qualifications necessary for the satisfactory performance of the services required (Govt. Code 4525 et seq.) Competitive selection also required for Architects and Construction Program Management (Ed. Code, ) 15 Procuring Your Team Competitive, qualifications based selection for Architects, CMs, and PMs (Ed. Code + Govt. Code) How do you accomplish that? Request for Qualifications (RFQ), Request for Proposals (RFP) Architects and CMs: RFQ for pool RFP per project PMs: RFQ, or RFQ/P (no pool) 16 8
9 Procuring Your Team: Best Practices RFQ/RFP process RFQ, RFP, RFQ/P? Determine if you want a pool Identify your selection criteria Identify selection committee members Solicit statements of qualifications Advertise List specific selection criteria Include proposed contract Rank responses Interview finalists Make your selection(s) 17 Lease-Leaseback (LLB) Understanding Updates and Making the Most of LLB 18 9
10 LLB: A Refresher District leases property to Builder Site Lease Site Lease (lease unimproved property) Builder constructs property improvements Builder leases back the property improvements to the District Facilities Lease 19 District Facilities Lease (leaseback property improvements) Builder LLB: Legal Developments Davis v. Fresno USD (June 1, 2015) McGee v. Balfour Beatty Construction, LLC (May 4, 2016) Lessons from Davis and McGee? Consultants providing pre-construction services are subject to conflict of interest statutes Disagreement about LLB financing component and impact Timing of lease payments District occupancy 20 10
11 LLB: New Legislation AB 2316 addresses some Davis concerns: Requires advertising Requires competitive Best Value selection Allows for pre-construction services to be included in contract, mitigating conflict of interest concerns SB 693 clarifies Skilled and Trained Workforce requirements Reboots and reduces prior apprenticeship program requirements Count by journeypersons or hours worked Allows Builder to cure violations Exempts contractors that agree to be bound by certain Project Labor Agreements 21 LLB: New Builder Procurement Process Builder and MEP Prequalification PCC , annually or quarterly 1+ month before opening proposals Prepare Best Value procedures and guidelines. Board adopts Best Value procedures and guidelines. 21+ calendar days before opening proposals Prepare RFP. 17+ calendar days before opening proposals Publish notice of RFP in newspaper and trade paper. 10 business days before opening proposals Deadline for proposers and MEP to submit prequal materials. 10+ calendar days before proposal deadline Publish final RFP notice. 5 business days before opening proposals Prequal deadlines for proposers and MEP. District lists prequalified Builders and MEP subs calendar days before proposal deadline Resolve appeals of prequal ratings. Deadline for receipt of Proposals. ~1 month before award District opens sealed proposals, evaluates per best value, negotiates contract. Day 0 District awards contract based on Best Value. ~1 week after award Execute Facilities Lease and Site Lease; collect insurance and bonds. optional file validation action 1+ month after award Builder competitively bids subs as necessary. Contract amended after DSA approves plans/specs. 11
12 LLB: New Project Timeline Builder and MEP Prequalification PCC , annually or quarterly District begins Project; retains Architect District enters into leases with Builder Builder Precon. Services (optional) Builder Design Input Architect Design Builder provides technical assistance to Architect DSA Approves Plans Construction Starts GMP Finalized (if lump sum not used) Owner makes tenant improvement payments Construction Construction completion Lease Payments Lease expires/ Builder transfers title to District LLB: Making the Most of It Smart Best Value Selection Carefully review Best Value evaluation and selection criteria Tailor categories for evaluation Used for one project? Used for multiple LLB projects? Consider Builder Preconstruction Involvement/Services Certain preconstruction services now authorized under Ed. Code mitigates potential for conflicts Builder input during design phase can help eliminate change orders 24 12
13 LLB: Making the Most of it (contin.) Maintaining Cost Control GMP: Fee for services provides transparency GMP: Lump sum does not provide same transparency Predetermined contingency for unforeseen site conditions Set margins for change orders Skilled and Trained Workforce Does District have existing PLA? If yes, does it meet LLB PLA requirements? If no, consider whether to use PLA (not required) If not using PLA, ensure documentation burden is on Builder 25 Citizens Bond Oversight Committees Managing Your Established Citizens Bond Oversight Committee (CBOC) 26 13
14 CBOCs A CBOC s purpose and scope of authority is limited: Overall purpose is to inform the public about expenditure of bond proceeds (Ed. Code, 15278, subd. (b).) Scope of authorized activity is limited to review of certain materials and site inspections (Ed. Code, 15278, subd. (b), subd. (c).) Remember: CBOCs do not determine how bond funds are spent CBOCs do not direct the Board 27 CBOCs: Management Best Practices How Will the Board Manage the CBOC? Board Policy Bylaws provided to CBOC Purpose and Duties Composition Officers Meetings Quorum Amendment 28 14
15 CBOCs: Management Best Practices Early CBOC Meeting: Presentation on the role of a CBOC by legal counsel and staff Review CBOC Bylaws Review District s sale of bonds Overview of District s bond program and progress to date Review reporting format Review CBOC members required legal compliance with: Brown Act Conflicts of Interest laws 29 Thank You! SAN FRANCISCO LONG BEACH SAN DIEGO NOVATO CHICO SACRAMENTO SAN LUIS OBISPO William B. Tunick wtunick@dwkesq.com 30 Lauren M. Charneski lcharneski@dwkesq.com YOU PASSED YOUR BOND NOW WHAT? Webinar Series January 25, Part 3: Lesser Used Delivery Methods, Project Labor Agreements February 1, Part 4: CEQA, Tales from the Field: Avoiding Construction Claims and Litigation Register at: /Events 15
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