Seminar on public construction law in Illinois for civil engineers.

1. “WORKING ON PUBLIC PROJECTS”
Prepared for
LEGAL ISSUES FOR ILLINOIS CIVIL ENGINEERS SEMINAR
HOSTED BY HALF MOON LLC
Presented and prepared for
educational purposes only by:
G. A. Finch, Esq.
Hoogendoorn & Talbot LLP
Chicago, Illinois
312-786-2250 (W)
312-513-7524 (C)
gafinch@hoogendoorntalbot.com
© 2007 by G. A. Finch
All rights reserved.

2. PUBLIC BIDDING
Four Types of Procurements
Concerning Engineering Contracts
Request for Qualifications (RFQS)
Request for Proposals (RFPS)
Small Procurements
Emergency Procurements

3. OTHER KINDS OF CONSTRUCTION
PROCUREMENTS NOT USUALLY INVOLVE
ENGINEERING FIRMS
– SOLE SOURCE
– COMPETITIVE SEALED BIDS

4. RFQ
• RFQ probably used the most
• Two statutes govern RFQs In Illinois

5. • State Government: Architectural,
Engineering and Land Surveying
Qualifications Based Selection Act (30
ILCS 535/1)

6. • Local Government: Local Government
Professional Services Selection Act (50
ILCS 510/0.01)
• Statutes have many similar provisions and
a few differences.

7. Notice
• State and local governments must publish
notice

8. Notice
• State issues at least a 14-day advance
notice published in a bulletin or advertised
in official state newspapers the services to
be procured and directs firms to send a
letter of interest and/or statement of
qualifications.

9. Notice
• Local Government allows firms to file
an annual statement of qualifications.
-- If there is no existing satisfactory
relationship with one or more firms, then
local government must mail notice to
firms whose names are on file or place an
ad in a newspaper:

10. a) requesting letter of interest;
b) requesting qualifications statement;
and, if applicable,
c) requesting performance data of the firms.

11. Evaluation Procedure
• State requires state agency to set up
selection committee which may have
public member.

12. Evaluation Procedure
• Local government statute does not have
evaluation committee requirement; local
governments typically have an internal
committee made up of procurement,
construction, user department, and legal
personnel to evaluate firms.

13. State and local government
evaluation criteria are the same:
• Ability of professional personnel
• Past record and experience
• Performance data on file
• Willingness to meet time requirements
• Location of firm
• Workload of firm
• Any other applicable qualification set out in
writing

14. Selection Procedure
Both State and local governments use
evaluations, discussions, and
presentations to select at least three
qualified firms and rank them in order to
provide services to a particular project.

15. Contract Negotiation
The State agency or local government
must then prepare “a written description
of the scope of the proposed services to be
used as a basis for negotiations and shall
negotiate a contract with the highest
qualified firm the government entity
determines to be fair and reasonable.”

16. Contract Negotiation
In making its decision on compensation to
the selected firm, the State agency or local
government must take into account:
• Estimated value
• Scope
• Complexity
• Professional nature of services to be
rendered

17. Contract Negotiation
If negotiations break down with preferred
firm, then government entity goes to the
next preferred firm to negotiate, and so
on.
If can’t negotiate a contract, then it must re-
evaluate the services requested
including, again,

18. Contract Negotiation
• estimated value,
• scope,
• complexity,
• and fee requirements,
• and then compile a top three list of
qualified firms and then begin
negotiations again.

19. RFP
A public agency will publish notice or send
solicitations to a list of firms asking for
proposals for a particular project
E.G., Will County Forest Preserve RFP for
Professional Engineering Services as a
model

20. RFP
This Project was the Messenger Marsh
Development in Homer Township.
Messenger Marsh is a recreational area.

21. RFP
The Project involved an expansion and
upgade of automobile and/or trailer
parking, shelters, limestone screening
trail, off leash dog area, latrines, walkways,
drinking fountains, signage, primitive
camp sites, wetland overlook, etc.

22. The RFP sets out
scope of services
• Design development
• Construction documentation preparation
and bidding
• Construction observation
• As-built drawings
and the RFP sets out

23. proposal submittals requirements :
• Statement of qualifications
• References
• Identification of project manager & staff
• insurance

24. • Presentation of costs (having not exceed
amounts)
• Hourly rates
• Cost for reimbursable items
• Statement of work and schedule

25. The Will County RFP’s stated
evaluation criteria are
• the perceived competence and expertise of
the firm’s proposed project manager and
team
• references

26. The Will County RFP’s stated
evaluation criteria are
• past record in performing similar work
• ability to work with forest preserve district
staff, and
• location of the firm

27. The criteria of past record in performing
similar work and ability to work with
governmental staff really are critical
drivers in the selection process.

28. Experience in similar work is an objective
criterion.
Ability to get along with staff is a
subjective standard – Does the staff like
and respect the project team ? -is the real
question

29. Negotiation
Based on “responsiveness of proposal,”
the Will County Forest Preserve District
selects one or more firms to negotiate an
acceptable agreement. The District can
request written clarification and additional
supporting materials.

30. The District can reject any, some, or all
proposals.

31. Note: qualifications are critical, of course;
as important are the pricing and creativity
of the firm responding to the proposal.

32. Price is not necessarily paramount as in a
sealed competitive bid model used in other
construction procurement.
Under an RFP process, experience and
track record often trump lower price in the
evaluation and selection process.

33. Note well:
Certain subjective, unspoken criteria such
as professional/personal relationships
and familiarity with the firm undoubtedly
can influence a selection outcome.

34. E.G., Another RFP Model
CHA has a two –step evaluation process in
its RFP selection:
First round of evaluations to establish
those firms within a “competitive range”

35. Those firms making the first cut then may
be required to provide additional
information, make presentations and
conduct negotiations.

36. CHA then selects respondent whose
proposal:
• conforms to solicitation
• is most advantageous to CHA
• has best value in cost, price and other
factors

37. SMALL CONTRACTS
Both the state and local governments
exempt from their competition
requirements, those engineering contracts
with estimated professional fees of less
than $25,000.

38. EMERGENCY CONRACTS
State and local governments also exempt
from competition requirements those
engineering contracts that are deemed
emergency contracts.

39. An emergency is when there is no time to
go through the normal procurement
process, like the Loop flood or Hurricane
Katrina or the initial occupation of Iraq.

40. The Illinois State statute sets out
criteria for “emergency services”:
--Determination that it is in best interest of
State to proceed with immediate selection
of a firm
--Or emergencies requiring immediate
services to protect public health and safety
such as, but not exclusively

41. • Earthquake,
• Tornado,
• Storm, or
• Natural or man-made disaster.

42. SOLE SOURCE PROCUREMENT
• Service or product is unique
• Only one available firm can provide it
• Mostly used in supply contracts
• Not ordinarily applicable to engineering
contracts

43. COMPETITVE SEALED BIDS
Most familiar procurement concept
Determined by lowest price from a
responsible bidder

44. A “responsible bidder” is one that has the
financial resources and basic skill sets to
complete the performance for a locked-in
price

45. Not used typically with professional
engineering services
An engineering firm that is part of general
contractor joint venture making a lump
sum bid would encounter this type of
procurement.

46. MBE/WBE/DBE
MINORITY OWNED BUSINESS
ENTERPRISE
Definition usually includes a business with
at least a 51% majority ownership by one
of the following racial and ethnic groups:
African-American, African, Hispanic,
Asian, Native American, Eskimos/Inuit

47. WOMAN OWNED BUSINESS
ENTERPRISE
Obviously defined by gender
Also requires at least 51% female ownership

48. DISADVANTAGED BUSINESS
ENTERPRISE
More often used by federal government
and usually defined by social and
economic disadvantage.

49. For example the U.S. Dept. of
Transportation
“presumes certain groups are
disadvantaged, including women, Black
Americans, Hispanic Americans, Native
Americans, Asian-Pacific
Americans, Subcontinent Asian-Pacific
Americans, or other minorities found to be
disadvantaged by the U.S. Small Business
Administration (SBA). Persons who are not
members of one of the above groups and own
and control their business may also be eligible if
they establish their "social" and "economic"
disadvantage.”

50. CONSTITUTIONALITY OF SET
ASIDE PROGRAMS
The 1989 Supreme Court Case of City of
Richmond v. J. A. Croson Co. set out the
constitutional standards for affirmative action in
public construction contracts.
Court invalidated a City of Richmond ordinance
that required prime contractors who are
awarded city contracts to subcontract at least
30% of the contract $ amount to MBE’s.

51. Key features of Chicago Ordinance:
Minorities defined as African-American
and Hispanic racial/ethnic groups, and
individual members of Asian-
American, Arab-American, and Native
American groups found to be socially
disadvantaged by having suffered racial or
ethnic prejudice or cultural bias.

52. MBEs and WBEs must respectively be at
least 51% minority or female owned and
such owners must be economically
disadvantaged.

53. Economically disadvantaged” means
having a net worth of less than $750,000.
The “aspirational goals” are 24% of the
annual dollar value of all construction
contracts to MBEs and 4% to WBEs.

54. The programs ordinarily have a waiver
provision when the contractor cannot find
sufficient MBEs and WBEs to meet its
goals.

55. Penalties
The Penalities for non-compliance with
MBE/WBE commitments range from
suspension to termination to liquidated
damages to disqualification of the
bidder/proposer from future awards.

56. MISCELLANEOUS
CONTRACT PROVISIONS
PUBLIC VS. PRIVATE CONTRACT
PROVISIONS

57. TERMINATION FOR
CONVENIENCE
Frequently found in public contracts and
allows public contracts to be terminated at
any time for no reason at all by a
governmental agency.

58. E.G., The Cook County Professional
Architectural/Engineering Contract allows the
County to
• terminate for convenience the entire agreement
• terminate a portion of the services or

59. • reduce the scope of the Project
• reduce the firm’s services, or
• reduce both the firm’s services and the scope of
the Project.

60. The Cook County provisions do
compensate the engineering firm for work
already performed and for authorized
reimbursable expenses already incurred.

61. The Chicago Housing Authority provides a
more liberal compensation clause and will
pay the Engineering firm for services
completed and the cost of settling or
otherwise liquidating any claims arising
out of the termination of any subcontracts
or orders for materials.

62. CONFLICT OF INTERESTS
Government contracts ordinarily contain a
conflict of interests provision.

63. The Cook County conflicts provision
requires representations by the
Engineering Firm that it has no or will not
acquire any direct or indirect interest that
would affect the performance or its
services or employ anyone having an
interest.

64. The CHA provision conflict of interests
provison is dictated by federal regulations
(24 CFR 85.36(b)) and is more stringent:
No employee, officer or agent of the CHA shall
participate in the selection of a contractor, or in
the award or administration of a contract
supported by Federal funds if a conflict of
interest, real or apparent, would be involved.

65. The conflict arises when the employee, officer or
agent, any member of his family, his or her
partner, or any organization that is about to
employ the employee, officer, agent or member
of his family, has a financial interest in the
selected firm.

66. Also the CHA conflict of interests
provision prohibits any CHA employee or
officers from soliciting or accepting
gratuities, favors or anything of monetary
value from the Engineering Firm or its
sub-consultants.

67. AVAILABILITY OF FUNDING/NON-
APPROPRIATION
Some government contracts expressly
provide that commencement or
continuation of a contract is contingent
upon the funding for the project being
appropriated or granted.

68. PREVAILING WAGES
Because of federal funding, the CHA
requires the Engineering firm not to pay
less than the prevailing wages in the
locality, as determined by HUD, to all
architects, technical engineers, draftsmen,
and technicians.

69. CERTIFICATE OF
QUALIFICATION
Cook County requires the Engineering
Firm to certify that it, as a person or
business entity, has not been convicted of
bribery or attempting to bribe a
government official or made an admission
of guilt of such conduct which is a matter
of record.

70. PROMPT PAYMENT
ACTS
TWO ACTS
State Prompt Payment Act (30 ILCS 540/)
Local Government Prompt Payment Act (50
ILCS 505/)

71. STATE ACT
• Approved bills must be paid within 60
days of receipt of proper invoice
• Interest penalty of 1% per month and any
fraction of a month until paid

72. • For construction-related invoices, a Notice
of defective invoice must be given no later
than 30 days after first submittal.

73. Notice must include
• nature of defect and
• additional information needed to remedy
defect

74. Importantly:
“If one or more items on a construction
related invoice are disapproved, but not
the entire bill or invoice, the portion that is
not disapproved shall be paid.”

75. Note well:
A State official may not request a
contractor to waive its rights under the
Prompt Payment Act to recover interest
penalty for late payments as a condition to
enter into a State contract.

76. Subcontractors
When an agency submits a voucher for
payment to a contractor, the agency shall
promptly make available electronically
the voucher information to subcontractors
and material suppliers.

77. When a contractor receives a payment, the
contractor is required to pay each sub or
supplier in proportion to work completed
by each, plus interest received under the
Act, less any retention

78. Where contractor received reduced
payment, then contractor must disburse
funds on a pro rata basis amongst the
contractor, subcontractors and suppliers.

79. Where State official is not releasing full
payment because contractor has rejected
work of certain subs and suppliers,
then those rejected subs and suppliers
shall not be paid for work rejected,
and all other compliant subs and suppliers
shall be paid in full with interest under the
Act.

80. Where contractor delays payment to its
subs and suppliers by 15 days, then
contractor must pay interest in the amount
of 2% a month.

81. Subs have the same interest obligations to
their sub-subcontractors and suppliers.

82. Where contractor fails to pay his subs and
suppliers within 15 days of receipt of
payment, the subs and suppliers may file
written notice of failure with the State
official.

83. State Administrative Law Judge shall have
a hearing and if the Judge finds no
reasonable cause for failure to pay, then
State official must direct Contractor to pay
within 15 days.

84. If contractor does not pay, then contactor
shall be barred from State public
construction contracts for one year.

85. LOCAL GOVERNMENT ACT
Local official must approve or disapprove an
invoice within 30 days after receipt of the invoice
or after receipt of goods or services.
If one or more items on a constructed-related
invoice is disapproved, then the portion that is
not disapproved shall be paid.
Local official has 30 days after approval to pay
invoice.

86. If approved bill is not paid, then there is an
interest penalty of 1% of any amount approved
and unpaid that shall be added for each month
of delay.
Local official and contractor can agree to a
longer time period for calculating the
commencement of the penalty for late payment.
(50 ILCS 505/6)
The Local Government Act provision for
payment to subcontractors is like the State.

87. PUBLIC LIENS
Section 23 of the Mechanics Lien Act (770
ILCS 60/23) governs liens concerning
public projects.

88. ON WHAT
• Lien on money, bonds, or warrants due or
to become due the contractor

89. • CANNOT LIEN IMPROVEMENTS
OWNED BY GOVERNMENT

90. • Private liens attach to the improvement
themselves
• Important distinctions between Public &
Private Liens and different procedure

91. • Lien is for value of what lien claimant
furnished to project

92. • Lien attaches to that portion of the public
funds against which no voucher or other
evidence of indebtedness has been issued
and delivered to the contactor by or on
behalf of the entity

93. • If project funds have been fully paid to the
contractor or the appropriated funds have
lapsed, then there are no funds to attach
the lien.

94. BY WHOM AND AGAINST WHOM
Who can file a lien?
“Any person who shall furnish
material, apparatus, fixtures, machine
ry or labor to any contractor having a
contract for public improvement…”

95. Under the public lien section of the
Mechanics Lien Act, “Contractor” includes
any sub-contractor and does not include
general contractor.

96. Person filing lien could be an engineering
firm who is a sub-contractor, sub-sub-
contractor, sub-consultant, or sub-sub-
consultant.

97. Conversely, an engineering firm contractor
having a public contract, could have a lien
filed against it by a sub-contractor.

98. ON WHOM
Section 23 (b) of the Act allows a lien against local
governments:
o County
o Township
o School District
o City
o Municipality
o Municipal Corporations
LOCAL GOVERNMENT LIEN REQUIREMENTS

99. Notice
Subcontractor must provide written
notification to clerk or secretary of local
government before payment is made to the
Contractor having the public contract.

100. Notice must be sent to the local
government clerk or secretary by
certified/registered mail return receipt
requested with delivery limited to
addressee only or delivered to the clerk or
secretary

101. Copy of notice must be sent or delivered in
the same manner to Contractor having the
public contract

102. Law Suit
• A lawsuit called a Complaint for an accounting
must be brought within 90 days of notice of lien
• The clerk or secretary of the local government
must be served with a copy of the complaint.
• Failure to commence law suit within 90 days
results in NO LIEN

103. Delay by Lien Claimant
• Contractor does not have to wait to be paid
because of possible lien claim.
• Contractor can serve written demand upon
potential lien claimant and send a copy to
the public official.

104. • Potential lien claimant then has 30 days to
file written notice of lien claim and a
sworn statement.
• Failure to file lien within 30 days results in
forfeiture of the lien.
• The State lien section has a similar
provision.

105. STATE LIEN REQUIREMENTS
A lien is created by giving notice of the lien
claim to the director or official whose duty
it is to let the contract.

106. State has two further requirements:
• written notice must contain a sworn
statement of the claim
• statement of the claim must show with
particularity the several items and the
amount owed on each
--“particularity” is not defined

107. Lapsed Funds
• Where appropriations funding a state
construction project are about to lapse, a
lien claimant must initiate suit and deliver
a copy of the complaint at least 15 days
prior to time of lapse.

108. • Lapsed funds means the appropriated
money is zeroed in the particular project
account and the funds are no longer
available

109. Official’s Duty & Option
• Under both the local government and state
public lien provisions, the officials who are
notified of the lien must withhold from
the contractor funds in the amount of the
claim for a 90-day period and afterward
when a suit has been filed.

110. • Both the local government and State
provisions allow the official to pay the lien
claim money to the clerk of the court upon
the filing of the law suit.
• Amounts paid to the clerk of the court
become a credit on the balance owed to the
contractor

111. PUBLIC CONTRACTOR
MISCONDUCT STATUTE
Applies to businesses who perform or
seeks to perform public contracts in
Illinois
These are new provisions in the Illinois
Criminal Code pertaining to misconduct
by contractors.

112. “Public Contractor Misconduct”
includes:
• Intentionally or knowingly making,
using or causing to be made or used a
false record or statement to conceal,
avoid or decrease an obligation to pay
or transmit money or property

113. • Knowingly performs an act that he or she
knows he or she is forbidden to perform

114. • With intent to obtain a personal advantage
for himself or another, he performs an act
in excess of his contractual responsibility

115. • Solicits or knowingly accepts for the
performance of any act a fee or reward
that he or she knows is not authorized by
law

116. Note well:
A violation of this Section concerning
Public Contractor Misconduct constitutes
a Class 3 felony under Illinois law
-- carries a sentence of penitentiary
imprisonment of not less than two
years and not more than five
years