Executing and Awarding the Contract
Volume 5, Chapter 8
- 8.1 CONDITIONS PREREQUISITE TO CONTRACT EXECUTION AND AWARD
- 8.2 CONCURRENT APPROVAL OF AWARD BY FUNDING AGENCY
- 8.3 FUNDING OF RELATED CONSTRUCTION OR EQUIPMENT
- 8.4 NOTIFYING THE LOWEST RESPONSIBLE BIDDER
- 8.5 REQUIRED BIDDER SUBMITTALS
- 8.6 EXECUTING THE CONTRACT
- 8.7 AWARDING THE CONTRACT
- 8.8 EARLY START OF CONSTRUCTION
- 8.9 NOTICE TO PROCEED
- 8.10 RECORDING THE CONTRACT DOCUMENTS
After the apparent lowest responsible bidder for competitive and informal bids has been determined, and approval has been received to award the contract, the bidder is sent the Agreement and other contract documents to execute (sign and return). After the signed documents are returned, and a preaward conference determines that all required submittals are acceptable, the contract is executed by the University, thereby making it valid, and is awarded to the bidder (at this point referred to as the contractor). (See RD1.11, Recommendation for Award of Contract.)
8.1 CONDITIONS PREREQUISITE TO CONTRACT EXECUTION AND AWARD
University Facilities have been delegated authority by the President to execute and award construction contracts where such contracts are within appropriated funds, and provided that all of the following conditions have been met:
- The contractor has been chosen by competitive bidding, when required, and the contract will be awarded to the lowest responsible bidder submitting a responsive bid.
- The contract documents conform to the documents used in the bidding.
- Protests or disputes involving bidding or award of the contract are resolved (see 9.1).
- The Office of the General Counsel has approved the legal form of the contract documents.
- The commitment of funds, the scope of construction, and equipment to be acquired conform to the project scope and cost itemization in the current approved Project Planning Guide or conform to the project description in the case of minor capital improvement projects.
- Funds are available.
- Concurrence by a federal or other funding agency is attained in the contract award (see 8.2).
- Execution and award of the contract does not invalidate or jeopardize any pending or intended application for funding (primarily from federal sources) of related construction or equipment (see 8.3).
- No post-bid-opening, pre-award negotiations with the lowest responsible bidder have been conducted for the purpose of awarding a contract in an amount, scope, or time of completion different from that contained in the final bidding documents.
- State review of any required environmental document has been completed.
- All required contract documents have been received and determined to be acceptable.
8.2 CONCURRENT APPROVAL OF AWARD BY FUNDING AGENCY
8.2.1 State-Funded Projects
Capital projects that are funded with state revenue bonds require the submittal of the Bid Summary and other supporting documents to the Office of the President for review and processing to State Public Works Board (SPWB) for the approval of the award of the construction contract. Other supporting documentation includes (1) a cover letter describing the bid relative to the range of bids, deductive alternates to be accepted in order to maintain the project budget, and any other significant information; (2) a new Capital Improvement Budget (Base 1) based on the bid amount; (3) a construction drawdown schedule; and (4) an updated project schedule. Upon receiving approval by the SPWB to award the construction contract, the Office of the President will inform the Facility that they may award the construction contract and transfer the construction funds from the unallocated balances to the plant expenditure ledger (see 3.3.2).
8.2.2 Projects Under Department of Energy Contracts
Construction projects at the National Laboratories must comply with the management contracts between the Department of Energy and the University of California. Policies and procedures governing competitive bidding and other construction requirements at the National Laboratories are found in the Laboratory Procurement Policy and Standard Practices Manual. This is published and maintained by the Laboratory Administration Office within the Office of the President. (See Business and Finance Bulletin BUS 43 Part 2, Responsibility and Authority, paragraph I.A.7).
8.2.3 Federally or Non-State-Funded Projects
Some federal agencies and programs require that after receipt of bids, and upon University determination of its intent to award a contract, such intention be referred to the agency or program for approval before award.
When a construction contract is proposed to be executed for a federally or non-state-funded project (other than a contract that must be done in compliance with the management contracts between the Department of Energy and the University of California), a determination must be made from the terms of the grant or funding agreement whether prior approval of the intent to award is required and what information must be submitted to the funding agency. The following may be required:
- Affidavit of advertising
- Bid Summary
- Copy of low bid
- Copy of Bid Bond and power of attorney by surety
- Letter of recommendation for award
- Construction project budget
8.3 FUNDING OF RELATED CONSTRUCTION OR EQUIPMENT
Occasionally, funding for a portion of a project may be sought as a grant from federal or other sources on a matching basis where the condition to qualify for the matching portion may be that construction shall not have started prior to a specified date. The Notice to Proceed date should not be prior to the date specified in the matching fund Agreement.
8.4 NOTIFYING THE LOWEST RESPONSIBLE BIDDER
- Long Form, Instructions to Bidders, Paragraph 5.2 and Article 6.
After the Facility determines who the lowest responsible bidder is, and all conditions prerequisite to contract award have been met, the Facility completes and sends the Notice of Selection as the Apparent Lowest Responsible Bidder (see RD1.9) and other University forms by messenger or overnight delivery. The notice informs the apparent lowest responsible bidder that the following items must be submitted within 10 days after receipt of the notice:
- Signed Agreement in triplicate. (Date the Agreement 10 days from date Notice of Selection is to be received by contractor.)
- Three originals of the Payment Bond. (Notary acknowledgement for Surety.)
- Three originals of the Performance Bond. (Notary acknowledgement for Surety.)
- Optional University of California Business Information Form, used to self-certify as DBE, WBE, DVBE for statistical reporting purpose only.
- Certificates of Insurance, along with Enrollment Application for coverage under the University Controlled Insurance Program (UCIP), if applicable.
- Name, qualifications, and references for superintendent proposed for the contract work.
- Names of all subcontractors, with evidence of reliability and responsibility.
- Preliminary Contract Schedule.
- Selection of Retention Options and Escrow Agreement.
- Other documents as stipulated in the Instructions to Bidders, Article 6.
If the 10 day time period for submission is extended, make the extension in writing with a new date for submission.
Both the Notice of Selection and the Instructions to Bidders inform the apparent lowest responsible bidder that if the above items are not submitted by the date specified, the Facility may disqualify the bidder, the Bid Security may be forfeited, and the contract may be awarded to another contractor. If the items are not submitted as required, notify the bidder in writing that the Notice of Selection is no longer valid, and send another Notice of Selection to the next apparent lowest responsible bidder who submitted a responsive bid. The University may continue this process until a bidder is selected.
8.4.1 Forfeiture of Bid Bond
If the apparent lowest responsible bidder refuses to sign the Agreement (defaults on contract), the Facility may demand payment from the low bidder's surety company. When this situation occurs, contact the Office of the General Counsel for appropriate language to include in the "demand letter" to the surety.
8.5 REQUIRED BIDDER SUBMITTALS
Before executing the contract, the Facility must obtain the signed Agreement from the lowest responsible bidder, as well as required items listed in the Notice of Selection (see 8.4).
8.5.1 Performance and Payment Bonds
- Long Form, General Conditions, Paragraph 11.4.
- Long Form, Supplementary Conditions.
- University policy: "Bonding Requirements for Construction Contracts" (see FM1:5).
The selected bidder must furnish a Performance Bond for the amount of the contract sum, covering the faithful performance of the contract, and a Payment Bond for the payment of all obligations arising thereunder. The bonds may be secured through the bidder's usual sources if the surety companies chosen meet the requirements of the General Conditions and Supplementary Conditions.
Verify that the surety company issuing the bond is an "admitted insurer", either by printing out information from the website of the Department of Insurance http://www.insurance.ca.gov/docs/index.html confirming the surety is an admitted surety insurer and attaching it to the bond or obtaining a certificate from the county clerk that confirms the surety is an admitted insurer and attaching it to the bond.
A Performance Bond is required for all Long Form and Brief Form construction contracts even if the lowest responsive bid is less than $50,000. A Payment Bond is not required for Brief Form contracts less than $25,000.
Form of Bonds. The bonds must be on the forms provided in the bidding documents and must be dated on or before the date of the Agreement. A certified and current copy of the power of attorney of the attorney-in-fact who executes the bonds on behalf of the surety must be affixed to the bonds.
Signatures. Surety signature must be notarized.
8.5.2 Certificates of Insurance
The selected bidder is required to furnish completed Certificates of Insurance on the form provided in the contract documents (for appropriate coverage and limits see BUS-63, Exhibit D). If the Project is covered by the University Controlled Insurance Program (UCIP), the selected bidder also must complete and submit the Enrollment Application (Form-3 attached to the UCIP Insurance Manual included in the bidding documents).
8.5.3 Contractor's Statement of Experience and Financial Condition
Use of the Contractor's Statement of Experience and Financial Condition is optional with Long Form contracts, is not anticipated to be used with the Brief Form, and should not be used with the Mini Form. When the Contractor's Statement is required, it must be submitted with the bid or a current accurate statement must have been previously submitted to the Facility where the bid was submitted. The statement must be for the most recent calendar year or contractor's fiscal year. If required in the Prequalification documents, the statement must be included for evaluation. (See 4.3.2.)
Determining Bidder Responsibility by Qualification. Should the contract documents stipulate that special minimum experience is required, the Contractor's Statement is a vehicle to set forth the contractor's compliance with the qualification procedure (see 4.4.2).
Determining Bidder Responsibility by Evaluation of the Statement. Bonding by an approved surety is, in most instances, evidence of a prospective contractor's experience and financial ability. However, bidders do not always submit a Bid Bond with their bid. Bidding documents allow the bidder to submit a certified check in lieu of a Bid Bond. The Contractor's Statement should be reviewed by the administrator who will make the award determination, to evaluate the bidder's responsibility (anticipated capability to satisfactorily complete the project).
A Bid Bond is not always an accurate reflection of a contractor's experience and financial status. The Contractor's Statement may be used to determine bidder responsibility if the administrator has reasons to question the bidder's financial capability despite the submittal of a Bid Bond.
To check experience, referenced owners of listed projects may be contacted to determine the quality and timeliness of previous work. Other University Facilities may be contacted for their experience with the prospective contractor. If the contractor's record is found to be poor, the contractor may be declared nonresponsible (see 4.1).
A contractor's maximum dollar construction volume currently in process should not exceed (a) four times the net worth listed on line 23 of the statement or (b) 10 times the working capital (current assets less current liabilities). If the contractor's maximum dollar construction exceeds either ratio, contact the bidder's banker, identified on statement. Ask the banker to state the amount of credit available to the contractor for the project to be awarded. If the contractor's maximum dollar construction exceeds either ratio above after adjustment for additional credit available, notify the bidder of a proposed determination of nonresponsibility. Follow the disqualification procedure (see 4.5), but state that the duration of the disqualification is to be only as long as the contractor's financial condition remains inadequate (modify the reference to a disqualification for one year). Consult the Office of the General Counsel before making this determination.
Prequalifying Bidders. The Contractor's Statement can also be used in prequalifying bidders (see 4.3).
Disqualifying Bidders. If material data in the Contractor's Statement is determined to be false, the bidder may be disqualified (see 4.5). Refer questions regarding the materiality of data to General Counsel before initiating the disqualification procedure.
Awarding the Contract to Another Bidder. If on the basis of the information contained in the Contractor's Statement the Facility determines that the bidder is not financially or otherwise qualified to perform the contract, the Facility may disqualify the bidder and award the contract to another bidder.
Accountant's Report. If this required report is not provided with the completed Contractor's Statement, or if there are substantial modifications or qualifications in the report, the bid may be nonresponsive. Refer questions about modifications or qualifications to Office of the General Counsel.
8.6 EXECUTING THE CONTRACT
After the bidder-signed Agreement and other required bidder submittals are found acceptable, the contract must be executed by the person delegated the authority to execute University construction contracts. All the conditions for execution and award (see 8.1) must be verified before the contract is executed.
8.6.1 Corporate Seal and Attest
The Secretary of The Regents does not presently require a construction contract to bear the corporate seal of The Regents, nor must the signature by the person executing the contract be attested by the Secretary. The seal and attest may be occasionally required by the other party to the contract or by an approving agency to the contract. When so required, submit the executed documents directly to the Secretary.
8.6.2 Digital Signatures
Digital signatures may be used in lieu of manual signatures provided they conform with the requirements set forth in this provision, California Code of Regulations (“CCR”) Sections 22000 through 22005 and Government Code Section 16.5. A digital signature is defined as an electronic identifier, created by a computer, intended by the party using it to have the same force and effect as the use of a manual signature.
If a Facility chooses to accept digital signatures, the signature shall have the same force and effect as the use of a manual signature if the form of the signature has the following attributes:
1. It is unique to the person using it;
2. It is capable of verification;
3. It is under the sole control of the person using it;
4. It is linked to data in such a manner that if the data are changed, the digital
signature is invalidated; and
5. It conforms to regulations adopted by the Secretary of State.
See Cal. Gov’t Code § 16.5; 2 C.C.R. 22002.
1. The Facility shall ensure that the level of security used to identify the signer of a document is sufficient for the transaction being conducted.
2. The Facility shall ensure that the level of security used to transmit the signature is sufficient for the transaction being conducted.
3. If a certificate is a required component of a digital signature transaction, the Facility shall ensure that the certificate format used by the signer is sufficient for the security and interoperability needs of the public entity. See C.C.R 22002
Digital signatures must be created by public key cryptography (“PKC”) or signature dynamics. See C.C.R. 22003
Special consideration must be given to documents requiring public notarization. Bid bonds, payment bonds, and performance bonds can be accepted in a digital format without notarization when they are verified and transmitted by a trusted third party entity (Surety2000, InsureVision, or equal).
8.7 AWARDING THE CONTRACT
After the contract has been executed, award the contract by sending the signed Agreement and other contract documents to the lowest responsible bidder, at this point known as the "contractor." Award the contract prior to the expiration of the bid bond. If the contract cannot be awarded prior to the expiration of the bid bond, request the contractor give written assurance that it will hold its bid good for the necessary additional days needed to award the contract.
8.7.1 Document Maintenance Before Award
A conformed set of the contract documents must be sent to the contractor with the executed Agreement. The conformed set includes all of the items listed in the Agreement. Additional conformed sets to be sent include an Executive Design Professional copy, a copy for the University's Designated Administrator (the individual who will act as University with respect to the Executive Design Professional Agreement), and a record set to the Facility's project file. Additional conformed sets may be required by the Facility.
8.7.2 Custody of Construction Documents
The Secretary of The Regents is the custodian of official records and documents. According to the Secretary, the University's official copy of construction documents and change orders may be retained in the office of, and under the control of, the responsible official at each Facility. This arrangement should be continued and should not be changed without approval by the Secretary.
8.7.3 Reporting the Award to the Office of the President
Capital Project Activity. Capital Project Activity is a system of recording, on a quarterly basis, changes to the budget or schedule of capital projects. The Facility provides to the Office of the President updated information each quarter. It is entered into the computer, collected into an annual system-wide report, and presented to The Regents. The Office of the President verifies the accuracy of the Facility data for conformance with Project Planning Guide (PPG) Approval, Augmentation, and Completion.
Historical Data Base. The Historical Data Base collects historical data for the University's construction experience for facilities over $5 million. The data includes project description, original budget, bid information, schedule, construction contractor, Facility contact, legal information, and contract dates.
This data base helps the University establish a basis for estimating the cost of new projects and facilitates an exchange of experience between Facilities.
Quarterly Report. For state-funded projects, the Office of the President tracks and reports to State Public Works Board the dollars appropriated, dollars augmented, dollars reverted, and percent completion for each project.
8.8 EARLY START OF CONSTRUCTION
An "early start" allows a contractor to move onto the project site and do preliminary work prior to contract award. This procedure is sometimes desirable and necessary in the interest of time.
A contractor engaged in preliminary work on a site with the knowledge or acquiescence of the University is an invitee of the University. Subcontractors and their employees who provide labor or furnish materials on the site are invitees of the contractor.
The University has an affirmative duty to exercise ordinary care to keep the premises in a reasonably safe condition for invitees. The University may be chargeable for the negligence of an independent contractor employed to construct the work. An invitee may recover damages from the University for personal injuries or losses of property sustained on the premises if those injuries or losses are caused by the negligent conduct of independent contractors or the dangerous physical conditions of the premises.
When in the best interest of the University, an early start may be permitted provided that:
- A License for Early Start of Construction (see RD1.10) is executed by both the University and contractor.
- The contractor furnishes to the University evidence of compliance with all insurance requirements of the contract.
- All conditions prerequisite to the award have been met (see 8.1).
- There is no legal restraint or unresolved bid protest (see 9.1).
Chancellors, Laboratory Directors, and members of President's Administrative Council have the authority to execute the License for Early Start of Construction. Authority may be delegated to a lower level at the Facility.
8.9 NOTICE TO PROCEED
The Notice to Proceed (see RD3.10) is a document added to the contract to start construction. The Facility will issue this notice immediately after the contract has been executed unless a delayed start has been stipulated in the contract documents. The notice instructs the contractor to start work on a specified date and states the number of days available to complete the work and the projected completion date.
If the contractor is notified orally to commence work, the Notice to Proceed shall be issued on the next work day. Confirm the oral notification in the notice. Send the notice by a means that provides proof of receipt.
The Division of Labor Standards Enforcement requires that a copy of the Notice to Proceed be included with the required extract (see DAS PWC-100 Online Application). The surety company also requires a copy of the Notice to Proceed, a copy of the Agreement, and one copy of each of the Payment and Performance Bond.
8.10 RECORDING THE CONTRACT DOCUMENTS
Recording the contract documents at the County Recorder's Office is not required. The Notice of Completion, however, must be recorded (see 18.5).
Revised July 8, 2011 (Change No. FM 11-035-C)