Bidder Beware: Construction Contracting By and With Local Governments in Florida.

• Author: Palmer, Mitchell O.
• Position: City, County and Local Government Law

Construction contracting in the local government setting presents unique challenges that every construction law attorney and local government attorney should be familiar with. This article serves as a primer for those practitioners. Rest assured that the city or county will prescribe the form and content of the contract document. The contract is likely to be one of three project delivery formats: 1) the lump sum (low bid) form; 2) the construction management (CM) at-risk form; or 3) the design-build form. Each of these types of contracts is specifically authorized in F.S. [section][section]255.103 and 255.20.

The low bid contract form is typically non-negotiable. With the CM at-risk form and the design-build form, negotiation as to project components and pricing is to be expected. The low bid form lends itself well to road and underground (utilities) construction when material quantities and linear footage are easily ascertainable. The CM at-risk and design-build forms are more likely to be utilized when the government is constructing a building.

Some of the unique features of local government construction contracting are payment and performance bonding, requirements for prompt payment, retainage on progress payments, dispute resolution processes, applicability of local purchasing ordinances, governmental sovereign immunity, tax-exempt materials purchases, and applicability of the Public Records Act.

Payment and Performance Bonding

F.S. Ch. 713 (Part I)--the construction lien law--has no applicability to local government construction contracts. Any unpaid general contractor, subcontractor, or material supplier who believes that he or she can place a lien on the government's property will be in for a rude surprise. It is an impossibility. One need look no further than the definition of "owner" in F.S. [section]713.01(23); the term does not include any political subdivision, agency, department of the state, municipality, or other governmental entity.

Instead, the statutes prescribe a payment and performance bonding system to cover 1) the claims of unpaid subcontractors and materialmen (the payment aspect of the bond); and 2) the faithful performance of the contractor's obligations to the governmental owner (the performance aspect of the bond). These requirements are set forth in F.S. [section]255.05. In its simplest terms, the contractor is required to purchase and post a surety bond from an insurance company (the surety), and it is the surety to whom unpaid construction participants must turn. The penal amount of the bond must equal the negotiated contract price.

There are additional requirements that the general contractor must keep in mind. The contractor must 1) record the bond in the public records of the county where the improvements are located; and 2) provide the local government with a certified copy of the recorded bond before commencing work. The government is prohibited from making any payments to the contractor before receipt of the certified copy of the recorded bond. (1)

In lieu of a bond, a contractor may file with the local government an alternative form of security, to include cash, money order, certified check, cashier's check, or an irrevocable letter of credit. (2)

Prompt Payment

F.S. Ch. 218 (Part VII) is the Local

Government Prompt Payment Act. F.S. [section]218.735 deals with prompt payment for purchases of construction services. In its simplest terms, the government must make payment to the general contractor 25 business days after the receipt of a payment request. If the government intends to reject the request as noncompliant with the contract, the rejection must occur within 20 days of receipt. If the government disputes only a portion of the pay application, the government must timely pay the undisputed portion.

Once the general contractor receives payment from the government, he or she must remit payment to subcontractors and suppliers within 10 days. Once a subcontractor receives payment from the general contractor, he or she must remit payment to sub-subcontractors and suppliers within seven days.

The Prompt Payment Act mandates that...