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AGC drops opposition to single-prime method of project delivery

By Dan Shaw

The Associated General Contractors of Wisconsin has withdrawn its opposition to the system of single-prime project delivery contained in Gov. Scott Walker’s 2013-15 proposed budget.

The decision was made by AGC’s board last week, said Jim Boullion, AGC director of government affairs. It increases the chances that the majority of the roughly $1.45 billion in state construction projects lawmakers are contemplating for the next two years will be managed using a single-prime system, Boullion said.

Boullion said he is aware of no strong opposition to the budget measure beyond what was coming from the AGC and its member companies.

“We are willing to give it a try,” he said. “If issues come up as we are trying to implement it, we are hoping we can work with the administration to fix those.”

Under the proposed change, on Jan. 1 the state would begin its default system of awarding contracts worth more than $185,000 to a single-prime or general contractor that would oversee the work of various sub- and specialty-contractors. The current default is to a multiple-prime system, which allows mechanical, electrical and plumbing trades to contract directly with the state without the intermediary of a general contractor.

Subcontractors long have maintained that they enjoy valuable protections under the multiple-prime system, but state officials have been pushing for a change that would simplify the management of large projects. In trying to reach a compromise between those two groups, the governor’s original proposal failed to take some of general contractors’ interests into consideration, said Mark Sherry, who runs the Wisconsin operation of Minneapolis-based Mortenson Construction.

But since February, when the governor released his budget, the perceived defects have been discussed thoroughly, he said. An amendment meant to eliminate some of them is being prepared, Boullion said.

“That has turned it from being a nonstarter at one point,” Sherry said, “and turned it into something acceptable.”

Sherry said Mortenson’s change of stance in part resulted from an understanding that the single-prime proposal in the governor’s budget likely will be amended before being adopted by lawmakers. Specifically, he said he has heard the change will avoid mandating that general contractors use subcontracts drafted by the Department of Administration, rather than only requiring that those subcontracts contain certain provisions.

Calls to the DOA were not immediately returned.

Whether such an amendment is adopted, it would do little to assuage the primary cause of concern cited by the AGC in the past: The requirement that single-prime contractors only work with subcontractors that have been selected by the Department of Administration. The governor’s proposal would take subcontractors that are seeking work on a project and put through a regular bidding process. General contractors then would be required to work with the lowest responsible bidders.

Boullion has said such a system would make general contractors responsible for ensuring state projects came in on time and on budget. But, he said, it gives them almost no control over the partners they work with to meet those goals. If that part of the proposed single-prime system remains unchanged, the AGC’s stance on the issue will stop short of full support, he said.

“We,” Boullion said, “are going from strongly opposed to neutral.”

Still, over the course of discussions in recent months, it has become apparent that the administration is fairly adamant about moving forward with its proposed single-prime system, Boullion said. That is, in part, what led the AGC to change its position, he said.

Attempts to reach a spokesman for the governor were not immediately successful.

In contrast, the spokesmen for a couple of groups representing subcontractors and specialty contractors said they would rather support the governor’s single-prime proposal than an alternative version. Jeff Gaecke, executive vice president of the Mechanical Contractors Association of Wisconsin, and Jeff Beiriger, executive director of the Specialty Contractors of Wisconsin, said mechanical, electrical and plumbing companies stand to lose a lot if they no longer are allowed to contract directly with the state.

The current multiple-prime system helps ensure there is transparency in the competition for jobs and that subcontractors are paid on time, Gaecke said. The governor’s proposal is a good compromise that prevents companies from losing those protections, even if they no longer have a direct relationship with the state, he said.

Gaecke said officials from Walker’s office did not explicitly seek out the opinion of the Mechanical Contractors Association when it was devising its single-prime proposal. There was little need to, he said, since the reasons for and against the change have been debated for years.

“I think the positions have been pretty much well-known,” he said. “We were always in favor of something that contained protections for mechanical contractors.”

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