Technology and Integrated Delivery May End Multiple Prime Contracts
New York schools use multiple primes above specified project costs.
With changes to its controversial contracting law in a budget bill, New York state could become the sole champion of multiple-prime contracts. Other states have abandoned or are reconsidering the method in favor of flexibility while collaborative delivery systems may soon make it obsolete.
The Wicks Law in New York has its roots in a series of laws the legislature passed starting in 1912. It requires the state and local goverments to have separate prime contracts for electrical, heating and plumbing subs as well as for the general contractor on public-works projects above a certain dollar threshold. The subs bid directly to the owner, who pays the subs directly. The idea behind multiple primes is to encourage competition in bidding and eliminate the practice of bid-shopping among subs.
The New York legislature amended the Wicks Law in April in a last-minute fashion to include new thresholds. The previous $50,000 state-wide project minimum was boosted to $3 million for New York City, $1.5 million for Long Island and Westchester County and $500,000 for the rest of the state. The changes, which took effect on July 1, also allow local governments to prequalify firms, require bid sublistings and speed payments from 15 days to 7 days. The changes also provide for a waiver if projects employ a project labor agreement (PLA) and use contractors with employees in a state-approved apprenticeship program for the last three years. Some in New York feel the law has evolved into an informal compact between organized labor and subcontractors.
Opponents claim the Wicks Law increases costs; promotes inefficiency, delay and shoddy workmanship; encourages criminal activity and generally is a legal and administrative nightmare. “The reform has one virtue: a modest change in threshold,” says Jeffrey J. Zogg, executive director of General Building Contractors Association of New York State, Albany. “All the rest is negative and does not serve the public interest. It is confusing, costly and dangerous public policy.” He says politicians perceive Wicks as a “labor issue” when, in fact, it is a contractor-subcontractor issue.
Michael J. Misenhimer, executive director of Northeastern Subcontractors Association Inc., Albany, has another perspective. “Our organization is 50/50 open shop/union, and so when the reform was passed as part of the budget bill, we were not upset about the threshold increases,” he says. “What did upset our members was the PLA provision. By adopting PLAs, [lawmakers] basically legislated open-shop contractors out of public projects. And ironically, women- and minority-owned firms will be hardest hit, the very groups the state has been trying to help.” He also notes that for about the past year there has been a moratorium on apprenticeship training programs, which could further reduce bidders.
The Wicks Law “is confusing, costly and dangerous public policy.”
— Jeffrey J. Zogg, general building Contractors Association, Albany
Multiple primes are also required in Illinois, North Carolina, North Dakota, Ohio and Pennsylvania. But do they save money? The answer is no, according to a 2004 graduate thesis done by David Col Debella at the Dept. of Civil and Environmental Engineering, University of Pittsburgh. Col Debella analyzed contract data for single-prime, multiple-prime and multiple-prime-with-agency CM projects in school districts in Pennsylvania, Ohio, New Jersey, Massachusetts and Virginia. He concluded that “the three systems did not present significant differences in several statistical analyses, but significance was found in some tests.”
In assessing single and multiple primes, Col Debella found no difference in speed, unit costs, cost growth or change orders. But he discovered single-prime contracts resulted in considerably less litigation.
“We found that single primes did not have a greater construction cost than multiple primes when it came to initial unit costs,” says Robert J. Ries, assistant professor at the Rinker School of Building Construction, University of Florida, Gainesville, and Col Debella’s former advisor in Pittsburgh. “There were also no significant differences between [single and multiple primes] regarding cost growth or change orders, which led us to conclude that the differences were minimal and that awarding authorities should have the flexibility to determine which system best suits their purpose. They should not be locked into a single system.” He says the general trend is away from multiple primes.
But another study conducted in 2007 by the University of Washington concluded: “Public construction projects organized with multiple-prime contracts tend to have 5% less direct costs than projects using a single-prime contractor. Moreover, about 80% of these savings are attributed to lower bid costs for multiple- prime projects.” The study was conducted for Electri International, the Foundation for Electrical Construction Inc., Bethesda, Md., which is the research arm of the National Electrical Contractors Association. Comparing multiple- and single-prime contracts was difficult because they are bid differently, indirect costs are not easily quantified, and not all states were covered, said the researchers.
Both studies suggested a middle ground using an alternative approach called the Minnesota Model in which single primes are used in conjunction with mechanical and electrical bid listing. “As long as the traditional design-bid-build systems are in use, there will be differences over who controls the funds,” says Daniel G. Walter, NECA vice president. “But with the advent of integrated delivery and building information modeling, there will probably be less focus on that and better and earlier cooperation, which may mean fewer change orders, requests for information and earlier detection of problems, resulting in lower costs.”
But the union-nonunion issue may be a more formidable problem. “The issue is bringing qualified workers to a public project,” says James W. Cahill, international representative, New York state pipe trades. “We get that with the amended Wicks Law.”