Bid allowances are typically included in base bids as estimates for work that will be completed under the base construction contract, but the exact costs or scope are indeterminate at the time of bid. These amounts are later adjusted to actual costs, once the work is completed. The Trustees, with advice from the Architect, should specify the scope and value for each allowance. Examples of allowances include: keying, hard rock excavations, special utility permits or utility connection fees, signage, or unspecified finishes. The total of all allowances shall not exceed ten percent of the project’s construction value.

Allowances should be specifically included and listed on the bid proposal form, on the schedule of values, and referenced and defined in Division One specifications (in section 01 21 00). It is important to include in the Division One specifications exactly how mark-ups will apply to allowances. This should eliminate claims or disputes regarding application or mark-ups on allowances.

References:

• SUAM Section 9721.08
• CM Procedures Manual, Section 22

Forms/Templates:

• Schedule of Values (702.21),
• Change Order (703.04)

A contractor may request a substitution of a subcontractor under the The Subletting and Subcontracting Fair Practices Act (PCC 4100 et seq.), and there are nine types of substitutions of a subcontractor that a contractor may request under the Act: Public Contract Code Section 4107(a). Upon receipt of Contractor"s written request for substitution, citing one or more reasons listed in 4107(a), CA shall adhere to the following procedure:

1. read and become familiar with the Section 4107(a) statute requirement;
2. notify the subcontractor of the prime contractor"s request by sending her/him a letter by certified mail, and require a response within five days (refer to sample letter). CA shall act timely in issuing five working days written notice to the listed subcontractor, and tracking the five-day response period. OGC issued the opinion that the five-day period equates to the response time for subcontractor to mail its response. Therefore, CA shall wait three more days beyond the expiration of the five-day period to receive any such mail, and postmark on subcontractor"s letter is the date the responsed is deemed to be received. If subcontractor does not respond timely, or responds that they do not object to the substitution, CA shall send a letter to all parties approving the substitution.

Protest of Substitution: If a protest is received from the subcontractor to be substituted, CA shall expeditiously call and schedule a substitution hearing. If either or both the prime contractor and subcontractor give notice that they intend to bring their attorney, then University Counsel must also attend. Though it may be very difficult to set a hearing time with so many parties, it is CSU"s obligation to make an effort to schedule a timely hearing. If the only time when all parties are available is unreasonable or too far in the future, then CA will issue a hearing notice by certified mail. In this notice CA shall give the two principal participants five working day notice (plus mailing time) of the hearing, at the time and place specified; failure to attend will waive their rights. Contact CPDC CM or University Counsel for more information on the substitution hearing as this ia a formal process to which CSU staff must adhere.

Inadvertent Clerical Error: Under PCC 4107(a)5 and 4107.5, if the prime contractor made an inadvertent clerical error in the subcontractor list submitted with his bid, s/he has two working days after the time of the bid opening to give written notice to the CSU, the listed subcontractor and the intended subcontractor. The listed subcontractor has six working days from the time of the bid opening to submit to the awarding authority and the prime contractor its written objection. If a protest is received, CA shall timely call and hold a substitution hearing.

Other bases for substitution: PCC section 4107(a)4, failing or refusing to meet the prime contractor"s bond requirements. This statute requires the prime contractor to advertise its subcontractor bond requirements. Failure to do so shall preclude the prime contractor from substituting for not meeting bond requirements. A warning is included in the Contract General Conditions, see Article 4.04.

PCC section 4106 identifies that if a prime contractor fails to specify a subcontractor or specifies more than one subcontractor for the same portion of work, that work being valued greater than one half of one percent, then it agrees to and shall perform that work himself. No subcontractor shall be employed by the contractor to perform work valued at more than one half of one percent if the original subcontractor listing indicated that the prime contractor was going to perform the work.

Subcontractor Directory: CA is required to police the use of subcontractors using the Subcontractor Directory, created to police contract compliance. CGC requires Contractor to submit the Subcontractor Directory with the contract award package to the Trustees, and with each payment request that follows. CA shall compare the Subcontractor Directory with the Expanded List of Subcontractors. If any listed firms have been substituted without approval in accordance with PCC Section 4107(a), penalties are applicable per PCC Section 4110 (SUAM Sections 9821, 9823). Note: the listed subcontractor must perform the scope of work for which it was listed. Contractor/Campus may use another subcontractor for added work via change order.

Penalty: The penalty for violating the provisions of the Subletting and Subcontracting Fair Practices Act is identified in PCC Section 4110. CA shall provide Contractor notification of assessment of penalty or termination and a public hearing held. If a ten percent penalty is assessed, the monies remain in the project funds. If the violation is egregious, then this may be used as a basis of disqualification (in the Prequalification process). Again, notification needs to be issued and the opportunity for a disqualification hearing allowed.

Important to Note:

1. A subcontractor who was not listed in the original bid has no rights under the Subletting and Subcontracting Fair Practice Act, even though the subcontractor was legally substituted for the listed subcontractor.
2. If the general contractor does not list a subcontractor, or if it lists more than one subcontractor for the same portion of work (in excess of ½ of one percent of the general contractor’s total bid), the general contractor must perform the work itself, or if the general contractor subcontracts that portion of work, it will be subject to penalty provided in PCC 4110 and 4111. Failure to list a subcontractor is not a basis for rejecting the bid as nonresponsive.
3. If, after award of a contract based in part on the application of the small business preference, the Non-Small Business Contractor (NSB) shall use the small business subcontractors and suppliers listed in its proposal, unless a the NSB requests a substitution in writing to the Trustees, and the Trustees approve the substitution in writing. Please reference Contract General Conditions for DBB Major Cap Projects, Article 4.04-b, Substitution of a Small Business Subcontractor. Refer to the California Code of Regulations, Title 2, Section 1896.10 for further information.
4. Contractor shall use the Disabled Veteran Business Enterprise (DVBE) companies listed in its bid proposal, unless a substitution is requested in writing to the Trustees, and the Trustees and the Dept. of General Services (DGS) approve the substitution in writing before the commencement of any work. Please reference Contract General Conditions for DBB Major Cap Projects, Article 4.04-c, Substitution of a Disabled Veteran Business Enterprise. Refer to the California Code of Regulations, Title 2, Section 1896.73, Substitution of a DVBE, for further information.

References:

• SUAM Sections 9821-9823;
• CM Procedures Manual,
• section 19 Contract General Conditions for DBB Major Projects,
• Article 4.04,
• Substitution of Subcontractors Law of D&C, Dec. 2017
• Section XIII, Substitution of Subcontractors. PCC section 4100 et seq.
• The Subletting and Subcontracting Fair Practices Act

Forms/Templates: