Engineering process | Final Design
Outstanding Permits and Agreements at Time of Letting and the Effect on Contract Award: A Project Manager’s Responsibility is Not Done
Purpose
Outstanding permits and agreements at time of letting can have many negative and costly consequences to the project and to MnDOT, including but not limited to Award Delay, project delay, and contractor claims. Project Managers must ensure any outstanding permits and agreements are fully executed expeditiously after bids have been opened and give status notifications to the Office of Construction and Innovative Contracting, and the Office of Land Management.
When to use this subject
Use on every project with outstanding permits or agreements at time of letting.
Definitions
Award Delay: Contract Award delayed due to an outstanding Contract contingency requirement.
Contractor Claim: Request by the Contractor for additional time and/or money for compensation for damages caused by failure of the Owner (MnDOT) to fulfill its obligations under the Contract.
Owner-Caused Delay: A delay in project schedule caused by the Owner.
Proposal Guaranty: The security furnished with a Proposal to guarantee that the Bidder will enter into the Contract if the Department awards the Contract to the Bidder. All bids must be accompanied by a Proposal Guaranty equal to 5% of the bidder’s bid price, per Standard Specification 1208. Also known as a bid bond.
How this subject fits into the overall project development process
Contract Award must be made within 33 calendar days from letting, per Standard Specification 1302. Project Managers must consider the time needed to fully execute permits and agreements when bringing projects to letting. Ideally, permits and agreements are fully executed prior to letting; however, when they are not, project managers must ask themselves:
- Will the permit/agreement be fully executed soon after the letting?
- Does the permit/agreement need local entity approval, and if so, how soon after letting does the entity meet to decide?
- How much risk is being assumed by MnDOT?
If a permit/agreement cannot be secured soon after the letting, then the project must move to a later letting. MnDOT will not and must not knowingly let a project that will go into automatic Award Delay status.
If a contract is unable to be awarded due to an outstanding permit/agreement, MnDOT must issue an Award Delay Letter to the apparent low bidder (ALB) stating the reason for the delay. A delay of this nature is considered an owner-caused delay. Owner-caused delays put MnDOT at financial risk of contractor claims due to impacts to the contractor and the project schedule.
Award Delay also puts MnDOT at risk of losing the ALB, and possibly the project itself. Bidders are only bound to their bids during the 33-day period after letting. If MnDOT does not make award with this timeframe, the apparent low bidder may walk away from their bid without forfeiture of their proposal guaranty (bid bond). If the original ALB is no longer interested in the project, MnDOT could approach the second low bidder, however, considerations would have to be made if the project is still feasible in the construction season, the cost differential between the low and second bid, availability of the second low bidder, etc. In a worst-case scenario, MnDOT would have to reject all bids and the project would have to be repackaged and relet. Award Delay should be avoided at all costs.
Organizations involved
- MnDOT:
- Office of Construction and Innovative Contracting
- Office of Project Management and Technical Support
- Office of Land Management
- District Project Managers
- District Resident Engineers
- District Engineers and Assistant District Engineers
- District Construction Office Managers
- Municipalities and Counties
- Watershed Districts and Authorities
- Minnesota Department of Natural Resources (DNR)
- Railroads
- Utilities
- Army Corps of Engineers
- Federal Highway Administration (FHWA)