ANNOTATED VERSION



To: House Fiscal Note Date: 02-03-11

221 The Capitol

Email to: hfn@LASPBS.state.fl.us

From:

Agency Affected: Department of Management Services Telephone: 850-488-6285

Program Manager: Tom Berger, Facilities Program Director Telephone: 850-487-9921

Agency Contact: Elizabeth Boyd, Legislative Affairs Director Telephone: 850-488-6285

Respondent: John Owen, Senior Management Analyst Telephone: 850-488-0439

RE: HOUSE BILL # HB 135 Procurement of Design Professional Services

(Note if analysis is for a committee substitute or a bill with amendments.)

I. SUMMARY

HB 135 is an act relating to the procurement of professional services of architects, engineers and other professional services by a state agency, municipality, political subdivision, school district, or school board. It amends s. 287.055, F.S. related to compensation as a factor during the competitive selection process for professional services. It authorizes an agency or board to reopen terminated negotiations with a selected firm following termination of negotiations with other firms. The proposed effective date is July 1, 2011.

II. PRESENT SITUATION

The selection of the private architects, engineers, landscape architects, and registered land surveyors is accomplished in accordance with Section 287.055, F.S., commonly called the Consultant's Competitive Negotiation Act (CCNA). The current statutory language of the CCNA works to further its purpose of selecting design professionals based on the specific needs of an identified project and an assessment of the quality of service the firms will deliver, while letting price be a secondary consideration. Agencies currently determine which firms are most qualified for a project based on factors other than price, then negotiate a contract with the these firms at a compensation that the agency determines is fair, competitive, and reasonable. The “Reasonableness” of fees is determined by scaling in accordance with the "Design Professional Fee Guidelines.” This guide is available at the following website: .

The competitive fee negotiation for licensed design professional represents some of the most important proactive dollars expended on a project. These funds are an investment that affects the successful delivery of a quality project as well as the economical long-term service of a building. Because it is impossible for a firm or governmental entity to know the exact cost of the project at the time of negotiations, the use of fee guidelines is the best way to negotiate the rendering of services at a fair, competitive, and reasonable price. The original fee guidelines, generated in 1969, were based on the Engineering News Record (ENR) Construction Cost Index. In 2006, the formulas used in the fee guidelines were updated to marketplace relevance. The fee guidelines scale is based on the complexity of the services needed as well as any additional services that may be required to address each project's specific requirements.

For each proposed project, an agency's professional staff evaluates current statements of qualifications and performance data that are on file with the agency, together with any other firms interested in a proposed project. Discussions are conducted and it may require public presentations in order to result in no fewer than three qualified firms. Selection is based on a qualifications approach to the project needs and a firm's ability to furnish the required services. The fees are then negotiated based on the standard guidelines.

In making a determination, the agency conducts a detailed analysis of a project’s scope and complexity in addition to considering the cost of the professional services required to deliver the project. Should the agency be unable to negotiate a satisfactory contract with the most qualified firm at a price the agency determines to be fair, competitive, and reasonable, negotiations with that firm are formally terminated. The agency then undertakes negotiations with the second most qualified firm and, failing negotiation with the second most qualified firm, the agency must terminate negotiations and undertake negotiations with the third most qualified firm.

Once a design is established, the project's construction phase elements are bid out based on the exact requirements of the approved design. Implementation of the project's construction phase is performed following the requirements of Chapter 255 F.S. and 60D-5 Rules of the Florida Administrative Code.

III. EFFECT OF PROPOSED CHANGES

The proposed language in HB 135 will make renegotiations with any design professional optional. CCNA’s are unique because they are negotiated before there is a detailed, defined concept established for the project. It is problematic to pursue a “low bid” for a CCNA because any bids would not, and could not, be based on an actual design. Firms could be tempted to estimate a low cost to win the contract, which will most likely later result in a request for additional design work (hours/costs) in the original design activity. This will defeat the intent of a negotiated fee based on the Design Professional Fee Guidelines standard and not secure the most qualified firm to design the project.

CCNA contracts solicit services for a plan that does not yet exist. In order for a firm to estimate a proposed compensation before negotiation, there will be more of an upfront cost to the governmental agency to develop the plan to a point where it can be accurately bid on. Additional staff may be needed for this process.

The effects of HB 135 could discourage private providers from participating in government contracting activities due to their inability to estimate costs for an unrealized project, thereby limiting options for the delivery of public construction to firms that may not be proficient in the specifics of a project's needs.

These changes will also likely lengthen the entire CCNA process because the agencies would be able to “revisit” negotiations with vendors that they had already terminated without limit.

IV. ESTIMATED FISCAL IMPACTS ON STATE AGENCIES:

(FY 11-12) (FY 12-13) (FY 13-14)

Amount / FTE Amount / FTE Amount / FTE

A. Revenues

1. Recurring

2. Non-Recurring

B. Expenditures

1. Recurring

Professional services fees may be used as a more primary determinant by agencies in the selection of design professionals, which may reduce the potential for not selecting the most qualified provider for a project as intended by the CCNA statute.

2. Non-Recurring

The specific needs of a state funded construction project may be reduced in its potential for lifecycle performance. This may reduce the initial cost of a project's design phase but increase the long-term cost effectiveness in operations and maintenance.

V. ESTIMATED FISCAL IMPACTS ON LOCAL GOVERNMENTS:

VI. ESTIMATED IMPACTS ON PRIVATE SECTOR:

HB 135 would require more effort by the design professionals for obtaining a government contract and disrupt the current standard of practice establish by the CCNA of negotiating with the most qualified provider identified in the selection process. The most qualified private providers with unique and specific talents may become disinterested in government projects.

VII. LEGAL ISSUES

A. Does the proposed legislation conflict with existing federal law or regulations? If so, what laws and/or regulations?

No. However, this law will affect several state statutes, such as § 255.32 and § 255.103, which refer to using the 287.055 procurement process.

B. Does the proposed legislation raise significant constitutional concerns under the U.S. or Florida Constitutions (e.g. separation of powers, access to the courts, equal protection, free speech, establishment clause, impairment of contracts)?

No.

C. Is the proposed legislation likely to generate litigation and, if so, from what interest groups or parties?

Potentially. The proposed changes could allow for bid protests by firms who are not ranked “first.” This protest could come after the ranking of the firms, or after the award. The process for ranking vendors based on solution AND price is not clearly defined, and the firms who offered a “lower price,” but had a less preferable solution will likely protest this decision. Without statutory guidelines for how to consider the inclusion of compensation in the ranking process, the governmental entities run the risk of looking arbitrary or capricious in their competitive selection process.

Also, if the fees are no longer based on a set fee guideline, there may be additional litigation which stems from the inability of firms to adhere to their proposed prices.

D. Other:

VIII. COMMENTS:

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