Citations Affected: IC 4-3; IC 5-11; IC 36-1.
Synopsis: Municipal and county public work projects. Provides that the
workforce of a municipality or a county may perform certain public
works projects if the cost of the project is estimated to be less than
$150,000. Gives a public works contractor discretion to have the board
that contracts for the public work to: (1) hold the retainage; or (2) place
the retainage in an escrow account. Provides that the board shall not be
required to pay interest on the retainage that the board holds. Specifies
notice and public meeting requirements that must be satisfied before a
public work project may be performed by the municipality's or county's
own workforce. Requires the auditor to withhold from motor vehicle
highway account funds an amount equal to the excess costs of a public
work project incurred in the preceding fiscal year. Adds requirements
for examination reports prepared by the state board of accounts
concerning public work projects performed by the municipality's or
county's own workforce. Provides that if the cost of public work by a
municipal or county hospital is less than $75,000, the hospital may
have the work done without receiving bids and by means of its own
workforce.
Effective: July 1, 2002.
January 7, 2002, read first time and referred to Committee on Public Policy.
January 17, 2002, reported favorably _ Do Pass.
January 22, 2002, read second time, ordered engrossed.
January 23, 2002, engrossed.
January 24, 2002, read third time, passed. Yeas 45, nays 4.
A BILL FOR AN ACT to amend the Indiana Code concerning local
government.
SECTION 1. IC 4-3-19-23 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 23. A person who
believes that a department has violated IC 8-23-9, IC 8-23-11, or
IC 36-1-12-3, or IC 36-1-12-3.1 may file a written complaint with the
board. The complaint must set forth the alleged violation.
SECTION 2. IC 4-3-19-28 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 28. The opinion issued
under section 27 of this chapter must:
(1) state whether the department has violated IC 8-23-9,
IC 8-23-11, or IC 36-1-12-3, or IC 36-1-12-3.1; and
(2) be forwarded to the person who filed the complaint and the
department not later than sixty (60) days after the hearing is
conducted.
SECTION 3. IC 5-11-1-26 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 26. (a) If a state office,
municipality, or other entity has authority to contract for the
construction, reconstruction, alteration, repair, improvement, or
maintenance of a public work, the state board of accounts shall include
in each examination report concerning the state office, municipality, or
entity:
(1) an opinion concerning whether the state office, municipality,
or entity has complied with IC 5-16-8; and
(2) a brief description of each instance in which the state office,
municipality, or entity has exercised its authority under
IC 5-16-8-2(b) or IC 5-16-8-4.
(b) If a municipality or a county performs a public work by
means of its own workforce under IC 36-1-12-3 or IC 36-1-12-3.1,
the state board of accounts shall include the following in each
examination report concerning the municipality or county:
(1) An opinion concerning whether the municipality or county
has complied with IC 36-1-12-3 or IC 36-1-12-3.1 for each
public work performed by the entity's own workforce.
(2) A brief description of each public work that the
municipality or county has performed with its own workforce
under IC 36-1-12-3 or IC 36-1-12-3.1, including a calculation
of the actual cost of each public work pursuant to
IC 36-1-12-3.1(d).
(3) An opinion concerning whether the municipality or county
has complied with IC 36-1-12-19 in calculating the actual
costs of a public work project performed under IC 36-1-12-3
or IC 36-1-12-3.1.
(b) (c) The state board of accounts may exercise any of its powers
under this chapter concerning public accounts to carry out this section,
including the power to require a uniform system of accounting or the
use of forms prescribed by the state board of accounts.
SECTION 4. IC 36-1-12-3 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 3. (a) Except as
provided in section 3.1 of this chapter, the board may purchase or
lease materials in the manner provided in IC 5-22 and perform any
public work, by means of its own workforce, without awarding a
contract whenever the cost of that public work project is estimated to
be less than one hundred thousand dollars ($100,000). Before a board
may perform any work under this section by means of its own
workforce, the political subdivision or agency must have a group of
employees on its staff who are capable of performing the construction,
maintenance, and repair applicable to that work. For purposes of this
subsection, the cost of a public work project includes the actual cost of
materials, labor, equipment, rental, a reasonable rate for use of trucks
and heavy equipment owned, and all other expenses incidental to the
performance of the project.
(b) When the project involves the rental of equipment with an
operator furnished by the owner, or the installation or application of
materials by the supplier of the materials, the project is considered to
be a public work project and subject to this chapter. However, an
annual contract may be awarded for equipment rental and materials to
be installed or applied during a calendar or fiscal year if the proposed
project or projects are described in the bid specifications.
(c) A board of aviation commissioners or an airport authority board
may purchase or lease materials in the manner provided in IC 5-22 and
perform any public work by means of its own workforce and owned or
leased equipment, in the construction, maintenance, and repair of any
airport roadway, runway, taxiway, or aircraft parking apron whenever
the cost of that public work project is estimated to be less than fifty
thousand dollars ($50,000).
(d) Municipal and county hospitals must comply with this chapter
for all contracts for public work that are financed in whole or in part
with cumulative building fund revenue, as provided in section 1(c) of
this chapter. However, if the cost of the public work is estimated to be
less than fifty thousand dollars ($50,000), seventy-five thousand
dollars ($75,000), as reflected in the board minutes, the hospital board
may have the public work done without receiving bids, by purchasing
the materials and performing the work by means of its own workforce
and owned or leased equipment.
(e) If a public works project involves a structure, an improvement,
or a facility under the control of a department (as defined in
IC 4-3-19-2(2)), the department may not artificially divide the project
to bring any part of the project under this section.
SECTION 5. IC 36-1-12-3.1 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 3.1. (a) This section applies to a municipality or a
county.
(b) The board may purchase or lease materials in the manner
provided in IC 5-22 and perform a public work, by means of the
board's own workforce, in the construction, maintenance, and
repair of a highway, a street, an alley, a road, or a bridge within
the jurisdiction of the municipality or county without awarding a
contract if the cost of the public work project is estimated to be less
than one hundred fifty thousand dollars ($150,000).
(c) The workforce of a municipality or county may perform a
public work described in subsection (b) only if:
(1) the workforce, through demonstrated skills, training, or
expertise, is capable of performing the public work; and
(2) for a public work project whose cost is estimated to be
more than one hundred thousand dollars ($100,000), the
board:
(A) publishes a notice pursuant to IC 5-3-1 that:
(i) describes the public work that the board intends to
perform with its own workforce; and
(ii) sets forth the projected cost of each component of the
public work as described in subsection (d); and
(B) determines at a public meeting that it is in the public
interest to perform the public work with the board's own
workforce.
(d) For purposes of this section, the cost of a public work project
includes:
(1) the actual cost of materials, labor, equipment, and rental
used in;
(2) a reasonable rate for trucks and heavy equipment that are
owned by the municipality or county and are used in; and
(3) other expenses incidental to;
the performance of the project.
(e) A public work project performed by a board's own
workforce shall be inspected and accepted as complete in the same
manner as a public work project performed pursuant to a contract
awarded after receiving bids.
SECTION 6. IC 36-1-12-14 IS AMENDED TO READ AS
FOLLOWS [EFFECTIVE JULY 1, 2002]: Sec. 14. (a) This section
applies to public work contracts in excess of one hundred thousand
dollars ($100,000) for projects other than highways, roads, streets,
alleys, bridges, and appurtenant structures situated on streets, alleys,
and dedicated highway rights-of-way. This section also applies to a
lessor corporation qualifying under IC 21-5-11 or IC 21-5-12 or any
other lease-back arrangement containing an option to purchase,
notwithstanding the statutory provisions governing those leases.
(b) A board that enters into a contract for public work, and a
contractor who subcontracts parts of that contract, shall include in their
respective contracts provisions for the retainage of portions of
payments by the board to contractors, by contractors to subcontractors,
and for the payment of subcontractors. Either the board or At the
discretion of the contractor, or both, shall place the retainage shall
either be held by the board or be placed in an escrow account, with
a bank, savings and loan institution, or the state as the escrow agent.
The escrow agent shall be selected by mutual agreement between board
and contractor or contractor and subcontractor under a written
agreement among the bank or savings and loan institution and:
(1) the board and the contractor; or
(2) the subcontractor and the contractor.
The board shall not be required to pay interest on the amounts of
retainage that it holds under this section.
(c) To determine the amount of retainage to be withheld, the board
shall:
(1) withhold no more than ten percent (10%) of the dollar value
of all work satisfactorily completed until the public work is fifty
percent (50%) completed, and nothing further after that; or
(2) withhold no more than five percent (5%) of the dollar value of
all work satisfactorily completed until the public work is
substantially completed.
If upon substantial completion of the public work minor items remain
uncompleted, an amount computed under subsection (f) of this section
shall be withheld until those items are completed.
(d) The escrow agreement must contain the following provisions:
(1) The escrow agent shall invest all escrowed principal in
obligations selected by the escrow agent.
(2) The escrow agent shall hold the escrowed principal and
income until receipt of notice from the board and the contractor,
or the contractor and the subcontractor, specifying the part of the
escrowed principal to be released from the escrow and the person
to whom that portion is to be released. After receipt of the notice,
the escrow agent shall remit the designated part of escrowed
principal and the same proportion of then escrowed income to the
person specified in the notice.
(3) The escrow agent shall be compensated for the agent's
services. The parties may agree on a reasonable fee comparable
with fees being charged for the handling of escrow accounts of
similar size and duration. The fee shall be paid from the escrowed
income.
The escrow agreement may include other terms and conditions
consistent with this subsection, including provisions authorizing the
escrow agent to commingle the escrowed funds with funds held in
other escrow accounts and limiting the liability of the escrow agent.
(e) The contractor shall furnish the board with a performance bond
equal to the contract price. If acceptable to the board, the performance
bond may provide for incremental bonding in the form of multiple or
chronological bonds that, when taken as a whole, equal the contract
price. The surety on the performance bond may not be released until
one (1) year after the date of the board's final settlement with the
contractor. The performance bond must specify that:
(1) a modification, omission, or addition to the terms and
conditions of the public work contract, plans, specifications,
drawings, or profile;
(2) a defect in the public work contract; or
(3) a defect in the proceedings preliminary to the letting and
awarding of the public work contract;
does not discharge the surety.
(f) The board or escrow agent shall pay the contractor shall be
paid in full, including all escrowed principal and escrowed income, by
the board and escrow agent, within sixty-one (61) days after the date of
substantial completion, subject to sections 11 and 12 of this chapter.
Payment by the escrow agent shall include all escrowed principal
and escrowed income. If within sixty-one (61) days after the date of
substantial completion there remain uncompleted minor items, an
amount equal to two hundred percent (200%) of the value of each item
as determined by the architect-engineer shall be withheld until the item
is completed. Required warranties begin not later than the date of
substantial completion.
(g) Actions against a surety on a performance bond must be brought
within one (1) year after the date of the board's final settlement with the
contractor.
(h) This subsection applies to public work contracts of less than two
hundred fifty thousand dollars ($250,000). The board may waive the
performance bond requirement of subsection (e) and accept from a
contractor an irrevocable letter of credit for an equivalent amount from
an Indiana financial institution approved by the department of financial
institutions instead of a performance bond. Subsections (e) through (g)
apply to a letter of credit submitted under this subsection.
SECTION 7. IC 36-1-12-22 IS ADDED TO THE INDIANA CODE
AS A NEW SECTION TO READ AS FOLLOWS [EFFECTIVE JULY
1, 2002]: Sec. 22. (a) For purposes of this section, the "actual cost"
of a public work project includes:
(1) the actual cost of materials, labor equipment, and rental
used in;
(2) a reasonable rate for trucks and heavy equipment that are
owned by the municipality or county and are used in; and
(3) other expenses incidental to;
the performance of the project.
(b) For purposes of this section, the "excess cost" of a public
work project is the amount by which the actual cost of a public
work project performed by a municipality or county with its own
workforce under section 3 or 3.1 of this chapter exceeds one
hundred five percent (105%) of the amount permitted under
section 3.1(b) of this chapter.
(c) The state board of accounts shall calculate the excess costs
incurred by a municipality or a county pursuant to its examination
under IC 5-11-1-26.
(d) The auditor shall withhold from the distribution of motor
vehicle highway account funds an amount equaling the sum of the
excess costs incurred by a municipality or a county in the
preceding fiscal year.