Next time you drive by a public-school building under construction, know that our state is intentionally spending 10% more on that project because of an archaic law that only exists in Pennsylvania.
On May 1, 1913, Governor John Tener put his signature on legislation to enact the Pennsylvania Separations Act. Tener assumed our state’s top office as we were coming off of a construction scandal involving the Pennsylvania State Capitol. State Treasurer William Berry had found that there had been an unappropriated cost for our state capitol’s construction of over $7.7 million ($211,282,599 today). Mr. Berry found many questionable charges, which led to the conviction of the building architect and the former State Treasurer. Due to today’s technology, every cent that is spent is easily tracked.
At the time, in 1913, a Separations Act-type law was the norm in America. However, it is not the norm today as every other state, the federal government and the private sector enjoy options in construction delivery. Yet Pennsylvania remains the lone holdout that mandates the Separations Act which requires the use of multiple prime delivery.
Supporters of the Separations Act like to debate the statement that Pennsylvania is the only state left with this cumbersome contracting requirement and they believe there are two other states joining us. They feel that North Dakota and New York join us. These two states have chipped away at their multiple prime mandate, allowing flexibility in public contracting methods depending on the type of project. But regardless of whether Pennsylvania is the only state or one of three states, it’s a pretty weak defense to keep a law on the books that wastes tax dollars.
So, what is the Separations Act and multiple prime delivery? And why should taxpayers care?
The Separations Act requires that public entities, like a school district, solicit and receive at least four separate bids for one construction project. This is referred to as the multiple prime delivery method. Let that sink in – four separate companies tasked with building one project. This multiple prime delivery method requires the public entity to hold and manage the multiple contracts, making the public entity responsible for coordination of contracts. Consequently, the public entity increases its contractual liability exposure and is forced to be involved in contractual disputes among the primes.
Without one company in charge of the construction project, the multiple prime requirement is cumbersome and sets the stage for adversarial relationships amongst the prime contractors, resulting in a drastic rise in change orders and claims on multiple prime delivered projects. Additionally, without one contractor guiding the project, there are multiple project schedules, and this lack of collaboration eliminates the prospect of early completion. In the private sector, like the healthcare industry, it’s typical to read in the newspaper that the new hospital was built under budget and ahead of schedule – wouldn’t it be nice to afford the public sector similar contracting options that others benefit from?
There is draft legislation that would bring Pennsylvania inline with the rest of the country when it comes to project delivery for public construction, but most importantly it would save tax dollars. This legislation would allow the public entity to choose between four different delivery systems: Design-Bid-Build Multiple Prime (current mandate), Design-Bid-Build Single Prime, Construction Management At Risk, and Design Build. To the non-construction professional these terms might be foreign to you. While there are thousands of resources that explain the various delivery systems (and I don’t mind pointing people in the right direction if requested), I’ll try to keep the explanation simple: each of the listed delivery systems have a different entry point to have the construction team join the design team. Due to design and construction teams joining forces at different times, depending on the selected delivery system, the systems vary in collaboration as illustrated here:
Now I’ve been told that the Separations Act is a tough issue for the general public to understand. Personally, I thought an issue that saves tax dollars is something the masses can get behind. But perhaps I can use an analogy that may help:
- Can you imagine if the Philadelphia Eagles had four head coaches? This lack of leadership would result in chaos on the field with players unsure who to listen to.
- Or what if the Pittsburgh Symphony Orchestra had four principal conductors? The crowd would need aspirin and earplugs if the orchestra were to receive four different directions.
On Pennsylvania public construction projects, we have four head coaches and four conductors all giving different orders. There is no perfect construction delivery method, and our industry has evolved since the days of Governor Tener. We have adapted delivery methods in response to the customer’s changing circumstances.
The customer should be afforded the opportunity to select the most appropriate delivery method for a particular project on a case-by-case basis as cost, quality, and time vary from project to project. Flexibility to choose the most effective and efficient project contracting method will enable local public entities to control costs on building projects, which ultimately saves tax dollars.