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New construction manager-general contractor rules for public agencies will take effect Tuesday, but some stakeholders are concerned that they lack teeth.

The changes came via Senate Bill 254 in 2013, after three years of work. They add transparency in how agencies choose to use the CM-GC model and how CM-GC firms select their subcontractors, said Jeremy Vermilyea, a Schwabe, Williamson & Wyatt attorney who was part of a 30-person advisory committee involved in the rule-changing process. However, no enforcement element is included.

“The big question mark is whether it will change behavior for the better without there having been any kind of added enforcement mechanism built into the law,” he said. “If I had one regret about this process, we were unable to fix the third leg of the stool – when the process goes wrong, there’s not a lot of ways to enforce.”

Under the expiring rules, public agencies were allowed to opt out of state CM-GC statutes. Many municipalities, including Portland and Multnomah County, followed the spirit of the law, but adhered to their own rules in the process, Vermilyea said. Other agencies, particularly those less experienced with the CM-GC process, in some cases awarded projects following a no-bid process.

“We found municipalities literally copying findings,” he said. “They had the same typos and the same misplaced commas. They were copied multiple times.”

The rule-making process, though slow and laborious, resulted in general consensus, Vermilyea said. A key result is that public agencies – including school districts, cities, counties and state governments – can no longer opt out. They are required to follow state rules, he said.

Now, the construction industry will have more power to essentially regulate itself and its agency partners, said Jerry Milstead, a construction project manager for Crook County who has been working on CM-GC projects with public agencies around the state for about 20 years. He also was an advisory committee member.

“There’s not a lot of teeth except for those of us who work in this business to read the law, follow the law and encourage agencies to do so,” he said.

Construction companies can now technically use the threat of lawsuit in cases where public agencies fail to follow the new rules, Milstead said. More likely, attorneys or consultants will direct their clients to adhere to the rules, he said.

“Some cities, counties, fire and school districts weren’t following things the way they needed to be done,” he said. “We pushed this so that we could say, ‘You’ve got to follow the rules.’ ”

The lack of an enforcement arm will make things interesting, said Brent Schafer, president of Todd Construction Inc., which has done several CM-GC projects in Oregon and Washington.

“I don’t think the rules are going to change people’s way of doing business,” he said. “I’m sure the committee put in a great effort attempting to improve the system, but until there’s an independent regulator overseeing the process, not much will change.”

The new rules – the first major overhaul of the state’s CM-GC process in about 20 years – will make a difference when it comes to the way agencies work with contractors and contractors work with subcontractors, according to Brian R. Smith, purchasing manager for Multnomah County and an advisory committee member.

“Prior to the new rules, an agency could get into a relationship with a CM-GC and there weren’t any rules with bidding out subpackages,” he said. “That was one of the big victories.”

Under the new rules, subs can request a debriefing after a bid package has been awarded if they did not get the work. This came about, Smith said, because subs often weren’t given information.

“The subs were saying, ‘We get a bid package from a general, and they say, Sorry, you didn’t get it,’ ” he said. “And that was it.”

But then Multnomah County let subs inquire about decisions made for the Sellwood Bridge and East County Courthouse projects, and the process worked, Smith said.

Also, public officials are now required to ask a lot more open-ended questions and reconsider whether the timing of the project, its complexity and other factors warrant a CM-GC process, Vermilyea said. That clarifies the process, he said, but does not require that information be forwarded to a state agency until the end of the project. By that point, there is really nothing that can be done, he said.

The rules also require CM-GCs to tell agencies how they plan to select subs during the interview process, whether by hard bid or other method.

“It creates more transparency, but does not mandate how contractors are selecting,” Vermilyea said. “And it gives subs the opportunity to ask a contractor why they weren’t selected. The agency is out of it.”

Three main points in new state rules

New state contracting rules that take effect Tuesday come with three things to keep in mind, according to Schwabe, Williamson & Wyatt attorney Jeremy Vermilyea.

The first is how public agencies choose to forgo a competitive bidding process and use the CM-GC model. Now, a more detailed explanation of that decision is required. This forces agencies to engage in thoughtful discussions at the decision-making level, Vermilyea said.

The second is how the subcontractor selection process will change. For example, a CM-GC must tell the agency during the interview process how it plans to make its selections. Also, subs will have an opportunity afterward to ask why they were not selected. These measures will create more transparency and give agencies a say in how contractors select their subs, according to Vermilyea.

The third is that essentially no enforcement exists. No money was available to pay for an enforcement agency and some stakeholders resisted creation of one. In the end, the Rules Advisory Committee ran out of time, Vermilyea said.